<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, 1999

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)

901 YAMATO ROAD, SUITE 175, 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
             -----------

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:     $2,333,642

The aggregate market value of the Registrant's common stock, $.01 par value,
held by non-affiliates as of April 10, 2000, based on the average bid and asked
price of the common stock as of April 10, 1999, was: $1,366,612.

As of April 10, 2000 there were 10,398,440 shares of the Registrant's common
stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the 2000 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, 1999 are
incorporated by reference into Part III of this Form 10-KSB.


<PAGE>   2



                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

                  GENERAL

                  Visual Edge Systems, Inc. was organized to develop, market and
                  sell personalized CD-ROM and videotape golf lessons featuring
                  One-on-One instruction by leading professional golfer Greg
                  Norman. Visual Edge has developed video production technology
                  that 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 golf lesson. Our
                  One-on-One personalized golf lesson analyzes a golfer's swing
                  by comparing it to Greg Norman's swing at several different
                  club positions from two camera angles. Greg Norman's
                  pre-recorded instructional commentary, analysis and computer
                  graphics highlight important golf fundamentals intended to
                  improve a golfer's performance. Golf instructor Jim McLean
                  provides pre-recorded drills and instruction designed to
                  correct the specific errors made by the golfer. We sell our
                  products under the name "One-on-One with Greg Norman." Visual
                  Edge was incorporated in Delaware in July 1994.

                  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,
                  has increased from approximately $12.7 billion in 1989 to
                  approximately $15.1 billion in 1994 to approximately $30.1
                  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

                  Visual Edge has developed six personalized One-on-One golf
                  lessons with Greg Norman for both right- and left-handed
                  golfers. Our 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.

                  RELATIONSHIP WITH GREG NORMAN

                  Under the terms of a license agreement among Visual Edge, Greg
                  Norman and Great White Shark Enterprises, Inc., Greg Norman
                  granted to Visual Edge a worldwide license to use his name,
                  likeness and endorsement and certain trademarks owned by him
                  in connection with the production and promotion of our
                  products. The Greg Norman license prohibits Greg Norman from
                  granting similar


                                       2

<PAGE>   3

                  rights to any person with respect to any concept which is the
                  same as or confusingly similar to our concept or products and
                  does not prohibit Visual Edge from entering into similar
                  endorsement agreements with other athletes or instructors.

                  The Greg Norman license originally required Visual Edge to
                  make minimum guaranteed royalty payments to Mr. Norman;
                  however, as a result of an amendment to the agreement,
                  guaranteed payments are no longer required from Visual Edge.
                  For the year ended December 31, 1999, a total of $186,095 of
                  royalties owed by Visual Edge under the Greg Norman license
                  were accrued, although no payments were made. By letter dated
                  July 30, 1999, Greg Norman and Great White Shark notified
                  Visual Edge of certain alleged defaults by Visual Edge with
                  respect to the Greg Norman license, and subsequently
                  terminated the Greg Norman license. Visual Edge, Greg Norman
                  and Great White Shark Enterprises, Inc. have entered into an
                  amendment to the license agreement to allow Visual Edge to
                  continue using the rights under the Greg Norman license. Under
                  this amendment, payments on the accrued amounts as of December
                  31, 1999 are to be paid on a schedule of twelve equal monthly
                  payments beginning in March 2000. The original term of the
                  Greg Norman license expires on December 31, 2001, subject to
                  prior termination provided thereunder. Our business and future
                  prospects are dependent upon our continued association with
                  Greg Norman.

                  MARKETING AND DISTRIBUTION

                  Our marketing strategy is to sell One-on-One video golf
                  lessons to:

                           o        various organizers of amateur corporate,
                                    charity and member golf tournaments (who
                                    typically offer gifts to tournament
                                    participants)

                           o        golf professionals at private and daily fee
                                    golf courses and driving ranges

                           o        indoor event planners that organize trade
                                    shows, conventions, sales meetings, retail
                                    store openings and promotions

                  To implement our marketing and business strategy, Visual Edge
                  has developed its product to be delivered to customers through
                  CD-ROM and electronic mail. Visual Edge representatives record
                  a customer's golf swing and, at the same time, give the
                  customer a CD-ROM containing the golf swing lesson and
                  transmit the recording to the production facility located at
                  Visual Edge's executive office. At the production facility,
                  Visual Edge processes the recording of the customer's golf
                  swing to compare it to Greg Norman's golf swing. Visual Edge
                  then transmits this comparative information to the customer
                  using electronic mail. In addition to delivering its product
                  using electronic mail, Visual Edge has mobile One-on-One
                  production facilities which are housed in vans and other types
                  of vehicles. These One-on-One vehicles are equipped with video
                  and personal computer equipment to produce our products at the
                  site where the customer records his or her swing.

                  In the first quarter of 1999, Visual Edge signed an agreement
                  to develop, market and produce Visual Edge's product in the
                  United Kingdom. In 1999, approximately 7% of our revenue was
                  derived from operations outside the United States.


                                       3
<PAGE>   4

                  FINANCING TRANSACTIONS

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

                  March Financing

                  In March 1997, Visual Edge obtained bridge financing (the
                  "March Bridge Financing") pursuant to which Visual Edge issued
                  to 13 investors (including Status-One Investments Inc., a
                  company controlled by the family of a former executive officer
                  of Visual Edge), a non-cash financing fee of

                           o        100,000 shares of common stock and

                           o        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 to
                  various banks, which in turn issued stand-by letters of credit
                  to Visual Edge in the aggregate amount of up to $3,500,000.
                  Visual Edge used the Letters of Credit to secure a $3,500,000
                  line of credit from a bank. In June 1997, Visual Edge used a
                  portion of the proceeds from the issuance and sale of certain
                  of its securities 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 investors involved in the March
                  Bridge Financing.

                  Infinity Financing

                  On June 13, 1997, Visual Edge arranged a three-year $7.5
                  million debt and convertible equity facility (the "Infinity
                  Financing") with a group of investment funds, which resulted
                  in net proceeds to Visual Edge of approximately $7.2 million.
                  Under the Securities Purchase Agreement dated June 13, 1997,
                  including the amendments that have since been made to this
                  agreement, Visual Edge issued to the investment funds
                  1,039,388 shares of common stock, 6,000 shares of Series A-2
                  Convertible Preferred Stock with a liquidation preference of
                  $1,000 per share and 8.25% Convertible Notes in the original
                  principal amount of $1.5 million. As of April 10, 2000, the
                  investment funds hold of record 298,538 shares of our common
                  stock subject to the recognition of the conversion by Infinity
                  of 1,627 shares of Series A-2 Convertible Preferred Stock,
                  which is described below.


                                       4
<PAGE>   5
                  The investment funds may convert their Series A-2 Convertible
                  Preferred Stock and Convertible Notes into additional shares
                  of our common stock, subject to our right to prepay or redeem
                  any of those convertible instruments at any time. Because
                  Visual Edge's common stock has been delisted from the Nasdaq
                  SmallCap Market, an Event of Default exists under the Infinity
                  Financing. As a result, the investment funds may convert each
                  share of Series A-2 Convertible Preferred Stock into a number
                  of shares of common stock based on a formula using a
                  percentage of the market price of the common stock. On August
                  30, 1999, one of the investment funds delivered a notice of
                  conversion to Visual Edge, to convert 1,627 of its 4,400
                  shares of our Series A-2 Convertible Preferred Stock into
                  9,594,857 shares of our common stock. The conversion was
                  disputed, and litigation ensued in the Delaware Court of
                  Chancery. See "Item 3. - Legal Proceedings."  In January
                  2000, the court dismissed the action, stating that the claim
                  relating to the conversion was moot because parties to the
                  dispute had resigned from their positions with Visual Edge.
                  Currently, Visual Edge is in discussions with Infinity
                  regarding this conversion of series A-2 Convertible Preferred
                  Stock into common stock.

                  Because of the existing Event of Default under the Infinity
                  Financing, the investment funds may convert the Convertible
                  Notes into common stock based on the same formula used to
                  convert the Series A-2 Convertible Preferred Stock into
                  shares of common stock during an Event of Default. As of the
                  date of this filing, the holders of the Convertible Notes
                  have neither declared a default nor given notice of
                  acceleration of the amounts owed under the Convertible Notes.

                  Dividends on the Series A-2 Convertible Preferred Stock began
                  accruing on January 1, 2000 at the rate of 8.25% annually and
                  are payable quarterly in cash or in shares of common stock.
                  To date, no dividends have been paid. The investment funds
                  are entitled to receive 495,000 shares of our common stock in
                  each of the year 2000 and 2001 as payment of dividends on the
                  Series A-2 Convertible Preferred Stock.

                  The Convertible Notes mature in June 2000 and interest on the
                  notes shall be paid in cash. The notes are secured by all of
                  our significant assets.

                  Marion Equity Financing

                  In March 1998, Visual Edge entered into a Purchase Agreement
                  with Marion Interglobal, Ltd., an investment group owned by
                  Ronald Seale, a director and executive officer of Visual Edge,
                  and its nominee. Under this agreement, Marion agreed to invest
                  up to $11 million in exchange for up to 5,200,000 shares of
                  common stock in three separate phases. In connection with the
                  first two phases, Visual Edge issued to Marion an aggregate of
                  two million shares of common stock for $5 million. Marion
                  opted not to proceed with the third phase. Visual Edge paid
                  certain transaction fees to Marion totaling two million
                  additional shares of common stock upon the completion of the
                  first two phases. As of December 31, 1999, Marion beneficially
                  owns 976,000 shares of our common stock for its own account.

                  COMPETITION

                  Visual Edge faces competition for consumer discretionary
                  spending from numerous other businesses in the golf industry
                  and related market segments. Visual Edge competes with a
                  variety of products and services that are used as participant
                  gifts at golf events or provide golf instruction, including
                  instructional


                                       5
<PAGE>   6
                  CD ROM's and videotapes, golf software used to analyze golf
                  swings and golf courses, schools and professionals who offer
                  video golf lessons, certain of which may be less expensive or
                  provide other advantages to consumers. In addition, certain
                  companies offer both hardware and software to golf
                  professionals for use in connection with golf lessons.
                  Moreover, the instructional golf video segment of the
                  industry has no substantial barriers to entry and,
                  consequently, Visual Edge expects that other companies that
                  have developed software technologies similar to those used by
                  Visual Edge may seek to enter our target markets and compete
                  directly against Visual Edge. There can be no assurance that
                  other companies are not developing or will not seek to
                  develop similar products.

                  PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION

                  Visual Edge has obtained a patent from the United States
                  Patent and Trademark Office covering certain aspects of its
                  digital video editing and videotape production process. There
                  can be no assurances that any patent applications will result
                  in issued patents, the breadth or degree of protection which
                  patents may afford Visual Edge or that our patent 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.
                  Furthermore, there can be no assurance that Visual Edge will
                  have financial or other resources necessary to enforce its
                  patent or defend a patent infringement action. In addition to
                  filing a patent application, Visual Edge 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 our proprietary processes, ideas
                  and documentation. Moreover, although Visual Edge has entered
                  into confidentiality agreements with certain of its employees,
                  there can be no assurance that such arrangements will
                  adequately protect Visual Edge.

