As filed with the Securities and Exchange Commission on March 13, 1997
Registration No. 333-15011
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4 to
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
GENISYS RESERVATION SYSTEMS, INC.
(Name of small business issuer in charter)
New Jersey 7872 22-2719541
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification I.D. Number)
incorporation Code Number)
or organization)
(Address and telephone number, of registrant's
principal executive offices)
2401 Morris Avenue, 3rd Floor
Union, NJ 07083
(908) 810-8767
(Address of principal place of business or
intended principal place of business)
(Name, address and telephone number, of agent for service)
JOHN H. WASKO
c/o Genisys Reservation Systems, Inc.
2401 Morris Avenue, 3rd Floor
Union, NJ 07083
(908) 810-8767
Please send a copy of all communications to:
DAVID W. SASS, ESQ. William J. Davis
McLaughlin & Stern, LLP Scheichet & Davis, P.C.
260 Madison Avenue 505 Park Avenue, 20th Floor
New York, New York 10016 New York, New York 10022
(212) 448-1100 (212) 688-3200
Fax(212) 448-0066 Fax(212) 371-7634
<PAGE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []_____
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
[]---
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act of 1933, check the following box [x]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. []
------------------------------
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C> <C> <C>
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Security Being Offering Price Aggregate Offering
Registration
Being Registered Registered Per Unit/Share (1) Price Fee
- --------------------------------------------------------------------------------------------------
Shares of Common Stock 1,035,000 $5.00 $5,175,000 $1,568.18
$.0001 par value(2)(3) Shares
Class A Common Stock 1,725,000 $0.20 $ 345,000 $ 104.55
Warrants(2)(3) Warrants
Shares of Common Stock 1,725,000 $5.75 $9,918,750 $3,005.68
underlying the Class A Shares
Warrants(2)(3)(4)
Class B Common Stock 1,035,000 $0.10 $ 103,500 $ 31.36
Warrants(2)(3) Warrants
Shares of Common Stock 1,035,000 $6.75 $6,986,250 $2,117.05
underlying the Class B Shares
Warrants(2)(3)(4)
Class A Common Stock
Warrants(5) 287,500 $ .01 $ 2,875 $ .87
Shares of Common Stock 287,500 $5.75 $1,653,125 $ 500.95
underlying Class A
Warrants issued in a
private placement(5)
Underwriter's Warrant 90,000 $ .0001 $ 9 $ .01
to purchase Common Shares
Stock(2)
Class A Warrants(2) 150,000 $ .0001 $ 15 $ .01
Warrants
Class B Warrants(2) 90,000 $ .0001 $ 9 $ .01
Warrants
Underwriter's Shares 90,000 $6.00 $ 540,000 $ 163.64
of Common Stock(2) Shares
Shares of Common Stock 150,000 $6.90 $ 1,035,000 $ 313.64
Underlying Under- Shares
writer's Warrant to
Purchase Class A
Warrants(2)(3)
Shares of Common Stock 90,000 $8.10 $ 729,000 $ 220.91
Underlying Under- Shares
writer's Warrant to
Purchase Class B
Warrants(2)(3)
TOTAL $8,026.86
---------
Paid on Account 8,026.86
---------
Balance Due $ -0-
</TABLE>
3
<PAGE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Securities being registered for sale by the Company.
(3) Includes an additional 135,000 shares of Common Stock, 225,000 Class A
Warrants, 225,000 shares of Common Stock underlying the Class A
Warrants, 135,000 Class B Warrants and 135,000 shares of Common Stock
underlying the Class B Warrants as part of the Underwriter's
Overallotment Option.
(4) Pursuant to Rule 416 there are also being registered such additional
shares as may be issued as a result of the anti-dilution provisions of
the Common Stock Purchase Warrants and the Representative's Warrant.
(5) Securities being registered for resale only.
------------------------------
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
-----------------------------
4
<PAGE>
EXPLANATORY NOTE
This registration statement covers the primary offering of Common Stock
and Class A and Class B Redeemable Warrants by Genisys Reservation Systems, Inc.
("Company") and the offering of securities by certain selling stockholders
("Selling Stockholders"). The Company is registering under the primary
prospectus ("Primary Prospectus") 900,000 Shares of Common Stock, 1,500,000
Class A Redeemable Warrants, and 900,000 Class B Redeemable Warrants for sale by
the Underwriter. The Selling Stockholders are registering, under an alternate
prospectus ("Alternate Prospectus") 287,500 Class A Warrants and 287,500 shares
of Common Stock underlying outstanding Class A Warrants. The Alternate
Prospectus pages, which follow the Primary Prospectus, contain certain sections
which are to be combined with all of the sections contained in the Primary
Prospectus, with the exceptions of the front and back cover pages and the
section entitled "The Offering." Furthermore, all references contained in the
Alternate Prospectus to the "Offering" shall refer to the Company's offering
under the Primary Prospectus.
5
<PAGE>
GENISYS RESERVATION SYSTEMS, INC.
<TABLE>
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Cross Reference Sheet
Item Caption Location
1. Forepart of Registration Statement Outside Front Cover
Page and Outside Front
Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Back
Outside Pages of Prospectus Cover Pages
3. Summary Information and Risk Factors Prospectus Summary;
Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Underwriting; Risk
Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Underwriting
9. Legal Proceedings Risk Factors; Business
10. Directors, Executive Officers, Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
12. Description of Securities Description of
Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on Underwriting-
Indemnification for Securities Act Indemnification
15. Organization Within Last Five Years Not Applicable
16. Description of Business Business; Risk
Factors; Financial
Statements; Selected
Financial Data;
Prospectus Summary;
Use of Proceeds
6
<PAGE>
17. Management's Discussion and Analysis Management's
or Plan of Operation Discussion and
Analysis of Financial
Condition and Results
of Operation
18. Description of Property Business-Properties
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Equity and Related Market Information;
Stockholder Matters Prospectus Summary
21. Executive Compensation Management-Executive
Compensation
22. Financial Statements Financial Statements
23. Changes In and Disagreements With Not Applicable
Accountants on Accounting and
Financial Disclosure
</TABLE>
<PAGE>
Subject to Completion dated March 13, 1997
PROSPECTUS
GENISYS RESERVATION SYSTEMS, INC.
900,000 Shares of Common Stock
1,500,000 Class A Redeemable Warrants
900,000 Class B Redeemable Warrants
Genisys Reservation Systems, Inc., a New Jersey corporation
("Company"), hereby offers through R.D. White & Co., Inc.
("Underwriter") 900,000 shares ("Shares") of Common Stock, par
value $.0001 per share ("Common Stock"), and 2,400,000 redeemable
warrants ("Redeemable Warrants"), 1,500,000 of which will be "Class
A Redeemable Warrants" and 900,000 of which will be "Class B
Redeemable Warrants," at an anticipated public offering price of
$5.00 per share of Common Stock, $.20 per Class A Redeemable
Warrant and $.10 per Class B Redeemable Warrant (the Common Stock
and Redeemable Warrants collectively referred to as the
"Securities"). The Common Stock, Class A Warrants and Class B
Warrants will be offered separately. See "Underwriting."
Each Redeemable Warrant shall be exercisable for a period of 48 months,
commencing six (6) months from the date on which the registration statement
("Registration Statement") of which this prospectus ("Prospectus") forms a part
is declared effective ("Effective Date") by the Securities and Exchange
Commission ("Commission"). Each Class A Redeemable Warrant shall entitle the
holder to acquire one share of Common Stock at a price equal to $5.75 per share.
Commencing 12 months after the Effective Date, the Company will have the right
at any time to redeem all, but not less than all, of the Class A Redeemable
Warrants at a price equal to twenty cents ($.20) per Class A Redeemable Warrant,
provided that the closing bid price of the Common Stock equals or exceeds $6.25
per share for any twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth trading day prior to the date of
the notice of redemption. Each Class B Redeemable Warrant shall entitle the
holder to acquire one share of the Common Stock at a price equal to $6.75 per
share. Commencing 12 months after the Effective Date, the Company will have the
right at any time to redeem all, but not less than all, of the Class B
Redeemable Warrants at a price equal to ten cents ($.10) per Class B Redeemable
Warrant, provided that the closing bid price of the Common Stock equals or
exceeds $7.25 per share for any twenty (20) trading days within a period of
thirty (30) consecutive trading days ending on the fifth trading day prior to
the date of the notice of redemption. See "Descriptions of Securities."
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<PAGE>
The Underwriting Agreement prohibits the Company from issuing any
capital stock or other securities without the Underwriter's prior consent for a
period of eighteen (18) months following the date of this Prospectus. This
provision may limit the Company's ability to raise additional equity capital.
AN INVESTMENT IN THE SECURITIES DESCRIBED HEREIN INVOLVES A HIGH
DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK
FACTORS" AND "DILUTION."
SUCH SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Price to Public Underwriting Discounts Proceeds to
and Commissions (1) Company(2)
Per Share offered by $5.00 $.50 $4.50
Company............
Per Class A Redeemable $.20 $.02 $.18
Warrant offered by
Company..........
Per Class B Redeemable $.10 $.01 $.09
Warrant offered by
Company..........
Total(3)..... $4,890,000 $489,000 $4,401,000
- --------------------------- --------------------------- -------------------------- --------------------------
</TABLE>
R.D. White & Co., Inc.
-----------------
The Date of this Prospectus is _________, 1997
- ---------------
(1) Does not include additional underwriting compensation to be
paid by the Company to the Underwriter in the form of a non-
accountable expense allowance of $146,700 ("Non-Accountable
Expense Allowance") equal to 3% of the aggregate public
offering price of the Securities or $168,705 assuming exercise
in full of the Over-Allotment Option (as defined below),
$50,000 of which has been advanced to the Underwriter.
(2) Exclusive of exercise of the Over-Allotment Option (as defined
below) and before deducting expenses payable by the Company
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<PAGE>
estimated at $381,700 (including the Underwriter's Non-Accountable
Expense Allowance of $146,700 payable by the Company). After deducting
such expenses and applicable underwriting discounts, the net proceeds
to the Company, exclusive of the exercise of the Over-Allotment Option
(as defined below), will be approximately $4,019,300.
(3) The Company has granted an option to the Underwriter to
purchase all or part of an additional 15% of the Shares of
Common Stock and Redeemable Warrants from the Company to cover
over-allotments for a period of forty five (45) days from the
Effective Date upon the same terms and conditions ("Over-
Allotment Option"). If the Over-Allotment Option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to the Company will be $5,623,500,
$562,350 and $5,061,150, respectively (exclusive of other
expenses payable by the Company of $235,000 and the Non-
Accountable Expense Allowance of $168,705). Assuming exercise
of the Over-Allotment Option and after deducting expenses and
applicable Underwriting Discounts, the net proceeds to the
Company will be approximately $4,657,445. The Underwriter has
agreed to exercise the Over-Allotment Option in full on the Effective
Date. See "Underwriting."
Prior to the Company's public offering as described herein, there has
been no active public market for the Common Stock or the Redeemable Warrants and
no assurance may be given that a public market will develop following the
completion of the offering or that, if any such market does develop, it will be
sustained. The Company has applied to have the Securities listed for quotation
on The NASDAQ SmallCap MarketSM ("NASDAQ") under the symbols: "GENS," "GENSW,"
and GENSZ," respectively. There can be no assurance given that the Company will
be able to satisfy on a continuing basis the requirements for quotation of such
securities on NASDAQ. See "Risk Factors - No Assurances of Public Market or
Continued NASDAQ Listing," and "Risk Factors - Risk of Penny Stock Regulations".
The Securities being offered for sale by the Company are being offered
on a firm commitment basis, subject to prior sale, when, as and if delivered to
and accepted by the Underwriter pursuant to the terms of the Underwriting
Agreement relating to the offering. See "Underwriting." It is expected that
delivery of certificates representing the securities being offered by the
Company will be made against payment therefor at the offices of the Underwriter
on or about ______, 1997. See "Available Information."
The Registration Statement of which this Prospectus forms a part but
with a different Prospectus cover page ("Alternate Prospectus") also relates to
the offer and sale of 287,500 Class A Redeemable Warrants and 287,500 shares of
Common Stock issuable upon exercise of 287,500 outstanding Class A Redeemable
Warrants which were previously issued by the Company to the holders thereof
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<PAGE>
and are to be offered and sold by such stockholders ("Selling Stockholders").
The Class A Redeemable Warrants are exercisable at $5.75 per share. Such
securities are subject to an 18 month lock-up by the Underwriter. The shares are
being offered by the Selling Stockholders and are being registered for resale
purposes only pursuant to the Alternate Prospectus. Sales of the securities to
be offered by the Selling Stockholders (or even the potential of such sales)
would likely have an adverse effect on the market prices of the securities being
offered by the Company. The Company will not receive the proceeds of any sale of
such securities by the Selling Stockholders but may receive proceeds from the
exercise of the Redeemable Warrants covered by such shares if such Redeemable
Warrants are exercised, as to which there can be no assurance. The Selling
Stockholders will receive the proceeds from the sale, if any, of the securities
to be offered by Selling Stockholders. Except as otherwise set forth herein, the
costs incurred in connection with the registration of such securities are to be
borne by the Company. See "Selling Stockholders."
