<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 UNITED STATES

                                 FORM 10-KSB/A

(MARK ONE)

[X]               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                       OR

[ ]               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                  FOR THE TRANSITION PERIOD FROM ___________ TO ___________

                  COMMISSION FILE NUMBER 0-20995

                            VISUAL EDGE SYSTEMS INC.
             (Exact name of Registrant as specified in its charter)

           DELAWARE                                            13-3778895
(State or other jurisdiction of                              (I.R.S Employer
incorporation or organization)                             Identification No.)

2424 NORTH FEDERAL HIGHWAY, SUITE 100, BOCA RATON, FLORIDA        33431
       (Address of principal executive offices)                 (zip code)

                                 (561) 750-7559
              (Registrant's telephone number, including area code)

   Securities registered pursuant to Section 12(b) of the Exchange Act: None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
        REDEEMABLE WARRANTS, EACH TO PURCHASE ONE SHARE OF COMMON STOCK
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                              Yes [X] No [  ]


<PAGE>   2
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB/A or any
amendment to this Form 10-KSB/A. [ ]

The Registrant's revenue for its most recent fiscal year:    $2,632,213

The aggregate market value of the Registrant's Common Stock (the "Common
Stock"), $.01 par value, held by non-affiliates as of May 6, 1999, based on the
last sale price of the Common Stock as reported on the Nasdaq SmallCap Market,
was $3,088,190.

As of May 6, 1999, there were 10,398,440 shares of the Registrant's Common
Stock and 1,930,000 redeemable warrants outstanding, of which 1,495,000 are
publicly traded.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the 1999 Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission not later than 120 days
after the end of the Registrant's fiscal year ended December 31, 1998 are
incorporated by reference into Part III of this 10-KSB/A.






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                            VISUAL EDGE SYSTEMS INC.
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                             PAGE
                                                         PART I                
<S>               <C>                                                                                        <C>
ITEM 1.           Description of Business                                                                      4

ITEM 2.           Description of Property                                                                     14

ITEM 3.           Legal Proceedings                                                                           14

ITEM 4.           Submission of Matters to a Vote of Securityholders                                          14

                                                        PART II

ITEM 5.           Market for Common Equity and Related Stockholder Matters                                    15

ITEM 6.           Management's Discussion and Analysis or Plan of Operation                                   16

ITEM 7.           Financial Statements                                                                        20

ITEM 8.           Changes in and Disagreements with Accountants on Accounting and Financial Disclosure        44

                                                        PART III

ITEM 9.           Directors, Executive Officers, Promoters and Control Persons; Compliance with               45
                  Section 16(a) of the Exchange Act

ITEM 10.          Executive Compensation                                                                      45

ITEM 11.          Security Ownership of Certain Beneficial Owners and Management                              46

ITEM 12.          Certain Relationships and Related Transactions                                              46

ITEM 13.          Exhibits, Financial Statements Schedules, and Reports on Form 8-K                           47



</TABLE>





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<PAGE>   4




                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

         GENERAL

                  Visual Edge Systems Inc. (the "Company") was organized to
                  develop and market personalized videotape golf lessons
                  featuring ONE-ON-ONE instruction by leading professional
                  golfer Greg Norman. The Company has developed video
                  production technology which digitally combines actual video
                  footage of a golfer's swing with a synchronized
                  "split-screen" comparison to Greg Norman's golf swing to
                  produce a 45-minute ONE-ON-ONE videotape golf lesson. The
                  Company's ONE-ON-ONE personalized videotape golf lesson
                  analyzes a golfer's swing by comparing it to Greg Norman's
                  swing at several different club positions from two camera
                  angles using Greg Norman's pre-recorded instructional
                  commentary and analysis and computer graphics to highlight
                  important golf fundamentals intended to improve a golfer's
                  performance. The Company sells its products under the name
                  "ONE-ON-ONE WITH GREG NORMAN."

                  The Company was incorporated in July 1994 and commenced
                  developmental operations in January 1995. From the Company's
                  inception through the end of 1996, it was primarily engaged
                  in product development, market development, testing
                  technology, recruitment of key personnel, raising capital and
                  preparing the software, hardware and videotape coaching
                  instructions used in the production of its products.

         INDUSTRY OVERVIEW

                  Golf has become an increasingly popular form of sport and
                  entertainment in recent years. According to the National Golf
                  Foundation, consumer spending on golf-related activities,
                  including green fees, golf equipment and related merchandise,
                  increased from approximately $12.7 billion in 1989 to
                  approximately $15.1 billion in 1994 to approximately $16.3
                  billion in 1998. The number of golfers and golf courses and
                  driving ranges has also increased and golf industry
                  participants have sought to increase public awareness and
                  provide greater access to golfers of all ages and income
                  levels.

         PRODUCTS

                  The Company has developed six full swing personalized
                  ONE-ON-ONE golf lessons with Greg Norman for both right- and
                  left-handed golfers. The Company's personalized products
                  include a lesson stressing basic golf fundamentals for either
                  males or females, a lesson geared towards senior golfers, an
                  advanced lesson for lower-handicap players and a "follow-up"
                  lesson which measures a golfer's improvement from prior
                  lessons. The Company also plans to eventually develop
                  additional videotape golf lessons, such as short game, sand
                  play and putting lessons.



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<PAGE>   5

         RELATIONSHIP WITH GREG NORMAN

                  Pursuant to a license agreement, as amended, by and among the
                  Company, Greg Norman and Great White Shark Enterprises, Inc.
                  (the "Greg Norman License"), Greg Norman granted to the
                  Company a worldwide license to use his name, likeness and
                  endorsement and certain trademarks owned by him in connection
                  with the production and promotion of the Company's products.
                  The Greg Norman License originally required the Company to
                  make minimum guaranteed royalty payments to Mr. Norman;
                  however, as a result of a recent amendment, there are no
                  longer any guaranteed payments required, a royalty of all the
                  Company's sales of its products. As of December 31, 1998, the
                  Company has paid Mr. Norman $1,300,000 in cash and has issued
                  to him 602,000 shares of Common Stock, as well as an option
                  to purchase 125,000 shares of the Company's Common Stock at
                  $1.00 per share. The original term of the Greg Norman License
                  expires on December 31, 2001. The Company's business and
                  prospects are dependent upon the Company's continued
                  association with Greg Norman.

                  The Greg Norman License prohibits Greg Norman from granting
                  similar rights to any person with respect to any concept
                  which is the same as or confusingly similar to the Company's
                  concept or products and does not prohibit the Company from
                  entering into similar endorsement agreements with other
                  athletes or instructors.

         MARKETING AND DISTRIBUTION

                  The Company's marketing strategy is to sell ONE-ON-ONE
                  videotapes to (a) various organizers of amateur corporate,
                  charity and member golf tournaments (who typically offer
                  gifts to tournament participants), golf professionals at
                  private and daily fee golf courses and driving ranges and
                  indoor event planners who organize trade shows, conventions,
                  sales meetings, retail store openings and promotions and
                  automobile dealer showroom promotions, (b) corporations who
                  will give the ONE-ON-ONE WITH GREG NORMAN lesson as customer
                  and employee appreciation gifts instead of gifts such as golf
                  balls with logos, fruit baskets or chocolates, (c) individual
                  golfers or persons who wish to give a gift to a golfer via
                  the Internet or a planned thirty minute infomercial, and (d)
                  corporations who will use the ONE-ON-ONE product as an
                  incentive to entice individuals to purchase or use their
                  product or service.

                  To implement its marketing and business strategy, the Company
                  has built 17 mobile ONE-ON-ONE production facilities
                  ("vans"), equipped with video and personal computer
                  equipment, to market, promote and produce the Company's
                  products. The Company locates its ONE-ON-ONE vans in selected
                  geographic areas that service golf courses and driving ranges
                  throughout the United States, and has placed its first vans
                  in Arizona, California, Florida, Georgia, Illinois, Maryland,
                  Massachusetts, Michigan, New Jersey, New York, Ohio,
                  Pennsylvania, Texas and Ontario, Canada. The vans travel to
                  golf courses and corporate events to film participants and
                  produce the ONE-ON-ONE lessons on-site. The Company has also
                  opened authorized ONE-ON-ONE videotaping centers in key
                  cities throughout the country, which allow recipients of
                  ONE-ON-ONE gift certificates or certificates which may in the
                  future be obtained through a planned infomercial to redeem





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                  their certificates and receive their personalized ONE-ON-ONE
                  video golf lesson. These videotaping centers are permanent,
                  part-time locations which the Company has developed in
                  partnership with existing driving ranges, golf courses,
                  automobile dealerships and other retailers. In 1998, almost
                  100% of the Company's sales were derived from van service.
                  The Company expects that the videotaping centers will account
                  for less than 10% of sales during 1999, although this amount
                  may be affected by the impact of the planned infomercial. The
                  infomercial has been completed and is currently awaiting
                  approval from Greg Norman and Great White Shark Enterprises,
                  Inc. The Company expects to begin testing the infomercial in
                  May 1999 in three markets. The Company has incurred no costs
                  related to the infomercial's development, because it licensed
                  development rights to an independent third party infomercial
                  company. Delays in testing the infomercial have been related
                  to editing delays by the third party.

                  The Company is marketing the gift certificate program as a
                  corporate incentive and promotional product and is selling
                  the certificates directly to golfers via the Company's web
                  site. Sales to corporations are handled by the Company's
                  sales force and independent sales representatives.

         FINANCING TRANSACTIONS

                  For the past several years, the Company sought financing
                  through private sources. In general, the Company raised
                  capital through a combination of debt and equity issuances to
                  private investor groups.

                  MARCH FINANCING

                  In March 1997, the Company consummated a bridge financing
                  (the "March Bridge Financing") pursuant to which it issued to
                  13 investors (including Status-One Investments Inc., a
                  company controlled by the family of the Chief Executive
                  Officer of the Company), a non-cash financing fee of (i)
                  100,000 shares of common stock and (ii) 100,000 warrants to
                  purchase 100,000 shares of common stock at a price of $10.00
                  per share, subject to adjustment in certain circumstances. As
                  consideration for such securities, the investors in the March
                  Bridge Financing pledged an aggregate of $3,500,000 in cash
                  and other marketable securities as cash collateral (the "Cash
                  Collateral") to various banks, which in turn issued stand-by
                  letters of credit (the "Letters of Credit") to the Company in
                  the aggregate amount of up to $3,500,000. The Company used
                  the Letters of Credit to secure a $3,500,000 line of credit
                  (the "Line of Credit") from a bank. In June 1997, the Company
                  used a portion of the proceeds from the issuance and sale of
                  certain securities, outlined hereafter in note 5(b), to repay
                  the remaining outstanding balance due and owing on the Line
                  of Credit and returned the Letters of Credit to the various
                  banks, which in turn returned all of the Cash Collateral to
                  the March Bridge Financing investors.






                                       6
<PAGE>   7

                  INFINITY FINANCING

                  On June 13, 1997, the Company entered into a financing
                  arrangement with a group of investment funds, which resulted
                  in net proceeds to the Company of approximately $7.2 million.
                  Under a securities purchase agreement and several amendments
                  thereto, the Company issued to these investors 1,039,388
                  shares of common stock, 6,000 shares of Series A-2
                  Convertible Preferred Stock with a liquidation preference of
                  $1,000 per share and 8.25% convertible notes in the current
                  principal amount of $1.5 million. As of May 12, 1999, the
                  investment funds hold 700,638 shares of the Company's common
                  stock. However, the investment funds also may convert their
                  Series A-2 preferred stock and notes into additional shares
                  of the Company's common stock, although the Company has the
                  right at any time to prepay or redeem any of these
                  convertible instruments and, as a result, suffer no dilutive
                  effects. If the Company does not make such prepayment or
                  redemption, then the investment funds will receive upon
                  conversion the number of shares set forth below, based upon
                  the timing of the exercise of their conversion right:
<TABLE>
<CAPTION>

<S>                                                                    <C>
If the investment funds convert Series A-2 preferred stock:            then they will receive a maximum of:
         at any time through June 30, 1999                             3,300,000 shares of common stock
         between July 1, 1999 and January 1, 2000                      3,827,273 shares of common stock
         on or after January 2, 2000                                   4,800,000 shares of common stock

If the investment funds convert notes:                    then they will receive a maximum of:
         at any time through January 1, 2000                           600,000 shares of common stock
         on or after January 2, 2000                                   1,200,000 shares of common stock
</TABLE>

                  The investment funds have agreed not to convert any shares of
                  Series A-2 preferred stock or notes which would result in
                  them owning an aggregate of 9.99% or more of the Company's
                  outstanding common stock following the conversion.

                  Dividends on the Series A-2 preferred stock will begin
                  accruing on January 1, 2000 at the rate of 8.25% annually,
                  payable quarterly in cash or in shares of common stock. The
                  Series A-2 preferred stock is convertible into shares of the
                  Company's common stock at conversion prices ranging between
                  $1.25 and $2.50, and has rights that are senior to those of
                  the common stock with respect to dividends, liquidation and
                  dissolution. The investment funds are entitled to receive
                  495,000 shares of the Company's common stock in each of 2000
                  and 2001 as payment of dividends on the Series A-2 preferred
                  stock.

                  The notes mature in June 2000 and interest on the notes shall
                  be paid in cash. The notes are secured by all of the
                  Company's significant assets and are convertible into shares
                  of common stock at a price of $2.50 per share, although that
                  price will become $1.25 per share after January 1, 2000.

                  MARION EQUITY FINANCING

                  In March 1998, the Company entered into an equity financing
                  arrangement with Marion Interglobal, Ltd., an investment
                  group owned by Ron Seale, the Company's Chairman of the






                                       7
<PAGE>   8

                  Board, and its nominees. Under this agreement, Marion was to
                  invest up to $11 million in exchange for up to 5,200,000
                  shares of common stock in three separate phases. In
                  connection with the first two phases, in March and June 1998,
                  respectively, the Company issued to Marion an aggregate of
                  2,000,000 shares of its common stock in exchange for $5
                  million. Marion opted not to proceed with the third phase.
                  The Company paid "transaction fees" to Marion totaling
                  2,000,000 additional shares of common stock upon completion
                  of the first two phases of Marion's investment. Marion
                  presently holds 976,000 shares of common stock for its own
                  account, with the remaining shares having been given to
                  Marion's nominees.

                  Marion's investment in Visual Edge was on terms as favorable
                  to the Company as those available in an arm's length
                  transaction in the marketplace.

         COMPETITION

                  The Company faces competition for consumer discretionary
                  spending from numerous other businesses in the golf industry
                  and related market segments. The Company competes with a
                  variety of products and services which are used as
                  participant gifts at golf events or provide golf instruction,
                  including instructional golf videotapes, golf software used
                  to analyze golf swings and golf courses, schools and
                  professionals who offer video golf lessons, certain of which
                  may be less expensive or provide other advantages to
                  consumers. In addition, certain companies offer both hardware
                  and software to golf professionals for use in connection with
                  golf lessons. Moreover, the instructional golf video segment
                  of the industry has no substantial barriers to entry and,
                  consequently, the Company expects that other companies which
                  have developed software technologies may seek to enter the
                  Company's target markets and compete directly against the
                  Company. There can be no assurance that other companies are
                  not developing or will not seek to develop similar products.

         PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION

                  The Company has filed a patent application with the United
                  States Patent and Trademark Office covering certain aspects
                  of its digital video editing and videotape production
                  process. There can be no assurance, however, as to the
                  breadth or degree of protection which patents may afford the
                  Company, that any patent applications will result in issued
                  patents or that patents will not be circumvented or
                  invalidated. Rapid technological developments in the computer
                  software industry result in extensive patent filings and a
                  rapid rate of issuance of new patents. In addition, there can
                  be no assurance that the Company will have financial or other
                  resources necessary to enforce its own patent or defend a
                  patent infringement action and the Company could, under
                  certain circumstances, become liable for damages, which also
                  could have a material adverse effect on the Company. The
                  Company relies on proprietary processes and employs various
                  methods to protect the concepts, ideas and documentation of
                  its products. However, such methods may not afford complete
                  protection and there can be no assurance that others will not
                  independently develop such processes or obtain access to the
                  Company's proprietary processes, ideas and documentation.
                  Furthermore, although the Company has entered into
                  confidentiality agreements with certain of its employees,
                  there can be no assurance that such arrangements will
                  adequately protect the Company.






                                       8
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         EMPLOYEES

                  At December 31, 1998, the Company employed (directly or
                  indirectly) four executive employees and 49 employees engaged
                  in the operation of its offices and vans.

         EXECUTIVE OFFICERS OF THE COMPANY

<TABLE>
<CAPTION>

                  <S>                                          <C>      <C>
                  NAME                                         AGE      POSITION
                  ----                                         ---      --------
                  Earl T. Takefman                              49       Chief Executive Officer and Director
                  Richard Parker                                37       President and Chief Operating Officer
                  Thomas Peters                                 53       Vice President of Operations and Technology
                  Melissa Forzly                                40       Chief Financial Officer
</TABLE>

                  EARL T. TAKEFMAN, a co-founder of the Company, has been Chief
                  Executive Officer of the Company since March 1995. Prior to
                  founding the Company, Mr. Takefman was Co-Chief Executive
                  Officer of SLM International, Inc. ("SLM"), a publicly traded
                  toy and sporting goods company, from December 1989 to August
                  1994. From 1980 to 1989, prior to joining SLM, Mr. Takefman
                  was Chief Operating Officer of Charan Industries ("Charan"),
                  a publicly traded Canadian toy and sporting goods company.
                  Mr. Takefman received a Bachelor of Architecture degree in
                  1971 and a Masters of Business Administration degree from
                  McGill University in Montreal, Canada in 1973.

                  RICHARD PARKER has been the Company's President and Chief
                  Operating Officer since July 1996. From February 1990 until
                  his appointment as Chief Operating Officer of the Company,
                  Mr. Parker was the founder, owner and President of Diomo
                  Marketing Inc. and Devrew Merchandising Inc., companies
                  engaged in marketing and selling consumer products in Canada.
                  From August 1984 to February 1990, Mr. Parker held various
                  positions, including Vice President at Charan. Mr.
                  Parker graduated from Vanier College in Montreal in 1980.

                  THOMAS PETERS has been Vice President of Operations and
                  Technology of the Company since May 1996. Since July 1992,
                  Mr. Peters has been the owner of Smart View ("Smart View"), a
                  company he founded to design and develop computer golf
                  software to be used by golf professionals when giving video
                  golf lessons. In March 1995, Smart View was engaged as an
                  independent consultant to the Company and was principally
                  responsible for the development of the software used in the
                  Company's products. Smart View also developed operating
                  systems used by Golf Academy at PGA National and at the Doral
                  Golf Learning Center, each in Florida. Prior to founding
                  Smart View, Mr. Peters, for 26 years, held various positions
                  at IBM Corporation, including Manager of Application
                  Development from July 1989 to July 1992 and Personal Computer
                  Product Planning Manager from 1984 to 1989. Mr. Peters
                  graduated from Harper College at University of New York in
                  1967, with a B.A. in mathematics.






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<PAGE>   10

                  MELISSA FORZLY has been the Chief Financial Officer of the
                  Company since March 1998 and joined the Company as Controller
                  in June 1997. Prior to joining the Company, Ms. Forzly was
                  Controller of Big Entertainment, a public company trading on
                  the Nasdaq SmallCap market, which is a diversified
                  entertainment company involved in the licensing of
                  entertainment properties, the operation of retail stores, and
                  the publishing and packaging of books. Ms. Forzly graduated
                  from Boston University in 1981 with a B.S. in Business
                  Administration with concentrations in accounting and finance.

         RISK FACTORS

                  Readers of this annual report or any of the Company's press
                  releases should carefully consider the following risk
                  factors, in addition to the other information contained
                  herein. This annual report and the Company's press releases
                  contain certain statements of a forward-looking nature
                  relating to future events or the future financial performance
                  of the Company within the meaning of Section 27A of the
                  Securities Act of 1933, as amended, and Section 21E of the
                  Securities Exchange Act of 1934, as amended, and which are
                  intended to be covered by the safe harbors created thereby.
                  Readers are cautioned that such statements are only
                  predictions and that actual events or results may differ
                  materially. In evaluating such statements, readers should
                  specifically consider the various factors identified herein,
                  including the matters set forth below, which could cause
                  actual results to differ materially from those indicated by
                  such forward-looking statements.

                  SIGNIFICANT AND CONTINUING LOSSES. For the period from July
                  15, 1994 (inception) to December 31, 1998, the Company
                  incurred an accumulated deficit of $20,302,283. The Company
                  incurred a net loss of $4,846,792 for the year ended December
                  31, 1998. The Company believes that it will continue to incur
                  losses until, at the earliest, it generates sufficient
                  revenues to offset the costs associated with producing,
                  selling and delivering its products. These losses could limit
                  the Company's ability to grow and to raise new funds to allow
                  it to remain in business.

                  CAPITAL RESOURCES. As a result of the Company's continuing
                  losses and the low market price of its common stock, the
                  Company believes that it will be very difficult, if not
                  impossible, for it to raise additional capital in the future.
                  As of April 28, 1999, the Company had a total of cash and
                  cash equivalents and certificates of deposit of approximately
                  $1,222,425. Thus, if the Company is unable to become
                  profitable in the near future or raise new funds, it will
                  exhaust its cash resources and be unable to continue in
                  business.

                  POTENTIAL INFLUENCE ON MARKET OF SALE OF SHARES; DILUTION. As
                  part of the Infinity Financing, the Company issued to the
                  Funds, through December 31, 1998, an aggregate of 1,039,388
                  shares of Common Stock. In addition, the Company will be
                  obligated to issue to the Funds additional shares if they
                  decide to convert their Notes or shares of Preferred Stock
                  into Common Stock. Conversion of some or all of the Notes or
                  Preferred Stock would have a dilutive effect on the Company's
                  stockholders. While no prediction can be made as to the
                  effect that the sale of any of these shares will have on






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<PAGE>   11

                  market prices of the Common Stock, the possibility that a
                  substantial number of shares of Common Stock may be sold in
                  the public market may adversely affect prevailing market
                  prices and could impair the Company's ability to further
                  raise capital through the sale of its equity securities.
                  Additionally, there are currently outstanding options to
                  purchase an aggregate of 1,874,039 shares of Common Stock at
                  exercise prices ranging from $1.00 to $10.75 per share, and
                  outstanding warrants (including the IPO warrants) to purchase
                  an aggregate of 1,930,000 shares of Common Stock at exercise
                  prices ranging from $3.25 to $10.00. Exercise of any of the
                  foregoing options or warrants will have a dilutive effect on
                  the Company's stockholders. Furthermore, holders of such
                  options or warrants are more likely to exercise them at times
                  when the Company could obtain additional equity capital on
                  terms that are more favorable to us than those provided in
                  the options or warrants. As a result, exercise of the options
                  or warrants may adversely affect the terms of such financing.

                  DEPENDENCE ON GREG NORMAN LICENSE. The Company's business may
                  be adversely affected if Greg Norman dies, becomes disabled,
                  retires, experiences a significant decline in the level of
                  his tournament play, commits a serious crime or performs any
                  act which adversely affects his reputation. In connection
                  with the production and promotion of the Company's products,
                  the Company uses, under a worldwide license, Mr. Norman's
                  name, likeness, endorsement and certain trademarks. The
                  Company's license expires on December 31, 2001, but is
                  subject to renewal at the Company's option for two additional
                  five-year periods, with a fee of $500,000 per renewal term.
                  The Company has obtained "keyman" life insurance on the life
                  of Mr. Norman in the amount of $10,000,000.

                  MINIMUM BID PRICE. On March 1,1999, the minimum bid price of
                  the Company's shares had been less than $1.00 per share for
                  thirty consecutive business days and in accordance with
                  Nasdaq's listing requirements, the Company received notice
                  from Nasdaq regarding the minimum bid price of the Company's
                  shares. If the bid price of the Company's shares is not above
                  $1.00 per share for at least ten consecutive business days
                  before June 1, 1999, the Company's shares could be excluded
                  from Nasdaq for failure to comply with Nasdaq's minimum bid
                  price requirement. Although the Company may attempt to meet
                  Nasdaq's rules by effecting a reverse stock spilt, this is
                  unlikely. Exclusion of our shares from Nasdaq would adversely
                  affect the market price and liquidity of our equity
                  securities.






                                      11
<PAGE>   12

                  PENNY STOCK REGULATIONS. In the event the Company's common
                  stock is delisted from the Nasdaq SmallCap Market, it may
                  subsequently become subject to the rules and regulations
                  governing penny stocks. In general, penny stocks are equity
                  securities (i) of companies that have net tangible assets of
                  less than $2 million (if continuously operating for less than
                  three years) or $5 million (if continuously operating for
                  more than three years) and (ii) that have a market price of
                  less than $5.00 (excluding securities that are quoted on
                  Nasdaq or are registered on a national securities exchange
                  meeting certain guidelines). As at December 31, 1998, the
                  Company had been continuously operating for more than three
                  years and had net tangible assets of $3,382,103. In addition,
                  as indicated in the Minimum Bid Price risk factor, the market
                  price of the Company's common stock had been less than $5.00
                  per share.

                   Under the penny stock rules, broker-dealers who recommend
                  those securities to persons other than institutional
                  accredited investors (generally institutions with assets in
                  excess of $5 million) must make a special suitability
                  determination for the purchaser, receive the purchaser's
                  written agreement to the transaction prior to the sale and
                  provide the purchaser with risk disclosure documents which
                  identify risks associated with investing in penny stocks and
                  which describe the market for the penny stock and the
                  purchaser's legal remedies. Further, the broker-dealer must
                  obtain a signed and dated acknowledgment from the purchaser
                  demonstrating that the purchaser has actually received the
                  required risk disclosure document before effecting a
                  transaction in a penny stock. These requirements may have the
                  effect of reducing the level of trading activity in
                  securities which become subject to the penny stock rules. If
                  the Company's common stock becomes subject to the penny stock
                  rules, purchasers of shares of the Company's common stock may
                  find it more difficult to sell these securities, which could
                  have an adverse affect on its market price.

                  UNCERTAINTY OF PROPOSED PLAN OF OPERATION AND MARKET
                  ACCEPTANCE. The Company's ONE-ON-ONE personalized videotape
                  golf lesson is a new business concept and, accordingly,
                  demand and market acceptance for its products is uncertain.
                  Although the Company commenced marketing activities in 1997,
                  it has not been able to develop a sales force necessary to
                  raise widespread awareness of the product and acquire a
                  customer base sufficient to offset its expenses. The
                  Company's business prospects will depend significantly on its
                  ability to successfully build an effective sales
                  organization. To the extent that the Company enters into
                  third-party marketing and distribution arrangements in the
                  future, it will depend on the marketing efforts of those
                  third parties, which will reduce its operating and gross
                  profit margins. The Company cannot assure you that its
                  business strategy will result in successful product
                  commercialization or that its efforts will result in
                  broad-based market acceptance of its products. The Company
                  may need to change its marketing plans based on the progress
                  of its marketing efforts and changes in market conditions.
                  The Company cannot assure that it will be able to continue to
                  implement its business plan.






                                      12
<PAGE>   13

                  PRODUCT OBSOLESCENCE. The markets for the Company's products
                  may be characterized by rapidly changing technology which
                  could result in product obsolescence or short product life
                  cycles. The Company's competitors could develop technologies
                  or products that render its products obsolete or less
                  marketable. Accordingly, the Company's ability to compete may
                  depend on its ability to continually enhance and improve its
                  products.

                  DEPENDENCE ON KEY PERSONNEL. The Company depends on the
                  personal efforts of Earl T. Takefman, Richard Parker, Thomas
                  Peters and other key personnel to implement its operating and
                  growth strategies. The loss of the services of these
                  individuals could adversely affect the Company's business and
                  prospects because they have unique knowledge and experience
                  in the industry. The Company has entered into employment
                  agreements with Mr. Takefman and other key personnel and has
                  obtained "keyman" insurance on the life of Mr. Takefman in
                  the amount of $5,000,000, which will not be renewed when it
                  expires in July 1999.

                  DEPENDENCE ON LIMITED PRODUCT LINE. The Company is entirely
                  dependent on the sales of a limited product line to generate
                  revenues and on the commercial success of its products. The
                  Company cannot assure that its products will prove to be
                  commercially viable. Failure to achieve commercial viability
                  on a timely basis would cause the Company to close its
                  business.

                  INDUSTRY FACTORS. The Company's future operating results will 
                  depend on numerous factors beyond its control, including:

                       o    the popularity, price and timing of competitors'
                            products being introduced and distributed;

                       o    national, regional and local economic conditions
                            (particularly recessionary conditions adversely
                            affecting consumer spending);

                       o    changes in consumer demographics;

                       o    the availability and relative popularity of other
                            forms of sports and entertainment; and

                       o    public tastes and preferences, which may change
                            rapidly and cannot be predicted.

                  The Company's ability to plan for product development and
                  promotional activities may be affected by its ability to
                  anticipate and respond to relatively rapid changes in
                  consumer tastes and preferences. To the extent that the
                  Company targets consumers with limited disposable income, it
                  may find it more difficult to price its products at levels
                  which result in profitable operations.






                                      13
<PAGE>   14

                  ACQUISITION STRATEGY. The Company has recently adopted an
                  acquisition strategy to expand its product offering, focusing
                  on technology companies including, in particular, companies
                  engaged in the business of "distance education" or
                  instruction via the Internet. To be suitable for acquisition
                  by the Company, these companies must be small enough to be
                  affordable yet profitable. These candidates may be few in
                  number and may attract offers from companies with greater
                  financial resources than the Company. The Company cannot
                  assure you that it will be able to locate suitable
                  acquisition targets or that it will be able to complete any
                  acquisitions.

                  FINANCING OF ACQUISITIONS. The Company's current financial
                  condition will not allow it to finance an acquisition
                  independently. If the Company locates an acquisition
                  opportunity, it will have to depend on the profitability of
                  the company to be acquired and the efforts of some of its
                  major stockholders to attract and obtain financing. The
                  Company cannot assure you that it will be able to obtain
                  financing on acceptable terms or at all. If the Company
                  cannot obtain financing, it will not be able to complete any
                  acquisitions.

