<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                  UNITED STATES

                                   FORM 10-KSB

[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               (IRS Employer Identification No.)
  incorporation or organization)

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 or any
amendment to this Form 10-KSB [ ].

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 March 23, 1999, based on
the last sale price of the Common Stock as reported on the Nasdaq SmallCap
Market, was: $4,182,875.

As of March 23, 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 Form 10-KSB.







































                                       2

<PAGE>   3



                            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                         15 

                                     PART II

ITEM 5.           Market for Common Equity and Related Stockholder Matters                   16 

ITEM 6.           Management's Discussion and Analysis or Plan of Operation                  17 

ITEM 7.           Financial Statements                                                       20  

ITEM 8.           Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure                                                   42 

                                    PART III

ITEM 9.           Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act                          43 
                  
ITEM 10.          Executive Compensation                                                     43 

ITEM 11.          Security Ownership of Certain Beneficial Owners and Management             43  

ITEM 12.          Certain Relationships and Related Transactions                             43 

ITEM 13.          Exhibits, Financial Statements Schedules, and Reports on Form 8-K          44 

</TABLE>















                                       3


<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."

         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.

         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



                                       4

<PAGE>   5

                  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 Company has also opened authorized ONE-ON-ONE
                  videotaping centers in key cities throughout the country which
                  allow recipients of ONE-ON-ONE infomercial or gift
                  certificates to redeem their certificates and receive their
                  personalized ONE-ON-ONE video golf lesson. These centers are
                  permanent, part time locations which the Company has developed
                  in partnership with existing retail establishments such as
                  driving ranges, golf courses, retailers and automobile
                  dealerships. The Company is marketing the gift certificate
                  program as corporate incentives and promotional products and
                  is selling direct to golfers via the Company's web site. Sales
                  to corporations are handled by the Company's sales force and
                  independent sales representatives. The Company also plans to
                  test its infomercial in the second quarter of 1999.

         FINANCING TRANSACTIONS

                  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 



                                       5
<PAGE>   6

                  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.

                  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 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 (collectively, the "Interest Shares"),
                  respectively, for payment of interest due.

                  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.





                                       6

<PAGE>   7

                  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,
                  computer software, inventory and equipment and fixtures
                  excluding the vans.

                  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.

                  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.

                  As a condition to the consummation of the Marion Equity
                  Financing (as defined in and described in "Marion Equity
                  Financing" and Note 5(c) in the accompanying financial
                  statements), the Company entered into the Agreement and Second
                  Amendment to Bridge Securities Purchase Agreement and Related
                  Documents (the "Second Amendment"), dates 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






                                       7

<PAGE>   8

                  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.

                  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 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.

                  The Third Amendment also revised the conversion price at which
                  the Notes may be convertible into Common Stock and at which
                  the Series A-2 Preferred Stock may be convertible into Common
                  Stock (the "Series A-2 Conversion Shares"). 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
                  agreed to return 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





                                       8


<PAGE>   9

                  President of Operations and Technology, all such options to be
                  immediately vested and to have an exercise price of $1.00 per
                  share. 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.

                  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.

                  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.

         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 





                                       9
<PAGE>   10

                  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.

         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>
                   NAME                           AGE      POSITION

<S>                                               <C>                                          
                  ------------------------------- -------- ------------------------------------------
                  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.




                                       10

<PAGE>   11

                  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.

                  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 contains
                  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 ending December
                  31, 1998 and it believes that it will incur continuing losses
                  in 1999. Such losses will continue until, at the earliest, the
                  Company generates sufficient revenues to offset the operating
                  costs associated with commercializing its products.





                                       11
<PAGE>   12

                  UNCERTAINTY OF PROPOSED PLAN OF OPERATION AND MARKET
                  ACCEPTANCE. The Company's plan of operation and prospects are
                  largely dependent upon the Company's ability to achieve
                  significant market acceptance for its products, establish and
                  maintain satisfactory relationships with those who arrange
                  golf events, successfully hire and retain skilled technical,
                  marketing and other personnel, and successfully develop, equip
                  and operate ONE-ON-ONE vans on a timely and cost effective
                  basis. There can be no assurance that the Company will be able
                  to continue to implement its business plan. Failure to
                  implement its business plan would have a material adverse
                  effect on the Company.