For a period of time, the Company was not in compliance with the filing
requirements of the Securities Exchange Act of 1934 ("Exchange Act") and may be
subject to legal liability as a result thereof. See "Risk Factors -
Non-Compliance with Exchange Act Reporting Requirements".
As of March 5, 1997 there were 769 shareholders of record of the
Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMPANY'S SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
ALTHOUGH IT HAS NO LEGAL OBLIGATION TO DO SO, THE UNDERWRITER MAY FROM
TIME TO TIME ACT AS A MARKET-MAKER AND OTHERWISE EFFECT TRANSACTIONS IN THE
COMPANY'S SECURITIES. THE UNDERWRITER WILL NOT ACT AS A MARKET-MAKER UNTIL SUCH
TIME AS ITS PARTICIPATION IN THIS OFFERING IS COMPLETE. THE UNDERWRITER, IF IT
PARTICIPATES IN THE MARKET, MAY BE A DOMINATING INFLUENCE IN ANY MARKET THAT
MIGHT DEVELOP FOR ANY OF THE COMPANY'S SECURITIES. SUCH ACTIVITIES, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME OR FROM TIME TO TIME. THEREFORE,
THERE IS NO ASSURANCE THAT THE UNDERWRITER WILL OR WILL NOT BE A DOMINATING
INFLUENCE. THE PRICES AND LIQUIDITY OF THE SECURITIES OFFERED HEREUNDER MAY BE
AFFECTED BY THE DEGREE, IF ANY, OF THE UNDERWRITER'S PARTICIPATION IN THE
MARKET. SEE "RISK FACTORS" AND "UNDERWRITING."
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act") and in accordance
therewith presently files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected at the Commission's public reference room located in Room 1024 at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional
Offices located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such materials may also be obtained at prescribed
rates from the Public Reference Section of the Commission located in Room 1024
at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed a Registration Statement relating to the
securities offered hereby with the Commission pursuant to the provisions of the
Securities Act of 1933, as amended ("Securities Act"). Although this Prospectus
forms a part of the Registration Statement, it does not contain all of the
information set forth in the Registration Statement, the exhibits or the
schedules thereto. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement, the
exhibits and the schedules thereto. All material elements of documents
referenced in the Registration Statement are set forth in the prospectus
disclosure herein. Reference is also made to the copy of such document which has
been filed as an exhibit to the Registration Statement.
12
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to and
should be read in conjunction with the more detailed information and financial
data (including any financial statements and the notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, all share and per
share amounts set forth hereinafter have been adjusted to reflect the reverse
split on a one-for-two basis effectuated in July 1996. Each prospective investor
is urged to read this Prospectus in its entirety.
The Company
The principal business activity of Genisys Reservation Systems, Inc.
("Company") is developing a computerized limousine reservation and payment
system for the business traveler. The management of the Company anticipates that
the proprietary software that is being developed will enable limousine
reservations to be completely computerized i.e., be entirely automatic and
operate without human intervention except for the initial inputing of travel
information. Genisys Reservation Systems, Inc. is a development stage company
and has no commercially available products at the present time.
At the present time, there are four major airline computer reservation
systems in operation in the United States -- "Sabre", "Worldspan", "Apollo" and
"System One" (each reservation system referred to hereinafter as a "CRS"). Each
CRS allows a travel agency or corporate travel department to make an airline
reservation and receive instantaneously a confirmation and a printed airline
ticket on any airline. It is also possible to make a hotel reservation with any
of the major hotel chains through any CRS and receive an instantaneous
confirmation of room availability. Additionally, a travel agent or corporate
travel manager may make an automobile reservation with any of the major car
rental companies (Hertz, Avis and the like) through any CRS and receive an
immediate confirmation of the car rental reservation.
When it comes to limousine reservations, however, there is at present
no method for making a reservation through a CRS and receiving an immediate
guaranteed confirmation. The usual method of making a limousine reservation in a
destination city is to call a limousine company, if the corporate travel
department or travel agent knows of one. This use of the telephone, with its
attendant inconveniences such as "telephone tag" and missed communications,
13
<PAGE>
can make securing a confirmed limousine reservation inconvenient.
The Company seeks to solve this problem by:
1. developing a limousine reservation system that utilizes
the CRS` already in use;
2. developing a way to identify and qualify the best
limousine service providers in the cities that are the business
travelers most frequent destinations;
3. developing a way to disseminate reservation information to
corporate clients and to limousine service providers with no
errors, with immediate confirmation and without the need to utilize
the telephone;
4. developing an automated electronic payment system to
process all fees charged by the Company to its clients;
5. performing the above-described tasks with a high degree of
quality control; and
6. providing corporate clients with precise management and
financial information, to enable them to ascertain where their
money is being spent.
The Company was organized on April 25, 1986 under the name of
JEC02 Lasers, Inc. and changed its name to Robotic Lasers, Inc. on
December 22, 1987. It changed its name to Genisys Reservation
Systems, Inc. on July 16, 1996. The Company's executive offices
are at 2401 Morris Avenue, Union, NJ 07083, and its telephone
number is 908-810-8767.
14
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
The Offering
Securities Offered 900,000 shares of Common Stock, par
value $.0001, per share ("Common
Stock") and 2,400,000 redeemable
warrants ("Redeemable Warrants"),
1,500,000 of which will be "Class A
Redeemable Warrants" and 900,000 of
which will be "Class B Redeemable
Warrants."
Offering Price $5.00 per Share of Common Stock
$0.20 per Class A Redeemable Warrant
$0.10 per Class B Redeemable Warrant
The Redeemable Warrants Each Redeemable Warrant shall be
exercisable for a period of 48
months, commencing six (6) months
from the date on which the
registration statement
("Registration Statement") of which
this prospectus ("Prospectus") forms
a part is declared effective
("Effective Date") by the Securities
and Exchange Commission
("Commission"). Each Class A
Redeemable Warrant shall entitle the
holder to acquire one share of
Common Stock at a price equal to
$5.75 per share. Commencing 12
months after the Effective Date, the
Company will have the right at any
time to redeem all, but not less
than all, of the Class A Redeemable
Warrants at a price equal to ten
cents ($.10) per Redeemable Warrant,
provided that the closing bid price
of the Common Stock equals or
exceeds $6.25 per share for any
twenty (20) trading days within a
period of thirty (30) consecutive
trading days ending on the fifth
trading day prior to the date of the
notice of redemption. Each Class B
Redeemable Warrant shall entitle the
holder to acquire one share of the
Common Stock at a price equal to
$6.75 per share. Commencing 12
months after the Effective Date, the
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<PAGE>
Company will have the right
at any time to redeem all,
but not less than all, of
the Class B Redeemable
Warrants at a price equal
to ten cents ($.10) per
Redeemable Warrant,
provided that the closing
bid price of the Common
Stock equals or exceeds
$7.25 per share for any
twenty (20) trading days
within a period of thirty
(30) consecutive trading
days ending on the fifth
trading day prior to the
date of the notice of
redemption.
Securities Outstanding Prior to the
Company's Offering
Common Stock 3,280,594 Shares
Class A Warrants 287,500
Securities Outstanding After the
Company's Offering:
Common Stock (1)(3) 4,330,594 Shares
Class A Warrants(2) 2,012,500 Warrants
Class B Warrants(2) 1,035,000 Warrants
Proposed NASDAQ SmallCap MarketSM
Symbols(4)
Common Stock GENS
Class A Warrants GENSW
Class B Warrants GENSZ
- ---------------
</TABLE>
(1) Does not include: (a) 2,400,000 shares of Common Stock
issuable upon exercise of the Redeemable Warrants; (b)
360,000 shares of Common Stock issuable
upon the exercise of the Redeemable Warrants contained in the
Over-Allotment Option; and (c) 287,500 shares issuable upon
exercise of Class A Redeemable Warrants issued in a private
placement in May 1996, but does include the 135,000 Shares of
Common Stock included in the Over-Allotment Option. See
"Description of Securities," and "Underwriting."
(2) Includes the 360,000 Redeemable
Warrants issuable upon exercise of the Over-Allotment Option
and 287,500 Class A Redeemable Warrants
issued in a private placement in May 1996. See "Underwriting"
and "Description of Securities."
(3) Includes 15,000 shares of Common Stock issuable upon the
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<PAGE>
conversion of two promissory notes at the completion of this Offering
in the principal amounts of $20,000 and $10,000, respectively
("Convertible Notes").
(4) The Shares of Common Stock and the Class A Redeemable Warrants
and Class B Redeemable Warrants are expected to be listed for
quotation on NASDAQ under the symbols: "GENS", "GENSW" and
"GENSZ", respectively. There can be no assurance given that
the Company will be able to satisfy on a continuing basis the
requirements for quotation of such securities on NASDAQ. See
"Risk Factors" and "Market for the Company's Securities and
Other Related Stockholder Matters."
Risk Factors
An investment in any of the securities being offered hereby is
highly speculative and involves substantial risks including a
qualified independent auditors report, financial losses, limited
operations, early development stage of the Company, rapid
technological changes, market acceptance, dependence on existing
computer reservation systems, working capital, broad discretion in
application of proceeds, dependence upon a key individual, possible
need for additional financing, dependence on certain suppliers,
economic downturn, technological change, new product development,
product protection and infringement, and competition. See "Risk
Factors."
Use of Proceeds
The Company will receive the net proceeds of its offer and sale of the
Common Stock and Warrants of approximately $4,019,300 and intends to use the net
proceeds for the following: (i) approximately $850,000 for systems and
procedures development and additional equipment; (ii) approximately $563,500 for
repayment of outstanding indebtedness; and (iii) approximately $2,605,800 for
general working capital purposes. See "Risk Factors" and "Use of Proceeds."
17
<PAGE>
Summary Financial Information
The following summary of selected financial information concerning the
Company, other than the "As Adjusted" information reflecting the Company's
receipt and use of the net proceeds of its public offering (see "Use of
Proceeds"), have been derived from the financial statements (including the
related notes thereto) of the Company included elsewhere in this Prospectus
("Financial Statements").
SUMMARY STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year Ended Four Months Year Ended Period from
December 31, Ended December August 31, March 7, 1994
1996 31, 1996 1995 to August 31,
1994
Costs and $1,051,203 $ 293,210 $ 269,080 $ 31,510
Expenses
Net Loss $(1,051,203) $(293,210) $(269,080) $(31,510)
Net Loss Per $ (.36) $ (.11) $ (.16) $ (.02)
Share
SUMMARY BALANCE SHEET DATA:
December 31, 1996 December 31, 1996
December 31, As
1995 Adjusted(1)(2)
Working Capital $(814,504) $(600,043) $3,493,902
(Deficit)
Total Assets $ 352,685 $ 903,598 4,997,543
Long-term Debt $ 89,746 $ 1,603,257 1,009,757
Total Liabilities $ 927,566 $ 2,295,929 1,702,429
Stockholders' Equity $(574,881) $(1,392,331) 3,295,114
(Deficiency)
</TABLE>
(1) Includes the net proceeds (after Underwriting Commission,
Nonaccountable Expense Allowance and other estimated expenses) of the
offering contemplated herein of $4,657,445 (including the exercise in
full of the Over-Allotment Option) and the repayment of outstanding
indebtedness of $563,500. See "Use of Proceeds".
(2) Includes the conversion of $30,000 of Convertible Notes payable into
15,000 shares of Common Stock upon the consummation of this Offering.
18
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A
HIGH DEGREE OF RISK. SUCH SECURITIES SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN
AFFORD TO LOSE THEIR ENTIRE INVESTMENT. THEREFORE, EACH PROSPECTIVE INVESTOR
SHOULD, PRIOR TO PURCHASE, CONSIDER VERY CAREFULLY THE FOLLOWING RISK FACTORS,
AS WELL AS ALL OF THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS
AND THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS, THE NOTES THERETO AND
THE DOCUMENTS REFERENCED HEREIN.
When used in this Prospectus, the words "may," "will," "expect", "anticipate,"
"continue," "estimate," "project," "intend" and similar expressions are intended
to identify forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
regarding events, conditions and financial trends that may affect the Company's
future plans of operations, business strategy, operating results and financial
position. Prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included
within the forward-looking statements as a result of various factors. Such
factors are described under the headings "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "The Company," "Business" and
in the risk factors set forth below.
Qualified Independent Auditor's Report - Financial Losses and Going
Concern.
The financial statements have been prepared assuming that the Company
will continue as a going concern. At December 31, 1996, the Company had incurred
an accumulated deficit of ($1,645,003)as well as a working capital deficit of
($600,043). There is therefore substantial doubt as to the Company's ability to
continue as a going concern. Furthermore, no assurance can be given that the
Company's business strategy will prove successful or that the Company will
operate profitably. See "Business", "Financial Statements" and "Management's
Discussion and Analysis".