                  CHANGES IN MANAGEMENT OF VISUAL EDGE

                  On September 13, 1999, the holders of our Preferred Stock
                  exercised their rights under the Certificate of Designation
                  relating to the Series A-2 Convertible Preferred Stock and
                  appointed John A. Wagner to our board of directors. The board
                  of directors held a meeting on September 14, 1999 at which the
                  directors voted to remove Earl Takefman from his position as
                  Chief Executive Officer and Richard Parker from his position
                  as President and Chief Operating Officer. At the same meeting,
                  the board of directors appointed our Chairman, Ronald F.
                  Seale, to the office of Chief Executive Officer. On September
                  21, 1999, Earl Takefman and Richard Parker resigned as
                  members of the board of directors. On November 19, 1999, the
                  board of directors elected J. Keith Benedict to the board of
                  directors to the extent that he was not already a director
                  pursuant to the stockholder consent dated August 30, 1999. On
                  November 19, 1999, the board of directors elected Thomas
                  Peters to the office of Executive Vice President and Chief
                  Technology Officer. As is further explained under Item 3
                  "Legal Proceedings" contained in this Report, the conversion
                  of shares of Series A-2 Convertible Preferred Stock, as well
                  as the members of the board of directors elected as a result
                  of the conversion, has been disputed. To confirm the members


                                       6
<PAGE>   7

                  of the board of directors, the members of the board that were
                  still in office and that were elected by means other than as a
                  result of the conversion, elected Keith Benedict, Stuart
                  Chasanoff and Tom Peters to fill vacancies in the board of
                  directors created from resignations from the board of
                  directors. Stuart Chasanoff submitted his resignation from the
                  board of directors in April 2000.

                  EMPLOYEES

                  At December 31, 1999, Visual Edge employed (directly or
                  indirectly) two executive employees and 18 employees engaged
                  in the operation of its offices and vans.

                  RISK FACTORS

                  Readers of this annual report or any of our press releases
                  should carefully consider the following risk factors, in
                  addition to the other information contained herein. This
                  annual report on Form 10-K and our press releases contain
                  statements of a forward-looking nature relating to future
                  events or the future financial performance of Visual Edge
                  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.

                  VISUAL EDGE HAS EXPERIENCED SIGNIFICANT AND CONTINUING LOSSES.
                  As of December 31, 1999, Visual Edge had an accumulated
                  deficit of $24,173,544. We incurred a net loss of $3,237,570
                  for 1999. We believe that Visual Edge will continue to incur
                  losses until Visual Edge generates sufficient revenues to
                  offset the operating costs associated with commercializing its
                  products. These losses could limit our ability to grow and to
                  raise new funds and could ultimately jeopardize our ability to
                  remain in business.

                  OUR PERFORMANCE MAY PREVENT VISUAL EDGE FROM OBTAINING
                  ADDITIONAL CAPITAL. As a result of our continuing losses, the
                  low market price of our common stock and the delisting of our
                  common stock from the Nasdaq SmallCap Market, we believe that
                  it will be very difficult, if not impossible, for Visual Edge
                  to raise additional capital in the future. As of December 31,
                  1999, Visual Edge had a total of cash and cash equivalents of
                  approximately $19,274. Visual Edge is unlikely to become
                  profitable in the reasonably foreseeable future. Accordingly,
                  if Visual Edge cannot raise new funds, Visual Edge may exhaust
                  its cash resources and be unable to continue in business.

                  THE VALUE OF VISUAL EDGE'S SECURITIES COULD DECREASE UPON THE
                  ISSUANCE OF ADDITIONAL SECURITIES BY VISUAL EDGE. As a result
                  of the decline in the market price of the common stock and the
                  delisting of our common stock from the Nasdaq SmallCap Market,
                  the holders of our Series A-2 Convertible Preferred Stock and
                  Convertible Notes have the right to convert their securities
                  into shares


                                       7
<PAGE>   8
                  of common stock based on a formula using a percentage of the
                  market price for the common stock. Infinity, the holder of
                  Series A-2 Convertible Preferred Stock and Convertible Notes,
                  has given notice to convert 1,627 shares of its Preferred
                  Stock into 9,594,857 shares of common stock. See "Item 1. -
                  Financing Transactions" and  "Item 3. - Legal Proceedings."
                  This conversion, if recognized by Visual Edge, could result in
                  substantial dilution to the other holders of common stock. Any
                  additional conversions using this formula would result in
                  additional substantial dilution to the other holders of common
                  stock.

                   Additionally, as of December 31, 1999 there were a
                   substantial number of outstanding options and warrants to
                   purchase shares of our common stock. The exercise of any of
                   these options or warrants will also have a dilutive effect on
                   our stockholders. Furthermore, holders of such options or
                   warrants are more likely to exercise them at times when
                   Visual Edge 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.
                   The sale of a substantial number of our common stock may
                   adversely affect the prevailing price of such common stock in
                   the public market and may impair our ability to raise capital
                   through the sale of its equity securities.

                   VISUAL EDGE RELIES SIGNIFICANTLY ON ITS LICENSE WITH GREG
                   NORMAN. In connection with the production and promotion of
                   our products, Visual Edge uses, under a worldwide license,
                   Greg Norman's name, likeness, endorsement and certain
                   trademarks. During 1999, Greg Norman and Great White Shark
                   notified Visual Edge of defaults by Visual Edge under the
                   Greg Norman license. The parties have since entered into an
                   amended license agreement to allow Visual Edge to continue to
                   use its rights under the Greg Norman license. The Greg Norman
                   license expires on December 31, 2001, subject to termination
                   pursuant to the terms thereunder. Our business may be
                   adversely affected if the Greg Norman license is terminated
                   in the future or if Greg Norman dies, becomes disabled,
                   retires from tournament play, experiences a significant
                   decline in his performance at golf tournaments, reduces his
                   participation in golf tournaments, commits a serious crime or
                   performs any act which adversely affects his reputation.
                   Visual Edge has obtained a "key-man" life insurance policy on
                   Greg Norman in the amount of $10,000,000.

                  OUR COMMON STOCK HAS BEEN DELISTED FROM THE NASDAQ SMALLCAP
                  MARKET AND IS SUBJECT TO ADDITIONAL SIGNIFICANT RISKS. Because
                  we were unable to meet Nasdaq's listing requirements, Visual
                  Edge was delisted from the Nasdaq SmallCap Market as of June
                  1, 1999. The delisting of our common stock means that, among
                  other things, fewer investors have access to trade our common
                  stock which will limit our ability to raise capital through
                  the sale of its securities. In addition, our common stock is
                  subject to penny stock regulations, which could cause fewer
                  brokers and market makers to execute trades in our common
                  stock. This is likely to hamper our common stock trading with
                  sufficient volume to provide liquidity and could cause our
                  stock price to further decrease.


                                       8
<PAGE>   9

                  The penny stock regulations require that broker-dealers who
                  recommend penny stocks to persons other than institutional
                  accredited investors must make a special suitability
                  determination for the purchaser, receive the purchaser's
                  written agreement to the transaction prior to the sale and
                  provide the purchaser with risk disclosure documents which
                  identify risks associated with investing in penny stocks.
                  Furthermore, the broker-dealer must obtain a signed and dated
                  acknowledgement from the purchaser demonstrating that the
                  purchaser has actually received the required risk disclosure
                  document before effecting a transaction in penny stock. These
                  requirements have historically resulted in reducing the level
                  of trading activity in securities that become subject to the
                  penny stock rules. Holders of our common stock may find it
                  more difficult to sell their shares of common stock, which is
                  expected to have an adverse effect of the market price of the
                  common stock.

                  WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO
                  OUR STOCK PRICE VOLATILITY. In the past, securities class
                  action litigation has often been brought against a company
                  following periods of volatility in the market price of its
                  securities. We may be the target of similar litigation.
                  Securities litigation may result in substantial costs and
                  divert management's attention and resources, which may
                  seriously harm our business, prospects, financial condition
                  and results of operations.


                  WE MUST BE ABLE TO IMPLEMENT OUR BUSINESS PLAN. Our plan of
                  operation and prospects are largely dependent upon our ability
                  to achieve significant market acceptance for our products,
                  establish and maintain relationships with our customers,
                  successfully hire and retain skilled technical, marketing and
                  other personnel, and successfully develop, market and sell our
                  products on a timely and cost effective basis. There can be no
                  assurance that Visual Edge will be able to continue to
                  implement our business plan. Failure to effectively implement
                  our business plan will have a material adverse effect on
                  Visual Edge.

                  OUR PRODUCTS MAY BE SUBJECT TO PRODUCT OBSOLESCENCE OR SHORT
                  PRODUCT LIFE CYCLES BEFORE THEY ARE ACCEPTED. The markets for
                  our products may be characterized by rapidly changing
                  technology which could result in product obsolescence or short
                  product life cycles. Our competitors could develop
                  technologies or products that render our products obsolete or
                  less marketable. Accordingly, our ability to compete may be
                  depend upon our ability to continually enhance and improve our
                  products.

                  VISUAL EDGE DEPENDS ON OUR OFFICERS AND KEY PERSONNEL FOR OUR
                  SUCCESS. The prospects of Visual Edge depend on the personal
                  efforts of Ronald Seale, our Chairman of the Board, Chief
                  Executive Officer and President, and


                                       9
<PAGE>   10

                  Thomas Peters, our Executive Vice President and Chief
                  Technology Officer, and other key personnel to implement our
                  operating and growth strategies. The loss of the services of
                  these executives could have a material adverse effect on our
                  business and prospects because of their experience and
                  knowledge in the industry.

                  VISUAL EDGE HAS A LIMITED PRODUCT LINE. Visual Edge currently
                  depends entirely on the sales of a limited product line to
                  generate revenues. Visual Edge may develop other products in
                  the future that may or may not be similar to our current
                  products. Visual Edge cannot assure that our current or future
                  products will prove to be commercially viable. Failure to
                  achieve commercial viability on a timely basis would cause
                  Visual Edge to close our business.

                  INDUSTRY FACTORS BEYOND OUR CONTROL COULD AFFECT OUR FINANCIAL
                  PERFORMANCE. Our future operating results will depend on
                  numerous factors beyond our control, including:

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

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

                           o        changes in consumer demographics

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

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

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

                  OUR PRODUCTS ARE SUBJECT TO SEASONALITY. Our business may be
                  affected by seasonal weather conditions that may limit the
                  golf seasons in certain geographic areas. Such seasonal
                  factors may result in fluctuations in our future operating
                  results. Our business has historically been seasonal with
                  higher sales in the second and third quarters of each fiscal
                  year. Visual Edge believes greater numbers of golf events are
                  held during the warm months of the year.