                  VOLATILITY OF MARKET PRICE OF COMMON STOCK AND WARRANTS.
                  Since the Company's initial public offering, the market price
                  of its publicly traded securities has been highly volatile,
                  as has been the case with the securities of other emerging
                  companies. The Company's operating results and announcements
                  by the Company or its competitors may have a significant
                  impact on the market price of its securities. In addition, in
                  recent years, the stock market has experienced a high level
                  of price and volume volatility and market prices for the
                  stock of many companies have experienced wide price
                  fluctuations which have not necessarily been related to the
                  operating performance of those companies.

ITEM 2.  DESCRIPTION OF PROPERTY

                  The Company leases approximately 4,400 square feet of office
                  space in Boca Raton, Florida for its executive offices. The
                  lease of this office space provides for a monthly rent of
                  approximately $9,580 and expires on September 30, 1999, with
                  one option to renew for an additional three years. The
                  Company believes that suitable additional space, if required,
                  is readily available on terms that will be reasonably
                  acceptable to the Company.

ITEM 3.  LEGAL PROCEEDINGS

                  The Company has no material legal proceedings pending or, to
                  the Company's knowledge, threatened.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

                  None.






                                      14
<PAGE>   15

                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS SUBMISSION OF
        MATTERS TO A VOTE OF SECURITYHOLDERS

         MARKET FOR COMMON STOCK

                  The Company's Common Stock and warrants are traded on the
                  Nasdaq SmallCap Market under the symbols "EDGE" and "EDGEW,"
                  respectively (see Risk Factor - Minimum Bid Price). The
                  Company completed the IPO in July 1996 at an offering price
                  of $5.00 per share for its Common Stock and $.10 per warrant.
                  The following table sets forth, for the periods indicated,
                  the range of high and low last reported sale prices for the
                  Common Stock and the warrants.

<TABLE>
<CAPTION>
                  COMMON STOCK:                                      HIGH           LOW
                  -------------                                      ----           ----
                  <S>                                               <C>            <C> 
                  Fiscal Year 1996
                    Third Quarter (from July 24, 1996)              $ 8.00         $4.38
                    Fourth Quarter                                    7.63          5.63

                  Fiscal Year 1997
                     First Quarter                                  $12.38         $5.75
                     Second Quarter                                  13.75          8.63
                     Third Quarter                                   10.25          6.50
                     Fourth Quarter                                   8.25          3.06

                  Fiscal Year 1998
                     First Quarter                                  $ 4.38         $2.63
                     Second Quarter                                   4.69          2.81
                     Third Quarter                                    3.47          1.38
                     Fourth Quarter                                   1.97           .63

                  IPO WARRANTS:                                      HIGH           LOW
                  ------------                                       ----           ---

                  Fiscal Year 1996
                    Third Quarter (from July 24, 1996)             $ 4.13          $1.00
                    Fourth Quarter                                   3.16           1.88

                  Fiscal Year 1997
                     First Quarter                                 $ 7.56          $1.88
                     Second Quarter                                  8.63           4.00
                     Third Quarter                                   5.13           3.00
                     Fourth Quarter                                  3.44            .75

                  Fiscal Year 1998
                     First Quarter                                 $ 1.69          $ .69
                     Second Quarter                                  1.25            .00
                     Third Quarter                                    .88            .25
                     Fourth Quarter                                   .69            .06

</TABLE>






                                      15
<PAGE>   16

         HOLDERS OF COMMON STOCK

                  On March 23,1999, the last reported sale price of the Common
                  Stock on the Nasdaq SmallCap Market was $.719 per share and
                  the last reported sale price of the warrants on the Nasdaq
                  SmallCap Market was $.188 per warrant. At March 23, 1999,
                  there were 128 holders of record of the Company's Common
                  Stock and 6 holders of record of the Company's warrants. The
                  Company believes that there are more than 700 beneficial
                  holders of the Company's Common Stock.

         DIVIDENDS

                  The Company does not anticipate paying any cash dividends on
                  its Common Stock in the foreseeable future and intends to
                  retain its earnings, if any, to finance the expansion of its
                  business and for general corporate purposes. Any payment of
                  future dividends will be at the discretion of the Board of
                  Directors and will depend upon, among other things, the
                  Company's earnings, financial condition, capital
                  requirements, level of indebtedness, contractual restrictions
                  and other factors that the Company's Board of Directors deems
                  relevant. In addition, the payment of cash dividends is
                  limited by the terms of the Preferred Stock and may be
                  further limited or prohibited by the terms of future loan
                  agreements or the future issuance of other series of
                  Preferred Stock, if any.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

                  The following discussion and analysis should be read in
                  conjunction with the Company's Financial Statements and the
                  Notes thereto included in Part II, Item 7 of this Report.

         OPERATING MARGINS AND OVERHEAD STRUCTURE

                  Approximately 25% of the cost of sales are variable costs
                  related to making the sale. These costs include the cost of
                  the videotapes, royalties to Greg Norman and salesmen's
                  commissions. The remaining 75% of each sales dollar is
                  contributed to the Company's fixed operating costs which
                  includes operator salaries, vehicle storage and van
                  depreciation and the Company's fixed overhead expenses. As
                  soon as the Company achieves sales levels sufficient to
                  offset its fixed operating costs, the Company believes that
                  75% of each sales dollar will result in income before taxes.
                  The Company believes that sales of $6,500,000 to $7,000,000
                  are needed before it may be able to generate profits.
                  Management believes that the Company will not achieve these
                  sales levels in 1999 and no assurance can be given that the
                  Company will ever achieve such sales levels or that the
                  variable costs will remain constant as a percent of sales or
                  that the Company will not incur additional fixed costs.

         RESULTS OF OPERATIONS

                  For the year ended December 31, 1998 ("Y-98") as compared to
                  the year ended December 31, 1997 ("Y-97")





                                      16
<PAGE>   17

                  Sales for Y-98 increased 91% to $2,632,213 as compared to
                  $1,381,111 for Y-97. The increase in sales in 1998 as
                  compared to 1997 is primarily due to the Company's marketing
                  efforts. In addition, the Company had more vans in use for
                  all of 1998 as compared to 1997.

                  The Company's gross profit increased to $168,273 for Y-98 as
                  compared to a gross loss of $186,362 for Y-97, or a gross
                  margin of 6% in Y-98 as compared to a gross margin of -13% in
                  Y-97. The increase in gross profit in 1998 as compared to
                  1997 is primarily due to significant training costs for van
                  operators that were incurred in 1997 and were significantly
                  decreased in 1998, as well as low initial sales during the
                  Company's start-up phase in 1997. In addition the Company's
                  sales increased at a greater rate than the cost of sales. The
                  Company's cost of sales in 1998 as compared to 1997 increased
                  by 57% vs. a 91% sales increase. The increase in the cost of
                  sales is primarily attributable to increases in the number of
                  videotapes produced ($30,115), royalty expense to Greg Norman
                  ($200,000), salesmen's commissions ($86,180), and vehicle
                  fuel costs ($33,275). These expenses are all directly related
                  to sales. Operator salaries related to videotape production
                  also increased by $169,860. The balance of the increase is
                  primarily attributable to an increase in depreciation expense
                  associated with the increased number of vans for the full
                  year of 1998 vs. 1997.

                  Operating expenses for Y-98 decreased 42% to $4,577,034 as
                  compared to $7,929,850 for Y-97. The decrease in operating
                  expenses reflects reductions in corporate overhead and
                  start-up expenses that were incurred in 1997. The decrease in
                  operating expense is attributable to a reduction in General &
                  Administrative salaries of $194,166, a reduction in legal
                  fees of $333,446, a reduction in travel expenses of $342,001,
                  a reduction in advertising and marketing expenses of $720,911
                  and a reduction in financing costs of $825,807. The balance
                  of the decrease is primarily attributable to a decrease in
                  depreciation and amortization expenses.

                  Operating loss for Y-98 decreased 46% to $4,408,761, as
                  compared to $8,116,212 for Y-97.

                  The Company earned $119,647 in interest income for Y-98, as
                  compared to $111,140 for Y-97. Interest expense for Y-98 was
                  $251,566, as compared to $508,080 for Y-97. The decrease in
                  interest expense is primarily due to the conversion of the
                  June Financing Notes to Preferred Stock.

                  Net loss before extraordinary item for Y-98 decreased 50% to
                  $4,846,792, as compared to $9,756,570 for Y-97. Net loss per
                  share for Y-98 decreased 64% to $.81, as compared to $2.26
                  for Y-97. The decreases in operating and net loss in 1998 as
                  compared to 1997 resulted from increased gross profit and
                  decreased operating expenses in 1998. The decrease in net
                  loss per share in 1998 as compared to 1997 is attributable to
                  both a decrease in net loss and an increase in the number of
                  shares outstanding which is partially offset by Preferred
                  Stock dividends recorded in 1998.







                                      17
<PAGE>   18

         LIQUIDITY AND CAPITAL RESOURCES

                  On December 31, 1998, the Company had cash and cash
                  equivalents of $244,346, unrestricted short-term investments
                  (certificates of deposit) of $1,750,000 and working capital
                  of $1,269,548, as compared to cash and cash equivalents of
                  $224,429, unrestricted short-term investments (certificates
                  of deposit) of $1,080,000 and working capital of $788,323 at
                  December 31, 1997. Net cash used in operating activities for
                  Y-98 was $3,176,816, which was used to fund the Company's
                  losses. Net cash used in investing activities was $1,017,737
                  and $4,214,470 was provided by financing activities for a
                  total increase in cash and cash equivalents of $19,917. Net
                  cash used in operating activities for Y-97 was $5,997,342.
                  Net cash used in investing activities in Y-97 was $95,124 and
                  $6,083,778 was provided by financing activities, for a total
                  decrease in cash and cash equivalents in Y-97 of $8,688.

                  On December 31, 1998, the Company had stockholders' equity of
                  $3,549,880, as compared to a stockholders' deficit of
                  $1,137,662 at December 31, 1997.

                  The Company anticipates that its current capital resources,
                  when combined with anticipated cash flows from operations,
                  will be sufficient to satisfy the Company's contemplated
                  working capital requirements for the year ending December 31,
                  1999. However, there can be no guarantee that the Company's
                  anticipated cash flow from operations and sales will be
                  realized. If the Company is unable to realize the anticipated
                  cash flows, or raise additional equity, it may exhaust its
                  cash resources by the year-end and may be forced to curtail
                  its operations. (See Risk Factors - Uncertainty of Proposed
                  Plan of Operation and Market Acceptance and Risk Factors -
                  Capital Resources).

         THIRD PARTY REPORTS AND PRESS RELEASES

                  The Company does not make financial forecasts or projections
                  nor endorse the financial forecasts or projections of third
                  parties nor does it comment on the accuracy of third party
                  reports. The Company does not participate in the preparation
                  of the reports or the estimates given by the analysts.
                  Analysts who issue financial reports are not privy to
                  non-public financial information. Any purchase of the
                  Company's securities based on financial estimates provided by
                  analysts or third parties is done entirely at the risk of the
                  purchaser.

                  The Company periodically issues press releases to update
                  shareholders on new developments. These releases may contain
                  certain statements of a forward-looking nature relating to
                  future events or the future financial performance of the
                  Company within the meaning of Section 27A of the Securities
                  Act of 1933, as amended, and Section 21E of the Securities
                  Exchange Act of 1934, as amended, and which are intended to
                  be covered by the safe harbors created thereby. Readers are
                  cautioned that such statements are only predictions and that
                  actual events or results may differ materially. In evaluating
                  such statements, readers should specifically consider the
                  various risk factors identified which could cause actual
                  results to differ materially from those indicated by such
                  forward-looking statements.






                                      18
<PAGE>   19

         YEAR 2000 ISSUE

                  The Company has completed its assessment of the impact of
                  Year 2000 on its business including its readiness of internal
                  accounting and operating systems and communicated with key
                  suppliers regarding their exposure to Year 2000 issues. The
                  Company anticipates that its business operations will
                  electronically interact with third parties very minimally, if
                  at all. The Company's Year 2000 risks from third parties are
                  insignificant. Management believes that the Company's worst
                  case scenario would involve delays in receiving videotapes
                  from its supplier. The Company will stockpile videotapes used
                  in production before the 1999 year-end, so as not to run
                  short if its vendor cannot supply the Company. The majority
                  of the Company's systems consist of packaged software
                  purchased from vendors which are already Year 2000 compliant,
                  based on representations from the vendors. The Company has
                  addressed both Information Technology and Non-Information
                  Technology concerns; for instance, the network file servers
                  have been designed to handle Year 2000 issues, and the
                  recently installed telephone system is designed to handle
                  Year 2000 issues. The Company is not presently aware of any
                  significant expenditures which will be necessitated in order
                  to be ready for the Year 2000, although there can be no
                  assurances that significant expenditures may not be required
                  in the future. The Company presently believes that the Year
                  2000 issue will not have a material impact on the Company's
                  business or operations; however, there can be no guarantee
                  that the Company will be unaffected or in the level of timely
                  compliance by key suppliers or vendors which could impact the
                  Company's operations including, but not limited to,
                  disruptions to the Company's business.






                                      19
<PAGE>   20

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                         INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                                          PAGE
                  <S>                                                                                     <C>  
                  Report of Independent Certified Public Accountants                                       21

                  Balance Sheets as of December 31, 1997 and December 31, 1998                             22

                  Statements of Operations for the Years Ended December 31, 1997 and 1998                  23

                  Statements of Stockholders' Equity (Deficit) for the Years Ended
                           December 31, 1997 and 1998                                                      24

                  Statements of Cash Flows for the Years Ended December 31, 1997 and 1998                  25

                  Notes to Financial Statements                                                            26


</TABLE>



                                      20
<PAGE>   21

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders 
  of Visual Edge Systems Inc.:

We have audited the accompanying balance sheets of Visual Edge Systems Inc. as
of December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Visual Edge Systems Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Miami, Florida,
  March 24, 1999 (except with respect to the matter discussed in Note 11, as to
  which the date is May 12, 1999).