Limited Operations - No Revenues to Date
To date, the operations of the Company have been limited to market
research and development of a software and hardware system for computerizing the
limousine reservation and payment process. The Company has not yet generated any
revenues and will require further technical development within a period of the
next twelve months, as well as an additional investment of the proceeds from
this Offering before a determination of the system's commercial feasibility can
be made. No assurance can be given that the
19
<PAGE>
Company's reservation and payment system will achieve commercial
feasibility. See "Business."
Development Stage of the Company
The Company is not sufficiently established to fully evaluate
or forecast its prospects. The Company is thus subject to all the
risks associated with the creation of a new business and there is
no assurance that it will be able to continue to function as a
viable entity. See "Business."
Rapid Technological Changes - Cost and Competition
The computer hardware and software industry is relatively new and has
undergone, and is expected to continue to undergo, significant and rapid
technological changes. Market penetration and customer acceptance of the
Company's system will depend upon the Company's ability to develop and maintain
a technically competent marketing force as well as its ability to adapt to rapid
technological changes in its industry. The Company also expects that new
competitors may introduce systems or services that are directly or indirectly
competitive with those of the Company. Such competitors may succeed in
developing systems and services that have greater functionality or are less
costly than the Company's systems and services and may be more successful in
marketing such systems and services. The Company is still developing its
products and none are currently available. See "Business."
No Assurance of Market Acceptance
The Company believes that its computerized limousine
reservation and payment system will gain acceptance among corporate
travel departments, however, there can be no assurance that a
sufficient number of corporate travel departments will be willing
to utilize the Company's system to enable the Company to achieve
profitable operations. See "Business."
Dependence on Existing Computer Reservation Systems
The Company is dependent on access to existing computer reservation
systems. If such systems were to experience technical difficulties or be unable
to operate for a period of time, the Company's business would be adversely
affected. In addition, the Company has agreements with three of the four CRS`.
There can be no assurance that such agreements will be renewed or renewed on
favorable terms after their expiration. Moreover, if such agreements were to
terminate and the Company were to lose access to such systems, its business
would be materially and adversely affected. See "Business."
20
<PAGE>
Broad Discretion by Management in Application of Proceeds; Funding of Day to Day
Operations and Officers' Salaries; Repayment of Debt.
A portion (approximately $2,605,800 or 64.9%) of the net proceeds
derived from the sale of the Securities offered hereby will be added to the
Company's general working capital. Management will have complete discretion as
to the application of such funds, including payment of executive salaries and
fees relating to the day to day operations. In addition, $563,500, or 14% of the
net proceeds of the Offering will be used to repay certain debt of the Company.
See "Use of Proceeds."
The management of the Company also has broad discretion as to the
application and allocation of up to $16,353,125 of gross proceeds that may be
received upon exercise of the Redeemable Warrants. As a result of the foregoing,
the success of the Company will be substantially dependent upon the discretion
and judgment of the management of the Company with respect to the application
and allocation of the net proceeds hereof. Pending use of such proceeds, the net
proceeds of this offering will be invested by the Company in temporary,
short-term investment grade interest-bearing obligations. See "Use of Proceeds,"
"Business" and "Management."
Dependence Upon Key Individual; Thin Executive Management; Lack of
Independent Directors
The Company has only 2 executive officers and 3 non-executive employees
and has no independent Directors. Its success is dependent upon the activities
of Joseph Cutrona, its President. The loss of Mr. Cutrona's services through
death, disability or resignation would have a material and adverse effect on the
business of the Company. See "Management."
Non-Compliance with Exchange Act Reporting Requirements
Between November 1988 and December 1995, the Company was not in
compliance with the filing requirements of the Exchange Act. During such period,
the Company filed unaudited financial statements rather than the audited
financial statements required by the Exchange Act because it was unable to pay
for audited financial statements. The Company may be subject to legal liability
as a result thereof. If necessary, the Company may in the future use a portion
of the proceeds from this offering allocated to working capital to pay for
audited financial statements. See "Use of Proceeds."
Possible Need for Additional Financing
The Company intends to fund its operations and other capital needs for
the next twelve (12) months from the date of this offering substantially from
revenues generated by the Company's planned operations and the proceeds of this
offering, but there can
21
<PAGE>
be no assurance that such funds will be sufficient for these
purposes. There can be no assurance that such financing will be
available, or that it will be available on acceptable terms. See
"Use of Proceeds."
Dependence on Certain Suppliers
The Company is dependent on certain of its suppliers who are involved
with the development of the Company's system. Should the Company lose any such
suppliers, it would cause a delay in the Company's bringing its system to
market. The Company is dependent on two key suppliers who provide software
development services to the Company. Travel Automation Management provides the
"script" software programs which enable the Company's program to interact with
each of the airline computer reservation systems. Prosoft, Inc. has written all
the proprietary custom software for the Company's reservation system and is
presently completing the Company's payment system. Travel Automation
Management's services are provided on a purchase order/contract basis with
progress payment terms. Prosoft's services are provided under various formal
written consulting agreements. No assurance can be given that the Company will
be able to adequately replace these two suppliers in the event of a termination
of services by the suppliers to the Company. See "Business."
Adverse Effect of Economic Downturn
The Company's system, when operable, will be dependent on the
travel habits of its customers. In the event there is an economic
downturn or change in travel patterns, the Company's business could
be adversely affected. See "Business."
Continuing Voting Control by Current Officers and Directors
As of the date hereof, the management of the Company owns 2,684,627
shares of Common Stock. Consequently, immediately upon completion of the
Company's public offering of the Securities, including exercise of the
Over-Allotment Option but assuming no exercise of the Redeemable Warrants, the
officers and directors of the Company will own or control the voting of 62.45%
of the Company's issued and outstanding Common Stock. There are no cumulative
voting rights and directors must be elected by a plurality of the outstanding
voting securities entitled to vote. Therefore management of the Company will be
in a position to control the actions of the Company. See "Principal
Stockholders" and "Certain Transactions."
Limitations on Product Protection and Possibility of Infringement
The Company does not have any patents on any of its technology and
relies largely on copyright, its license agreements with customers and its own
security systems, confidentiality procedures
22
<PAGE>
and employee nondisclosure agreements to maintain the trade secrecy of its
proprietary information. There can be no assurance that the legal protections
and precautions taken by the Company, or available remedies, will be adequate to
prevent misappropriation of the Company's proprietary information. In addition,
these protections do not prevent independent third-party development of
functionally equivalent or superior systems, products or methodologies.
Moreover, there can be no assurance that third parties will not assert
infringement claims against the Company.
See "Business."
Likely Competition
Although, to the best of the knowledge of the management of the
Company, there are as yet no competitors, it must be assumed that if the
Company's efforts are successful, other companies will begin to offer competing
systems. These future competitors may well be companies which have substantially
greater research, development, marketing and financial resources than the
Company. Moreover, customers seeking limousine service will be able to reserve
such service through existing telephone based systems or alternative methods
which may indirectly compete with the Company.
See "Business."
Need for Highly Qualified Personnel
The success of the Company's business will depend upon its
ability to attract and retain personnel with a wide range of
technical capabilities. Competition for such personnel is intense,
and is expected to increase in the future. No assurance can be
given that the Company will be able to attract and retain such
personnel. See "Business."
Limited Lock-Up Agreement for Selling Stockholders.
The Registration Statement of which this Prospectus forms a part also
covers the registration of 287,500 Class A Redeemable Warrants and 287,500
shares of Common Stock issuable upon their exercise. These Warrants were issued
by the Company in a private placement. While these securities may not be sold
for eighteen (18) months from the date hereof pursuant to an agreement with the
Underwriter, such restriction may be released in the Underwriter`s sole
discretion at any time after all of the Securities offered hereby have been
sold. No assurance can be given that the Underwriter will not release this
lock-up before the eighteen (18) month period has expired.
Arbitrary Determination of Offering Price of Securities
The public offering price of the Securities and the exercise price of
the Redeemable Warrants were determined by negotiation between the Company and
the Underwriter and do not necessarily bear
23
<PAGE>
any relationship to the Company's assets, book value, net worth or any other
established criteria of value. Among the factors considered in determining such
prices were the Company's historical performance and growth, management's
assessment of the Company's business potential and earning prospects, the
prospects for growth in the industry in which the Company operates, market
prices and prevailing market conditions generally. Neither the offering price of
the Securities nor the exercise price of the Redeemable Warrants should be
regarded as indicative of the actual value of any of the securities being
offered by the Company. The trading price of the securities and/or exercise
price of the Redeemable Warrants could also be subject to significant
fluctuations in response to variations in quarterly results of operations,
announcements of new contracts or services by the Company or its competitors,
government regulatory action, general trends in the industry and other actions,
including extreme price and volume fluctuations which have been experienced by
the securities markets from time to time in recent years. See "Underwriting."
Immediate and Substantial Dilution
This Offering involves an immediate and substantial dilution of $4.36
or 87.2% per share between the net tangible book value per share of Common Stock
upon consummation of this Offering and the public offering price. To the extent
that any future financing involves the sale of the Company's equity securities,
the interests of the Company's then existing stockholders, including investors
in this Offering, could be substantially diluted. See "Dilution" and "Possible
Adverse Effect of Future Sales of Stock by Stockholders."
Absence of Dividends on Common Stock
The Company has not paid any dividends on its Common Stock since its
incorporation and anticipates that, for the foreseeable future, working capital
and earnings, if any, will be retained for use in the Company's business
operations and in the expansion of its business. The Company has no present
intention to pay cash dividends on its Common Stock. See "Dividend Policy" and
"Description of Securities."
Potential Presence of Outside Party at Directors` Meetings
The Underwriting Agreement grants the Underwriter the right to appoint
a designee to attend all of the Company's Directors` meetings for a period of
five (5) years. Such person would not owe the Company or its stockholders any
fiduciary duty under state law as would the Company's actual Directors and
executive officers. No assurance can be given that the Company or its
stockholders would have any legal remedy against such potential designee if such
person were to take any action, such as usurping a corporate opportunity, that
might be found to be a breach of fiduciary duty had such action been taken by an
actual Director.
24
<PAGE>
Possible Adverse Effect of Future Sales of Stock by Stockholders
Of the Company's 3,280,594 outstanding shares of Common Stock prior to
the Offering contemplated hereby, 3,084,784 shares are "restricted securities"
as that term is defined under the Securities Act and in the future may only be
sold in compliance with Rule 144 promulgated under the Securities Act or
pursuant to an effective registration statement. Rule 144 provides, in essence,
that a person (including a group of persons whose shares are aggregated) who has
satisfied a two-year holding period for such restricted securities may sell
within any three-month period, under certain circumstances, an amount of
restricted securities which does not exceed the greater of 1% of that class of
the Company's outstanding securities or the average weekly trading volume of
that class of securities during the four calendar weeks prior to such sale. In
addition, pursuant to Rule 144, persons who are not affiliated with the Company
and who have held their restricted securities for at least three years are not
subject to the quantity limitations or the manner of sale restriction of the
rules. As of the date hereof, no shares of Common Stock are available for resale
pursuant to Rule 144. Pursuant to an agreement with the Underwriter, the
officers, directors and holders of 5% or more of the Company's equity
securities, other than Steven Pollan and other than 200,000 shares of common
stock held by Loeb are restricted from selling their respective securities for a
period of 18 months from the Effective Date, absent waiver of such restriction
by the Underwriter. See "Certain Transactions" and "Underwriting."
In the event that shares of Common Stock which are not currently
salable become salable by means of registration, eligibility for sale under Rule
144 or otherwise and the holders of such shares of Common Stock elect to sell
such shares of Common Stock in the public market, there is likely to be a
negative effect on the market price of the Company's securities and on the
ability of the Company to obtain additional equity financing. In addition, to
the extent that such shares of Common Stock enter the market, the value of the
Common Stock in the over-the-counter market may be reduced. No predictions can
be made as to the effect, if any, that sales or availability for sale of the
Securities will have on the market price of any such securities, which may
prevail from time to time. Nevertheless, the foregoing could adversely affect
such prevailing market prices. See "Principal Stockholders," "Certain
Transactions" and "Description of Securities."
Potential and Pending Litigation
In August 1996, the Company gave notice to one of its former officers,
Mr. Steven E. Pollan, that it was canceling 333,216 shares of Common Stock
issued to him for services he was to have provided at the inception of Corporate
Travel Link, Inc. The Company believes that Mr. Pollan never provided such
services; Mr.
25
<PAGE>
Pollan has informed the Company, however, that he will contest any attempt to
cancel his shares. No assurances can be given that the Company would prevail if
any legal proceeding is commenced by Mr.
Pollan.