                  VISUAL EDGE MAY NOT BE ABLE TO CARRY OUT OUR ACQUISITION
                  STRATEGY. Visual Edge has recently adopted an acquisition
                  strategy to expand our product offerings. This strategy
                  focuses on technology companies, including in particular
                  companies engaged in the business of "distance education" or
                  instruction via the Internet. To be suitable for acquisition
                  by Visual Edge, these companies must be small enough to be
                  affordable yet profitable. These candidates may be few in
                  number and may attract offers from companies with greater
                  financial resources than Visual Edge. We cannot assure you
                  that Visual Edge will be able to locate suitable acquisition
                  targets or that Visual Edge will be able to complete any
                  acquisitions.


                                       10
<PAGE>   11

                  OUR CURRENT FINANCIAL CONDITION PREVENTS VISUAL EDGE FROM
                  FINANCING AN ACQUISITION INDEPENDENTLY. Our current financial
                  condition will not allow Visual Edge to finance an acquisition
                  independently. If Visual Edge locates an acquisition
                  opportunity, it will have to depend on the profitability of
                  the target company and the efforts of some of our major
                  stockholders to attract and obtain financing. We cannot assure
                  you that Visual Edge will be able to obtain financing on
                  acceptable terms or at all. If we cannot obtain financing, we
                  will not be able to complete any acquisitions.

                  THE MARKET PRICE FOR OUR COMMON STOCK AND WARRANTS IS
                  VOLATILE. Since our initial public offering, the market prices
                  of our publicly traded securities have been highly volatile as
                  has been the case with the securities of other emerging
                  companies. The market price of our common stock may be
                  affected by certain factors such as our operating results and
                  press releases or those of our competitors. In addition, in
                  recent years, the stock market has experienced a high level of
                  price and volume volatility and market prices for the
                  securities of many companies have experienced wide price
                  fluctuations which have not necessarily been related to the
                  operating performance of those companies.


ITEM 2.           DESCRIPTION OF PROPERTY

                  Visual Edge's principal executive office is a leased facility
                  with approximately 2,400 square feet of space in Boca Raton,
                  Florida. Visual Edge leases this space under a lease agreement
                  that expires in July 2005. Visual Edge believes that its
                  existing facilities are well maintained and in good operating
                  condition and are adequate for its present and anticipated
                  levels of operations.

ITEM 3.           LEGAL PROCEEDINGS

                  Proceedings with Stockholders

                  On August 2, 1999, Infinity filed suit in Delaware Chancery
                  Court against Visual Edge and three of our then current
                  officers and directors, Earl Takefman, Richard Parker, and
                  Thomas Peters (Infinity Investors Limited v. Earl T. Takefman,
                  et al.; Civil Action No. 17347-NC, in the Court of Chancery of
                  the State of Delaware in and for New Castle County). In its
                  original complaint in that action, Infinity sought, among
                  other things, injunctive relief to prevent the defendants from
                  interfering with Infinity's alleged rights to convert
                  Preferred Stock to common stock, as well as from interfering
                  with the subsequent removal of Messrs. Takefman, Parker, and
                  Peters as directors and officers of Visual Edge. The original
                  complaint also disclosed Infinity's intention to convert
                  certain shares of our convertible Preferred Stock into
                  approximately 9,600,000 shares of our common stock. Infinity
                  asserts that an event of default under Infinity's securities
                  purchase agreement with Visual Edge occurred when our common
                  stock was delisted from the Nasdaq SmallCap Market and a
                  listing on a comparable market or exchange was not obtained
                  within the applicable period. Infinity further asserts that
                  the occurrence of such an event provides it with the
                  aforementioned conversion rights.



                                       11
<PAGE>   12

                  On August 4, 1999, the parties in the Delaware action agreed
                  to a standstill stipulation approved by the Delaware Court. In
                  the standstill stipulation, Visual Edge and the individual
                  defendants agreed, pending final resolution, to refrain from
                  taking certain actions without court approval, or in certain
                  other cases, without prior notice to Infinity. By letter dated
                  August 16, 1999, the Delaware Court ordered that current
                  management may continue to operate and manage Visual Edge on a
                  day-to-day basis so long as it does so consistent with the
                  terms of the standstill stipulation.

                  On August 13, 1999, Infinity delivered a notice of conversion
                  to Visual Edge, pursuant to which Infinity alleges that it
                  converted 1,627 of its 4,400 shares of our Series A-2
                  Cumulative Convertible and Redeemable Preferred Stock into
                  9,594,857 shares of our common stock. Also on August 13, 1999,
                  Infinity dismissed Visual Edge from the Delaware lawsuit.

                  On August 30, 1999, Infinity delivered a stockholders' consent
                  to Visual Edge, pursuant to which Messrs. Parker, Peters, and
                  Takefman were allegedly removed from our board of directors,
                  and Stuart J. Chasanoff and J. Keith Benedict, affiliates of
                  Infinity, were appointed as directors. On the same date, the
                  purported newly-appointed Board of directors caused a
                  unanimous written consent to be delivered to Visual Edge,
                  pursuant to which, among other things, Mr. Takefman was
                  removed from his position as Chief Executive Officer, Mr.
                  Parker was removed from his position as President and Chief
                  Operating officer, and Mr. Peters was removed from his
                  position as Vice President of Operations and Technology.

                  On September 13, 1999, the Series A-2 Preferred Stockholders
                  of Visual Edge appointed John A. Wagner to our board,
                  exercising their rights under the applicable Certificate of
                  Designation to appoint a representative to our board of
                  directors. To the extent that the alleged unanimous board
                  consent of August 30, 1999 did not terminate Messrs. Takefman
                  and Parker from their offices, our board of directors held a
                  meeting on September 14, 1999 and removed Messrs. Takefman and
                  Parker from their positions with Visual Edge. By letters dated
                  September 21, 1999, Messrs. Takefman and Parker resigned from
                  our board of directors effective immediately.

                  On November 5, 1999, Takefman and Parker filed a motion to
                  dismiss Infinity's Delaware action. By Memorandum Opinion
                  issued January 28, 2000, the Delaware Chancery Court granted
                  that motion in part and denied it in part, holding that
                  Infinity could continue to pursue its claims against those two
                  individuals for tortious interference and for breach of their
                  fiduciary duties of care and loyalty with respect to their
                  alleged interference with Infinity's stock conversion and
                  their alleged failure to disclose their intent to take control
                  of the Visual Edge Board of Directors. The Delaware Court also
                  held that Takefman and Parker necessarily conceded the
                  validity of Infinity's conversion and their subsequent removal
                  from Visual Edge's board of directors.



                                       12
<PAGE>   13

                  PROCEEDINGS WITH FORMER OFFICERS AND DIRECTORS

                  On September 23, 1999, Messrs. Takefman and Parker filed suit
                  in Florida state court against Visual Edge, Infinity, HW
                  Partners, L.P., Clark Hunt, Barrett Wissman, John Wagner,
                  Stuart Chasanoff and Keith Benedict (Earl Takefman, et al. v.
                  Visual Edge System, Inc., et al., Case No. CL 99-9086 AG, in
                  the Circuit Court of the Fifteenth Judicial Circuit in and for
                  Palm Beach County, Florida). Messrs. Takefman and Parker
                  allege that they are owed severance payments pursuant to their
                  respective employment agreements with Visual Edge, and assert
                  claims for breach of contract, tortious interference with
                  contract, and interference with employment. Visual Edge
                  believes Takefman's and Parker's claims are without merit and
                  intends to vigorously defend itself against those claims.

                  On October 12, 1999, Visual Edge filed suit in Delaware
                  Chancery Court against Messrs. Takefman and Parker for, among
                  other things, breach of fiduciary duty, breach of employment
                  agreements, and tortious interference with contract (Visual
                  Edge Systems Inc. v. Earl T. Takefman, et al.; Civil Action
                  No. 17472-NC, in the Court of Chancery of the State of
                  Delaware in and for New Castle County). On November 5, 1999,
                  Messrs. Takefman and Parker moved to dismiss the action or to
                  stay the action in favor of the Florida suit. On January 31,
                  2000, the Delaware Court granted the motion to stay until
                  further order of that Court. As a result, Visual Edge intends
                  to assert its claims against Takefman and Parker as
                  counterclaims in the prior-filed Florida action, which is
                  described in the immediately preceding paragraph.


                PROCEEDINGS WITH GREG NORMAN AND HIS AFFILIATES

                  By letter dated July 30, 1999, Great White Shark Enterprises,
                  Inc. placed Visual Edge on notice of certain alleged defaults
                  with respect to the License Agreement, dated March 1, 1995, as
                  amended, by and among Great White Shark, Greg Norman, and
                  Visual Edge, pursuant to which Great White Shark and Mr.
                  Norman, as licensors, have granted to Visual Edge, among other
                  things, the right to use the name and likeness of Greg Norman
                  in connection with the One-on-One product sold by Visual Edge.
                  Mr. Norman alleged in that default notice that Visual Edge had
                  failed to pay certain royalties and had failed to comply with
                  certain other covenants of the Greg Norman license. Pursuant
                  to its terms, the Greg Norman license terminates, upon the
                  option of Norman, 90 days following notice thereof if a
                  monetary default is not cured within 10 days, or a
                  non-monetary default is not cured within 30 days, from the
                  date of notice of default. Therefore, the possibility exists
                  that Norman will declare the Greg Norman license to be
                  terminated because of our purported failure to timely cure the
                  alleged defaults within the applicable periods. In addition,
                  Mr. Norman may seek to recover damages and other relief
                  against Visual Edge as a result of the alleged defaults and/or
                  any alleged termination of the License Agreement.

                  On August 11, 1999, Visual Edge filed a Complaint and Demand
                  for a Jury Trial, with the United States District Court,
                  Southern District, West Palm Beach Division, against Greg
                  Norman, Great White Shark Enterprises, Inc., Greg Norman
                  Interactive LLC, and LibertyOne Limited for breach of
                  contract, unfair and deceptive trade practices, unjust
                  enrichment and trademark infringement. In October 1999, Visual
                  Edge filed a Motion to Dismiss without Prejudice in this
                  action. Visual Edge has no current plans to pursue this
                  lawsuit. See "Item 1 - Description of Business Relationship
                  with Greg Norman."



                                       13
<PAGE>   14

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                  None.


                                       14
<PAGE>   15


                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

                  MARKET FOR COMMON STOCK

                  Our common stock and warrants are traded on the
                  over-the-counter market under the symbols EDGE and EDGEW. Our
                  common stock and warrants were traded on the Nasdaq SmallCap
                  Market until June 1, 1999. Visual Edge completed our initial
                  public offering in July 1996 at an offering price of $5.00 per
                  share for our common stock and $.10 per warrant. The following
                  table sets forth

                           o        for the periods from January 1998 through
                                    June 1, 1999, the range of high and low last
                                    sale prices for the common stock and the
                                    warrants reported on the Nasdaq SmallCap
                                    Market and

                           o        for the period from June 2, 1999 through
                                    December 31, 1999, the range of high and low
                                    bid prices for the common stock reported on
                                    the over-the-counter bulletin board. The
                                    quotations from the over-the-counter
                                    bulletin board reflect interdealer prices,
                                    without retail mark-up, mark-down or
                                    commission, and may not represent actual
                                    transactions.