                   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 will be significantly affected by its
                  ability to successfully build an effective sales organization
                  and develop a significant number of ONE-ON-ONE vans. The
                  Company had limited marketing and technical experience and
                  limited financial, personnel and other resources to
                  independently undertake extensive marketing activities. The
                  Company's strategy and preliminary and future marketing plans
                  may be subject to change as a result of a number of factors,
                  including progress or delays in the Company's marketing
                  efforts, changes in market conditions. To the extent that the
                  Company enters into third-party marketing and distribution
                  arrangements in the future, it will be dependent on the
                  marketing efforts of such third parties and in certain
                  instances on the popularity and sales of their products. 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.

                  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 March 24, 1999, the Company had a total of cash and cash
                  equivalents and certificates of deposit of approximately
                  $1,429,500. Thus, if the Company is unable to successfully
                  implement its business plan and become profitable in the near
                  future, it may exhaust its cash resources and will be unable
                  to continue in business.

                  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. The Company must achieve compliance with Nasdaq's
                  rules by June 1, 1999 or the Company's Common Stock will 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
                  spilt. Exclusion of our shares from Nasdaq would adversely
                  affect the market price and liquidity of our equity
                  securities.

                  DEPENDENCE ON GREG NORMAN LICENSE. Pursuant to the Greg Norman
                  License (including several recent amendments), Greg Norman
                  agreed to grant to the Company a worldwide license to use his
                  name, likeness, endorsement and certain trademarks in
                  connection with the production and promotion of the Company's
                  products. The original term of the Greg Norman License expires
                  on December 31, 2001. There may be a material adverse effect
                  to the 





                                       12
<PAGE>   13

                  Company if Greg Norman dies, becomes disabled, retires from
                  tournament play, experiences a significant decline in the
                  level of his tournament play, commits a serious crime or
                  performs any act which adversely affects his reputation. The
                  Company has obtained "key-man" insurance on the life of Greg
                  Norman in the amount of $10,000,000.

                  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 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 LIMITED PRODUCT LINE AND PRODUCT OBSOLESCENCE.
                  The Company is entirely dependent on the sales of a limited
                  product line to generate revenues and on the commercial
                  success of its products. There can be no assurance that the
                  Company's products will prove to be commercially viable.
                  Failure to achieve commercial viability would have a material
                  adverse effect on the Company. 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. Accordingly, the ability of the Company to
                  compete may be dependent upon the Company's ability to
                  continually enhance and improve its software. There can be no
                  assurance that competitors will not develop technologies or
                  products that render the Company's products obsolete or less
                  marketable.

                  DEPENDENCE ON KEY PERSONNEL. The prospects of the Company are
                  dependent on the personal efforts of Earl T. Takefman, its
                  Chief Executive Officer, Richie Parker, its President and
                  Chief Operating Officer, and Tom Peters, its Vice President of
                  Operations and Technology. The loss of the services of any of
                  these executives could have a material adverse effect on the
                  Company's proposed business and prospects. The Company has
                  entered into employment agreements with all of these
                  executives and has obtained "key-man" insurance on the life of
                  Mr. Takefman in the amount of $5,000,000.

                  INDUSTRY FACTORS. The Company's future operating results will
                  depend on numerous factors beyond its control, including the
                  popularity, price and timing of competitors' products being
                  introduced and distributed, national, regional and local
                  economic conditions (particularly recessionary conditions
                  adversely affecting consumer spending), changes in consumer
                  demographics, the availability and relative popularity of
                  other forms of sports and 





                                       13
<PAGE>   14

                  entertainment, and 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 the Company's 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, the Company may find it more
                  difficult to price its products at levels which result in
                  profitable operations. In addition, seasonal weather
                  conditions limiting the playing seasons in certain geographic
                  areas may result in fluctuations in the Company's future
                  operating results.