On February 20, 1997, two individuals filed an action against the
Company and Travel Link in the Superior Court of New Jersey seeking, among
other things, damages in the amount of 8% of any financing secured by Travel
Link resulting from Plaintiffs' efforts as well as 5% of the Company`s Common
Stock allegedly due for services rendered in connection with the Company`s
acquisition of Travel Link in 1995. The claim for money damages is based upon a
written agreement between Travel Link and plaintiffs while the claim for the
shares of Common Stock is based upon alleged oral representations and promises
made by an officer of Travel Link. No assurances can be given that the Company
will prevail in this matter. See "Business-Litigation."
Possible Adverse Effects of Authorization of Preferred Stock; Anti-
Takeover Effects.
The Company's Certificate of Incorporation authorizes the issuance of a
maximum of 25,000,000 shares of preferred stock, $.0001 par value ("Preferred
Stock"), on terms which may be fixed by the Company's Board of Directors without
further stockholder action. None of such Preferred Stock has been designated or
issued. The terms of any series of Preferred Stock, which may include priority
claims to assets and dividends, and special voting rights, could adversely
affect the rights of holders of the Common Stock. The issuance of Preferred
Stock could make the possible takeover of the Company or the removal of
management of the Company more difficult, discourage hostile bids for control of
the Company in which stockholders may receive premiums for their shares of
Common Stock or otherwise dilute the rights of holders of Common Stock and the
market price of the Common Stock. See "Description of Securities - Preferred
Stock."
Capital-Raising Restrictions
The Underwriting Agreement prohibits the Company from issuing any
capital stock or other securities without the Underwriter's prior consent for a
period of eighteen (18) months following the date of this Prospectus. This
provision may limit the Company's ability to raise additional equity capital.
Greater Share of Financial Risk to Investors in Public Offering
Upon completion of the Company's public offering, the Company's current
stockholders will have paid $618,600 for 3,295,594 shares of Common Stock, or
76.1% of the Company's then
26
<PAGE>
outstanding shares of Common Stock, and purchasers of the Securities in the
Company's public offering will have paid $5,175,000 for 1,035,000 shares of
Common Stock, or 23.9% (exclusive of related warrants) of the Company's then
outstanding shares of Common Stock, including the exercise of the Over-Allotment
Option in full but not including the exercise of the Redeemable Warrants
included therein. Therefore, investors purchasing Securities in the Company's
public offering will bear a substantially greater financial risk than the
Company's current stockholders. See "Dilution."
No Assurance of Public Market or NASDAQ Listing
Prior to the Company's public offering, there has been no public market
for any of the Company's securities, and there can be no assurance given that a
regular trading market for the Securities will develop after the completion of
the Company's public offering. If a trading market does in fact develop for any
of the foregoing securities, there can be no assurance given that it will be
sustained. In connection with the Company's public offering, the Company applied
for inclusion of the Common Stock and the Redeemable Warrants for quotation on
NASDAQ under the symbols: GENS, GENSW, and GENSZ, respectively. While such
securities are expected to be listed for quotation on NASDAQ, there can be no
assurance given that the Company will be able to satisfy the requirements for
continued quotation on NASDAQ or that such quotation will otherwise continue.
If, for any reason, any of such securities become ineligible for continued
listing and quotation or a public trading market does not develop, purchasers of
such securities may have difficulty selling their securities should they desire
to do so. See "Market Information."
Risk of "Penny Stock" Regulations
The Commission has adopted regulations which define a "penny stock" to
be any equity security that has a market price (as defined) of less than $5.00
per share, subject to certain exceptions. The Company believes that, as of the
date of this Prospectus, the Common Stock and/or the Redeemable Warrants may be
deemed to be "penny stocks" as defined by the Exchange Act and the rules and
regulations promulgated thereunder. For any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the transaction, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities, information on the limited market in penny stocks and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. In addition, the
broker-dealer must obtain a written acknowledgment from the customer that such
disclosure information was provided and must retain such acknowledgment from the
customer for at least three years.
27
<PAGE>
Further, monthly statements must be sent to the customer disclosing
current price information for the penny stock held in the account. While many
NASDAQ-listed securities would otherwise be covered by the definition of penny
stock, transactions in a NASDAQ-listed security would be exempt from all but the
sole market-maker provision for: (i) issuers who have $2,000,000 in tangible
assets ($5,000,000 if the issuer has not been in continuous operation for three
years); (ii) transactions in which the customer is an institutional accredited
investor; and (iii) transactions that are not recommended by the broker-dealer.
In addition, transactions in a NASDAQ-listed security directly with a NASDAQ
market-maker for such securities would be subject only to the sole market-maker
disclosure, and the disclosure with respect to commissions to be paid to the
broker-dealer and the registered representative.
The above-described rules may materially adversely affect the liquidity
for the market of the Company's securities. Such rules may also affect the
ability of broker-dealers to sell the Company's securities and may impede the
ability of holders (including, specifically, purchasers in this offering) of the
Common Stock, the Class A Redeemable Warrants, the Common Stock underlying the
Class A Redeemable Warrants, the Class B Redeemable Warrants and the Common
Stock underlying the Class B Redeemable Warrants to sell such securities in the
secondary market.
Underwriter's Influence on the Market; Possible Restrictions on
Market-Making Activities during Warrant Solicitation
Although it has no legal obligation to commence or continue to do so,
the Underwriter may from time to time act as a market-maker and otherwise effect
transactions in the Company's securities. To the extent the Underwriter acts as
a market-maker in the Common Stock or Redeemable Warrants it may be a dominating
influence in that market inasmuch as a significant amount of such securities may
be sold to customers of the Underwriter.
To the extent that the Underwriter solicits the exercise of the
Redeemable Warrants from the holders thereof, it may be prohibited pursuant to
the requirements of Rule 10b-6 under the Exchange Act from engaging in
market-making activities during such solicitation and for a period of up to nine
(9) days preceding such solicitation. See "Underwriting."
Risk of Blue Sky Restrictions on Exercise of the Redeemable
Warrants
The Company has qualified the sale of the securities being offered
hereby in a limited number of states. Although certain exemptions in the Blue
Sky laws of certain states, other than those states in which such securities are
initially qualified, may permit such securities, including the Redeemable
Warrants, to be transferred to purchasers in such states, the Company will be
28
<PAGE>
prevented from issuing Common Stock upon exercise of the Redeemable Warrants in
such states unless an exemption from registration or qualification is available
or unless the issuance of Common Stock upon the exercise of the Redeemable
Warrants is qualified and a current registration statement is in effect. The
Company may decide not to seek or may not be able to obtain qualification of the
issuance of such Common Stock in all of the states in which the ultimate
purchasers of the Redeemable Warrants reside. In such case, the Redeemable
Warrants of such purchasers will expire and have no value if such warrants
cannot be exercised. Accordingly, the market for the Redeemable Warrants may be
limited. See "Underwriting."
Current Prospectus Requirement to Exercise Warrants
During the exercise period of the Redeemable Warrants, the Company must
maintain and make available a current prospectus. This Prospectus will no longer
be current after _________, 1997 (or earlier upon the occurrence of a material
event or change which would render the information herein inaccurate or
otherwise misleading). There can be no assurance given that the Company will not
be prevented by financial or other considerations from maintaining a current
prospectus. In the event that a current prospectus is not available, the
Redeemable Warrants may not be exercisable and the Company will be precluded
from redeeming the Redeemable Warrants. See "Underwriting."
Adverse Effects of Possible Redemption of the Redeemable Warrants
Each Class A Redeemable Warrant shall entitle the holder to acquire one
share of the Common Stock at a price equal to $5.75 per share. Commencing 12
months after the Effective Date, the Company will have the right at any time to
redeem all, but not less than all, of the Class A Redeemable Warrants at a price
equal to ten cents ($.10) per Redeemable Warrant, provided that the closing bid
price of the Common Stock equals or exceeds $6.25 per share for any twenty (20)
trading days within a period of thirty (30) consecutive trading days ending on
the fifth trading day prior to the date of the notice of redemption. Each Class
B Redeemable Warrant shall entitle the holder to acquire one share of the Common
Stock at a price equal to $6.75 per share. Commencing 12 months after the
Effective Date, the Company will have the right at any time to redeem all, but
not less than all, of the Class B Redeemable Warrants at a price equal to ten
cents ($.10) per Redeemable Warrant, provided that the closing bid price of the
Common Stock equals or exceeds $7.25 per share for any twenty (20) trading days
within a period of thirty (30) consecutive trading days ending on the fifth
trading day prior to the date of the notice of redemption. See "Descriptions of
Securities." Although holders of the Redeemable Warrants will have the right to
exercise their Redeemable Warrants through the date of redemption, they may be
unable to do so because they lack sufficient funds at the time of
29
<PAGE>
redemption, or they may simply not wish to invest any more money in shares of
the Common Stock at that time. Should a holder of the Redeemable Warrants fail
to exercise such Redeemable Warrants or to sell such Redeemable Warrants on or
prior to the redemption date, such Redeemable Warrants will have no value beyond
their redemption value. The Company may not redeem the Redeemable Warrants
unless the Company has available a current prospectus with respect to the
Redeemable Warrants. See "Risk Factors-Current Prospectus Requirement" above and
"Description of Securities-Redeemable Warrants."
30
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities being
offered by the Company, after deducting expenses and other costs of the
offering, are estimated to be approximately $4,019,300 (or $4,657,445 if the
Over-Allotment Option is exercised in full). The Company intends to use the net
proceeds of its offering substantially as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Proposed Use of Proceeds Approximate Amount Percentage
System Procedures Development
and additional equipment(1) $850,000 21.1%
Repayment of Debt (2) 563,500 14.0%
Working Capital (3) 2,605,800 64.9%
--------- -----
Total $4,019,300 100%
---------
- ----------------------------
</TABLE>
(1) To be utilized for (a) completion of software development and acquisition of
computer hardware needed to complete development of the Genisys Payment System
(hereinafter defined) ($560,000) and (b) completion of software development and
acquisition of computer hardware necessary to complete integration of the
Genisys Reservation System (hereinafter defined) with the Apollo CRS ($290,000).
(2) The total of $563,500 bears interest at 10% per annum and is payable to 16
unaffiliated parties and matures upon the earlier to occur of May 29, 1997 or
thirty days after the closing date of the first underwritten public offering of
the Company's securities.
(3) General working capital contemplates, among other things, the use for
general corporate purposes, including funding day to day operations of the
Company such as executive salaries, compliance with reporting requirements and
the Company's future development.
The amounts set forth above are estimates developed by management of
the Company based upon the Company's current plans and prevailing economic and
industry conditions. Although the Company does not currently contemplate
material changes in the proposed use of proceeds set forth above, to the extent
that management of the Company finds that adjustment thereto is required, the
amounts shown may be adjusted among the uses indicated above. The Company's
proposed use of proceeds is subject to changes in general, economic and
competitive conditions, timing and management discretion, each of which may
change the amount of proceeds expended for the purposes intended. The proposed
application of proceeds is also subject to changes in market conditions and the
Company's financial condition in general. Changes in general, economic,
competitive and market conditions and
31
<PAGE>
the Company's financial condition would include, without limitation, the
occurrence of an economic slowdown or recession and changes in the competitive
environment in which the Company operates. While management of the Company is
not currently aware of the existence or pending threat of any of the foregoing
events, there can be no assurance given that one or more of such events will not
occur. See "Risk Factors" generally, including specifically, "Broad Discretion
by Management in Application of Proceeds; Funding of Day to Day Operations and
Officer's Salaries"; "Adverse Effect of Economic Downturn" and "Likely
Competition". Any additional proceeds received upon exercise of the
Over-Allotment Option or Redeemable Warrants will be added to working capital
and used as management, in its sole discretion, deems appropriate.
While no assurance can be given, the Company believes that the net
proceeds from its public offering and revenues generated by the Company's
planned operations will be adequate to satisfy the Company's working capital
needs for the next 12 months. The Company does not currently anticipate that it
will need the proceeds from the potential exercise of Redeemable Warrants to
fund its working capital needs or to maintain its operations over the next
twelve (12) months. However, the Company may require additional financing in the
future in order to expand its business. The Company is not able at this time to
predict the amount or potential source of such additional funds and has no
current commitments to obtain such funds, other than relating to the potential
exercise of outstanding Warrants. There can be no assurance that additional
financing on acceptable terms will be available to the Company when needed, if
at all. See "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Pending use of the net proceeds from the
Company's public offering, the Company may make temporary investments in
short-term investment grade interest-bearing instruments.
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<PAGE>
- ----------------------------------------------------------------
CAPITALIZATION
- -----------------------------------------------------------------
The following table sets forth as of December 31, 1996 the Company's
capitalization on a historical basis and as adjusted to give effect to this
Offering and its net proceeds, including the exercise of the Over-Allotment
Option in full. The information below should be read in conjunction with the
Financial Statements contained in this Prospectus, which should be read in their
entirety.