                                      21
<PAGE>   22

                            VISUAL EDGE SYSTEMS INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>

                                                             DECEMBER 31, 1997      DECEMBER 31, 1998
                                                             -----------------      -----------------
<S>                                                            <C>                    <C>             
                          ASSETS
Current Assets:
  Cash and Cash Equivalents                                    $        224,429       $        244,346
  Certificates of Deposit                                             1,080,000              1,750,000
  Accounts Receivable                                                    23,917                 26,893
  Inventory                                                              72,771                103,142
  Prepaid Expenses - Advance Royalties                                  350,000                220,577
  Other Current Assets                                                  217,225                107,345
                                                               ----------------       ----------------
                      Total Current Assets                            1,968,342              2,452,303

Fixed Assets, net                                                     2,632,826              2,248,514
Intangible Assets, net                                                  286,986                167,777
Prepaid Expenses - Advance Royalties                                        449                680,157
Investments-Restricted (Note 5(d))                                      812,719                587,108
                                                               ----------------       ----------------
                      Total Assets                             $      5,701,322       $      6,135,859
                                                               ================       ================

      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
  Accounts Payable                                             $        344,884       $        201,617
  Accrued Expenses                                                      173,605                167,795
  Other Current Liabilities                                             121,266                218,259
  Current Maturities of  Equipment Loans                                540,264                595,084
                                                               ----------------       ----------------
                      Total Current Liabilities                       1,180,019              1,182,755
Equipment Loans                                                         661,939                149,951
Convertible Debt                                                      4,997,026              1,253,273
                                                               ----------------       ----------------
                      Total Liabilities                               6,838,984              2,585,979
                                                               ----------------       ----------------

                      Commitments and Contingencies (Notes 5 and 9)

          STOCKHOLDERS' EQUITY (DEFICIT):

Preferred Stock, $.01 par value, 5,000,000 shares                                   
  authorized: Series A-2 convertible, none issued and
  outstanding at December 31, 1997 and 6,000 shares issued
  and outstanding at December 31, 1998                                       --              6,000,000
Common Stock, $.01 par value, 20,000,000 shares                                     
  authorized, 5,316,696 shares issued and outstanding at
  December 31, 1997 and  10,378,440 issued and outstanding
  at December 31, 1998                                                   53,167                103,784
Additional Paid in Capital                                           12,427,394             17,748,379
Accumulated Deficit                                                 (13,618,223)           (20,302,283)
                                                               ----------------       ----------------
            Total Stockholders' Equity (Deficit)                     (1,137,662)             3,549,880
                                                               ----------------       ----------------
            Total Liabilities & Stockholders' 
               Equity (Deficit)                                $      5,701,322       $      6,135,859
                                                               ================       ================
</TABLE>



  The accompanying notes are an integral part of these financial statements.





                                      22
<PAGE>   23

                            VISUAL EDGE SYSTEMS INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                              For the years ended
                                                                  December 31,
                                                        --------------------------------
                                                             1997                1998
                                                        -------------      -------------
<S>                                                     <C>                <C>          
Sales                                                   $   1,381,111      $   2,632,213

Cost of Sales                                               1,567,473          2,463,940
                                                        -------------      -------------
Gross (Loss) Profit                                          (186,362)           168,273
                                                        -------------      -------------

Operating Expenses:
  General and Administrative                                4,565,007          3,024,271
  Selling and Marketing                                     2,072,537          1,036,713
  Financing Fees                                            1,049,049            223,242
  Non-cash Stock Compensation Expense                         243,257            292,808
                                                        -------------      -------------
                    Total Operating Expenses                7,929,850          4,577,034
                                                        -------------      -------------
                    Operating Loss                         (8,116,212)        (4,408,761)
                                                        -------------      -------------
Other Income (Expenses):
  Interest Income                                             111,140            119,647
  Interest Expense                                           (508,080)          (251,566)
  Amortization of Deferred Financing Fees                  (1,243,418)          (306,112)
                                                        -------------      -------------
                   Total Other Income (Expenses)           (1,640,358)          (438,031)
                                                        -------------      -------------
                   Net Loss before Extraordinary Item      (9,756,570)        (4,846,792)

Extraordinary item - write off of financing fees in
  connection with extinguishment of debt                     (999,000)                --
                                                      ---------------      -------------
                   Net Loss                               (10,755,570)        (4,846,792)

Preferred Stock dividend                                           --         (1,837,268)
                                                      ---------------      -------------
Net Loss to common stockholders                       $  (10,755,570)      $  (6,684,060)
                                                      ==============       =============  
Basic and Diluted Loss per Share:
  Net Loss per Share before Extraordinary Item                 (2.05)              (0.81)
  Extraordinary Item                                           (0.21)                 --
                                                      --------------       -------------  
  Net Loss per Share                                  $        (2.26)      $       (0.81)
                                                      ==============       =============  

Weighted average common shares outstanding                 4,758,605           8,238,208
                                                      ==============       =============  

</TABLE>



   The accompanying notes are an integral part of these financial statements.







                                      23
<PAGE>   24

                            VISUAL EDGE SYSTEMS INC.
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998

<TABLE>
<CAPTION>
                                                          Common Stock                    Additional 
                                                        -----------------     Preferred    Paid-in      Accumulated
                                                        Shares      Amount      Stock      Capital        Deficit        Total
                                                        ------      ------    ---------  ------------   ------------  ------------
<S>                                                   <C>          <C>        <C>        <C>           <C>            <C>         
 Balance at December 31, 1996                         4,615,000    $46,150    $     --   $  6,481,159  $ (2,862,653)  $  3,664,656

 Common stock issued in connection with the March 
   bridge financing                                     100,000      1,000          --        999,000            --      1,000,000
 Warrants issued in connection with the March 
   bridge financing                                          --         --          --        665,000            --        665,000
 Common stock issued in connection with the Infinity
   financing                                            288,025      2,880          --      1,755,619            --      1,758,499
 Warrants issued in connection with the Infinity                                                                   
   financing                                                 --         --          --        962,012            --        962,012
 Common stock issued for services                       270,000      2,700          --        997,300            --      1,000,000
 Options and warrants issued for services                    --         --          --        458,237            --        458,237
 Exercise of options                                     25,000        250          --        127,750            --        128,000
 Issuance of common stock for payment of interest on                                                               
   convertible debt                                      65,671        657          --        333,101            --        333,758
 Repurchase and cancellation of common stock            (47,000)      (470)         --       (351,784)           --       (352,254)
 Net loss                                                    --         --          --             --   (10,755,570)   (10,755,570)
                                                    -----------   --------  ----------    -----------  ------------   ------------
 Balance at December 31, 1997                         5,316,696     53,167          --     12,427,394   (13,618,223)    (1,137,662)

 Preferred stock Series A convertible issued in                                                                    
   connection with the Infinity financing                    --         --   6,000,000     (2,178,942)           --      3,821,058
 Cancellation of Preferred stock Series A convertible                                                              
   issued in connection with the Infinity financing          --         --  (6,000,000)     6,000,000            --             --
 Preferred stock Series A-2 convertible issued in                                                                  
   connection with the Infinity financing                    --         --   6,000,000     (6,000,000)           --             --
 Preferred stock embedded dividend                           --         --          --      1,350,000    (1,350,000)            --
 Sale of preferred stock in connection with the Infinity                                                           
   financing                                                 --         --   1,550,000             --            --      1,550,000
 Redemption of preferred stock in connection with the                                                              
   Infinity financing                                        --         --  (1,550,000)            --            --     (1,550,000)
 Issuance of common stock for payment of dividends on                                                              
   preferred stock                                      302,755      3,028          --        484,240      (487,268)            --
 Issuance of common stock for payment of interest on                                                               
   convertible debt                                      80,989        809          --        123,972            --        124,781
 Common stock and warrants issued in connection with
   the Infinity financing amendments                    350,000      3,500          --        260,909            --        264,409
 Common stock issued in connection with the Marion 
   equity financing                                   4,010,000     40,100          --      4,678,678            --      4,718,778
 Common stock and warrants issued in connection with 
   the Greg Norman agreement                            272,000      2,720          --        290,088            --        292,808
 Issuance of common stock for payment of prepaid                                                                   
   royalties                                             30,000        300          --        299,700            --        300,000
 Exercise of options                                     16,000        160          --         12,340            --         12,500
 Net loss                                                    --         --          --             --    (4,846,792)    (4,846,792)
                                                    -----------   --------  ----------    -----------  ------------   ------------
 Balance at December 31, 1998                       $10,378,440   $103,784  $6,000,000    $17,748,379  $(20,302,283)   $ 3,549,880
                                                    ===========   ========  ==========    ===========  ============    ===========
</TABLE>



   The accompanying notes are an integral part of these financial statements.




                                      24
<PAGE>   25

                            VISUAL EDGE SYSTEMS INC.
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                    For the years ended
                                                                                       December 31,
                                                                         ---------------------------------------
                                                                                1997                  1998
                                                                         ------------------     ----------------
<S>                                                                      <C>                    <C>
Operating activities:
Net loss                                                                 $     (10,755,570)     $     (4,846,792)
Adjustments to reconcile net loss to net cash used in operating 
 activities:
      Non-cash stock compensation expense                                          243,257               292,808
      Non-cash stock financing fees                                              1,036,000                95,242
      Non-cash interest expenses                                                   333,758               124,781
      Depreciation and amortization                                              1,128,964               851,258
      Amortization of deferred financing expenses                                1,243,418               306,112
      Extraordinary Item                                                           999,000                    --
      Changes in assets and liabilities:
           Increase in accounts receivable                                         (23,917)               (2,976)
           (Increase)/decrease in other current assets                            (136,469)              109,880
           (Increase)/decrease in prepaid expense - advance royalties              (50,000)              129,423
           Increase in inventory                                                   (36,024)              (30,371)
           Increase in other assets                                                     --              (154,097)
           Increase/(decrease) in accounts payable                                  11,770              (143,267)
           Decrease in accrued expenses                                           (111,295)               (5,810)
           Increase in other current liabilities                                   119,766                96,993
                                                                         -----------------      ----------------
                Net cash used in operating activities                           (5,997,342)           (3,176,816)
                                                                         -----------------      ----------------
Investing activities:
      Capital expenditures                                                         (71,457)             (347,737)
      Purchases of short-term investments                                       (3,523,667)           (3,750,000)
      Proceeds from the sale of short-term investments                           3,500,000             3,080,000
                                                                         -----------------      ----------------
                Net cash used in investing activities                              (95,124)           (1,017,737)
                                                                         -----------------      ----------------
Financing activities:
      Proceeds from the issuance of common stock                                        --             4,718,778
      Exercise of options                                                          128,000                12,500
      Repurchase common stock                                                     (352,254)                   --
      Repayment of borrowings                                                   (4,351,968)             (516,808)
      Payments of financing costs                                                 (340,000)                   --
      Proceeds from borrowings                                                  11,000,000                    --
                                                                         -----------------      ----------------
                Net cash provided by financing activities                        6,083,778             4,214,470
                                                                         -----------------      ----------------
                Net change in cash and cash equivalents                             (8,688)               19,917
Cash and cash equivalents at beginning of period                                   233,117               224,429
                                                                         -----------------      ----------------
Cash and cash equivalents at end of period                               $         224,429      $        244,346
                                                                         =================      ================
Supplemental disclosure of cash flow information:
      Cash paid for interest                                             $         174,069      $        117,279
                                                                         =================      ================

</TABLE>

   The accompanying notes are an integral part of these financial statements.





                                      25
<PAGE>   26
                            VISUAL EDGE SYSTEMS INC.

                         NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1997 AND 1998

(1)      BACKGROUND

                  Visual Edge Systems Inc. (the "Company") was organized to
                  develop and market personalized videotape golf lessons
                  featuring ONE-ON-ONE instruction by professional golfer Greg
                  Norman. The Company has developed video production technology
                  which digitally combines actual video footage of a golfer's
                  swing with a synchronized "split-screen" comparison to Greg
                  Norman's golf swing to produce a ONE-ON-ONE videotape golf
                  lesson. The Company sells its products under the name
                  "ONE-ON-ONE WITH GREG NORMAN".

                  The Company was incorporated in July 1994 and commenced
                  developmental operations in January 1995. From the Company's
                  inception through the end of December 31, 1996, it was
                  primarily engaged in product development, market development,
                  technology testing, recruitment of key personnel, capital
                  raising and preparation of the software, hardware and
                  videotape coaching instructions used in the production of its
                  products. As a consequence, the Company did not generate any
                  revenue and operated as a development stage company through
                  December 31, 1996. The Company emerged from its development
                  stage and commenced generating revenue from its primary
                  business activities during the first quarter of fiscal 1997.

                  The Company's marketing strategy is to sell ONE-ON-ONE
                  videotapes to (a) various organizers of amateur corporate,
                  charity and member golf tournaments (who typically offer
                  gifts to tournament participants), golf professionals at
                  private and daily fee golf courses and driving ranges and
                  indoor event planners who organize trade shows, conventions,
                  sales meetings, retail store openings and promotions and
                  automobile dealer showroom promotions, (b) corporations who
                  will give the ONE-ON-ONE WITH GREG NORMAN lesson as customer
                  and employee appreciation gifts instead of gifts such as golf
                  balls with logos, fruit baskets or chocolates, (c) individual
                  golfers or persons who wish to give a gift to a golfer via
                  the Internet or a planned thirty minute infomercial, and (d)
                  corporations who will use the ONE-ON-ONE product as an
                  incentive to entice individuals to purchase or use their
                  product or service.

                   To implement its marketing and business strategy, the
                  Company has built 17 mobile ONE-ON-ONE production facilities
                  ("vans") equipped with video and personal computer equipment
                  to market, promote and produce the Company's products. The
                  Company locates its ONE-ON-ONE vans in selected geographic
                  areas that service golf courses and driving ranges throughout
                  the United States, and has placed its first vans in Arizona,
                  California, Florida, Georgia, Illinois, Maryland,
                  Massachusetts, Michigan, New Jersey, New York, Ohio,
                  Pennsylvania, Texas and Ontario, Canada. The vans travel to
                  golf courses and corporate events to film participants and
                  produce the ONE-ON-ONE lessons on-site. The Company has also
                  opened authorized ONE-ON-ONE videotaping centers in key




                                      26
<PAGE>   27

                  cities throughout the country which allow recipients of
                  ONE-ON-ONE gift certificates or certificates which may in the
                  future be obtained through a planned infomercial to redeem
                  their certificates and receive their personalized ONE-ON-ONE
                  video golf lesson. These videotaping centers are permanent,
                  part time locations which the Company has developed in
                  partnership with existing retail establishments such as
                  driving ranges, golf courses, automobile dealerships and
                  other retailers. In 1998, almost 100% of the Company's
                  revenue was derived from van service. The Company expects
                  that the videotaping centers will account for less than 10%
                  of sales during 1999, although this amount may be affected by
                  the impact of the planned infomercial. The infomercial has
                  been completed and is currently awaiting approval from Greg
                  Norman and Great White Shark Enterprises, Inc. The Company
                  expects to begin testing the infomercial in May in three
                  markets. The Company has incurred no costs related to the
                  infomercial's development, because it licensed development
                  rights to an independent third party infomercial company.
                  Delays in testing the infomercial have been related to
                  editing delays by the third party.

                  The Company is marketing the gift certificate program as a
                  corporate incentive and promotional product and is selling
                  the certificates directly to golfers via the Company's web
                  site. Sales to corporations are handled by the Company's
                  sales force and independent sales representatives.

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (A)      ACCOUNTING ESTIMATES

                  The preparation of financial statements in conformity with
                  generally accepted accounting principles requires management
                  to make estimates and assumptions that affect the reported
                  amounts of assets and liabilities and disclosure of
                  contingent assets and liabilities at the date of the
                  financial statements and the reported amounts of revenues and
                  expenses during the reporting period. Actual results could
                  differ from those estimates.

         (B)      REVENUE RECOGNITION

                  Revenue from sale of event days or individual personalized
                  videotapes is recognized when the Company completes the event
                  day or delivers the videotapes to the individual customer.
                  Deposits received in advance of videotape delivery are
                  recorded as customer deposits which are included in other
                  current liabilities in the accompanying balance sheets.