                                       15
<PAGE>   16


<TABLE>
<CAPTION>
                  COMMON STOCK                                         HIGH                       LOW
                  ------------                                         ----                       ---
<S>                                                                   <C>                     <C>
         Fiscal Year 1998
               First Quarter                                           $4.38                   $2.62
               Second Quarter                                           4.69                    2.81
               Third Quarter                                            3.47                    1.38
               Fourth Quarter                                           2.00                     .62
         Fiscal Year 1999
               FirstQuarter                                            $1.25                   $ .69
               Second Quarter (through June 1, 1999)                     .78                     .38
               Second Quarter (from June 2, 1999)                        .45                     .22
               Third Quarter                                             .56                     .09
               Fourth Quarter                                            .16                     .06


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

         Fiscal Year 1998
               First Quarter                                           $1.69                   $ .62
               Second Quarter                                           1.25                     .50
               Third Quarter                                             .88                     .00
               Fourth Quarter                                            .50                     .00

         Fiscal Year 1999
               First Quarter                                             .25                   $ .00
               Second Quarter (through June 1, 1999)                     .19                     .09
               Second Quarter (from June 2, 1999)                        .12                     .12
               Third Quarter                                             .12                     .00
               Fourth Quarter                                            .00                     .00
</TABLE>


                  HOLDERS OF COMMON STOCK

                  At April 10, 2000, the last reported high bid price of the
                  common was $.30 per share and the last reported sale price of
                  the warrants was $.05 per warrant. At April 10, 2000, there
                  were 122 holders of record of our common stock and 8 holders
                  of record of our warrants. Visual Edge believes that there are
                  more than 3,900 beneficial holders of our common stock and 510
                  beneficial holders of our warrants.

                  DIVIDENDS

                  Visual Edge does not anticipate paying any cash dividends on
                  our common stock in the foreseeable future and intends to
                  retain our earnings, if any, to finance the expansion of our
                  business and for general corporate purposes. Any payment of
                  future dividends will be at the discretion of our board of
                  directors and will depend upon, among other things, our
                  earnings, financial condition, capital requirements, level of
                  indebtedness, contractual restrictions and other factors that
                  our board of directors deems relevant. In addition, the
                  payment of cash dividends is limited by the terms of our
                  outstanding 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.



                                       16
<PAGE>   17

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

                           The following discussion and analysis should be read
                  in conjunction with the financial statements and notes thereto
                  included as Item 7 of this Annual Report on Form 10-KSB. This
                  discussion and analysis contains certain forward-looking
                  statements that involve risks and uncertainties. Visual Edge's
                  actual results and the timing of certain events could differ
                  materially from those discussed in the forward-looking
                  statements as a result of certain factors including those set
                  forth in Visual Edge's filings with the Securities and
                  Exchange Commission, specifically including the risk factors
                  set forth under Item 1 of this Annual Report on Form 10-KSB.

                  GENERAL

                  Visual Edge was organized to develop, market and sell
                  personalized CD-ROM and videotape golf lessons featuring
                  One-on-One instruction by leading professional golfer Greg
                  Norman. Visual Edge 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 golf lesson. Our
                  One-on-One personalized golf lesson analyzes a golfer's swing
                  by comparing it to Greg Norman's swing at several different
                  club positions from two camera angles. Greg Norman's
                  pre-recorded instructional commentary and analysis and
                  computer graphics highlight important golf fundamentals
                  intended to improve a golfer's performance. Golf instructor
                  Jim McLean provides pre-recorded drills and instruction
                  designed to correct the specific errors made by the golfer. We
                  sell our products under the name "One-on-One with Greg
                  Norman".

                  Our marketing strategy is to sell One-on-One golf lessons to
                  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.

                  At a One-on-One event, Visual Edge's team of technicians uses
                  portable video and computer equipment or a truck or other
                  vehicle outfitted as a mobile production facility. When
                  portable equipment is used, the digitized swing recordings are
                  electronically forwarded to Visual Edge's production facility
                  and the completed product is delivered to the golfer using
                  electronic mail. Visual Edge locates its One-on-One vans in
                  selected geographic areas that service golf courses and
                  driving ranges throughout the United States. When mobile
                  production vehicles are used, they are driven to golf courses
                  and corporate events to film participants and produce the
                  One-on-One lessons on-site. In the first quarter of 1999,
                  Visual Edge signed an agreement to develop, market and sell
                  Visual Edge's product in the United Kingdom. In 1999, sales
                  outside the United States accounted for approximately
                  7% of Visual Edge's revenues.

                  The majority of our cost of sales is contributed to Visual
                  Edge's fixed operating costs which includes operator salaries,
                  vehicle storage and depreciation and


                                       17
<PAGE>   18

                  Visual Edge's fixed overhead expenses. Approximately 25% of
                  the cost of sales are variable costs related to sales and
                  production. These costs include the cost of the videotapes and
                  CD-ROMs, royalties to Greg Norman and sales commissions.
                  Visual Edge believes that significantly higher sales levels
                  are needed before it may be able to generate profits.
                  Management believes that Visual Edge will not achieve such
                  sales levels in 2000 and no assurance can be given that Visual
                  Edge will ever achieve such sales levels or that the variable
                  costs will remain constant as a percent of sales or that
                  Visual Edge will not incur additional fixed costs.

                  RESULTS OF OPERATIONS

                  Year ended December 31, 1999 compared year ended December 31,
                  1998

                  Sales for 1999 decreased 11.3% to $2,333,642, as compared to
                  $2,632,213 for 1998. This decrease in sales in 1999, as
                  compared to 1998, is primarily due to decreased revenues from
                  sales of Visual Edge's product in the United States, which was
                  partially offset by an increase in revenues derived from the
                  agreement to sell the product in the United Kingdom.

                  The cost of sales for 1999 increased 18.2% to 2,912,792, as
                  compared to $2,463,940 for 1998. This increase in the cost of
                  sales is primarily attributable to an earlier recognition
                  during 1999 of certain prepaid expenses and advance
                  royalties relating to the Greg Norman license and a
                  depreciation charge relating to the mobile production vehicles
                  used in our operations.

                  Operating expenses for 1999 decreased 33.9% to $3,026,938, as
                  compared to $4,577,034 for 1998. This decrease in 1999
                  operating expenses is attributable primarily to a decrease in
                  executive salaries and benefits and salaries and benefits
                  relating to processing facility personnel. This decrease was
                  partially offset by an increase in legal fees.

                  Operating loss for 1999 decreased 18.2% to $3,606,088, as
                  compared to $4,408,761 for 1998.

                  Visual Edge earned $67,098 in interest income for 1999, as
                  compared to $119,647 for 1998. Interest expense for 1999 was
                  $119,142, as compared to $251,566 for 1998. This decrease in
                  interest expense is primarily due to reduced equipment loans.

                  Net loss for 1999 decreased 20.1% to $3,871,261, as compared
                  to $4,846,792 for 1998. Net loss per share for 1999 decreased
                  54.3% to $.37, as compared to $.81 for 1998.

                  LIQUIDITY AND CAPITAL RESOURCES

                           Visual Edge does not currently maintain a bank credit
                  facility. Visual Edge has historically financed its operations
                  primarily through the sale of equity securities or instruments
                  convertible into equity securities. On December 31, 1999,
                  Visual Edge had cash and cash equivalents of $19,724, no
                  unrestricted short-term investments (certificates of deposit)
                  and working capital deficit of


                                       18
<PAGE>   19

                  $557,141, as compared to 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 at
                  December 31, 1998. Net cash used in operating activities for
                  December 31, 1999 was $1,743,317. Net cash provided by
                  investing activities was $2,148,591, and $629,896 was used in
                  financing activities for a total decrease in cash and cash
                  equivalents of $224,622. Net cash used in operating activities
                  for 1998 was $3,176,816. Net cash used in investing activities
                  in 1998 was $1,017,737, and $4,214,470 was provided by
                  financing activities, for a total increase in cash and cash
                  equivalents in 1998 of $19,917.

                           On December 31, 1999, Visual Edge had stockholders
                  equity of $329,810, as compared to stockholders equity deficit
                  of $303,881 at December 31, 1998.

                            Visual Edge has not paid interest owed on Visual
                   Edge's outstanding Convertible Notes since March 31, 1999. As
                   of March 31, 2000, the amount of unpaid accrued interest on
                   the Convertible Notes was approximately $123,000. Visual Edge
                   has outstanding $1,500,000 face amount of Convertible Notes
                   held by Infinity, Summit Capital Limited and Glacier Capital
                   Limited. Interest on the Convertible Notes is payable
                   quarterly. The non-payment of such interest constitutes an
                   Event of Default under the Convertible Notes and related
                   agreements. As of the date of this filing, the holders of the
                   Convertible Notes have neither declared a default nor given
                   notice of acceleration of the amounts owed under the
                   Convertible Notes.

                           Visual Edge will require further cash or a reduction
                  in operating expenses at the current revenue levels to satisfy
                  Visual Edge's contemplated working capital requirements for
                  the year ending December 31, 1999. If Visual Edge is unable to
                  raise cash or finance its operations from cash flow, it may
                  exhaust its cash resources by the year-end and may be forced
                  to curtail or cease its operations.

                           The financial statements have been prepared assuming
                  that Visual Edge will continue as a going concern and do not
                  include any adjustments to reflect the possible future effects
                  on the recoverability and classification of assets and the
                  amount of classification of liabilities that may result from
                  the possible inability of Visual Edge to continue as a going
                  concern.

                  SEASONALITY

                           Visual Edge's business has historically been seasonal
                  with higher sales in the second and third quarters of each
                  fiscal year. Visual Edge believes greater numbers of golf
                  events are held during the warm months of the year.


                  THIRD PARTY REPORTS AND PRESS RELEASES

                  Visual Edge does not make financial forecasts or projections
                  nor does Visual Edge endorse the financial forecasts or
                  projections of third parties or comment on the accuracy of
                  third party reports. Visual Edge does not participate in the
                  preparation of the reports or the estimates given by analysts.
                  Analysts who issue financial reports are not privy to
                  non-public financial information. Any purchase


                                       19
<PAGE>   20

                  of our securities based on financial estimates provided by
                  analysts or third parties is done entirely at the risk of the
                  purchaser.

                  Visual Edge periodically issues press releases to update
                  shareholders on new developments relating to Visual Edge and
                  our business. These releases may contain certain statements of
                  a forward-looking nature relating to future events or the
                  future financial performance of Visual Edge 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 materially
                  differ with those statements. 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.