Historical As Adjusted(1)(2)
Short-term debt:
Current maturities
of long-term debt $161,282 161,282
Total Short-term debt 161,282 161,282
------- -------
Long-term debt:
10% Promissory notes payable 563,500 -
Convertible notes payable(3) 30,000 -
Long-term debt, less current
maturities 1,009,757 1,009,757
--------- ----------
Total long-term debt 1,603,257 1,009,757
-------- ----------
Stockholders' equity (deficiency):
Preferred stock, $.0001 par value;
25,000,000 shares authorized;
None outstanding - -
Common stock, $.0001 par value;
75,000,000 shares authorized;
3,280,594 shares issued and
outstanding 328 433
4,330,594 shares outstanding,
as adjusted - -
Paid in capital 252,344 4,939,684
Deficit accumulated during the
development stage (1,645,003) (1,645,003)
----------- ------------
Total stockholders' equity
(Deficiency) (1,392,331) 3,295,114
----------- ----------
Total Capitalization
Debt and stockholders' equity
$ 372,208 $4,466,153
-------------- ----------
- -------------
(1) Gives effect to the anticipated net public offering proceeds
of $4,657,445 and repayment of debt in the amount of $563,500.
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<PAGE>
(2) Includes the 135,000 Shares of Common Stock included in the
Over-Allotment Option, but does not include: (a) 287,500
shares of Common Stock issuable upon exercise of the Class A
Redeemable Warrants issued in a private placement;
(b) 360,000 shares of Common Stock issuable
upon exercise of the Redeemable Warrants included in the Over-
Allotment Option; or (c) 90,000 shares of Common Stock
issuable upon exercise of the Underwriter's Purchase Option.
In the event all outstanding options (including 360,000
Redeemable Warrants included in the Over-Allotment Option and
90,000 shares covered by the Underwriters Purchase Option)
were exercised there would be 8,190,193 shares of Common Stock
outstanding. See "Description of Securities," "Certain
Transactions," "Management" and "Underwriting."
(3) Includes the conversion of $30,000 of Convertible Notes into
15,000 shares of Common Stock upon consummation of this
Offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and
Capital Resources."
DILUTION
As of December 31, 1996, the Company had an aggregate of 3,280,594 shares of
Common Stock outstanding and a net tangible book value of $(1,903,105) or $(.58)
per share of Common Stock,. (See December 31, 1996 Financial Statements). "Net
Tangible Book Value Per Share" represents the total amount of the Company's
tangible assets, less the total amount of its liabilities, divided by the total
number of shares of Common Stock outstanding.
After giving effect to the sale of 1,035,000 shares of Common Stock
(including exercise of the Over-Allotment Option in full) at the offering price
of $5.00 per share and the proceeds from the sale of the Class A and Class B
Redeemable Warrants and the deduction of offering expenses in the amount of
$235,000 and Underwriting Discounts and Commissions estimated at $731,055 (
including payment of the Underwriter's Non-Accountable Expense Allowance ), the
net tangible book value of the Company would be $.64 per share of Common Stock.
This amount represents an immediate dilution (the difference between the
attributed price per share of Common Stock to purchasers in the Company's
offering and the net tangible book value per share of Common Stock as of
December 31, 1996, of approximately $4.36 per share of Common Stock, or
approximately 87.2% to new investors and an immediate increase (the difference
between the net tangible book value per share of Common Stock as of December 31,
1996 and the net tangible
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<PAGE>
book value per share of Common Stock as of December 31, 1996 after giving effect
to the issuance of 1,035,000 shares of Common Stock and related Redeemable
Warrants) of $1.22 per share of Common Stock, or approximately 310.3% to the
Company's stockholders. Such increase to the Company's current stockholders is
solely attributable to the cash price paid by purchasers of the Securities
offered hereby.
The following table illustrates the per share dilution as of December 31, 1996:
Public offering price per share(1)................. $5.00
Net tangible book value per share
before giving effect to the Company's
offering(3)..................................... $(.58)
Increase per share attributable to the net proceeds
of the sale of 1,035,000 shares of Common Stock
and related warrants offered by the Company..... 1.22
Net tangible book value per share as of
December 31,1996 reflecting the Company's
Offering(2)........................................ .64
Dilution per share to purchasers in the Company's
offering........................................... 4.36
- ------------------------
(1) Attributes $5.00 of the public offering price to the shares of
Common Stock and none to the Redeemable Warrants. Represents
the public offering price before deduction of estimated
expenses of the Company's offering, Underwriting Discounts and
Commissions.
(2) Includes the exercise of:
the Over-Allotment Option, but not (a) the
exercise of the Redeemable Warrants included therein or (b)
the exercise of the Underwriter's Purchase Option (or exercise
of the Redeemable Warrants included therein). See
"Capitalization," "Underwriting," "Certain Transactions" and
"Description of Securities."
(3) Includes the conversion of $30,000 of Convertible Notes into 15,000
shares of Common Stock upon the consummation of this Offering.
The following table sets forth, as of December 31, 1996 a comparison of
the number of shares of Common Stock acquired by current stockholders from the
Company, the total consideration paid
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<PAGE>
for such shares of Common Stock and the average price per share paid by current
stockholders of Common Stock and to be paid by the prospective purchasers of the
shares of Common Stock offered for sale by the Company (based upon the
anticipated public offering price of $5.00 per share of Common Stock, before
deducting Underwriting Discounts and Commissions and estimated offering
expenses).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Common Stock Acquired Total Consideration Average Price
Number Percent Amount Percent Per Share
Current Stockholders..... 3,295,594 76.1% $ 618,600 10.7% $ .19
New Investors(1)(2)...... 1,035,000 23.9% $5,175,000 89.3% $5.00(3)
----------- ----- ----------- ----
Total(2)(3)(4)....... 4,330,594 100% $5,793,600 100%
</TABLE>
(1) Including the 135,000 shares of Common Stock being issued by
reason of the Underwriter's exercise of the Over-Allotment
Option, but not the exercise of the Redeemable Warrants
included therein.
. See "Underwriting".
(2) Assumes no exercise of the Underwriter's Purchase Option
(or exercise of the Redeemable Warrants included therein)
. See "Capitalization," "Management
Discussion and Analysis of Financial Conditions and Results of
Operations", "Underwriting," and "Description of Securities."
(3) Aggregate offering price before deduction of offering
expenses, Underwriting Discounts and Commissions.
(4) Includes 15,000 shares of Common Stock issuable upon the
conversion of the Convertible Notes.
DIVIDEND POLICY
The Company has never paid and does not anticipate paying any
dividends on its Common Stock in the foreseeable future. The
Company currently intends to retain all working capital and
earnings, if any, for use in the Company's business operations and
in the expansion of its business. See "Description of Securities-
Common Stock."
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The principal business activity of the Company is developing a
computerized limousine reservation and payment system for the business traveler.
The Company anticipates that the proprietary software that is being developed
will enable limousine reservations to be completely computerized i.e., be
entirely automated and operate without human intervention except for initial
input of travel information.
The Company, a New Jersey corporation, was organized on April 25, 1986,
under the name of JECO2 Lasers, Inc. and changed its name to Robotic Lasers,
Inc. on December 22, 1987. On August 11, 1995, Robotic Lasers acquired Corporate
Travel Link, Inc. (a development-stage enterprise) which was incorporated in New
Jersey on March 7, 1994. For accounting purposes, the share exchange transaction
and combination of Corporate Travel Link with the Company has been treated as a
reverse acquisition. The previous historical financial statements of Corporate
Travel Link (since its information in March 1994) are now reported as the
historical consolidated financial statements of the Company and its subsidiary.
Since August 11, 1995, the Company's business and operations have consisted
solely of the business and operations of Corporate Travel Link, which continues
to operate as a wholly-owned subsidiary of the Company. The Company changed its
name from Robotic Lasers, Inc. to Genisys Reservation Systems, Inc. on July 16,
1996.
The Company changed its fiscal year end from August 31 to December 31,
effective December 31, 1995.
Development of the Company's Systems
The development of the software program and the database for the Genisys
reservation system ("Genisys Reservation System") has been completed. All the
hardware elements of the Genisys computer system have been purchased and
integrated and the completed system is up and operating. The Worldspan "script"
computer software interface, which allows the Genisys Reservation System to
operate over the Worldspan CRS, has been completed. The completed Genisys
Reservation System and data base operating through the Worldspan CRS has been
"beta" tested with a major entertainment company and its travel agency in
Atlanta and with a limousine service provider in Los Angeles. Actual
reservations were booked, confirmed and limousine services were provided. At
that time, Worldspan could have been brought on-line but the management of the
Company decided
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<PAGE>
to wait until the payment system and the Sabre system could be brought on-line
at the same time.
The Sabre "script" computer software interface has also been completed and is
now undergoing preliminary or "alpha" testing, which the Company expects to be
completed shortly. The Company expects to begin "beta" testing the Sabre system
in February 1997.
The hardware and software development of the Genisys payment system ("Genisys
Payment System") has been completed and is currently undergoing "alpha" testing
in conjunction with the Sabre system. The Genisys Payment System will be "beta"
tested along with and integrated into the Sabre system. Upon completion of the
testing of the Sabre reservation/payment system, the Worldspan system will be
given a second "beta" test with the Genisys Payment System integrated within its
system as well. Upon completion of the Worldspan reservation/payment system
"beta" test, both the Sabre and Worldspan systems will be brought on-line.
Management expects this to occur in early 1997.
The "script" software program for Apollo is currently being developed and should
be ready for "alpha" testing in early 1997. Since by that time both the Genisys
Reservation and Payment Systems will be operating through the Sabre and
Worldspan CRSs, management expects that "beta" testing of the Apollo system can
be completed by mid 1997 and the Apollo system brought on-line in late 1997.
Components of Revenues and Expenses
Revenues. The Company is a development-stage company and has generated
no revenues and has no commercial operations to date. The Company did not
generate any revenues from operations during the fiscal year ending December 31,
1996. The Company does expect to bring its Genisys Reservation and Payment
Systems on-line through two of the four CRS` in existence (Sabre and Worldspan)
in early 1997, at which time the Company expects to generate revenues. The
Company anticipates completing development of and bringing a third CRS, Apollo,
on-line in late 1997, which it expects to increase revenues.
The Company anticipates that its Genisys Reservation and Payment
Systems will generate revenue from the following sources: (I) a booking fee
charged for use of the Genisys Reservation System and billed through the Genisys
Payment System, (ii) a processing fee generated by charges processed through the
Genisys Payment System, (iii) an annual software licensing fee charged to
limousine service providers who utilize the Genisys Reservation and Payment
Systems.
Expenses. Cost of service will include all costs directly
attributable to the Company's provision of services to its
corporate clients and the limousine service providers. The most
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<PAGE>
significant component of cost of service is the booking fee charged by the CRS
for reservations made by the Genisys systems utilizing the CRS. Booking fees are
a set amount charged by each CRS for transactions posted through the system.
Cost of service also includes the access and file fees charged by a commercial
bank acting as the Company's Automated Clearing House in distributing payments
made to limousine service providers through the Genisys Payment System.
General and administration expenses include salaries, commissions and
benefits, travel costs, professional fees, rent, telephone and other operating
costs of the Company. The Company has not capitalized any internal expenditures
with respect to the costs of developing and implementing the Genisys Reservation
and Payment Systems.
Results of Operations
The Company is in the development stage and has not yet generated any
revenues and has no commercial operations to date. The Company has been
unprofitable since inception and expects to incur additional operating losses
over the next several fiscal quarters. The Company does not expect to generate
any revenues from operations until mid 1997. As reflected in the accompanying
financial statements, the Company has incurred losses totaling $1,645,003 since
inception and at December 31, 1996, had a working capital deficit of $600,043.
Selling, general and administrative expenses were $819,205 for the year
ended December 31, 1996 as compared to $256,621 for the year ended August 31,,
1995. The primary reason for the difference between the two periods is the
commencement of operations during the earlier period when the Company had only 4
part-time employees for approximately half the period, while during the latter
period the Company was operational with 5 full-time employees. Payroll and
payroll-related costs increased approximately $229,000 during 1996. Other
approximate cost increases during the 1996 period consist of consulting fees
($54,000), travel costs ($23,000), marketing costs ($16,000), other
administrative costs ($83,000) and professional fees ($136,000). Professional
and consulting fees for the year ended December 31, 1996 totaled $237,000. Such
amount consisted of attorney's fees of $84,000, accounting fees of $42,000,
accrued consulting fees of $36,000 payable to Loeb Partners, $48,000 payable to
John H. Wasko (accrued prior to his becoming an employee of the Company),
$16,000 in consulting fees payable to Mark A. Kenny and miscellaneous fees of
$11,000. Loeb Partners, Mr. Kenny and Mr. Wasko are affiliates of the Company.
Liquidity and Capital Resources.
The Company's funds have principally been provided from Loeb Holding
Corporation, as escrow agent ("Loeb"), for Warren D.
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<PAGE>
Bagatelle, HSB Capital, trusts for the benefit of families of two principals of
Loeb Holding Corporation, and three unaffiliated individuals, LTI Ventures
Leasing Corporation and a private offering, as described below.