         (C)      CASH AND CASH EQUIVALENTS

                  For purposes of the statements of cash flows, the Company
                  considers all highly liquid investments purchased with a
                  maturity of three months or less at the date of purchase to
                  be cash equivalents. At December 31, 1997 and 1998,
                  substantially all cash and cash equivalents are
                  interest-bearing deposits.






                                      27
<PAGE>   28

         (D)      INVENTORIES

                  The Company's inventory consists exclusively of videotapes.
                  Inventory is stated at the lower of weighted average or cost
                  or market. In evaluating whether inventory is stated at the
                  lower of cost or market, management considers factors such as
                  the amount of inventory on hand, estimated time to sell such
                  inventory and current market conditions.

         (E)      FIXED AND INTANGIBLE ASSETS

                  Fixed assets are stated at cost. Depreciation is calculated
                  on a straight-line basis over the estimated useful lives of
                  the assets which range from 3 to 5 years. Intangible assets
                  consist primarily of video production costs. The costs of
                  video production are amortized on a straight-line basis over
                  a period of 4 years, the estimated useful lives of the
                  intangible assets.

                  The Company has adopted Statement of Financial Accounting
                  Standards ("SFAS") No. 121, "Accounting for the Impairment of
                  Long-Lived Assets and for Long-Lived Assets to Be Disposed
                  Of". Under the provisions of this statement, the Company has
                  evaluated its long-lived assets for financial impairment, and
                  will continue to evaluate them as events or changes in
                  circumstances indicate that the carrying amount of such
                  assets may not be fully recoverable.

                  The Company evaluates the recoverability of long-lived assets
                  and certain identifiable intangibles to be held and used by
                  measuring the carrying amount of the assets against the
                  estimated undiscounted future cash flows associated with
                  them. At the time such evaluations indicate that the future
                  undiscounted cash flows of certain long-lived assets are not
                  sufficient to recover the carrying value of such assets, the
                  assets are adjusted to their fair values. Based on these
                  evaluations, there were no adjustments to the carrying value
                  of long-lived assets in 1997 or 1998.

                  The Company evaluates the recoverability of long-lived assets
                  held for sale by comparing the asset's carrying amount with
                  its fair value less cost to sell. No assets were held for sale
                  as of December 31, 1997 or 1998.

         (F)      PREPAID EXPENSES-ADVANCE ROYALTIES

                  As described in Note 9(a), prior to December 31, 1998, the
                  Company was required to pay minimum guaranteed advances
                  against a royalty of 8% of all revenues. On December 31, 1998
                  an amendment to the royalty agreement was signed which
                  eliminated the post December 31, 1998 minimum guaranteed
                  royalty payments and increased the royalty to 13% of all
                  revenues (8% to be paid annually/quarterly/monthly in cash
                  and 5% to be applied against past royalty amounts). Once the
                  Company's revenues exceed $24,172,000 the royalty is to be
                  reduced to 8%. The guaranteed minimum royalty payments were
                  capitalized and expensed as the related revenues were earned.
                  Additionally, the Company continually evaluates the expected
                  realization of the carrying value of the prepaid royalty and,
                  if necessary, reduces the carrying value to reflect
                  management's best estimate of the amounts to be recovered in
                  future periods.







                                      28
<PAGE>   29

                  Through December 31, 1998 payments in cash and shares of the
                  Company's common stock of $1,600,000 had been made under the
                  agreement of which $250,000 and $449,266 was expensed in cost
                  of goods sold in the accompanying statement of operations
                  during the years ended December 31, 1997 and 1998,
                  respectively, and $350,000 and $900,734, is included in
                  prepaid expenses and other assets in the accompanying balance
                  sheets as of December 31, 1997 and 1998, respectively.

         (G)      INCOME TAXES

                  In accordance with SFAS No. 109, "Accounting for Income
                  Taxes," deferred tax assets or liabilities are computed based
                  upon the difference between the financial statement and
                  income tax basis of assets and liabilities using the enacted
                  marginal tax rate applicable when the related asset or
                  liability is expected to be realized or settled. Deferred
                  income tax expense or benefit is based on the changes in the
                  asset or liability from period to period. If available
                  evidence suggests that it is more likely than not that some
                  portion or all of the deferred tax assets will not be
                  realized, a valuation allowance is established to reduce the
                  deferred tax assets to the amount that is more likely than
                  not to be realized. Future changes in such valuation
                  allowance would be included in the provision for deferred
                  income taxes in the period of change.

         (H)      CONCENTRATION OF CREDIT RISK

                  The Company has no significant off-balance sheet
                  concentrations of credit risk.

         (I)      FAIR VALUE OF FINANCIAL INSTRUMENTS

                  The carrying amounts of cash and cash equivalents,
                  certificates of deposit, investments, accounts receivable,
                  and other current assets as well as accounts payable, accrued
                  expenses and other current liabilities as reflected in the
                  accompanying balance sheets approximate fair value due to the
                  short-term maturity of these instruments. The fair value of
                  equipment loans and the convertible debt is estimated using
                  an appropriate valuation method and approximates the carrying
                  amounts reported in the accompanying balance sheets.

         (J)      LOSS PER SHARE

                  The Company adopted SFAS No. 128, "Earnings Per Share" during
                  1997. SFAS No. 128 establishes standards for computing and
                  presenting basic and diluted earnings per share. Basic loss
                  per share is calculated by dividing loss available to Common
                  Stockholders by the weighted average number of shares of
                  Common Stock outstanding during each period. Diluted loss per
                  share includes the potential impact of dilutive common share
                  equivalents using the treasury stock method. As of December
                  31, 1997 and 1998 shares of Common Stock issuable upon
                  conversion of convertible debt and Preferred Stock and the
                  exercise of outstanding options and warrants have been
                  excluded from the computation of diluted loss per share in
                  the accompanying statements of operations as their impact is
                  antidilutive.







                                      29
<PAGE>   30

         (K)      STOCK OPTION PLAN

                  Under the provisions of SFAS No. 123, "Accounting for
                  Stock-Based Compensation," companies can either measure the
                  compensation cost of equity instruments issued under employee
                  compensation plans using a fair value based method, or can
                  continue to recognize compensation cost using the intrinsic
                  value method under the provisions of Accounting Principles
                  Board ("APB") Opinion No. 25. The Company intends to
                  recognize compensation costs, where appropriate, under the
                  provisions of APB No. 25, and has provided the expanded
                  disclosure required under SFAS No. 123 for the years ending
                  December 31, 1997 and 1998(see Note 8).

         (L)      RECENT ACCOUNTING PRONOUNCEMENTS

                  In June 1997, the Financial Accounting Standards Board
                  ("FASB") issued Statement of Financial Accounting Standards
                  ("SFAS") No. 130, "Reporting Comprehensive Income" which is
                  required to be adopted in fiscal years beginning after
                  December 15, 1997. This statement requires the reporting and
                  display of comprehensive income and its components in a full
                  set of general-purpose financial statements. Comprehensive
                  income is defined as the change in equity during the
                  financial reporting period of a business enterprise resulting
                  from non-owner sources. The Company adopted SFAS No. 130 on
                  January 1, 1998. The adoption of SFAS No. 130 did not have a
                  material impact on the Company's financial position or
                  results of operations as comprehensive income is equal to net
                  income for all periods presented.

                  In June 1997, the FASB issued SFAS No. 131, "Disclosures
                  about Segments of an Enterprise and Related Information".
                  This statement establishes standards for reporting
                  information about operating segments in annual financial
                  statements and requires reporting of selected information
                  about operating segments in interim financial reports issued
                  to shareholders. It also establishes standards for related
                  disclosures about products and services, geographical areas
                  and major customers. The Company adopted SFAS No. 131
                  effective December 31, 1998. The adoption of SFAS No. 131 did
                  not affect the Company's disclosure requirements since the
                  Company operates in only one segment.

                  SFAS No. 133 ,"Accounting for Derivative Instruments and
                  Hedging Activities", is effective for fiscal years ending
                  after June 15, 1999. This statement establishes accounting
                  and reporting standards requiring that every derivative
                  instrument be recorded in the balance sheet as either an
                  asset or a liability at its fair value. The Company adopted
                  SFAS 133 in 1999 and expects that the adoption of this
                  pronouncement will not have a material impact on the
                  Company's financial position since the Company does not
                  presently have any derivative or hedging-type investment as
                  defined by SFAS 133.






                                      30
<PAGE>   31

                  In April 1998, the American Institute of Certified Public
                  Accountants (the "AICPA") issued a Statement of Position
                  98-5, "Reporting on the Costs of Start-Up Activities" ("SOP
                  98-5"). SOP 98-5 requires all costs associated with
                  pre-opening, pre-operating and organization activities to be
                  expensed as incurred. The Company's accounting policies
                  conform with the requirements of SOP 98-5, therefore adoption
                  of this statement will not impact the Company's financial
                  position or results of operations.

(3)      FIXED ASSETS, NET

                  Fixed assets, including equipment and mobile production units
                  acquired under capital leases, consist of the following at
                  December 31, 1997 and 1998:

<TABLE>
<CAPTION>

                                                                                                  LIVES
                                                                   1997           1998           (YEARS)
                                                                ----------      ----------       -------
                  <S>                                           <C>             <C>                   <C>
                  Mobile video-tape production units            $2,394,704      $2,696,553          5
                  Product development equipment                    489,149         523,224        3 - 5
                  Training and processing equipment                116,271         117,725          5
                  Office furniture and equipment                   382,399         392,759          5
                  Trade show exhibits                              146,657         146,657          5
                                                                ----------      ----------
                                                                 3,529,180       3,876,918
                  Less accumulated depreciation                   (896,354)     (1,628,404)
                                                                ----------     -----------
                  Fixed assets, net                              2,632,826       2,248,514
                                                                ==========     ===========

</TABLE>
(4)      INTANGIBLE ASSETS, NET

                  Intangible assets consist of the following at December 31,
                  1997 and 1998:

<TABLE>
<CAPTION>
                                                                           1997            1998
                                                                        ---------        ---------
                  <S>                                                   <C>              <C>      
                  Video and marketing production costs                  $ 447,404        $ 447,404
                  Deferred organizational costs                            29,428           29,428
                                                                        ---------        ---------
                                                                          476,832          476,832
                  Less accumulated amortization                          (189,846)        (309,055)
                                                                        ---------        ---------
                  Intangible assets, net                                $ 286,986        $ 167,777
                                                                        =========        =========
</TABLE>

(5)    FINANCINGS

         (A)      MARCH 1997 BRIDGE FINANCING

                  In March 1997, the Company consummated a bridge financing
                  (the "March Bridge Financing") pursuant to which it issued to
                  13 investors (including Status-One Investments Inc., a
                  company controlled by the family of the Chief Executive
                  Officer of the Company), a non-cash financing fee of (i)
                  100,000 shares of common stock and (ii) 100,000 warrants to
                  purchase 100,000 shares of common stock at a price of $10.00
                  per share, subject to adjustment in certain circumstances. As
                  consideration for such securities, the investors in the March
                  Bridge Financing pledged an aggregate of $3,500,000 in cash
                  and other marketable securities as cash collateral (the "Cash
                  Collateral") to various banks, which in turn issued stand-by
                  letters of credit (the "Letters of Credit") to the Company in






                                      31
<PAGE>   32

                  the aggregate amount of up to $3,500,000. The Company used
                  the Letters of Credit to secure a $3,500,000 line of credit
                  (the "Line of Credit") from a bank. In June 1997, the Company
                  used a portion of the proceeds from the issuance and sale of
                  certain securities, outlined hereafter in note 5(b), to repay
                  the remaining outstanding balance due and owing on the Line
                  of Credit and returned the Letters of Credit to the various
                  banks, which in turn returned all of the Cash Collateral to
                  the March Bridge Financing investors.

                  The Company valued the non-cash financing fee in accordance
                  with SFAS No. 123, which resulted in the recording of
                  original issue discounts and financing fees of $1,665,000. At
                  the time of the repayment of the outstanding balance due
                  under the Line of Credit, the Company had amortized $666,000
                  of the fees. The remaining fees of $999,000 are reflected as
                  an extraordinary item in the accompanying statement of
                  operations for the year ended December 31, 1997.

(B)      INFINITY  FINANCING

                  On June 13, 1997, the Company arranged a three-year $7.5
                  million debt and convertible equity facility (the "Infinity
                  Financing") with a group of investment funds (the "Funds").
                  The Company issued and sold to the Funds the following
                  securities pursuant to the Securities Purchase Agreement,
                  dated as of June 13, 1997 (the "Agreement"), among the
                  Company and the Funds: (i) 8.25% unsecured convertible notes
                  (the "Notes") in the aggregate principal amount of $7,500,000
                  with a maturity date of three years from the date of
                  issuance, subject to the mandatory automatic exchange of $5
                  million of the Notes for Preferred Stock, par value $.01 per
                  share, which Notes were convertible into shares of Common
                  Stock (the "Note Conversion Shares") at any time and from
                  time to time commencing January 1, 1998 at the option of the
                  holder thereof subject to certain limitations on conversion
                  set forth in the Agreement; (ii) 93,677 shares of Common
                  Stock subject to adjustment (the "Grant Shares"); and (iii)
                  five-year warrants (the "June Warrants") to purchase 100,000
                  shares of Common Stock (the "Warrant Shares") at an exercise
                  price equal to $10.675. The net proceeds to the Company from
                  the sale of the Notes, Grant Shares and June Warrants was
                  $7,236,938. In addition, the Company issued 14,052 shares
                  (the "IPO Underwriters Shares") of Common Stock to the
                  underwriter in the Company's initial public offering as a fee
                  for services rendered in connection with the transactions
                  contemplated by the Agreement.

                  Pursuant to the Agreement, the Company was required to issue
                  additional Grant Shares (the "Additional Grant Shares") to
                  the Funds in the event that the closing bid price of Common
                  Stock for each trading day during any consecutive 10 trading
                  days from June 13, 1997 through December 31, 1997 did not
                  equal at least $10.00 per share. The Company issued 180,296
                  Additional Grant Shares during the fourth quarter of 1997.

                  Interest payments on the Notes are, at the option of the
                  Company, payable in cash or in shares of Common Stock. During
                  1997 and 1998 the Company issued an aggregate of 65,671
                  shares and 80,989 shares, respectively, (collectively, the
                  "Interest Shares") for payment of interest due.






                                      32
<PAGE>   33

                  On February 6, 1998, the Company entered into the First
                  Amendment to the Securities Purchase Agreement and Related
                  Documents, dated December 31, 1997 (the "First Amendment"),
                  among the Company and the Funds. Pursuant to the First
                  Amendment, the Funds converted $6 million aggregate principal
                  amount of the Notes into the Company's Series A Convertible
                  Preferred Stock (the "Preferred Stock"). In addition, the
                  "Maximum Conversion Price" (as defined in the First
                  Amendment) at which shares of Preferred Stock are convertible
                  into Common Stock (the "Stock Conversion Shares") is $6.00,
                  subject to adjustment in certain circumstances.

                  Dividends on the Preferred Stock and the Series A-2 Preferred
                  Stock (as hereinafter defined) are, at the option of the
                  Company, payable in cash or in shares of Common Stock. During
                  1998 the Company issued an aggregate of 302,755 shares (the
                  "Dividend Shares") for payment of dividends.