                                       20
<PAGE>   21


ITEM 7.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                PAGE
<S>                                                                                            <C>
                  Report of Independent Certified Public Accountants.....................        22

                  Balance Sheets as of December 31, 1998 and December 31, 1999...........        23

                  Statements of Operations for the Years Ended December 31, 1998
                       and 1999..........................................................        24

                  Statements of Changes in Stockholders' Equity (Deficit) for the
                       Years Ended December 31, 1998 and 1999............................        25

                  Statements of Cash Flows for the Years Ended December 31, 1998
                       and 1999..........................................................        26

                  Notes to Financial Statements..........................................        27
</TABLE>





                                       21
<PAGE>   22




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To Visual Edge Systems Inc.:

We have audited the accompanying balance sheets of Visual Edge Systems Inc., a
Delaware corporation, as of December 31, 1998 and 1999, 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 auditing standards generally accepted
in the United States. 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, 1998 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has an accumulated deficit that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.



ARTHUR ANDERSEN LLP

Miami, Florida,
   March 28, 2000  (except with respect to the matter discussed in Note 12,
                    as to which the date is April 12, 2000)


                                       22
<PAGE>   23



                            VISUAL EDGE SYSTEMS INC.


                                 BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1999


<TABLE>
<CAPTION>
                                                                          1998            1999
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
                                  ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                                         $    244,346    $     19,724
   Certificates of deposit                                              1,750,000              --
   Accounts receivable                                                     26,893          32,765
   Inventories                                                            103,142          57,894
   Prepaid expenses - advance royalties                                   220,577         150,000
   Other current assets                                                   107,345          49,407
                                                                     ------------    ------------
              Total current assets                                      2,452,303         309,790
FIXED ASSETS, net                                                       2,248,514       1,404,097
INTANGIBLE ASSETS, net                                                    167,777          55,925
PREPAID EXPENSES - ADVANCE ROYALTIES                                      680,157              --
INVESTMENTS - RESTRICTED                                                  587,108         200,000
                                                                     ------------    ------------

              Total assets                                           $  6,135,859    $  1,969,812
                                                                     ============    ============

              LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Accounts payable                                                  $    201,617    $    137,772
   Accrued expenses                                                       167,795         476,229
   Other current liabilities                                              218,259          78,151
   Current maturities of equipment loans                                  595,084         174,779
                                                                     ------------    ------------
              Total current liabilities                                 1,182,755         866,931
EQUIPMENT LOANS, net of current maturities                                149,951              --
CONVERTIBLE DEBT                                                        1,253,273       1,406,762
                                                                     ------------    ------------
              Total liabilities                                         2,585,979       2,273,693
                                                                     ------------    ------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 5 and 10)
STOCKHOLDERS' EQUITY (DEFICIT):
   Series A-2 Convertible Preferred stock, $.01 par value, 5,000,000
     shares authorized, 6,000 shares issued and outstanding at
     December 31, 1998 and 1999                                         6,000,000       6,000,000
   Common stock, $.01 par value, 20,000,000 shares authorized,
     10,378,440 issued and outstanding at December 31, 1998 and
     10,398,440 shares issued and outstanding at December 31, 1999        103,784         103,984
   Additional paid in capital                                          17,748,379      17,765,679
   Accumulated deficit                                                (20,302,283)    (24,173,544)
                                                                     ------------    ------------
              Total stockholders' equity (deficit)                      3,549,880        (303,881)
                                                                     ------------    ------------

              Total liabilities and stockholders' equity (deficit)   $  6,135,859    $  1,969,812
                                                                     ============    ============
</TABLE>



                                       23
<PAGE>   24


                            VISUAL EDGE SYSTEMS INC.


                            STATEMENTS OF OPERATIONS

                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999


<TABLE>
<CAPTION>
                                                                   1998            1999
                                                           ------------    ------------
<S>                                                        <C>             <C>
SALES                                                      $  2,632,213    $  2,333,642

COST OF SALES                                                 2,463,940       2,912,792
                                                           ------------    ------------
                  Gross profit (loss)                           168,273        (579,150)
                                                           ------------    ------------

OPERATING EXPENSES:
   General and administrative                                 3,024,271       2,560,038
   Selling and marketing                                      1,036,713         466,900
   Financing fees                                               223,242              --
   Noncash stock compensation expense                           292,808              --
                                                           ------------    ------------
                  Total operating expenses                    4,577,034       3,026,938
                                                           ------------    ------------

                  Operating loss                             (4,408,761)     (3,606,088)
                                                           ------------    ------------

OTHER INCOME (EXPENSE):
   Interest income                                              119,647          67,098
   Interest expense                                            (251,566)       (119,142)
   Amortization of deferred financing fees                     (306,112)       (213,129)
                                                           ------------    ------------
                  Total other income (expense)                 (438,031)       (265,173)
                                                           ------------    ------------

                  Net loss                                   (4,846,792)     (3,871,261)

PREFERRED STOCK DIVIDENDS                                    (1,837,268)             --
                                                           ------------    ------------

              Net loss attributed to common stockholders   $ (6,684,060)   $ (3,871,261)
                                                           ============    ============

BASIC AND DILUTED LOSS PER SHARE:
   Net loss per share                                      $      (0.81)   $      (0.37)
                                                           ============    ============

              Weighted average common shares outstanding      8,238,208      10,395,329
                                                           ============    ============
</TABLE>


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




                                       24
<PAGE>   25


                            VISUAL EDGE SYSTEMS INC.


                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999


<TABLE>
<CAPTION>
                                                                         Common Stock                            Additional
                                                                 ---------------------------    Preferred         Paid-in
                                                                     Shares         Amount        Stock           Capital
                                                                 ------------   ------------   ------------    ------------
<S>                                                              <C>           <C>             <C>             <C>
Balance at December 31, 1997                                        5,316,696   $     53,167   $         --    $ 12,427,394

Preferred stock Series A convertible issued in connection with
   the Infinity financing                                                  --             --      6,000,000      (2,178,942)
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
Sale of preferred stock in connection with the Infinity
   financing                                                               --             --      1,550,000              --
Redemption of preferred stock in connection with the Infinity
   financing                                                               --             --     (1,550,000)             --
Issuance of common stock for payment of dividends on
   preferred stock                                                    302,755          3,028             --         484,240
Issuance of common stock for payment of interest on
   convertible debt                                                    80,989            809             --         123,972
Common stock and warrants issued in connection with the
   Infinity financing amendments                                      350,000          3,500             --         260,909
Common stock issued in connection with the Marion
   equity financing                                                 4,010,000         40,100             --       4,678,678
Common stock and warrants issued in connection with the
   Greg Norman agreement                                              272,000          2,720             --         290,088
Issuance of common stock for payment of prepaid royalties              30,000            300             --         299,700
Exercise of options                                                    16,000            160             --          12,340
Net loss                                                                   --             --             --              --
                                                                 ------------   ------------   ------------    ------------

Balance at December 31, 1998                                       10,378,440        103,784      6,000,000      17,748,379

Issuance of common stock for payment of services                       20,000            200             --          17,300
Net loss                                                                   --             --             --              --
                                                                 ------------   ------------   ------------    ------------

Balance at December 31, 1999                                       10,398,440   $    103,984   $  6,000,000    $ 17,765,679
                                                                 ============   ============   ============    ============
</TABLE>


<TABLE>
<CAPTION>

                                                                    Accumulated
                                                                      Deficit         Total
                                                                   ------------    ------------
<S>                                                                <C>             <C>
Balance at December 31, 1997                                       $(13,618,223)   $ (1,137,662)

Preferred stock Series A convertible issued in connection with
   the Infinity financing                                                    --       3,821,058
Cancellation of Preferred stock Series A convertible issued in
   Connection with the Infinity financing                                    --              --
Preferred stock Series A-2 convertible issued in connection
   with the Infinity financing                                               --              --
Preferred stock embedded dividend                                    (1,350,000)             --
Sale of preferred stock in connection with the Infinity
   financing                                                                 --       1,550,000
Redemption of preferred stock in connection with the Infinity
   financing                                                                 --      (1,550,000)
Issuance of common stock for payment of dividends on
   preferred stock                                                     (487,268)             --
Issuance of common stock for payment of interest on
   convertible debt                                                          --         124,781
Common stock and warrants issued in connection with the
   Infinity financing amendments                                             --         264,409
Common stock issued in connection with the Marion
   equity financing                                                          --       4,718,778
Common stock and warrants issued in connection with the
   Greg Norman agreement                                                     --         292,808
Issuance of common stock for payment of prepaid royalties                    --         300,000
Exercise of options                                                          --          12,500
Net loss                                                             (4,846,792)     (4,846,792)
                                                                   ------------    ------------

Balance at December 31, 1998                                        (20,302,283)      3,549,880

Issuance of common stock for payment of services                             --          17,500
Net loss                                                             (3,871,261)     (3,871,261)
                                                                   ------------    ------------

Balance at December 31, 1999                                       $(24,173,544)   $   (303,881)
                                                                   ============    ============
</TABLE>


                                       25
<PAGE>   26


                            VISUAL EDGE SYSTEMS INC.


                            STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999


<TABLE>
<CAPTION>
                                                                             1998            1999
                                                                        ------------    ------------
<S>                                                                     <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                             $ (4,846,792)   $ (3,871,261)
   Adjustments to reconcile net loss to net cash used in
     operating activities-
       Noncash stock compensation expense                                    292,808              --
       Noncash stock financing fees                                           95,242              --
       Noncash interest expense                                              124,781              --
       Depreciation and amortization                                         851,258         944,111
       Amortization of deferred financing fees                               306,112         230,629
       Loss on disposal of fixed assets                                           --             675
       Changes in assets and liabilities:
         Increase in accounts receivable                                      (2,976)         (5,872)
         (Increase) decrease in inventory                                    (30,371)         45,248
         Decrease in prepaid expenses - advance royalties                    129,423         750,734
         Decrease in other current assets                                    109,880          57,938
         Increase in other assets                                           (154,097)             --
         Decrease in accounts payable                                       (143,267)        (63,845)
         (Decrease) increase in accrued expenses                              (5,810)        308,434
         Increase (decrease) in other current liabilities                     96,993        (140,108)
                                                                        ------------    ------------
                  Net cash used in operating activities                   (3,176,816)     (1,743,317)
                                                                        ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                     (347,737)        (48,662)
   Proceeds from sale of fixed assets                                             --          60,145
   Purchases of short-term investments                                    (3,750,000)             --
   Proceeds from the sale of short-term investments                        3,080,000       2,137,108
                                                                        ------------    ------------
                  Net cash (used in) provided by investing activities     (1,017,737)      2,148,591
                                                                        ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from the issuance of common stock                              4,718,778              --
   Exercise of options                                                        12,500              --
   Repayment of borrowings                                                  (516,808)       (629,896)
                                                                        ------------    ------------
              Net cash provided by (used in) financing activities          4,214,470        (629,896)
                                                                        ------------    ------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                       19,917        (224,622)

CASH AND CASH EQUIVALENTS, beginning of period                               224,429         244,346
                                                                        ------------    ------------

CASH AND CASH EQUIVALENTS, end of period                                $    244,346    $     19,724
                                                                        ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid for interest                                               $    117,279    $     30,938
                                                                        ============    ============
</TABLE>



                                       26
<PAGE>   27


                            VISUAL EDGE SYSTEMS INC.