In February, 1995, Loeb agreed to loan the Company up to a maximum of
$500,000 as evidenced by Convertible Notes. In addition, pursuant to five
interim loan agreements, Loeb loaned the Company an additional $250,000 from
December 1995 thru March 1996. In November and December 1996, Loeb Holding
Corporation loaned the Company $210,000 evidenced by a series of eighteen month
term Promissory Notes bearing interest at the annual rate of 10%. Total loan
proceeds from Loeb and Loeb Holding Corporation to date are $960,000.
On September 30, 1995, the Company entered into a sale and lease-back
arrangement with LTI Ventures Leasing Corp. (LTI) whereby the Company sold the
bulk of its computer hardware and commercially purchased software to LTI. In
consideration for the sale, the Company received a total of $169,599 and agreed
to lease back the hardware and software for varying terms at a monthly rental
totaling $7,039.
During the quarter ended March 31, 1996, the Company sold 5,000 shares
of the Company's restricted Common Stock to a former officer and director of the
Company for $10,000. During the same period, the Company also sold 25,000 shares
of the Company's restricted Common Stock to an unaffiliated party for $50,000.
Pursuant to a private offering, the Company issued 11.5 units to
sixteen unaffiliated third parties in May and June 1996. The Underwriter acted
as placement agent for the private placement. Each $50,000 unit consists of a
$49,000 promissory note and a Class A Redeemable Warrant valued at $1,000 per
the unit. Each such warrant entitles the holder to purchase 25,000 shares of the
Company's Common Stock at $5.75 per share. The proceeds from this offering
totaled $575,000 and Class A Redeemable Warrants to purchase 287,500 shares of
Common Stock were issued by the Company.
In April and June 1996, the Company borrowed a total of $30,000 from
two unaffiliated third parties pursuant to two convertible notes. The maturity
date is the earlier of January 1, 1998, or the consummation of a public offering
of the Company's Common Stock. These notes bear interest at a rate of 7% per
annum, payable on the last day of each calendar quarter of each year, commencing
March 31, 1997, to the maturity date. If the maturity date of these notes shall
occur prior to January 1, 1998, in lieu of the $30,000 payment of the principal
amount due, the principal amount due shall be converted into 15,000 fully paid
and non-assessable shares of Common Stock of the Company.
In November, 1996, the Company sold 25,000 shares of the
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<PAGE>
Company's restricted Common Stock to an unaffiliated party for $50,000.
At December 31,1996, the Company had cash of $91,548 and a working
capital deficit of $600,043. The Company intends to fund its operations and
other capital needs for the next twelve (12) months from the date of this
offering substantially from revenues generated by the Company's planned
operations and the proceeds of this offering, but there can be no assurance that
such funds will be sufficient for these purposes. There can be no assurance that
such financing will be available, or that it will be available on acceptable
terms. See "Use of Proceeds."
During the quarters ended September 30, 1996 and December 31, 1996,
Joseph Cutrona, President of the Company made capital contributions to the
Company in the amounts of $41,700 and $35,000 respectively. In February 1997,
Mr. Cutrona made additional capital contributions totaling $15,700.
In February and March, 1997, the Company borrowed a total of $45,000
from two unaffiliated third parties pursuant to two eighteen (18) month
Promissory Notes bearing interest at 10% per annum payable at maturity. These
notes are secured by 11,250 shares of the Company`s restricted Common Stock
owned by Joseph Cutrona and 11,250 shares owned by Mark A. Kenny.
41
<PAGE>
- ------------------------------------------------------------
BUSINESS
- ------------------------------------------------------------
History
The Company was incorporated in New Jersey in April 1986 as a
wholly-owned subsidiary of JEC Lasers, Inc. ("JEC") to continue the research and
development of an ultra-compact, multi-kilowatt CO2 laser begun under an
agreement with Loughborough Consultants Ltd ("LCL"), which is affiliated with
Loughborough University of Technology, Loughborough, Leicestershire, England.
Due to the uncertain financial condition of JEC and, in order to
preserve the CO2 laser technology which management felt may have had some value,
the Board of Directors of JEC voted on May 30, 1996 to spin-off Robotic Lasers
into an independent, publicly-owned corporation by issuing a stock dividend of
one share of the Company's Common Stock for every four shares of JEC common
stock outstanding to all shareholders of record as of July 8, 1986. On September
23, 1988, the shares were registered for resale under the Securities Act of
1933, as amended. On June 25, 1986, the Company and JEC signed a Purchase
Agreement whereby the Company acquired all of the assets, rights and properties
relating to JEC's CO2 laser research and development agreement with LCL, subject
to certain liabilities.
On March 3, 1995, the Company sold all of the assets, rights and
properties relating to the C02 laser research and development agreement with
LCL, subject to certain liabilities, to JEC for $345,593 which generated a
profit of approximately $246,000.
On August 11, 1995, the Company acquired Corporate Travel Link, Inc. (a
development-stage enterprise) which was incorporated on March 7, 1994, by
issuing 1,682,924 shares of restricted New Common Stock of the Company (after
the July 16, 1996 one-for-two reverse split. See Notes 1 and 3 to December 31,
1995 financial statements) in exchange for 200 shares of the Common Stock of
Corporate Travel Link ("Travel Link"), which represented all of the authorized,
issued and outstanding shares of common stock of Travel Link.
Since August 11, 1995, the Company's business and operations have
consisted solely of the business and operations of Travel Link which continues
to operate as a wholly-owned subsidiary of the Company.
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<PAGE>
General
The principal business activity of the Company is developing a
computerized limousine reservation and payment system for the business traveler.
The management of the Company anticipates that the proprietary software that is
being developed will enable limousine reservations to be completely computerized
i.e., be entirely automatic and operate without human intervention, except for
initial inputing of travel information.
At the present time, there are four major airline computer
reservation systems in operation in the United States --"Sabre", "Worldspan",
"Apollo" and "System One"(each such system referred to hereinafter as a "CRS").
Each CRS allows a travel agency or corporate travel department to make an
airline reservation and receive instantaneously a confirmation and a printed
airline ticket on any airline. It is also possible to make a hotel reservation
with one of the major hotel chains through any CRS and receive an instantaneous
confirmation of room availability. Additionally, a travel agent or corporate
travel manager may make an automobile reservation with any one of the major car
rental companies (Hertz, Avis and the like) through any CRS and receive an
immediate confirmation of the car rental reservation.
When it comes to limousine reservations, however, there is at
present no method for making a reservation through one of the four CRS and
receiving an immediate guaranteed confirmation. The usual method of making a
limousine reservation in a destination city is to call a limousine company, if
the corporate travel department or travel agent knows of one. This use of the
telephone, with its attendant inconveniences such as "telephone tag" and missed
communications, can make securing a confirmed limousine reservation
inconvenient.
In today's cost-conscious business world, corporations must
explore every possible way to cut costs and save time. With the current CRS`
there is no quick, direct and efficient way to reserve limousine service. Today
reservations are still being booked, changed, canceled and reconfirmed largely
by telephone and telefax.
Computerized Limousine Reservation and Payment System
The Company proposes to work with travel agents and corporate
travel departments by providing a computerized system for securing limousine
reservations.
A typical reservation with the Company's proposed system may
be demonstrated as follows:
Assume that a corporate executive wishes to travel from
Newark, New Jersey to Phoenix, Arizona. The executive will contact
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<PAGE>
the travel manager/agent with his or her travel plans. The travel manager/agent
will then determine which airline flies between Newark and Phoenix on the date
and at the time when the executive wishes to travel.
The travel manager/agent will then go to the airline
reservation computer to enter the information necessary to book the reservation.
The information originated by the travel manager/agent will be transmitted to
one or more CRS mainframe computers and, in turn, will be relayed to the
mainframe computer of the selected airline. The airline's computer will
ascertain seat availability and it will transmit a reservation back to the CRS'
mainframe computer. The CRS will then retransmit the information to the travel
manager/agent and a ticket will be issued.
If the corporate executive also decides that he wishes to stay
at a particular hotel while in Phoenix, this reservation, too, may be made
through the CRS. The travel manager/agent inputs the data already in the
computer pertaining to the airline reservation, and he adds the data necessary
to secure a hotel reservation. The information is transmitted to the CRS's
mainframe computer, and it is then relayed to the hotel's mainframe. The latter
computer searches to ascertain room availability and relays a confirmed
reservation to the CRS. The CRS then transmits the information to the travel
manager/agent and a confirmed reservation slip is printed.
Finally, the corporate executive advises his travel
manager/agent to obtain four limousine reservations: (a) from home to Newark
Airport; (b) from Phoenix Airport to the hotel; (c) from the hotel to the
Phoenix Airport at the end of the trip; and (d) from Newark Airport to the
executive`s home. The travel manager/agent, however, cannot presently effect
these reservations through the CRS or any of the other reservation systems and
receive an immediate, error-free confirmed limousine reservation.
Instead, the travel manager/agent must use the telephone or
telefax. While a corporate travel manager/agent based in Newark will undoubtedly
know of a limousine company in the Newark area to call, he may not know of any
in the Phoenix area.
The Company's system proposes to remedy this dilemma. The
Company proposes to create its own computerized system which will be linked with
one or more CRS`. Any limousine reservations made through any CRS will be
relayed instantaneously to the Company's computer and then to a service provider
of the clients choice -- all without human intervention -- and an immediate
limousine reservation will be confirmed. In the event that the client has no
relationship with a service provider or has no preference, they will be able to
access a national network service provider through the Genisys Reservation
System. The Company is in the process of arranging access to such national
network services.
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<PAGE>
The Company's Computer System Defined
The Company's computer system would be made up of two main
systems, the Genisys Reservation System and the Genisys Payment System. The
Genisys Reservation System would be a fully automated computer system that
allows travel agents to make limousine bookings directly through any CRS, much
like hotel or car bookings. The Genisys Payment System is an automated
electronic payment and reporting system which will process and reconcile all
purchases made through the Genisys Reservation System. The Genisys Payment
System is not yet operational. All hardware required for development and
commercial operation of the Company's Reservation and Payment Systems are
purchased, off-the-shelf components and are not manufactured by the Company.
An Overview of the Genisys Reservation System
There are three main "components" that play a role in the
delivery of a limousine reservation; the CRS, the Genisys database, and the
Genisys computer terminals which must be purchased by the limousine service
provider. The Company's computer software will integrate these three components
into a fully functional, automated reservation delivery system.
CRS Interface Development
There are four main airline CRS` in existence today in the
U.S, Sabre, Worldspan, Apollo, and System One. These CRS` are the primary
technology tool utilized by travel managers/agents to make airline, hotel and
car rental reservations. The Company has contracts with Sabre, Worldspan and
Apollo which enabled the Company to develop an interface that will allow travel
managers/agents to make limousine reservations through the Genisys Reservation
System.
The Company has completed and tested the Genisys Reservation
System Worldspan interface, and will soon complete the Sabre interface. The
Company anticipates bringing Worldspan and Sabre on-line in mid 1997. Apollo
will be the third CRS brought on-line, and the Company anticipates completing
development and bringing Apollo on-line in late 1997.
The Company has contracts in place with Sabre, Apollo, and
Worldspan. Each contract requires the Company to pay a fee for each "booking"
processed by the CRS. A "booking" is broadly defined as a reservation that has
not been canceled prior to its effective date - in essence, a reservation where
service is performed. The "booking" fee charged to the Company varies by CRS
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<PAGE>
and is activity driven (no booking, no charge). Additionally, there are minimum
charges in each of the CRS agreements: Sabre - $2,000 / mo.; Apollo - $1,000 /
mo.; Worldspan - $350 / mo. These minimum payments will only apply if actual
booking fees do not
exceed monthly minimum.
Development of the Company's Systems
The development of the software program and the database for
the Genisys Reservation System has been completed. All the necessary hardware
elements of the Genisys computer system have been purchased and integrated and
the completed system is up and operating. The Worldspan "script" computer
software interface which allows the Genisys Reservation System to operate over
the Worldspan CRS has been completed. The completed Genisys Reservation System
and data base, operating through the Worldspan CRS, has been "beta" tested with
a major entertainment company and its travel agency in Atlanta and with a
limousine service provider in Los Angeles. Actual reservations were booked,
confirmed and limousine services were provided. At that time, Worldspan could
have been brought on-line but the management of the Company decided to wait
until the payment system and the Sabre system could be brought on-line at the
same time.
The Sabre "script" computer software interface has also been
completed and is now undergoing preliminary or "alpha" testing, which the
Company expects to be completed shortly. The Company began "beta" testing the
Sabre system in February 1997.
The hardware and software development of the Genisys Payment
System has been completed and is currently undergoing "alpha" testing in
conjunction with the Sabre system. The Genisys Payment System will be "beta"
tested along with and integrated into the Sabre system. Upon completion of the
testing of the Sabre reservation/payment system, the Worldspan system will be
given a second "beta" test with the payment system integrated within its system
as well. Upon completion of the Worldspan reservation/payment system "beta"
test, both the Sabre and Worldspan systems will be brought on-line. Management
reasonably expects this to occur in mid 1997.