                  VOLATILITY OF MARKET PRICE OF COMMON STOCK AND WARRANTS. Since
                  the IPO, the market prices of the Company's publicly traded
                  securities have been highly volatile as has been the case with
                  the securities of other emerging companies. Factors such as
                  the Company's operating results and announcements by the
                  Company or its competitors may have a significant impact on
                  the market price of the Company's 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 such companies.

                  LIMITATIONS OF LIABILITY OF DIRECTORS AND OFFICERS. The
                  Company's Certificate of Incorporation includes provisions to
                  limit, to the full extent permitted by Delaware law, the
                  personal liability of directors of the Company for monetary
                  damages arising from a breach of their fiduciary duties as
                  directors. The Certificate of Incorporation also includes
                  provisions to the effect that (subject to certain exceptions)
                  the Company shall, to the maximum extent permitted from time
                  to time under the law of the State of Delaware, indemnify, and
                  upon request shall advance expenses to, any director or
                  officer to the extent permitted under such law as it may from
                  time to time be in effect. In addition, the Company's By-Laws
                  require the Company to indemnify, to the full extent permitted
                  by law, any director, officer, employee or agent of the
                  Company for acts which such person reasonably believes are not
                  in violation of the Company's corporate purposes as set forth
                  in the Certificate of Incorporation. As a result of such
                  provisions in the Certificate of Incorporation and the By-Laws
                  of the Company, stockholders may be unable to recover damages
                  against the directors and officers of the Company for actions
                  taken by them which constitute negligence, gross negligence or
                  a violation of their fiduciary duties, which may reduce the
                  likelihood of stockholders instituting derivative litigation
                  against directors and officers and may discourage or deter
                  stockholders from suing directors, officers, employees and
                  agents of the Company for breaches of their duty of care, even
                  though such an action, if successful, might otherwise benefit
                  the Company and its stockholders.

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.







                                       14
<PAGE>   15

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

                  None.

















































                                       15
<PAGE>   16

                                     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>


                                       16
<PAGE>   17


         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.

         RESULTS OF OPERATIONS

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

                  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.

                  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.

                  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






                                       17
<PAGE>   18

                  interest expense is primarily due to the conversion of the
                  June Financing Notes to Preferred Stock (see note 5(b)).

                  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.

         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 (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.






                                       18
<PAGE>   19

                  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.

         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 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 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 in the level of
                  timely compliance by key suppliers or vendors which could have
                  a insignificant impact on 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 Changes in 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 general accepted accounting principles.

         ARTHUR ANDERSEN LLP

         Miami, Florida,
           March 24, 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 by 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 Company has also opened authorized ONE-ON-ONE
                  videotaping centers in key cities throughout the country which
                  allow recipients of ONE-ON-ONE infomercial or gift
                  certificates to redeem their certificates and receive their
                  personalized ONE-ON-ONE video golf lesson. These centers are
                  permanent, part time locations which the Company has developed
                  in partnership with existing retail establishments such as
                  driving ranges, golf courses, retailers and automobile
                  dealerships. The Company is marketing the gift certificate
                  program as corporate incentives and promotional products and
                  is selling direct to golfers via the Company's web site. Sales
                  to corporations are handled by the Company's sales force and





                                       26
<PAGE>   27

                  independent sales representatives. The Company also plans to
                  test its infomercial in the second quarter of 1999.

(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 cutomer 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.

     (d) INVENTORIES

                  The Company's inventory consists of videotapes, which are
                  priced using the weighted average method.

     (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 







                                       27
<PAGE>   28

                  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.

                  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 





                                       28
<PAGE>   29

                  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.

         (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





                                       29
<PAGE>   30

                  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.

                  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 







                                       30
<PAGE>   31

                  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.

                  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.



                                       31
<PAGE>   32

                  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.

                  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,






                                       32
<PAGE>   33

                  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.