                          NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1998 AND 1999



1.  COMPANY OPERATIONS

     a. Background

Visual Edge Systems Inc. (the "Company") was organized to develop, market and
sell personalized CD-ROM and 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 golf lessons to 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. As a result of continuing operating losses and changes in
management, the Company refocused its marketing and business strategy in the 4th
quarter of 1999. To implement its marketing and business strategy, the Company
has developed its product to be delivered to customers through CD-ROM and
electronic mail. The Company representatives record a customer's golf swing and,
at the same time, give the customer a CD-ROM containing the golf swing lesson
and transmit the recording to the production facility located at the Company's
executive office. At the production facility, the Company processes the
recording of the customer's golf swing to compare it to Greg Norman's golf
swing. The Company then transmits this comparative information to the customer
using electronic mail. In addition to delivering its product using electronic
mail, the Company has mobile One-on-One production facilities which are housed
in vans and other types of vehicles. These One-on-One vehicles are equipped with
video and personal computer equipment to produce our products at the site where
the customer records his or her swing.

     b. 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 implement its new business plan and strategy. 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 CD-ROM and
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 successfully implement
its business plan. 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 and
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


                                       27
<PAGE>   28


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 2000
revenues, when combined with planned cost savings and existing financial
resources will be sufficient to fund operations through at least January 1,
2001.

c.  Going Concern Matters

The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the financial
statements, during the years ended December 31, 1998 and 1999, the Company
incurred losses of approximately $4,850,000 and $3,870,000, respectively, and at
December 31, 1999, its current liabilities exceed its current assets by
approximately $560,000, and its accumulated deficit is approximately
$24,175,000. These factors, among others, indicate that the Company may be
unable to continue as a going concern.

The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to (a) generate sufficient cash flow to
meet its obligations on a timely basis, (b) obtain additional financing as may
be required, and (c) ultimately attain profitability. The Company is attempting
to obtain additional bank or equity financing to alleviate its cash flow
constraints.

d.  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 did not achieve
compliance with Nasdaq's rules by June 1, 1999 and its Common Stock was
delisted. Exclusion of the Company's shares from Nasdaq has adversely affected
the market price and liquidity of the Company's equity securities.

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.  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, 1998 and 1999, substantially
all cash and cash equivalents are interest-bearing deposits.

     c.  Certificates of Deposit

Certificates of deposit represent short-term investments with maturities of less
than one year.

     d.  Inventories

The Company's inventories consist of videotapes, which are stated at the lower
of weighted average cost or market.

     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



                                       28
<PAGE>   29


are not sufficient to recover the carrying value of such assets, the assets are
adjusted to their fair values. 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.

     f.  Prepaid Expenses-Advance Royalties

As described in Note 10(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 $450,000 and
$936,095 was expensed as cost of sales in the accompanying statements of
operations during the years ended December 31, 1998 and 1999, respectively, and
$900,734 and $150,000 is included in prepaid expenses - advance royalties in the
accompanying balance sheets as of December 31, 1998 and 1999, respectively.

     g.  Investments-Restricted

Investments-restricted represent certificates of deposit required as collateral
for the equipment loans (see Note 5(c)).

     h.  Revenue Recognition

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

     i.  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.

     j.  Concentration of Credit Risk

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

     k.  Fair Value of Financial Instruments

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




                                       29
<PAGE>   30




     l.  Loss per Share

The Company follows SFAS No. 128, "Earnings Per Share." 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, 1998 and 1999, 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.

Dividends on preferred shares do not begin to accrue until January 1, 2000.
Accordingly, no provision for preferred stock dividends has been included in the
accompanying statement of operations for the year ended December 31, 1999.

     m.  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 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 (see Note 9).

     n.  Recent Accounting Pronouncements

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS No. 137, is effective for fiscal years beginning after June 15,
2000. This statement establishes accounting and reporting standards requiring
that every derivative instrument be recorded in the balance sheet as either an
asset or a liability at its fair value. The Company 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 No. 133.

3.    FIXED ASSETS, NET

Fixed assets, including equipment and mobile production units acquired under
capital leases, consist of the following at December 31, 1998 and 1999:


<TABLE>
<CAPTION>
                                                                                Lives
                                                1998             1999          (Years)
                                             -----------      ------------      ------
<S>                                          <C>              <C>              <C>
Mobile videotape product units               $ 2,696,553      $  2,623,886        5
Product development equipment                    523,224           549,877      3 - 5
Training and processing equipment                117,725           117,725        5
Office furniture and equipment                   392,759           409,770        5
Trade show exhibits                              146,657           147,157        5
                                             -----------      ------------
                                               3,876,918         3,848,415
Less: accumulated depreciation                (1,628,404)       (2,444,318)
                                             -----------      ------------
         Fixed assets, net                   $ 2,248,514      $  1,404,097
                                             ===========      ============
</TABLE>




                                       30
<PAGE>   31


4.   INTANGIBLE ASSETS, NET

Intangible assets consist of the following at December 31, 1998 and 1999:

<TABLE>
<CAPTION>
                                           1998            1999
                                       ------------    ------------
<S>                                    <C>             <C>
Video and software production costs    $    447,404    $    447,404
Deferred organizational costs                29,428              --
                                       ------------    ------------
                                            476,832         447,404
Less: accumulated depreciation             (309,055)       (391,479)
                                       ------------    ------------
         Intangible assets, net        $    167,777    $     55,925
                                       ============    ============
</TABLE>

5.   FINANCINGS

     a.  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 or, in the event of default, in an amount based on a formula
using a percentage of the market price of the common stock. 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 1998, the Company issued an aggregate
of 80,989 shares (the "Interest Shares") for payment of interest due. The
Company made an interest payment of $30,938 for the first quarter of 1999 and
has accrued but not paid interest of $92,812 as of December 31, 1999. The Notes
mature in June 2000 and are convertible into shares of common stock at a price
of $1.25 per share. The fair value of the Company's common stock at the date of
issuance was less than the conversion price.

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



                                       31
<PAGE>   32


"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, inventories
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 fair value of the Company's common stock at the
date of issuance was less than the conversion price.

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

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

In connection with the Second Amendment, the Funds received 100,000 shares of
common stock. Furthermore, because the Company did not redeem all of the
Preferred Stock and Notes owned by the Funds by June 30, 1998, the Funds
received 200,000 additional shares of common stock. Further, the exercise price
of the June Warrants was reduced from $10.675 per share to $3.25 per share and
the exercise price of the New Warrants was reduced from $4.00 per share to $3.25
per share. The fair values of the issuances of common stock and the repricing of
the warrants have been recorded as an original issue discount and are being
amortized using a method which approximates the interest method over the term of
the Notes. The unamortized portion of the original issue discount was $246,727
and $93,238 at December 31, 1998 and 1999, respectively.

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 therefore, 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



                                       32
<PAGE>   33
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"). Unless an
Event of Default exists, 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,
unless an Event of Default exists, 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.

Because the Company's common stock has been delisted from the Nasdaq SmallCap
Market, an Event of Default exists under the Infinity Financing. As a result,
the New Funds may convert each share of Preferred Stock into a number of shares
of common stock based on a formula using a percentage of the market price of
common stock. The New Funds may also convert the Notes into common stock based
on the same formula used to convert the Preferred Stock into common stock. On
August 30, 1999, Infinity Investors Limited, one of the New Funds, delivered a
notice of conversion to the Company to convert 1,627 of its 4,400 shares of
Preferred Stock (see Note 10(d)).

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 Officers 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. Additionally, options to purchase 200,000 shares of common stock were
granted to the President and Chief Operating Officer and options to purchase
100,000 shares of common stock were 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. At the date of these
transactions, the fair value of the Company's common stock was less than the
conversion price.

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 statement 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.

     b. 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


                                       33
<PAGE>   34

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.

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 Chief
Executive Officer and President in 1999, 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 Note 5(a)).

     c. Equipment Loans

In August 1997, the Company entered into an equipment financing facility whereby
the Company was provided with up to $2.5 million in financing. The facility
provided the Company with equipment financing of $100,000 per van for 25 vans,
each of which was 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, 1998 and 1999 balance
sheets. In January 2000, the Company paid off the balance of this loan,
primarily with the certificate of deposit that was pledged to the lender.

The Company acquired certain fixed assets under capital leases totaling
$913,170. As a condition of the leases the Company was 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 $387,108 for the
year ended December 31, 1998, as security, which is included in
"Investments-Restricted" in the accompanying December 31, 1998 balance sheet. In
November 1999, the Company paid off the balance of this loan, primarily with the
proceeds from the collateral on the leases.

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 $99,460 and $39,820 at December 31,
1998 and 1999, respectively.

6. COMMON STOCK

In July 1996, the Company sold 1,395,000 shares of common stock and 1,495,000
redeemable warrants (the "IPO Warrants) to the public. The IPO Warrants are
exercisable and grant the holder the right to purchase one share of Common Stock
at a price of $5.00 per share, subject to adjustment in certain circumstances.
The IPO Warrants are redeemable by the Company, upon the consent of the IPO
underwriter, at a price of $.10 per Warrant, and subject to the terms set forth
therein. In the event that the Company calls the IPO Warrants for redemption, it
will be economically advantageous for the warrant holders to exercise the IPO
Warrants, resulting in the issuance by the Company of up to 1,495,000 additional
shares of Common Stock. As of December 31, 1999, none of the warrants





                                       34
<PAGE>   35

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.

On August 13, 1999, Infinity Investors Limited ("Infinity") delivered a notice
of conversion to the Company to convert 1,627 of its 4,400 shares of our Series
A-2 Cumulative Convertible and Redeemable Preferred Stock into 9,594,857 shares
of the Company's common stock. As of April 12, 2000, the Company has not
consummated this transaction (see Notes 10(d) and 12).

A summary of Common Stock reserved for potential future issuances as of December
31, 1999 is as follows:

<TABLE>
<S>                                                                                  <C>
 IPO warrants at $5.00 per share (Note 6)                                               1,495,000
 Warrants issued to the IPO underwriter at $6.90 per share                                260,000
 Stock option plan for officers, directors and employee consultants (Note 9)            1,649,039
 Warrants issued in connection with 1997 March Bridge Financing at
   $10.00 per share                                                                       100,000
 Equipment financing warrants at $10.00 per share (Note 5(c))                              75,000
 Options granted to Greg Norman at $1.00 per share (Note 10a)                             125,000
 Options granted to consultants in accordance with the Infinity Financing
   Third Amendment at $1.00 per share (Note 5(a))                                          50,000
 Options granted to consultants in accordance with the Infinity Financing
   Third Amendment at $3.00 per share (Note 5(a))                                          50,000
                                                                                     ------------
                                                                                        3,804,039
                                                                                     ============
</TABLE>

7. ROYALTY INCOME

In the first quarter of 1999, the Company signed an agreement with Visual Edge
Systems Limited ("VESL") that launched the One-on-One concept in the United
Kingdom. The Company provided VESL with the sole and exclusive right to use,
sub-license, develop and distribute its concept and sell its products throughout
the United Kingdom in exchange for certain considerations, which included
minimum guaranteed fees of $150,000 through March 31, 2000. The Company has
earned $131,188 in royalty income under this agreement for the year ended
December 31, 1999.