                  The remaining $1.5 million of outstanding Notes held by the
                  Funds have become secured debt pursuant to a Security
                  Agreement, dated as of February 6, 1998 (the "Security
                  Agreement"), between the Company and H.W. Partners, L.P., as
                  agent for and representative of the Funds. With respect to
                  such $1.5 million in outstanding Notes, the Funds have been
                  granted a security interest in the collateral described in
                  the Security Agreement, which includes all of the Company's
                  unrestricted cash deposit accounts, accounts receivable,
                  inventory and equipment and fixtures excluding the vans.

                  In connection with the First Amendment, the Company issued to
                  the Funds an aggregate of 200,000 warrants (the "New
                  Warrants"), each to purchase one share of Common Stock
                  (collectively, the "New Warrant Shares") at an exercise price
                  equal to $4.00 per share.

                  The issuance of the Grant Shares, Additional Grant Shares,
                  June Warrants, IPO Underwriters Shares and the New Warrants
                  resulted in the recording of financing costs of $2,720,511.
                  Additionally, the Company paid financing costs of $340,000 in
                  connection with the Agreement. As $5 million of the Notes
                  were automatically convertible to Preferred Stock as of
                  January 1, 1998, the total financing fees incurred were
                  allocated to equity and debt costs on a pro rata basis
                  consistent with the portion of the Notes subject to the
                  automatic conversion feature. Part of the financing has been
                  recorded as a reduction of the carrying value of the Notes,
                  while the portion of the financing fees attributable to debt
                  costs are recorded as an original issue discount and are
                  being amortized using a method which approximates the
                  interest method over the term of the Notes.

                  On March 16, 1998, the Company sold an additional 1,550
                  shares of Preferred Stock to the Funds in exchange for
                  marketable securities with an aggregate value of $1,550,000.
                  In connection therewith, the Funds as the holders of the
                  majority of the outstanding shares of Preferred Stock,
                  obtained the right to appoint one director to the Company's
                  Board of Directors, although they had not named such director
                  as of December 31, 1998.







                                      33
<PAGE>   34

                  As a condition to the consummation of the Marion Equity
                  Financing (as defined and described under "Marion Equity
                  Financing" in Note 5(c)), the Company entered into the
                  Agreement and Second Amendment to Bridge Securities Purchase
                  Agreement and Related Documents (the "Second Amendment"),
                  dated March 27, 1998, among the Company and the Funds.
                  Pursuant to the Second Amendment, the Funds agreed that they
                  would not convert, prior to December 31, 1998, any shares of
                  Preferred Stock or any principal amount of the Notes into
                  shares of Common Stock, unless a "Material Transaction"
                  (defined as a change of control of the Company, a transfer of
                  all or substantially all of the Company's assets or a merger
                  of the Company into another entity) has occurred. Further,
                  the Funds agreed that they would not, prior to March 31,
                  1999, publicly sell any shares of Common Stock owned or
                  acquired by the Funds, unless a Material Transaction has
                  occurred; the Funds are permitted, after June 30, 1998 and
                  subject to the Company's right of first refusal, to privately
                  sell any shares of Common Stock that they own or acquire,
                  provided the purchaser agrees in writing to be bound by the
                  same resale restrictions.

                  The Funds have granted to the Company an option to redeem the
                  Preferred Stock and the Notes owned by the Funds. The Company
                  is required to redeem all of the Preferred Stock outstanding
                  prior to redemption of any of the Notes. In addition, the
                  Funds have granted to the Company and to Marion (as hereafter
                  defined) an option to acquire, on or before March 31, 1999,
                  all of the shares of Common Stock owned by the Funds.

                  In connection with the Second Amendment, the Funds received
                  100,000 shares of Common Stock. Furthermore, because the
                  Company did not redeem all of the Preferred Stock and Notes
                  owned by the Funds by June 30, 1998, the Funds received
                  200,000 additional shares of Common Stock. Further, the
                  exercise price of the June Warrants was reduced from $10.675
                  per share to $3.25 per share and the exercise price of the
                  New Warrants was reduced from $4.00 per share to $3.25 per
                  share. The fair values of the issuances of Common Stock and
                  the repricing of the warrants have been recorded as an
                  original issue discount and are being amortized using a
                  method which approximates the interest method over the term
                  of the Notes. The unamortized portion of the original issue
                  discount was $246,727 at December 31, 1998.

                  On December 29, 1998, the Company entered into the Third
                  Amendment to Bridge Securities and Purchase Agreement and
                  Related Documents (the "Third Amendment"), among the Company
                  and Funds (or, if applicable, their respective transferees)
                  (the "New Funds"). Pursuant to the Third Amendment, the
                  Company agreed to retire all of the issued and outstanding
                  shares of its Series A Convertible Preferred Stock and, in
                  exchange therefor, issue to the New Funds 6,000 shares of a
                  new class of Series A-2 Convertible Preferred Stock (the
                  "Series A-2 Preferred Stock"). The Series A-2 Preferred Stock
                  is senior to the Common Stock with respect to dividends,
                  liquidation and dissolution. Prior to January 1, 2000, no
                  dividends shall accrue or be payable on the Series A-2
                  Preferred Stock. Beginning on January 1, 2000, each share of
                  Series A-2 Preferred Stock shall entitle the holder to an
                  annual dividend of 8.25%, payable on a quarterly basis, which
                  dividend shall increase to 18% in certain situations as
                  specified in the Certificate of Designation with respect to
                  the Series A-2 Preferred Stock.






                                      34
<PAGE>   35

                  The Third Amendment also revised the conversion price at
                  which the Notes may be convertible into Common Stock, at
                  which the Series A-2 Preferred Stock may be convertible into
                  Common Stock (the "Series A-2 Conversion Shares") and
                  required future interest payments on the Notes to be made in
                  cash. The "Conversion Price" (as defined in the Third
                  Amendment) applicable to the Company's outstanding
                  Convertible Notes is $2.50 until January 1, 2000, inclusive,
                  and $1.25 thereafter. The Conversion Price applicable to the
                  Series A-2 Preferred Stock is (i) for the first $2,000,000 of
                  aggregate liquidation preference of the Series A-2 Preferred
                  Stock, $1.25, (ii) for the next $1,000,000 of aggregate
                  liquidation preference of the Series A-2 Preferred Stock,
                  $2.00 until June 30, 1999, inclusive, $1.375 from July 1,
                  1999 until January 1, 2000, inclusive, and $1.25 thereafter,
                  and (iii) for any excess amounts of aggregate liquidation
                  preference of the Series A-2 Preferred Stock, $2.50 until
                  June 30, 1999, inclusive, $2.00 from July 1, 1999 until
                  January 1, 2000, inclusive, and $1.25 thereafter.

                  The New Funds agreed to a limitation on their conversion
                  rights, such that they may not convert any amount of
                  convertible instruments or exercise any portion of warrants
                  that would result in the sum of (a) the number of shares of
                  Common Stock beneficially owned by the New Funds and their
                  affiliates and (b) the number of shares of Common Stock
                  issuable upon conversion of convertible instruments or
                  exercise of warrants, exceeding 9.99% of the outstanding
                  shares of Common Stock after giving effect to such conversion
                  or exercise. The Third Amendment removed resale limitations
                  on the New Funds.

                  Furthermore, as a means of retaining the Company's management
                  and as an incentive for such management to pursue the
                  Company's long-term goals, the Third Amendment provided that
                  all outstanding stock options granted to the Chief Executive
                  Officer, the President and Chief Operating Officer, and the
                  Vice President of Operations and Technology be repriced to
                  $1.00 per share and that all such options shall be
                  immediately vested. The Company also agreed to reprice to
                  $1.00 per share approximately 82,000 existing employee stock
                  options, all such options to be immediately vested. In
                  addition, the New Funds also returned to the Company the
                  June Warrants and the New Warrants to purchase an aggregate
                  of 284,000 shares, and the Company repriced 16,000 of these
                  warrants to market value at $.781 per share that were
                  exercised pursuant to the Third Amendment (as described
                  below), provided that options to purchase 200,000 shares of
                  Common Stock be granted to the President and Chief Operating
                  Officer and options to purchase 100,000 shares of Common
                  Stock be granted to the Vice President of Operations and
                  Technology, all such options to be immediately vested and to
                  have an exercise price of $1.00 per share. The unamortized
                  portion amounting to $65,000 of the original issue discount
                  associated with the June Warrants and New Warrants has been
                  fully amortized in 1998. Moreover, the Company granted 200,000
                  new stock options to the President and Chief Operating
                  Officer, all such options to be immediately vested and to have
                  an exercise price of $1.00 per share.

                  In connection with the Third Amendment the Company paid
                  financing costs of $25,000, issued 50,000 shares of Common
                  Stock and issued 100,000 options, 50,000 with an exercise
                  price of $3.00 per share and 50,000 with an exercise price of
                  $1.00 per share, for the facilitation of the agreement. The
                  fair market value of these payments and issuances of $95,125
                  are recorded as financing fees in the accompanying 1998
                  statements of operations.






                                      35
<PAGE>   36

                  Lastly, the New Funds agreed in the Third Amendment to
                  exercise warrants to purchase shares of Common Stock to
                  result in a total exercise price of approximately $12,500.
                  Pursuant to this provision 16,000 shares were issued.

         (C)      MARION EQUITY FINANCING

                  In March 1998, the Company entered into a Purchase Agreement
                  (the "Marion Agreement") with Marion Interglobal, Ltd., an
                  investment group ("Marion"), or its assigns. The Marion
                  Agreement called for the Company to receive up to $11,000,000
                  from Marion in exchange for shares of Common Stock as
                  explained herein. Pursuant to the Marion Agreement, the
                  purchase of Common Stock was to occur in three tranches as
                  follows: (i) on March 27, 1998, the Company sold to Marion
                  1,200,000 shares of Common Stock for an aggregate
                  consideration of $3,000,000 which was received on April 16,
                  1998; (ii) on June 30, 1998, the Company sold to Marion
                  800,000 shares of Common Stock for an aggregate consideration
                  of $2,000,000; and (iii) on or prior to September 30, 1998
                  the Company was to sell a number of shares of Common Stock
                  (to be determined by when the closing occurs, which would
                  range from 2,666,667 shares to 3,200,000 shares) for an
                  aggregate consideration of $6,000,000. The third tranche was
                  contingent on Marion's satisfaction that the Company met or
                  exceeded certain unspecified financial targets expected by
                  Marion, in its sole discretion. Marion was under no firm
                  obligation to complete this tranche. The third tranche of the
                  Marion Agreement was not completed by Marion due to market
                  conditions. The Company paid transaction fees to Marion upon
                  completion of each tranche as follows: (i) 1,200,000 shares
                  of Common Stock for the first $3,000,000 tranche; and (ii)
                  800,000 shares of Common Stock for the second $2,000,000
                  tranche. The Company issued an additional 10,000 shares as a
                  finders fee in connection with this financing.

                  Further, upon the consummation of the second tranche of the
                  Marion Agreement, Mr. Alan Lubell, a former director of the
                  Company, transferred 250,000 shares of Common Stock to
                  Marion, which shares were registered under the Securities Act
                  of 1933, as amended, effective April 15, 1998.

                  Pursuant to the Marion Agreement, Marion represented a group
                  of investors and was entitled to assign its rights to receive
                  shares of Common Stock from the Company and Mr. Lubell.
                  Marion exercised this right and allocated the shares of
                  Common Stock from the Company and Mr. Lubell to various
                  unrelated investors and retained 876,000 shares for its own
                  account. Marion is controlled by Ronald Seale who became
                  Chairman of the Board of the Company on June 3, 1998 and
                  presently holds 976,000 shares of Common Stock.

                  As a condition to the consummation of this equity financing,
                  the Company renegotiated the terms of its outstanding Notes
                  and Preferred Stock with the Funds (see Infinity Financing
                  and Note 5(b) for details).






                                      36
<PAGE>   37

         (D)      EQUIPMENT LOANS

                  In August 1997, the Company entered into an equipment
                  financing facility whereby the Company will be provided with
                  up to $2.5 million in financing. The facility provides the
                  Company with equipment financing of $100,000 per van for 25
                  vans, each of which is anticipated to cost approximately
                  $150,000. The Company drew $800,000 on the facility to
                  finance eight vans purchased in May 1997. The outstanding
                  balance bears interest at the rate of 11.62% and is payable
                  in 36 consecutive monthly payments of $25,328 which commenced
                  in August 1997, followed by one balloon payment of $47,040.
                  The Company has pledged to the lender a certificate of
                  deposit in the aggregate amount of $200,000 in connection
                  with the financing of the first eight vans which is included
                  in "Investments-Restricted" in the accompanying December 31,
                  1997 and 1998 balance sheets.

                  The Company acquired certain fixed assets under capital
                  leases totaling $913,170. As a condition of the leases the
                  Company is required, throughout the term of the leases, to
                  post letters of credit in the aggregate amount of, the lesser
                  of $538,902 or the outstanding aggregate loan balance, for
                  collateral on the leases. The letters of credit were issued
                  from the Company's bank and the Company pledged one of its
                  investment funds with a balance of $612,719 and $387,108 for
                  the years ending December 31, 1997 and 1998, respectively, as
                  security, which is included in "Investments-Restricted" in
                  the accompanying December 31, 1997 and 1998 balance sheets.

                  Future payments under the facility and capital leases are as
                  follows:

<TABLE>
<CAPTION>

                                                                       FACILITY         CAPITAL LEASE         TOTAL
                                                                       --------         -------------         -----
                  <S>                                                  <C>                 <C>               <C>      
                  For the year ended December 31,
                    1999                                              $ 353,172           $ 303,936         $ 657,108
                    2000                                                 41,957             224,336           266,293
                                                                      ---------           ---------         ---------
                                                                        395,129             528,272           923,401
                  Less amount representing interest                     (52,991)            (25,915)          (78,906)
                                                                      ---------           ---------         ---------
                  Present value payments                                342,138             502,357           844,495
                  Less current portion                                 (265,406)           (329,678)         (595,084)
                                                                      ---------           ---------         ---------
                  Non current portion                                 $  76,732           $ 172,679         $ 249,411
                                                                      =========           =========         =========
</TABLE>

                  In connection with the Equipment Financing, the Company
                  issued warrants to purchase 75,000 shares of the Company's
                  common stock at a price per share of $10.00 (subject to
                  adjustment in certain circumstances) at any time prior to
                  August 20, 2000. The fair value of the warrants ($178,980)
                  was recorded as an original issue discount and is being
                  amortized using a method which approximates the interest
                  method over the term of the equipment financing. The
                  unamortized portion of the original issue discount is
                  $159,099 and $99,460 at December 31, 1997 and 1998,
                  respectively.







                                      37
<PAGE>   38

         (E)      FINANCING FEES

                  In 1997 two companies provided consulting services to the
                  Company in an attempt to identify financing sources. One of
                  the companies, in exchange for its services, received 270,000
                  shares of the Company's common stock with a fair market value
                  of $1,000,000, which is included in financing fees in the
                  accompanying 1997 statement of operations. The other company,
                  in exchange for its services, received 10,548 options to
                  purchase the Company's common stock at an exercise price of
                  $7.50 per share, with a fair market value of $36,000, which
                  is included in financing fees in the accompanying 1997
                  statement of operations. The 10,548 options were cancelled in
                  1998.