                  The Third Amendment also revised the conversion price at which
                  the Notes may be convertible into Common Stock and at which
                  the Series A-2 Preferred Stock may be convertible into Common
                  Stock (the "Series A-2 Conversion Shares"). 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 





                                       33
<PAGE>   34

                  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 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
                  agreed to return to the Company the June Warrants and the New
                  Warrants to purchase an aggregate of 284,000 shares, 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 these 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.

                  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 







                                       34
<PAGE>   35
                  $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).

         (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 





                                       35
<PAGE>   36

                  $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>          <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.

         (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 the 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.







                                       36
<PAGE>   37

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

<TABLE>
<CAPTION>
<S>               <C>                                                                   <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.

                  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.



                                       37
<PAGE>   38

                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.

                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         REMAINING                             AVERAGE
               EXERCISE                     EXERCISE        CONTRACTUAL                           EXERCISE
                PRICE       SHARES            PRICE            LIFE             SHARES             PRICE    
                -----       ------            -----            ----             ------             -----    
<S>         <C>            <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%.



                                       38
<PAGE>   39

(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.

                  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





                                       39
<PAGE>   40

                  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.

         (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 $463,750 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, establish and maintain
                  satisfactory relationships with those who arrange golf events,
                  successfully hire and retain skilled technical, marketing and
                  other personnel, and successfully develop, equip and operate
                  ONE-ON-ONE vans on a timely and cost effective basis. There
                  can be no assurance that the Company will be able to continue
                  to implement its business plan. Failure to implement its
                  business plan would have a material adverse effect on the
                  Company. 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 will be significantly affected by its
                  ability to successfully build an effective sales organization
                  and develop a significant number of ONE-ON-ONE vans. The
                  Company has limited marketing and technical experience and
                  limited financial, personnel and other resources to
                  independently undertake extensive marketing activities. The
                  Company's strategy and preliminary and future marketing plans
                  may be subject to change as a result of a number of factors,
                  including progress or delays in the Company's marketing
                  efforts, changes in market 





                                       40
<PAGE>   41

                  conditions. To the extent that the Company enters into
                  third-party marketing and distribution arrangements in the
                  future, it will be dependent on the marketing efforts of such
                  third parties and in certain instances on the popularity and
                  sales of their products. 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. However, 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.

         (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 will 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 spilt. 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. 




                                       41
<PAGE>   42
                  In 1998, the Company issued 302,755 shares of common stock for
                  payment of dividends totaling $487,268 on its preferred stock.

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

                  None.




























                                       42
<PAGE>   43

                                    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

                  Information called for by Item 10 is set forth under the
                  caption "Executive Compensation" in the Company's 1999 Proxy
                  Statement, which is incorporated herein by reference.

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.































                                       43
<PAGE>   44

                                     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)

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) 








                                       44
<PAGE>   45

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)

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).




                                       45
<PAGE>   46

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).

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.
     
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



                                       46
<PAGE>   47

                                   SIGNATURES

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

                               VISUAL EDGE SYSTEMS INC.

                               /s/ Earl T. Takefman
                               ------------------------------------
                               Earl T. Takefman
March 25, 1999                 Chief Executive Officer



                                POWER OF ATTORNEY

Each person whose signature appears below hereby authorizes and constitutes Earl
Takefman and Alan Lubell, 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, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the date indicated.


<TABLE>
<CAPTION>

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

<S>                        <C>                                                          <C> 
/s/ Earl Takefman          Director, Chief Executive Officer (Principal                 March 25, 1999
----------------------     Executive Officer)
Earl Takefman


/s/ Melissa Forzly         Chief Financial Officer (Principal Financial and             March 25, 1999
--- ------------------     Accounting Officer)
Melissa Forzly


/s/ Ron Seale              Chairman of the Board                                        March 25, 1999
--- ------------------
Ron Seale


/s/ Mark Hershhorn         Director                                                     March 25, 1999
----------------------
Mark Hershhorn


/s/ Beryl Artz             Director                                                     March 25, 1999
----------------------
Beryl Artz


/s/ Richard Parker         Director                                                     March 25, 1999
----------------------
Richard Parker
</TABLE>













                                       47