8. INCOME TAXES

As of December 31, 1998 and 1999, the Company had approximately $6,893,000 and
$8,218,000, 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, 1998 and 1999.

As of December 31, 1999 the Company's net operating loss carryforward is
approximately $20,462,000 and expires as follows:

<TABLE>
<S>                                                        <C>
                 2011                                      $  3,067,000
                 2012                                        10,557,000
                 2013                                         5,513,000
                 2014                                         1,325,000
                                                           ------------
                                                           $ 20,462,000
                                                           ============
</TABLE>






                                       35
<PAGE>   36




9. STOCK OPTION PLAN


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

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

The Company applies APB Opinion No. 25 in accounting for its Plan. Had the
Company determined compensation cost based on fair value at the grant date for
its stock options under SFAS No. 123, the Company's net loss and net loss per
share for the year ended December 31, 1998 and 1999 would have increased to
$7,525,041 and $.91 and $4,037,858 and $.39, respectively.

Stock option activity during the periods is indicated as follows:


<TABLE>
<CAPTION>
                                                Number of      Weighted Average
                                                 Shares        Exercise Price
                                               ----------      ---------------
<S>                                            <C>             <C>
Balance at December 31, 1997                      948,419      $          5.46
    Granted                                     1,321,500                 1.00
    Exercised                                          --                   --
    Forfeited                                    (395,880)                5.45
                                               ----------      ---------------
Balance at December 31, 1998                    1,874,039                 1.26
    Granted                                            --                   --
    Exercised                                          --                   --
    Forfeited                                          --                   --
                                               ----------      ---------------
Balance at December 31, 1999                    1,874,039      $          1.26
                                               ==========      ==============
</TABLE>







                                       36
<PAGE>   37






At December 31, 1998 and 1999, 1,780,633 and 1,761,965 options were exercisable,
respectively. At December 31, 1999, 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>
$               1.00       1,734,889   $        1.00            7.44       1,696,014   $        1.00
                3.00          50,000            3.00             .50              --              --
          5.00- 5.75          84,150            5.04            6.53          60,951            5.04
               10.75           5,000           10.75            2.00           5,000           10.75
--------------------   -------------   -------------   -------------   -------------   -------------

       $1.00 - 10.75       1,874,039   $        1.26            7.20       1,761,965   $        1.17
====================   =============   =============   =============   =============   =============
</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 1998 and
1999: risk free interest rate of 4.8%; expected lives of 1.5 to 5 years; and
expected volatility of 70%.

10. 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 and 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 $900,734 and $150,000
at December 31, 1998 and 1999, respectively. The amount that is expected to be
amortized within twelve months has been classified as a current asset on the
accompanying 1999 balance sheet.








                                       37
<PAGE>   38


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, 1998 the Company made additional
payments to Mr. Norman totaling $1,000,000, of which $700,000 was paid in cash
and the balance in the form of 30,000 shares of the Company's Common Stock
valued at $10.00 per share. In 1998 and 1999, the Company expensed $450,000 and
$302,404, respectively of the advance royalty which is presented in the
statements of operations as a cost of sales.

On January 1, 2000, the Norman Agreement was further amended to allow the
Company to continue using the rights under the Greg Norman license. The Company
agreed to pay Mr. Norman $75,000 as a renewal fee, in addition to the 1999
royalties of $186,095 owed to Mr. Norman and included in accrued expenses in the
accompanying 1999 balance sheet. The Company will pay these amounts to Mr.
Norman in twelve equal monthly installments commencing on March 1, 2000.

 b.  Operating Leases

The Company has two noncancelable operating lease for corporate office space
that expires on July 5, 2005. Rental payments include minimum rentals plus
building expenses. Rental expense for these leases during 1998 and 1999 was
$108,374 and $97,161, respectively. Future minimum lease payments under these
leases at December 31, 1999 are as follows:


              --------------------------------    ---------
              Year Ending December 31,
              --------------------------------    ---------
                  2000                            $  80,561
              --------------------------------    ---------
                  2001                               95,425
              --------------------------------    ---------
                  2002                               98,288
              --------------------------------    ---------
                  2003                              101,237
              --------------------------------    ---------
                  2004                              104,274
              --------------------------------    ---------
                  Thereafter                         53,425
              --------------------------------    ---------
                                                  $ 533,210
                                                  =========

  c. Significant and Continuing Losses

For the period from July 15, 1994 (inception) to December 31, 1999, the Company
has accumulated a deficit of $24,173,544. 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.

     d. Legal Proceedings

          Proceedings with Greg Norman and his affiliates

By letter dated July 30, 1999, Great White Shark Enterprises, Inc. placed the
Company on notice of certain alleged defaults with respect to the License
Agreement, dated March 1, 1995, as amended, by and among Great White Shark, Greg
Norman, and the Company, pursuant to which Great White Shark and Mr. Norman, as
licensors, has granted to the Company, among other things, the right to use the
name and likeness of Greg Norman in connection with the One-on-One product sold
by the Company. Mr. Norman alleged in that default notice that the Company had
failed to pay certain royalties and had failed to comply with certain other
covenants of the Greg Norman license. Pursuant to its terms, the Greg Norman
license terminates, upon the option of Norman, 90 days following notice thereof
if a monetary default is not cured within 10 days, or a non-monetary default is
not cured within 30 days, from the date of notice of default. Therefore, the
possibility exists that Norman will declare the Greg Norman license to be
terminated because of the Company's purported failure to timely cure the alleged
defaults within the applicable periods. In addition, Mr. Norman may seek to
recover damages and other relief against the Company as a result of the alleged
defaults and/or any alleged termination of the License Agreement.








                                       38
<PAGE>   39



On August 11, 1999, the Company filed a Complaint and Demand for a Jury Trial,
with the United States District Court, Southern District, West Palm Beach
Division, against Greg Norman, Great White Shark Enterprises, Inc., Greg Norman
Interactive LLC, and LibertyOne Limited for breach of contract, unfair and
deceptive trade practices, unjust enrichment and trademark infringement. The
action claimed, among other things, that Mr. Norman violated his implied
covenant of good faith and fair dealing by purposefully attempting to obstruct
the Company's business, failed to use his best efforts to perform the personal
services required by him, failed to actively provide his endorsement of the
Company, and purposely violated the Company's trademarks by operating a
confusingly similar web site, shark.com.

In October 1999, the Company filed a Motion to Dismiss without Prejudice in this
action. On January 1, 2000, the Company amended the License Agreement with Mr.
Norman to allow it to continue using the rights under the Greg Norman license
(see Note 10(a)). The Company has no current plans to pursue this lawsuit.
Although management believes that the Company will be able to continue the
License Agreement with Mr. Norman on terms acceptable and beneficial to both
parties, there is no assurance that the Company will be able to do so.

          Proceedings with Preferred Stockholders

On August 2, 1999, Infinity filed suit in Delaware Chancery Court against the
Company and three of the Company's then current officers and directors, Earl
Takefman, Richard Parker, and Thomas Peters (Infinity Investors Limited v. Earl
T. Takefman, et al.; Civil Action No. 17347-NC, in the Court of Chancery of the
State of Delaware in and for New Castle County). In its original complaint in
that action, Infinity sought, among other things, injunctive relief to prevent
the defendants from interfering with Infinity's alleged rights to convert
Preferred Stock to common stock, as well as from interfering with the subsequent
removal of Takefman, Parker, and Peters as directors and officers of the
Company. The original complaint also disclosed Infinity's intention to convert
certain shares of the Company's convertible Preferred Stock into approximately
9,600,000 shares of our common stock. Infinity asserts that an event of default
under Infinity's securities purchase agreement with the Company occurred when
its common stock was delisted from the Nasdaq Small Cap Market and a listing on
a comparable market or exchange was not obtained within the applicable period.
Infinity further asserts that the occurrence of such an event provides it with
the aforementioned conversion rights.

On August 4, 1999, the parties in the Delaware action agreed to a standstill
stipulation approved by the Delaware Court. In the standstill stipulation, the
Company and the individual defendants agreed, pending final resolution, to
refrain from taking certain actions without court approval, or in certain other
cases, without prior notice to Infinity. By letter dated August 16, 1999, the
Delaware Court ordered that current management may continue to operate and
manage the Company on a day-to-day basis so long as it does so consistent with
the terms of the standstill stipulation.

On August 13, 1999, Infinity delivered a notice of conversion to Visual Edge,
pursuant to which Infinity alleges that it converted 1,627 of its 4,400 shares
of Series A-2 Convertible Preferred Stock into 9,594,857 shares of the Company's
common stock. As of April 12, 2000, the Company has not consummated this
transaction (see Note 12). Also on August 13, 1999, Infinity dismissed the
Company from the Delaware lawsuit.

On August 30, 1999, Infinity delivered a stockholders' consent to the Company,
pursuant to which Messrs. Parker, Peters, and Takefman were allegedly removed
from the Company's Board of Directors, and Stuart J. Chasanoff and J. Keith
Benedict, affiliates of Infinity, were appointed as directors. On the same date,
the purported newly-appointed Board of Directors caused a unanimous written
consent to be delivered to the Company, pursuant to which, among other things,
Mr. Takefman was removed from his position as Chief Executive Officer, Mr.
Parker was removed from his position as President and Chief Operating officer,
and Mr. Peters was removed from his position as Vice President of Operations and
Technology.

On September 13, 1999, the Series A-2 Convertible Preferred Stockholders of the
Company appointed John A. Wagner to the Board of Directors, exercising their
rights under the applicable Certificate of Designation to appoint a
representative to the Company's Board of Directors. To the extent that the
alleged unanimous board consent of August 30, 1999 did not terminate Takefman
and Parker from their offices, the Board of Directors held a meeting on
September 14, 1999 and removed Takefman and Parker from their positions with the
Company. By letters dated September 21, 1999, Takefman and Parker resigned from
the Board of Directors effective immediately.







                                       39
<PAGE>   40
On November 5, 1999, Takefman and Parker filed a motion to dismiss Infinity's
Delaware action. By Memorandum Opinion issued January 28, 2000, the Delaware
Chancery Court granted that motion in part and denied it in part, holding that
Infinity could continue to pursue its claims against those two individuals for
tortious interference and for breach of their fiduciary duties of care and
loyalty with respect to their alleged interference with Infinity's stock
conversion and their alleged failure to disclose their intent to take control of
the Company's Board of Directors. The Delaware Court also held that Takefman and
Parker necessarily conceded the validity of Infinity's conversion and their
subsequent removal from the Company's board of directors.