(6) COMMON STOCK

                  In July 1996, the Company sold 1,395,000 shares of common
                  stock and 1,495,000 redeemable warrants (the "IPO Warrants")
                  to the public. The IPO Warrants are exercisable and grant the
                  holder the right to purchase one share of Common Stock at a
                  price of $5.00 per share, subject to adjustment in certain
                  circumstances. The IPO Warrants are redeemable by the
                  Company, upon the consent of the IPO underwriter, at a price
                  of $.10 per Warrant, and subject to the terms set forth
                  therein. In the event that the Company calls the IPO Warrants
                  for redemption, it will be economically advantageous for the
                  warrant holders to exercise the IPO Warrants, resulting in
                  the issuance by the Company of up to 1,495,000 additional
                  shares of Common Stock. As of December 31, 1998, none of the
                  warrants issued in connection with the Company's IPO have
                  been exercised. In addition, the Company issued to the IPO
                  underwriters 260,000 warrants to purchase Common Stock at a
                  price of $6.90 per share.

                  A summary of Common Stock reserved for potential future
                  issuances as of December 31, 1998 is as follows:


<TABLE>
<CAPTION>
                  <S>                                                                        <C>      
                    IPO warrants at $5.00 per share (Note 6)                                 1,495,000
                    Warrants issued to the IPO underwriter at $6.90 per share                  260,000
                    Stock option plan for officers, directors and employees                  
                      consultants (Note 8)                                                   1,649,039
                  Warrants issued in connection with 1997 March Bridge Financing at
                    $10.00 per share (Note 5a)                                                 100,000
                  Equipment financing warrants at $10.00 per share (Note 5d)                    75,000 
                  Options granted to Greg Norman at $1.00 per share (Note 9a)                  125,000 
                  Options granted to consultants in accordance with the Infinity
                    Financing  Third Amendment at $1.00 per share (Note 5b)                     50,000
                  Options granted to consultants in accordance with the Infinity 
                    Financing Third Amendment at $3.00 per share (Note 5b)                      50,000
                                                                                             ---------
                                                                                             3,804,039
                                                                                             =========
</TABLE>

(7) INCOME TAXES

                  As of December 31, 1997 and December 31, 1998, the Company
                  had approximately $5,011,000 and $6,893,000, respectively, of
                  net deferred tax assets resulting primarily from net
                  operating loss carryforwards. Due to the uncertainty of the
                  Company's ability to generate sufficient taxable income in
                  the future to utilize such loss carryforwards, the net
                  deferred assets have been fully reserved as of December 31,
                  1997 and 1998.






                                      38
<PAGE>   39

                  As of December 31, 1998 the Company's net operating loss
                  carryforward is approximately $19,137,000 and expires as
                  follows:

                                    2011          $ 3,067,000
                                    2012           10,557,000
                                    2013            5,513,000
                                                  -----------
                                                  $19,137,000
                                                  ===========
(8)        STOCK OPTION PLAN

                In April 1996, the Company adopted the 1996 Stock Option Plan
                (the "Plan"), which provides for the granting to directors,
                officers, key employees and consultants the greater of 800,000
                shares of common stock (reduced by the number of options which
                may be granted to two executive officers pursuant to their
                employment agreements) or 12% of the aggregate number of the
                Company's common stock outstanding, whichever is greater.
                Grants of options may be incentive stock options (to a maximum
                of 300,000) or non-qualified stock options and will be at such
                exercise prices, in such amounts, and upon such terms and
                conditions, as determined by the compensation committee of the
                board of directors. The term of any option may not exceed ten
                years (unless granted as an incentive stock option to a 10% or
                more stockholder, which terms may not exceed five years). In
                February of 1997, the Plan was amended to increase the number
                of shares reserved for issuance to the greater of 1,200,000 or
                12% of the Company's common stock outstanding and to include a
                provision allowing the compensation committee to issue options
                under the Plan at below fair market value.

                The Plan also provides for the automatic grant of 5,000
                non-qualified stock options upon commencement of service of a
                non-employee director and 2,500 options per year per director
                thereafter. The exercise price of the option may not be less
                than 100% of the market value of the Company's common stock at
                the time of grant. Such options vest one-third on the date of
                the grant and one-third on the first two anniversary dates and
                have a term of five years.

                The Company applies APB Opinion No. 25 in accounting for its
                Plan. Had the Company determined compensation cost based on
                fair value at the grant date for its stock options under SFAS
                No. 123, the Company's net loss and net loss per share for the
                years ended December 31, 1997 and 1998 would have increased to
                $12,575,665 and $2.64 and $7,525,041 and $.91, respectively.







                                      39
<PAGE>   40

                Stock option activity during the periods is indicated as
                follows:

<TABLE>
<CAPTION>

                                                                                             Weighted Average
                                                                      Number of Shares        Exercise Price
                                                                      ----------------       ----------------
                     <S>                                                 <C>                    <C>  
                    Balance at December 31, 1996                           787,871                $5.00
                             Granted                                       223,548                $7.07
                             Exercised                                     (25,000)               $5.12
                             Forfeited                                     (38,000)               $5.75
                                                                        ----------                -----
                    Balance at December 31, 1997                           948,419                $5.46
                             Granted                                     1,321,500                $1.00
                             Forfeited                                    (395,880)               $5.45
                                                                        ----------                -----
                    Balance at December 31, 1998                         1,874,039                $2.32
                                                                        ==========                =====

</TABLE>

                At December  31, 1997 and  December  31, 1998,  504,124 and  
                1,780,633  options  were  exercisable, respectively.

                At December 31, 1998, the weighted-average exercise price and
                weighted-average remaining contractual life of outstanding
                options was as follows:
<TABLE>
<CAPTION>

                                             Outstanding                 Exercisable     
                                        ---------------------      -----------------------
                                                    Weighted- 
                                        Weighted     Average                     Weighted-
                                        Average     Reamining                     Average 
               Exercise                 Exercise   Contractual                    Exercise
                Price         Shares      Price        Life        Shares          Price    
                -----         ------      -----        ----        ------          -----
            <S>             <C>          <C>         <C>          <C>             <C>
            $    1.00        1,734,889   $ 1.00        8.44       1,732,389        $ 1.00
                 3.00           50,000     3.00        1.50              --            --
              5.00-5.75         84,150     5.04        7.53          44,911          5.03
                10.75            5,000    10.75        3.00           3,333         10.75
            -----------      ---------   ------        ----       ---------        ------
            $1.00-10.75      1,874,039   $ 1.26        8.20       1,780,633        $ 1.12
            ===========      =========   ======        ====       =========        ======
</TABLE>

                The fair value of each option grant is estimated on the date of
                grant using an option pricing model with the following
                assumptions used for grants in 1997 and 1998: risk free
                interest rate of 6.3% for 1997 and 4.8% for 1998; expected
                lives of 1.5 to 5 years; and expected volatility of 70%.

(9)      COMMITMENTS AND CONTINGENCIES

         (A)      LICENSE AGREEMENT

                  In 1995 the Company entered into a license agreement (the
                  "Norman Agreement") with Greg Norman, a professional golfer,
                  and Great White Shark Enterprises, Inc. ("Great White
                  Shark"), pursuant to which the Company was granted a
                  worldwide license to use Mr. Norman's name, likeness,
                  endorsement and certain trademarks in connection with the
                  production and promotion of the Company's products. Under the
                  Norman Agreement, Mr. Norman received guaranteed minimum
                  payments against royalties of 8% of all net revenues, as
                  defined, derived from the sale of ONE-ON-ONE videotapes.







                                      40
<PAGE>   41

                  In 1996 certain principal stockholders of the Company
                  transferred an aggregate of 300,000 shares of Common Stock
                  owned by them to Mr. Norman pursuant to an option held by Mr.
                  Norman.

                  In 1997 the Norman Agreement was further amended to
                  restructure the terms of the guaranteed minimum payments due
                  to Mr. Norman under the Norman Agreement. The Company granted
                  to Mr. Norman 25,000 options to purchase shares of the
                  Company's Common Stock at an exercise price of $10.00 per
                  share and recorded non-cash marketing expenses of $93,132
                  related to the options.

                  On December 31, 1998, the Norman Agreement was further
                  amended to eliminate the guaranteed minimum payments to Mr.
                  Norman; increase the royalty to Mr. Norman to (i) 13% of all
                  revenue derived from aggregate sales of the ONE-ON-ONE WITH
                  GREG NORMAN products commencing January 1, 1999, until
                  aggregate sales shall total $24,172,000, and (ii) 8% of all
                  revenue derived from aggregate sales of the ONE-ON-ONE WITH
                  GREG NORMAN products thereafter. Payments are to be paid 8%
                  in cash and 5% applied to offset the excess of prior
                  guaranteed minimum payments over 8% of net revenues in prior
                  years. After the initial term, which ends on December 31,
                  2001, the Company has the option to renew the Norman
                  Agreement for two additional five-year periods with a fee of
                  $500,000 per renewal term. The accompanying balance sheets
                  include prepaid royalties of $350,000 and $900,734 at
                  December 31, 1997 and 1998, respectively. The amount that is
                  expected to be amortized within twelve months has been
                  classified as a current asset of $220,577 on the accompanying
                  1998 balance sheet. The remaining balance of the payments
                  made to Mr. Norman is a long-term prepaid royalty of $680,157
                  which is included in the accompanying 1998 balance sheet.

                  As consideration for entering into the December 1998
                  amendment, the Company paid Mr. Norman a fee equal to (i)
                  272,000 shares of the Company's Common Stock, (ii) an option
                  to purchase 100,000 shares of the Company's Common Stock with
                  an exercise price of $1.00 per share, such options to be
                  immediately vested, and (iii) 25,000 options currently held
                  by Mr. Norman, repriced to $1.00 per share. The Company
                  recorded a non-cash compensation expense of $292,808 related
                  to the December 1998 amendment.

                  Through December 31, 1997, the Company made payments to Mr.
                  Norman amounting to $600,000. These payments, less $250,000
                  which was expensed and is included in the 1997 statement of
                  operations as a cost of sales, are presented in the
                  accompanying 1997 balance sheet as prepaid expenses-advance
                  royalties. The remaining $350,000 is included in the
                  accompanying 1997 balance sheet as prepaid expenses-advance
                  royalties. Through December 31, 1998 the Company made
                  additional payments to Mr. Norman totaling $1,000,000, of
                  which $700,000 was paid in cash and the balance in the form
                  of 30,000 shares of the Company's Common Stock valued at
                  $10.00 per share. The Company expensed $450,000 of the
                  advance royalty which is presented in the 1998 statement of
                  operations as a cost of sales. The remaining balance is
                  included in current assets-prepaid royalties and other
                  assets-prepaid royalties in the accompanying 1998 balance
                  sheet.






                                      41
<PAGE>   42

         (B)      EMPLOYMENT AGREEMENTS

                  The Company currently has employment agreements with three
                  executive employees which expire on December 31, 2000. The
                  agreements provide for aggregate minimum annual compensation
                  of approximately $480,000 in 1998, $540,000 in 1999 and
                  $600,000 in 2000. The agreements are automatically renewed
                  thereafter for additional one-year periods unless the Company
                  or the employees provide timely notice of termination. The
                  agreements also provide for potential performance bonuses and
                  severance payments ranging from three to twelve months.

         (C)      OPERATING LEASES

                  The Company has one noncancelable operating lease for
                  corporate office space that expires in 1999. Rental payments
                  include minimum rentals plus building expenses. Rental
                  expense for these leases during 1997 and 1998 was $107,863
                  and $108,374, respectively. Future minimum lease payments
                  under these leases are $78,398 in 1999.

         (D)      SIGNIFICANT AND CONTINUING LOSSES

                  For the period from July 15, 1994 (inception) to December 31,
                  1998, the Company incurred an accumulated deficit of
                  $20,302,283. The Company believes that it will incur
                  continuing losses until, at the earliest, the Company
                  generates sufficient revenues to offset the substantial
                  operating costs associated with commercializing its products.

          (E)     UNCERTAINTY OF PROPOSED PLAN OF OPERATION

                  The Company's plan of operation and prospects are largely
                  dependent upon the Company's ability to achieve significant
                  market acceptance for its products and realize sufficient
                  sales to offset its operating expenses. There can be no
                  assurance that the Company will be able to continue to
                  implement a business plan that insures profitability. Failure
                  to successfully implement its business plan would result in
                  closure of the business. The Company's ONE-ON-ONE
                  personalized videotape golf lesson is a new business concept
                  and, accordingly, demand and market acceptance for the
                  Company's products is subject to a high level of uncertainty.
                  Achieving market acceptance for the Company's products will
                  require significant efforts and expenditures by the Company
                  to create awareness and demand. The Company's prospects are
                  significantly affected by its ability to successfully build
                  an effective sales organization. There can be no assurance
                  that the Company's strategy will result in successful product
                  commercialization or that the Company's efforts will result
                  in initial or continued market acceptance for the Company's
                  products. Management believes that projected 1999 revenues,
                  when combined with planned cost savings and existing
                  financial resources will be sufficient to fund operations
                  through at least January 1, 2000. However, if the Company is
                  unable to realize the anticipated cash flows, or raise
                  additional equity, it may exhaust its cash resources by
                  January 1, 2000 and may be forced to curtail or cease its
                  operations.






                                      42
<PAGE>   43

         (F)      CONTINUED COMPLIANCE WITH NASDAQ SMALLCAP LISTING REQUIREMENTS

                  On March 1, 1999, the minimum bid price of the Company's
                  shares had been less than $1.00 per share for thirty
                  consecutive business days and in accordance with Nasdaq's
                  listing requirements, the Company received notice from Nasdaq
                  regarding the minimum bid price of the Company's shares. The
                  Company must achieve compliance with Nasdaq's rules by June
                  1, 1999 or the Company's Common Stock could be delisted.
                  According to Nasdaq's rules, the Company can achieve
                  compliance if the minimum bid price of the Company's shares
                  is above $1.00 per share for at least ten consecutive
                  business days during the ninety-day compliance period. The
                  Company may attempt to meet Nasdaq's rules by effecting a
                  reverse stock split. Exclusion of the Company's shares from
                  Nasdaq would adversely affect the market price and liquidity
                  of the Company's equity securities.

(10)     SUPPLEMENTAL DISCLOSURE OF NON CASH RELATED ACTIVITIES

                  In 1997, the Company, in connection with the 1997 March
                  Bridge Financing and the Infinity Financing, recorded
                  non-cash financing fees of $1,665,000 and $2,720,511,
                  respectively, related to the issuance of the Company's
                  securities.

                  In 1997, the Company, in connection with its Equipment
                  Financing, recorded non-cash financing fees of $178,980
                  related to the issuance of warrants to purchase the Company's
                  common stock.

                  In 1997 the Company entered into capital lease and equipment
                  financing transactions totaling $1,713,270 for the Company's
                  mobile production units.