The Apollo "script" computer software interface program is
currently being developed and should be ready for "alpha" testing in early 1997.
Management currently anticipates that the Genisys Reservation and Payment
Systems will be operating through the Sabre and Worldspan CRS by mid 1997; that
"beta" testing of the Apollo system can be completed by mid 1997 and that the
Apollo system can be brought on-line in late 1997.
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<PAGE>
Genisys Database and Genisys Terminal Development
The Genisys Reservation System database was designed using
relational database technology which supports MPP (Massively Parallel
Processing), a technology that allows for much greater transaction processing
throughput through the use of additional low cost processors. The system, as
currently implemented, keeps a second server synchronized with the first to
continue operations in case of a server failure. The Company has developed
custom software applications to interact with the airline CRS (Apollo, Sabre and
Worldspan), the remote Genisys terminal ("Genisys Terminal") which will be
located at all limousine service provider locations, and the Genisys Payment
System.
The Genisys Terminal is a WindowsTM 3.1, 3.11 and Windows 95TM
compliant application, which has been built using technology purchased from a
leader in remote client/server communications. This technology is already in use
on more than 750,000 remote clients. Delivery of reservations and payment
information as well as the retrieval of completed trip information and their
associated costs are handled by clustered communications servers capable of
supporting over 5,000 Genisys Terminals in their current configuration. The
Genisys Terminal provides an easy to-use desktop with security for use by the
limousine service provider. Communications sessions with the limousine service
provider will always be initiated by the remote communications servers and
therefore will be transparent to the service provider. Communication sessions
will be supported via dedicated dial-up phone lines through the public switched
network to ensure availability. The limousine service provider will be
responsible for purchasing or leasing the Genisys Terminal, which the Company
estimates to cost approximately $2,000. The Company's database and terminal
software will be provided in accordance with licensing agreements entered into
with the limousine service providers.
An Overview of the Genisys Payment System
Currently under development, the Genisys Payment System will
provide an important addition to the Company's product package by performing two
key functions:
1. The Genisys Payment System will process all booking fees
charged by the Company for use of the Genisys Reservation System. This automated
collection of booking fees will eliminate billing and reduce accounts receivable
for the Company.
2. The Genisys Payment System will process payments for all
ground transportation purchases made through the Genisys Reservation System.
This functionality will allow the Company to become the "master merchant" for
all limousine purchases made through its Genisys Reservation System. By becoming
the "master merchant", the Company expects to create additional interest
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<PAGE>
revenue and processing fee revenue on the total dollar volume processed through
the Genisys Reservation and Payment Systems.
Revenue Sources
The Company anticipates generating revenue from the following
sources:
1. Booking Fee
The Company will charge a booking fee for the use of
the Genisys Reservation System. Booking fees will be processed daily through the
Genisys Payment System and will either be charged to the Company's corporate
customer via a centrally billed credit card account or deducted from the amount
wired to the limousine service providers bank account in settlement of the
services provided.
2. Processing Fee
The Company will charge service providers a
processing fee for limousine service transactions processed through the Genisys
Payment System. This processing fee will take the place of the merchant fee
currently charged to service providers by the credit card companies with whom
they do business. By processing payments for all ground transportation services
paid through the system, the Company becomes the "master merchant". The Company
has secured discounted merchant fees rates from the credit card companies and
will set its processing fee at a rate that is comparable to what limousine
service providers are currently paying in merchant fees. The difference between
the Company`s cost and the processing fee rate it charges is referred to as
processing fee revenue.
Competition
Although, to the best of the knowledge of the management of
the Company, there are as yet no competitors, it must be assumed that if the
Company's efforts are successful, other companies will begin to offer competing
systems. These future competitors may be companies which have substantially
greater research, development, marketing and financial resources than the
Company. Moreover customers seeking limousine service will be able to reserve
such service through existing methods such as direct contact with service
providers which may compete with the Company.
Employees
The Company presently employs 5 full-time employees; 2
executive officers, 2 marketing executives, and 1 office administrator. None of
these employees is covered by a collective bargaining agreement. The Company
utilizes several software and
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<PAGE>
marketing consultants on a part-time basis and one full-time ground
transportation industry consultant. The Company believes its personnel relations
to be satisfactory.
Properties
The Company presently leases approximately 1,500 square feet
of office space at 2401 Morris Avenue, Union, NJ 07083. The five-year lease
expires in November, 2000 and provides for a monthly rental of $2,125.00. This
property has been leased from unaffiliated third parties and adequately
satisfies the present needs of the Company. The Company anticipates that it will
need approximately 3,500 square feet in additional space in early 1997.
A portion of the additional space (approximately 1,500 square
feet) will be used to house the computer hardware system which runs the
Company's Reservation and Payment Systems' software programs. The balance of the
space will be used for additional corporate and sales offices. The Company
requires no manufacturing facilities since it has no present plans to
manufacture any hardware items. All hardware related to the Company's software
product is purchased commercially.
Government Regulation and Licensing
There are no special regulations which impact upon the Company
other than the usual statutes and regulations which govern businesses in
general.
Litigation
On February 20, 1997, two individuals filed an action against
the Company and Travel Link in the Superior Court of New Jersey seeking, among
other things, damages in the amount of 8% of any financing secured by Travel
Link resulting from plaintiffs` efforts as well as 5% of the Company`s Common
Stock allegedly due for services rendered in connection with the Company's
acquisition of Travel Link in 1995. The claim for money damages is based upon a
written agreement between Travel Link and plaintiffs while the claim for the
shares of Common Stock is based upon alleged oral representations and promises
made by an officer of Travel Link. Management cannot currently quantify either
the dollar amount or the number of shares of Common Stock that the plaintiffs
are seeking as damages because the complaint does not indicate for which of the
Company`s financings plaintiffs believe they are entitled to a commission.
Management believes that the plaintiffs have not introduced any financings to
the Company and intends to vigorously defend the action.
In August 1996, the Company gave notice to one of its
former officers, Mr. Steven E. Pollan, that it was canceling
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<PAGE>
333,216 shares of Common Stock issued to him for services he was to
have provided at the inception of Corporate Travel Link, Inc. The
Company believes that Mr. Pollan never provided such services; Mr.
Pollan has informed the Company, however, that he will contest any attempt to
cancel his shares.
-------------------------------------------------------
MANAGEMENT
---------------------------------------------------------
Directors and Officers
The following table sets forth certain information with respect to
each of the Company's directors and executive officers.
NAME AGE POSITION
Joseph Cutrona 59 President and Director
John H. Wasko 58 Chief Financial Officer,
Secretary, Treasurer
and Director
Mark A. Kenny 44 Director
Warren D. Bagatelle 58 Chairman and Director
The Company's Executive Committee is empowered to exercise
the full authority of the Board of Directors in circumstances when
convening the full Board is not practicable. Messrs. Warren D.
Bagatelle, John H. Wasko, and Joseph Cutrona currently serve as
members. All officers of the Company other than Mr. Bagatelle
devote their full time to the Company's business.
Upon the consummation of this offering, the Board of Directors of the
Company will appoint two independent Directors who will comprise the
Compensation Committee and Audit Committee. The Company's Compensation Committee
will be responsible for establishing executive salaries, bonuses and other
compensation and administering any stock option and other employee benefit plans
of the Company. The Company's Audit Committee will recommend the annual
appointment of the Company's auditors, with whom the Audit Committee will review
the scope of audit and non-audit assignments and related fees, accounting
principles used by the Company in financial reporting, internal auditing
procedures and the adequacy of the Company's internal auditing and control
procedures.
Joseph Cutrona has served the Company as President and
as a Director since August 1995, and has served as President and as
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<PAGE>
a Director of Travel Link since its inception on March 11, 1994. From 1992 to
1995, Mr. Cutrona was engaged as a marketing consultant of Country Club
Transportation Services, Newark, New Jersey, a company providing limousine
services. From 1990 to 1992, he served as Marketing Director of Gem Limousine,
Edison, New Jersey, a provider of limousine services. From 1978 to 1990, Mr.
Cutrona provided limousine consulting services to large corporations in the
tri-state area. Mr. Cutrona graduated from Fairleigh Dickinson University, The
University of Maryland and Sophia University, Osaka Japan.
John H. Wasko has served the Company as a Director since
August 1995, as Secretary since September 1995, and as Treasurer and Chief
Financial Officer since April 1996. Mr. Wasko has also served the Company as
President and Chairman of the Board since its inception to August, 1995, and as
Treasurer from April 1986 to September 1987 and from May 1988 to August 1995.
Mr. Wasko has also served as Chairman of the Board, President and Director of
JEC since it was organized in September 1977. He was awarded a bachelor of
science degree in physics in 1963 and a master of science degree in physics
(summa cum laude) in 1965 from Fairleigh Dickinson University.
Mark A. Kenny, currently a consultant to the Company, served as
the Company's Executive Vice President from August 1995 to October 1996 and as a
Director since August 1995. He has also served as Executive Vice President of
Travel Link from inception, March 11, 1994 to October 1996 and as a Director
since inception. From 1974 to November, 1996 he was a partner of Country Club
Transportation Services, a provider of limousine services, which he co-founded
in 1974. Mr. Kenny is one of the original members of the New Jersey Business
Travel Association and attended Seton Hall Preparatory School and Seton Hall
University. He is also a member of the Association of Corporate Travel
Executives and a charter member of the New Jersey Limousine Association.
Warren D. Bagatelle has been a director of the Company since
August, 1995 and Chairman of the Board of Directors of the Company since
December, 1996. Since 1988 he has been a Managing Director at Loeb Partners
Corporation, a New York City investment banking firm and member of the New York
and American Stock Exchanges. Mr. Bagatelle is also a director of Energy
Research Corporation, a company engaged in the development and commercialization
of electrical storage and power generation equipment, principally fuel cells and
rechargeable storage batteries. From 1981 to 1987, he was head of Corporate
Finance and Chairman of Josephthal, Lyon & Ross Incorporated (formerly
Rosenkrantz, Lyon & Ross, Inc.) an investment banking firm. Mr. Bagatelle has a
B.A. in economics from Union College and an M.B.A.
from Rutgers University.
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<PAGE>
Executive Compensation
The following tabulation shows the total compensation paid by the Company
for services in all capacities during the years ended December 31, 1996 and 1995
and August 31, 1995 to the Officers of the Company and total compensation for
all Officers as a group for such period:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Long-Term Compensation
Awards Payouts
Name and Other Annual Restricted All other
Principal Annual Compensation Compensation Stock Options LTIP Compen-
Position(1) Year Salary($) Bonus ($) Awards($) SARs Payouts(#) sation($)
Joseph Cutrona 1996 $73,500.00 $0 $5,000 0 0 0
President
1995 $45,000.00 $0 $3,840 0 0 0
1995 $28,000.00 $0 $3,840 0 0 0
Mark A. Kenny 1996 $42,000.00 $0 $16,250 0 0 0
1995 $44,795.00 $0 $3,840 0 0 0
1995 $28,000.00 $0 $3,840 0 0 0
John H. Wasko 1996 $10,000.00 $0 $48,000 0 0 0
Chief Financial
Officer
Secretary 1995 $0 $0 $2,500 0 0 0
Treasurer
1995 $0 $0 $2,500 0 0 0
</TABLE>
- -------
(1) See below "-Employment/Consulting Agreements," for a description of the
Company's employment agreements with Mr. Cutrona and Mr. Wasko.
Employment/Consulting Agreements.
The Company entered into an Employment Agreement with Joseph Cutrona
on September 5, 1995 which agreement was revised on October 17, 1996 for an
indefinite period of time, providing an annual salary of $75,000 for the period
from October 17, 1996 through December 31, 1996, and $100,000 thereafter until
modified by the Company. Mr. Cutrona is entitled to incentive bonuses in cash
and stock. Any incentive bonus paid to Mr. Cutrona shall be within the sole
discretion of the board of directors of the Company. The Company intends to
obtain key-man life insurance on the life of Mr.
Cutrona in the amount of $1,000,000.
The Company entered into an Employment Agreement on October 17, 1996
with John H. Wasko for an indefinite period of time, providing an annual salary
of $50,000 for the period from October
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<PAGE>
17, 1996 through December 31, 1996, and $80,000 thereafter until modified by the
Company. Mr. Wasko is entitled to incentive bonuses in cash and stock in each
year that the Company has net profits in amounts to be determined by the
Company. Any incentive bonus paid to Mr. Wasko shall be within the sole
discretion of the board of directors of the Company.
The Company entered into a Consulting Agreement on October 18, 1996
with Mark A. Kenny for an indefinite period of time, providing a monthly fee of
$6,500.00 during the period from October 18, 1996 through and including February
28, 1997, and a monthly fee of $8,400.00 thereafter, in each case payable in
arrears on the last day of each month during the term of the Consulting
Agreement. Mr. Kenny is entitled to incentive bonuses in cash and stock. Any
incentive bonuses paid to Mr. Kenny shall be within the sole discretion of the
board of directors of the Company.