          Proceedings with former officers and directors

On September 23, 1999, Takefman and Parker filed suit in Florida state court
against the Company, Infinity, HW Partners, L.P., Clark Hunt, Barrett Wissman,
John Wagner, Stuart Chasanoff and Keith Benedict (Earl Takefman, et al. v.
Visual Edge System, Inc., et al., Case No. CL 99-9086 AG, in the Circuit Court
of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida).
Takefman and Parker allege that they are owed severance payments pursuant to
their respective employment agreements with the Company, and assert claims for
breach of contract, tortious interference with contract, and interference with
employment. The Company believes Takefman's and Parker's claims are without
merit and intends to vigorously defend itself against those claims.

On October 12, 1999, the Company filed suit in Delaware Chancery Court against
Takefman and Parker for, among other things, breach of fiduciary duty, breach of
employment agreements, and tortious interference with contract (Visual Edge
Systems Inc. v. Earl T. Takefman, et al.; Civil Action No. 17472-NC, in the
Court of Chancery of the State of Delaware in and for New Castle County). On
November 5, 1999, Takefman and Parker moved to dismiss the action or to stay the
action in favor of the Florida suit. On January 31, 2000, the Delaware Court
granted the motion to stay until further order of that Court. As a result,
Visual Edge intends to assert its claim aginst Takefman and Parker as
counterclaims in the prior-filed Florida action, which is described in the
immediately preceding paragraph.

11. SUPPLEMENTAL DISCLOSURE OF NON CASH RELATED ACTIVITIES

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
was fully amortized in 1998.

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

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

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

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

In 1999, the Company issued 20,000 shares of common stock for payment of
services.

12. SUBSEQUENT EVENT

As of April 12, 2000, pursuant to the unanimous written consent of the Company's
Board of Directors in lieu of a special meeting, the following corporate actions
were approved.

By Notice of Conversion of Series A-2 Cumulative Convertible Preferred Stock,
dated August 13, 1999, Infinity Investors Limited allegedly converted 1,627
shares of the Series A-2 Cumulative Convertible Redeemable Preferred Stock of
the Company into 9,594,857 shares of the Company's common stock (the
"Conversion"). The Board of Directors has established a new committee to be
designated the Conversion Committee, which is authorized to review the materials
related to the Conversion and to make a determination regarding the validity of
the Conversion and the issuance of the Company's common stock as a result of the
Conversion.

The Company has entered into an agreement with Jim McLean Golf Schools to
provide Internet-based CD-ROM golf instruction at KSL resorts nationwide (the
"KSL Agreement"). The Board of Directors ratified the KSL Agreement in all
respects.

The Board of Directors approved an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
Common Stock, $.01 par value per share, from 20,000,000 to 50,000,000 (the
"Amendment"). This Amendment will be submitted to the Company's stockholders
entitled to vote thereon for their approval and adoption.

The Board of Directors considers it to be in the best interest of the Company to
amend the Company's Amended and Restated 1996 Stock Option Plan (the "Stock
Option Plan"). This Amended Stock Option Plan, including any other documents,
instruments, or agreements contemplated by such amended plan, with such further
changes therein as shall be approved by the officers of the Company will be
submitted to a vote of the Company's stockholders for approval.

                                       40
<PAGE>   41



ITEM 8.   CHANGES IN AND DISAGREEMENTS WTH ACCOUNTANTS ON ACCOUNT AND FINANCIAL
          DISCLOSURE.

          None.

                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

          Information called for by Item 9 is set forth under the caption
          "Section 16(a) Beneficial Ownership Reporting Compliance" in our 2000
          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 our 2000 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
          "Voting Securities and Beneficial Ownership" in our 2000 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 Transactions" in our 2000 Proxy Statement, which is
          incorporated herein by reference.

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.






                                       41
<PAGE>   42


<TABLE>
<CAPTION>
EXHIBIT
NUMBER         DESCRIPTION
------         -----------
<S>            <C>

3.1            Certificate of Incorporation of Visual Edge, 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 Visual Edge (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)

3.3            Certificate of Designation for Series A-2 Convertible Preferred
               Stock (Incorporated by reference to Exhibit A to the Third
               Amendment to Bridge Securities Purchase Agreement and Related
               Documents, dated as of December 29, 1998, among Visual Edge,
               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.), which is filed as Exhibit 99.1 to the
               Registrant's Current Report on Form 8-K filed January 8, 1999))

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 Visual Edge and Whale
               Securities Co., L.P. (Incorporated by reference to Exhibit 4.2 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,
               Visual Edge 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)

4.5            Form of Warrant Certificate issued to investors in the March
               1997 Bridge Financing (Incorporated by reference to Exhibit 4.5
               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)


</TABLE>


                                       42
<PAGE>   43



<TABLE>
<S>            <C>
  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)

  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 Visual Edge, 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 Visual Edge, 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          Amendment to License Agreement, dated as of January 1, 2000, by
               and among Visual Edge, Greg Norman and Great White Shark
               Enterprises, Inc. (Filed herewith)

*10.4          Employment Agreement, dated as of May 1, 1996, between Thomas S.
               Peters and Visual Edge, 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 our 1996 definitive Proxy Statement filed on April
               7, 1997)

 10.6          Lease Agreement by and between Fairfax Boca 92, L.P., a Georgia
               limited partnership, and Visual Edge Systems, Inc. for offices
               located at 901 Yamato Road, Boca Raton, Florida (Filed herewith)

 10.7          Assignment, dated April 19, 1996 from Thomas S. Peters to Visual
               Edge (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 Visual Edge and Status-One Investments Inc.
               (Incorporated by reference to
</TABLE>




                                       43
<PAGE>   44

<TABLE>
<S>            <C>

               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 Visual Edge 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
               Visual Edge 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 Visual
               Edge, the Funds and American Stock Transfer & Trust Company
               (Incorporated by reference to Exhibit 99.3 to our Report on Form
               8-K filed June 23, 1997).

10.12          Purchase Agreement, dated as of March 27, 1998, among Visual Edge
               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
               Visual Edge 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 Visual
               Edge 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 Visual Edge,
               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 Visual
               Edge, 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
</TABLE>






                                       44
<PAGE>   45

<TABLE>
<S>            <C>
               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 9, 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 9, 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 Visual Edge, as amended on
               April 19, 1996, October 18, 1996 and June 3, 1997 (Incorporated
               by reference to Exhibit 10.19 to the Registrant's Annual Report
               on Form 10-KSB for the fiscal year ended December 31, 1998)

10.21          Sublease Agreement, dated as of September 29, 1999, by and
               between Visual Edge and Sensormatic Electronics Corporation
               (Filed herewith)

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)

--------------

*Indicates management contract or compensatory plan or arrangement.

               (b) Reports on Form 8-K

               None
</TABLE>





                                       45
<PAGE>   46

                                   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/ Ronald Seale
                                               --------------------------------
                                               Ronald Seale
April 14, 2000                                 Chief Executive Officer

                               POWER OF ATTORNEY

Each person whose signature appears below hereby authorizes and constitutes
Ronald Seale, Thomas Peters and Keith Benedict, and each of them singly, his,
her or its true and lawful attorneys-in-fact with full power of substitution and
resubstitution, for him, her or its and in his, her or its 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, she or it 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>
       SIGNATURES                                 TITLE                              DATE
       ----------
<S>                                   <C>                                       <C>
     /s/ Ronald Seale                 Chief Executive Officer, President        April 14, 2000
---------------------------           and Director (Principal Executive
     Ronald Seale                     Officer and Principal Financial and
                                      Accounting Officer)

     /s/ J. Keith Benedict            Director                                  April 14, 2000
---------------------------
     J. Keith Benedict

     /s/ John Wagner                  Director                                  April 14, 2000
---------------------------
     John Wagner

     /s/ Thomas Peters                Director                                  April 14, 2000
---------------------------
     Thomas Peters
</TABLE>






                                       46
<PAGE>   47




                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER            DESCRIPTION
--------          -----------
<S>            <C>
3.1            Certificate of Incorporation of Visual Edge, 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 Visual Edge (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)

3.3            Certificate of Designation for Series A-2 Convertible Preferred
               Stock (Incorporated by reference to Exhibit A to the Third
               Amendment to Bridge Securities Purchase Agreement and Related
               Documents, dated as of December 29, 1998, among Visual Edge,
               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.), which is filed as Exhibit 99.1 to the
               Registrant's Current Report on Form 8-K filed January 8, 1999))

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 Visual Edge and Whale
               Securities Co., L.P. (Incorporated by reference to Exhibit 4.2 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,
               Visual Edge 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)

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

<PAGE>   48

<TABLE>
<S>            <C>
  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)

  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 Visual Edge, 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 Visual Edge, 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          Amendment to License Agreement, dated as of January 1, 2000, by
               and among Visual Edge, Greg Norman and Great White Shark
               Enterprises, Inc. (Filed herewith)

*10.4          Employment Agreement, dated as of May 1, 1996, between Thomas S.
               Peters and Visual Edge, 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 our 1996 definitive Proxy Statement filed on April
               7, 1997)

 10.6          Lease Agreement by and between Fairfax Boca 92, L.P., a Georgia
               limited partnership, and Visual Edge Systems, Inc. for offices
               located at 901 Yamato Road, Boca Raton, Florida (Filed herewith)

 10.7          Assignment, dated April 19, 1996 from Thomas S. Peters to Visual
               Edge (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)
</TABLE>

<PAGE>   49

<TABLE>
<S>            <C>
10.8           Share and Warrant Purchase Agreement, dated as of February 27,
               1997, between Visual Edge 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 Visual Edge 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
               Visual Edge 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 Visual
               Edge, the Funds and American Stock Transfer & Trust Company
               (Incorporated by reference to Exhibit 99.3 to our Report on Form
               8-K filed June 23, 1997)

10.12          Purchase Agreement, dated as of March 27, 1998, among Visual Edge
               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
               Visual Edge 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 Visual
               Edge 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 Visual Edge,
               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 Visual
               Edge, Infinity Investors Limited, IEO Holdings Limited (as the
               transferee from Infinity
</TABLE>
<PAGE>   50


<TABLE>
<S>            <C>
               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 9, 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 9, 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 Visual Edge, as amended on
               April 19, 1996, October 18, 1996 and June 3, 1997 (Incorporated
               by reference to Exhibit 10.19 to the Registrant's Annual Report
               on Form 10-KSB for the fiscal year ended December 31, 1998)

10.21          Sublease Agreement, dated as of September 29, 1999, by and
               between Visual Edge and Sensormatic Electronics Corporation
               (Filed herewith)

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)

-------------

* Indicates management contract or compensatory plan or arrangement
</TABLE>