                  In February 1998, the Company, in connection with the
                  Infinity Financing, recorded $1,350,000 as an imputed
                  dividend on its Preferred Stock, which has been fully
                  amortized in 1998.

                  In the first quarter of 1998, $6,000,000 in principal amount
                  of the Company's convertible debt was converted to preferred
                  stock net of finance costs of $2,178,942. 

                  In 1998 the Company issued 350,000 shares of common stock in
                  connection with the Infinity Financing Amendments.

                  In 1998, the Company issued 30,000 shares of common stock for
                  payment of royalties. 

                  In 1998, the Company issued 302,755 shares of common stock for
                  payment of dividends totaling $487,268 on its preferred stock.






                                      43
<PAGE>   44

(11)     RESTATEMENT

                  The Company has restated its financials pursuant to a comment
                  letter dated April 26, 1999 from the Securities and Exchange
                  Commission. The Company has revised Notes (1), (2(d)),
                  (5(b)), (9(b)) and (9(e)).

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

                  None.





                                      44
<PAGE>   45


                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                  Information called for by Item 9 is set forth under the
                  caption "Election of Directors" in the Company's 1999 Proxy
                  Statement, which is incorporated herein by reference.

ITEM 10.  EXECUTIVE COMPENSATION.

          EMPLOYMENT AGREEMENTS

                  Effective January 1, 1996, the Company entered into a
                  three-year employment agreement with Earl Takefman, the Chief
                  Executive Officer of the Company. This agreement was amended
                  on April 14, 1998 and extended until December 31, 2000.
                  Pursuant to the agreement, as amended, Mr. Takefman is
                  entitled to receive a base salary of $175,000 per annum,
                  subject to increase to $200,000 on January 1, 1999 and to
                  $225,000 on January 1, 2000. In addition, pursuant to the
                  original employment agreement, Mr. Takefman received 250,000
                  options upon the consummation of the Company's initial public
                  offering, which options have now vested, and currently have
                  an exercise price of $1.00. The agreement is automatically
                  renewed for additional one-year periods, unless Mr. Takefman
                  or the Company provides notice to the other of its
                  termination. In the event that Mr. Takefman is terminated
                  without cause, he will be entitled to receive twelve months
                  severance pay from the date of termination or the
                  compensation due for the remainder of the term of the
                  agreement, whichever is greater, as liquidated damages for
                  such termination.

                  Effective June 1, 1996, the Company entered into an
                  employment agreement with Richard Parker, pursuant to which
                  Mr. Parker serves as the President and Chief Operating
                  Officer of the Company. This Agreement was amended on April
                  14, 1998 and extended until December 31, 2000. Mr. Parker is
                  entitled to receive a base salary of $175,000 per annum,
                  subject to increase to $200,000 on January 1, 1999 and to
                  $225,000 on January 1, 2000. The agreement is automatically
                  renewed for additional one-year periods, unless Mr. Parker or
                  the Company provides notice to the other of its termination.
                  If Mr. Parker is terminated without cause, he will be
                  entitled to receive twelve months severance pay from the date
                  of termination or the compensation due for the remainder of
                  the term of the agreement, whichever is greater, as
                  liquidated damages for such termination. In addition, Mr.
                  Parker may terminate his employment agreement if Mr. Takefman
                  is no longer actively involved in the management of the
                  Company; in such case, Mr.
                  Parker would still be entitled to his severance package.

                  As of May 1, 1996, the Company entered into a two-year
                  employment agreement with Thomas Peters, pursuant to which
                  Mr. Peters originally served as Director of Software
                  Development and now serves as Vice President of Operations
                  and Technology. This Agreement was amended on April 14, 1998
                  and extended until December 31, 2000. Mr. Peters is entitled
                  to receive a base salary of $130,000 per annum, subject to
                  increase to $140,000 on January 1, 1999 and to $150,000 on
                  January 1, 2000. Pursuant to the agreement, Mr. Peters will
                  also be eligible to receive a bonus based on the Company's
                  performance, as determined by the Board of Directors. The
                  agreement is automatically renewed for additional one-year
                  periods, unless Mr. Peters or the Company provides notice to
                  the other of its termination. In the event that Mr. Peters is
                  terminated without cause, he will be entitled to receive six
                  months severance pay from the date of termination or the
                  compensation due for the remainder of the term of the
                  agreement, whichever is greater, as liquidated damages for
                  such termination.






                                      45
<PAGE>   46

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                  Information called for by Item 11 is set forth under the
                  caption "Security Ownership of Certain Beneficial Owners and
                  Management" in the Company's 1999 Proxy Statement, which is
                  incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                  Information called for by Item 12 is set forth under the
                  caption "Certain Relationships and Related Transactions" in
                  the Company's 1999 Proxy Statement, which is incorporated
                  herein by reference.







                                      46
<PAGE>   47

                                    PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)   The following Exhibits are filed as part of this Report as
               required by Item 601 of Regulation S-B.

EXHIBIT    
NUMBER       DESCRIPTION
-------      ------------ 

  3.1        Certificate of Incorporation of the Company, as amended
             (Incorporated by reference to Exhibit 3.1 to Amendment No. 2 to
             the Registrant's Registration Statement on Form SB-2 (Registration
             No. 333-5193) effective July 24, 1996)

  3.2        Amended and Restated By-Laws of the Company (Incorporated by
             reference to Exhibit 3.2 to Amendment No. 1 to the Registrant's
             Registration Statement on Form SB-2 (Registration No. 333-5193)
             effective July 24, 1996)

  4.1        Form of Specimen Common Stock Certificate (Incorporated by
             reference to Exhibit 4.1 to Amendment No. 1 to the Registrant's
             Registration Statement on Form SB-2 (Registration No. 333-5193)
             effective July 24, 1996)

  4.2        Form of Specimen Redeemable Warrant Certificate (Incorporated by
             reference to Exhibit 4.2 to Amendment No. 1 to the Registrant's
             Registration Statement on Form SB-2 (Registration No. 333-5193)
             effective July 24, 1996)

  4.3        Form of Warrant Agreement between the Company and Whale Securities
             Co., L.P. (Incorporated by reference to Exhibit 4.3 to the
             Registrant's Registration Statement on Form SB-2 (Registration No.
             333-5193) effective July 24, 1996)

  4.4        Form of Warrant among American Stock Transfer & Trust Company, the
             Company and Whale Securities Co., L.P. (Incorporated by reference
             to Exhibit 4.4 to the Registrant's Registration Statement on Form
             SB-2 (Registration No. 333-5193) effective July 24, 1996)

  4.5        Form of Warrant Certificate issued to investors in the March 1997
             Bridge Financing (Incorporated by reference to the Registrant's
             Registration Statement on Form SB-2 (Registration No. 333-24675)
             filed April 7, 1997)

  4.6        Form of Common Stock Purchase Warrant issued to investors in the
             Infinity Bridge Financing (Incorporated by reference to Exhibit
             99.4 to the Registrant's Current Report on Form 8-K filed June 23,
             1997)

  4.7        Form of Convertible Note issued to investors in the Infinity
             Bridge Financing (Incorporated by reference to Exhibit 99.5 to the
             Registrant's Current Report on Form 8-K filed June 23, 1997)







                                      47
<PAGE>   48

  4.8        Form of Common Stock Purchase Warrant issued to Vision Financial
             Group, Inc. (Incorporated by reference to Exhibit 4.8 to the
             Registrant's Quarterly Report on Form 10-QSB filed November 14,
             1997)

  4.9        Form of Common Stock Purchase Warrant issued to investors in the
             Infinity Bridge Financing in connection with the amendment to such
             financing (Incorporated by reference to Exhibit 99.3 to the
             Registrant's Current Report on Form 8-K filed February 9, 1998)

  10.1       License Agreement, dated March 1, 1995, between Great White Shark
             Enterprises, Inc. and the Company, as supplemented (Incorporated
             by reference to Exhibit 10.1 to the Registrant's Registration
             Statement on Form SB-2 (Registration No. 333-5193) effective July
             24, 1996)

  10.2       Amendment to License Agreement, dated as of June 3, 1997, by and
             among the Company, Greg Norman and Great White Shark Enterprises,
             Inc. (Incorporated by reference to Exhibit 99.1 to the
             Registrant's Current Report on Form 8-K/A filed June 27, 1997)

  10.3       Employment Agreement, dated as of January 1, 1996, between Earl
             Takefman and the Company, as amended (Incorporated by reference to
             Exhibit 10.3 to the Registrant's Registration Statement on Form
             SB-2 (Registration No. 333-5193) effective July 24, 1996).

  10.4       Employment Agreement, dated as of May 1, 1996, between Thomas S.
             Peters and the Company, as amended (Incorporated by reference to
             Exhibit 10.5 to the Registrant's Registration Statement on Form
             SB-2 (Registration No. 333-5193) effective July 24, 1996)

  10.5       Amended and Restated 1996 Stock Option Plan (Incorporated by
             reference to the Company's 1996 definitive Proxy Statement)

  10.6       Employment Agreement, dated as of June 1, 1996, between Richard
             Parker and the Company, as amended (Incorporated by reference to
             Exhibit 10.9 to Amendment No. 1 to the Registrant's Registration
             Statement on Form SB-2 (Registration No. 333-5193) effective July
             24, 1996)

  10.7       Assignment, dated April 19, 1996 from Thomas S. Peters to the
             Company (Incorporated by reference to Exhibit 10.11 to the
             Registrant's Registration Statement on Form SB-2 (Registration No.
             333-5193) effective July 24, 1996)

  10.8       Share and Warrant Purchase Agreement, dated as of February 27,
             1997, between the Company and Status-One Investments Inc.
             (Incorporated by reference to Exhibit 10.11 to the Registrant's
             Registration Statement on Form SB-2 (Registration No. 333-24675)
             filed April 7, 1997)







                                      48
<PAGE>   49

  10.9       Bridge Securities Purchase Agreement, dated as of June 13, 1997,
             among the Company and Infinity Investors Limited, Infinity
             Emerging Opportunities Limited, Sandera Partners, L.P. and Lion
             Capital Partners, L.P. (collectively with their transferees, the
             "Funds") (Incorporated by reference to Exhibit 99.1 to the
             Registrant's Current Report on Form 8-K filed June 23, 1997)

  10.10      Registration Rights Agreement, dated as of June 13, 1997, among
             the Company and the Funds (Incorporated by reference to Exhibit
             99.2 to the Registrant's Current Report on Form 8-K filed June 23,
             1997)

  10.11      Transfer Agent Agreement, dated as of June 13, 1997, among the
             Company, the Funds and American Stock Transfer & Trust Company
             (Incorporated by reference to Exhibit 99.3 to the Company's Report
             on Form 8-K filed June 23, 1997).

  10.12      Purchase Agreement, dated as of March 27, 1998, among the Company
             and Marion Interglobal, Ltd. (Incorporated by reference to Exhibit
             10.16 to the Registrant's Annual Report on Form 10-K for the
             fiscal year ended December 31, 1997).

  10.13      Registration Rights Agreement, dated as of March 27, 1998, among
             the Company and Marion Interglobal, Ltd. (Incorporated by
             reference to Exhibit 10.17 to the Registrant's Annual Report on
             Form 10-K for the fiscal year ended December 31, 1997).

  10.14      First Amendment to Bridge Securities Purchase Agreement and
             Related Documents, dated as of December 31, 1997, among the
             Company and the Funds (Incorporated by reference to Exhibit 99.1
             to the Registrant's Current Report on Form 8-K filed February 9,
             1998)

  10.15      Second Amendment to Bridge Securities Purchase Agreement and
             Related Documents, dated as of March 27, 1998, among the Company,
             Infinity Investors Limited, Infinity Emerging Opportunities
             Limited, Summit Capital Limited (as the transferee of Sandera
             Partners, L.P.) and Glacier Capital Limited (as the transferee of
             Lion Capital Partners, L.P.) (Incorporated by reference to Exhibit
             10.18 to the Registrant's Annual Report on Form 10-K for the
             fiscal year ended December 31, 1997).

  10.16      Third Amendment to Bridge Securities Purchase Agreement and
             Related Documents, dated as of December 29, 1998, among the
             Company, Infinity Investors Limited, IEO Holdings Limited (as the
             transferee from Infinity Emerging Opportunities Limited), Summit
             Capital Limited (as the transferee of Sandera Partners, L.P.) and
             Glacier Capital Limited (as the transferee of Lion Capital
             Partners, L.P.) (Incorporated by reference to Exhibit 99.1 to the
             Registrant's Current Report on Form 8-K filed January 8, 1999).

  10.17      Security Agreement, dated February 6, 1998, between the Company
             and HW Partners, L.P., as agent for and representative of the
             Funds. (Incorporated by reference to Exhibit 99.2 to the
             Registrant's Current Report on Form 8-K filed February 6, 1998).

  10.18      Form of Warrant Certificate. (Incorporated by reference to Exhibit
             99.3 to the Registrant's Current Report on Form 8-K filed February
             6, 1998).







                                      49
<PAGE>   50

  10.19      Amendment, dated as of December 31, 1998, to License Agreement
             dated as of March 1, 1995, by and between Greg Norman and Great
             White Shark Enterprises, Inc. and the Company, as amended on April
             19, 1996, October 18, 1996 and June 3, 1997 (Incorporated by 
             reference to Exhibit 10.19 to the Registrant's Annual Report on 
             Form 10-KSB filed March 31, 1999).

  16         Letter, dated November 14, 1997, from KPMG Peat Marwick LLP to the
             Securities and Exchange (Incorporated by reference to Exhibit 1 to
             the Registrant's Current Report on Form 8-K/A filed November 19,
             1997)

  24         Power of Attorney (included with the signature page hereof)

  27*        Financial Data Schedule
-----------------

* Filed herewith.

      (b) Reports on Form 8-K 
            
            None






                                      50
<PAGE>   51

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                         VISUAL EDGE SYSTEMS INC.



                                         By: /s/ Earl Takefman
                                             ----------------------------------
                                             Earl Takefman
                                             Chief Executive Officer

Date: May 13, 1999

                               POWER OF ATTORNEY

Each person whose signature appears below hereby authorizes and constitutes
Earl Takefman and Richard Parker, and each of them singly, his true and lawful
attorneys-in-fact with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities to sign and file
any and all amendments to this report with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
and he hereby ratifies and confirms all that said attorneys-in-fact or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

SIGNATURE                       CAPACITY IN WHICH SIGNED                                   DATE
---------                       ------------------------                                   ----


<S>                             <C>                                                        <C> 
/s/ Earl Takefman               Director, Chief Executive Officer                          May 13, 1999
------------------------------  (Principal Executive Officer)
Earl Takefman



            *                   Chief Financial Officer                                    May 13, 1999 
------------------------------  (Principal Financial and Accounting Officer)
Melissa Forzly




            *                   Chairman of the Board                                     May 13, 1999
------------------------------
Ronald F. Seale



            *                   Director                                                  May 13, 1999
------------------------------
Mark Hershhorn



            *                   Director                                                  May 13, 1999
------------------------------
Beryl Artz



            *                   Director                                                  May 13, 1999
------------------------------
Richard Parker

</TABLE>
-------------------------

* By Earl Takefman under Power of Attorney





                                      51