All officers other than Mr. Warren D. Bagatelle are full time
employees of the Company.
CERTAIN TRANSACTIONS
In August 1994 Joseph Cutrona and Mark A. Kenny each received a total
of 666,433 shares of the Company's common stock for services to be provided to
the Company.
During February 1995, the Company issued 45,765 shares of its Common
Stock in repayment of certain liabilities totaling $251,702. Those liabilities
include notes payable to Saddle Brook Investors of $149,633, note payable plus
accrued interest to an officer and Director of $34,273 and certain accounts
payable of $67,796.
In February 1995, Loeb Holding Corporation, as escrow agent ("Loeb"),
for Warren D. Bagatelle, HSB Capital, trusts for the benefit of families of two
principals of Loeb Holding Corporation and three unaffiliated individuals,
agreed to loan the Company $500,000 evidenced by a series of Convertible
Promissory Notes. In September, 1995, Loeb converted the Convertible Promissory
Notes into 841,455 common shares of the Company and two Term Promissory Notes,
one in the principal amount of $475,000 and the other in the principal amount of
$25,000.
The principal amount of the $475,000 Term Promissory Note is to be
repaid in twelve equal quarterly payments commencing two (2) years from the date
of said note. Prepayments may be made at any time without penalty. Interest is
accrued at a rate of 9% per annum and interest payments are to made quarterly at
the end of each calendar quarter, or at such earlier date that the Term
Promissory Note becomes due and payable as a result of acceleration, prepayment
or as otherwise provided therein. Interest began to run from the date that the
monies were advanced to the Company.
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<PAGE>
The Term Promissory Note in the amount of $25,000 and an additional
Note in the amount of $12,500 issued in December 1995 and discussed below have
been modified. Such Notes provide for accrued interest at the rate of 9% per
annum payable quarterly commencing September 1997 and unless previously
converted the principal amount of each note is to be repaid in twelve equal
quarterly installments, commencing April 1, 1998, or on such earlier date as
such notes provide. The notes are convertible at the sole option of the holder
into an aggregate of 400,000 common shares of the Company.
During March 1995, John H. Wasko, then President of the Company, upon
exercise of his own option, acquired 70,520 shares of the Common Stock of the
Company at an exercise price of $0.02145 per share.
On March 3, 1995, the Company and JEC signed a purchase agreement
whereby JEC acquired all of the assets, rights and properties relating to the
Company's CO2 laser research and development agreement with LCL, subject to
certain liabilities, in full consideration for the forgiveness of the
indebtedness of the Company to JEC in the amount of $345,593 owed as of February
28, 1995.
On August 11, 1995, Robotic Lasers acquired Travel Link by issuing
1,682,924 shares of restricted new Common Stock of the Company in exchange for
the shares of the common stock of Travel Link owned by Joseph Cutrona, Mark A.
Kenny and Steven E. Pollan, which represented all the issued and outstanding
shares of common stock of Travel Link.
In August 1995 the Company granted Mr. Wasko a five (5) year option
to purchase 25,000 shares of Common Stock at a price of $0.60 per share and in
November, 1996 granted Mr. Wasko a five (5) year option to purchase 35,000
shares of Common Stock at a price of $2.00 per share.
On September 5, 1995 the Company entered into a three year consulting
and investment banking agreement with Loeb Partners Corporation. Under the terms
of the agreement the Company pays Loeb Partners Corporation $3,000 per month.
Loeb Partners Corporation will also receive a fee for arranging private
financing and acquisitions. Mr. Warren D. Bagatelle, a Director and Chairman of
the Company, is a Managing Director of Loeb Partners Corporation.
During December 1995, Loeb agreed to loan the Company $250,000
evidenced by a series of Convertible Promissory Notes ("Convertible Promissory
Notes"). In November 1996, Loeb converted the Convertible Promissory Notes into
(i) two Term Promissory Notes, one in the principal amount of $237,500 and the
other in the principal amount of $12,500 issued in December 1995 and discussed
below and (ii) 420,728 shares of Common Stock of the Company, of which 420,000
shares of Common Stock are owned by four unaffiliated parties. Loeb Holding
Corporation did not receive any shares of Common Stock in this transaction.
The principal amount of the $237,500 Term Promissory Note is to be
repaid in twelve equal quarterly payments commencing two (2)
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<PAGE>
years from the date thereof. Prepayments may be made at any time without
penalty. Interest is accrued at a rate of 9% per annum and interest payments are
to be made quarterly at the end of each calendar quarter, or at such earlier
date that the Term Promissory Note becomes due and payable as a result of
acceleration, prepayment or as otherwise provided therein. Interest began to run
from the date that the monies were advanced to the Company.
In August 1996, the Company gave notice to Mr. Pollan that it was
canceling the 333,216 shares of Common Stock which had been issued to him for
services to be provided to the Company. The reason for such cancellation related
to various claims made by the Company against Mr. Pollan that he failed to
provide services to the Company. Mr. Pollan has informed the Company that he
intends to legally contest any attempt by the Company to cancel his shares.
During the quarters ended September 30, 1996 and December 31, 1996,
in order to raise additional working capital for the Company, Joseph Cutrona,
President of the Company, sold a total of 37,600 shares of restricted Common
Stock of the Company owned by him to nineteen unaffiliated third parties at
prices ranging from $2.00 to $2.50 per share for total proceeds of $76,500 which
Mr. Cutrona remitted to the Company in the form of a capital contribution. In
February 1997 Mr. Cutrona sold an additional 7,850 shares of restricted Common
Stock to 5 unaffiliated third parties at a price of $2.00 per share for total
proceeds of $15,700, which Mr. Cutrona remitted to the Company in the form of an
additional capital contribution. Mr. Mark A. Kenny has agreed to use 22,450 of
his own shares of restricted Common Stock to reimburse Mr. Cutrona for one-half
of the number of shares recently sold by Mr. Cutrona.
On October 10, 1996, the Company, Joseph Cutrona, President of the
Company, Mark A. Kenny and Prosoft, Inc. signed an agreement whereby Mr. Cutrona
and Mr. Kenny each agreed to transfer 14,533 shares of restricted Common Stock
owned by them to Prosoft, Inc., or its designees, upon completion of the design
and satisfactory development of the Genisys Payment System. Prosoft agreed to
accept the 29,066 shares at a negotitated price of $3.75 per share in
satisfaction of $108,997.50 which would be owed to Prosoft, Inc. by the Company
upon completion of the Genisys Payment System. The Company has agreed to issue
an equal number of new shares of restricted Common Stock to Messrs. Cutrona and
Kenny in six equal installments if the Company meets certain performance
criteria on six specified dates.
In October and November 1996, and February 1997 Joseph Cutrona, in
recognition of extensive valuable services rendered to the Company by three
employees of the Company, made gifts aggregating 35,000 shares of restricted
Common Stock owned by him to the three employees, including a gift of 20,000
shares of restricted Common Stock to John H. Wasko.
During November and December 1996, the Company and Loeb Holding
Corporation signed four eighteen (18) month Promissory Notes whereby Loeb
Holding Corporation loaned the Company the sums of $75,000, $30,000, $10,000 and
$95,000 (totaling $210,00). The Promissory Notes which bear interest at 10%,
mature on May 11, 1998, May 25, 1998, June 2, 1998 and June 9, 1998.
55
<PAGE>
The Company believes that each of these transactions was entered into
on terms at least as favorable to the Company as could have been obtained from
unaffiliated third parties.
The transactions described above involve actual or potential
conflicts of interest between the Company and its officers or directors. In
order to reduce the potential for conflicts of interest between the Company and
its officers and directors, prior to entering into any transaction in which a
potential material conflict of interest might exist, the Company's policy has
been and will continue to be, that the Company does not enter into transactions
with officers, directors or other affiliates unless the terms of the transaction
are at least as favorable to the Company as those which would have been
obtainable from an unaffiliated source. As of the date of this Prospectus, the
Company has no plans to enter into any additional transactions which involve
actual or potential conflicts of interest between the Company and its officers
or directors. Should the Company enter into any such transaction in the future,
it will not do so without first obtaining at least one fairness opinion from,
depending on the nature of the transaction, either its own independent directors
or from an independent investment banking firm.
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<PAGE>
- ----------------------------------------------------------------
PRINCIPAL STOCKHOLDERS
The following tabulation shows the security ownership as of December 31, 1996 of
(I) each person known to the Company to be the beneficial owner of more than 5%
of the Company's outstanding Common Stock,(not including 333,216 shares issued
to Steven Pollan which the Company has given notice of cancellation of as a
result of certain disputes between Mr. Pollan and the Company) (ii) each
Director and Officer of the Company, and (iii) all Directors and Officers as a
group.
NUMBER OF PERCENT PERCENT
NAME & ADDRESS SHARES OWNED OF CLASS AFTER OFFERING
Loeb Holding Corporation
As Escrow Agent (1)
61 Broadway
New York, NY 10006 1,242,183 37.86% 28.68%
Warren D. Bagatelle(2)
Loeb Partners Corp.
61 Broadway
New York, NY 100061 1,271,155 38.75% 29.35%
Joseph Cutrona(5)
Genysis Reservation Systems
2401 Morris Avenue
Union, NJ 07083 611,133 18.63% 14.11%
Mark A. Kenny(5)
10 Lisa Drive
Chatham, NJ 07928 646,133 19.70% 14.92%
John H. Wasko(3)(4)
Genysis Reservation Systems
2401 Morris Avenue
Union, NJ 07083 176,206 5.37% 4.07%
All Officers and Directors
as a group (4 persons) 2,704,627 82.44% 62.45%
(1) Includes 842,183 shares of Common Stock purchased by Loeb Holding
Corporation as escrow agent for Warren D. Bagatelle, Managing Director of Loeb
Partners Corp., HSB Capital of which Warren Bagatelle is a partner, and trusts
for the benefit of families of two principals of Loeb Holding Corporation and
three unaffiliated persons and 400,000 shares of Common Stock issuable
57
<PAGE>
upon conversion of two Convertible Notes aggregating $37,500. Loeb Holding
Corporation disclaims any beneficial interest in these shares.
(2) Includes 842,183 shares of Common Stock purchased by Loeb Holding
Corporation as escrow agent for Warren D. Bagatelle, Managing Director of Loeb
Partners Corp., HSB Capital of which Warren D. Bagatelle is a partner, and
trusts for the benefit of families of two principals of Loeb Holding Corporation
and three unaffiliated individuals; 6,739 shares of Common Stock owned directly
by Warren D. Bagatelle; 2,233 of shares Common Stock owned directly by HSB
Capital; 20,000 shares of Common Stock pledged by Joseph Cutrona to Warren D.
Bagatelle as security and 400,000 shares of Common Stock issuable upon
conversion of two Convertible Notes aggregating $37,500.
(3) Includes 29,383 shares of Common Stock owned of record
by Joan E. Wasko, John Wasko's wife, of which Mr. Wasko disclaims
beneficial ownership, but of which he may be deemed beneficial
owner.
(4) Includes a five (5) year option to purchase 25,000 shares of
Common Stock at a price of $0.60 per share granted to Mr. Wasko by the Company
on August 11, 1995, a five (5) year option to purchase 35,000 shares of the
Company's Common Stock at a price of $2.00 per share granted to Mr. Wasko by the
Company on November 1, 1996 and 5,333 shares of Common Stock issuable upon
conversion of two Convertible Notes aggregating $37,500.
(5) Does not give effect to 14,533 shares of Common Stock to
be transferred to ProSoft, Inc. upon successful completion of the
Genisys Payment System.
Messrs. Cutrona and Kenny may be deemed to be "parents" and
"promoters" of the Company, as those terms are defined in the rules
and regulations of the Securities Act of 1933, as amended. In
August 1994 Messrs. Cutrona and Kenny each received their Common
Stock in the Company for services to be provided to the Company.
For accounting purposes the value of these shares was recorded at
$7,840 for each individual. Mr. Pollan received his Common Stock
in August 1994 for services to be provided. See "Certain
Transactions".
SELLING STOCKHOLDERS
In addition to the Securities, the Registration Statement, of which
this Prospectus forms a part, also covers the registration of an aggregate of
287,500 Class A Redeemable Warrants and 287,500 shares of Common Stock issuable
upon the exercise of the Class A Redeemable Warrants, which were issued by the
Company in a private
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placement. The terms and conditions of the Common Stock Purchase Warrants issued
by the Company in the private placement are identical to the terms and
conditions of the Class A Redeemable Warrants being offered pursuant to this
Prospectus. The costs of qualifying these 287,500 Class A Redeemable Warrants
and 287,500 shares of Common Stock under federal and state securities laws,
together with legal and accounting fees, printing and other costs in connection
with this offering, will be paid by the Company.
Pursuant to an agreement with the Underwriter, the Class A Redeemable
Warrants and the 287,500 shares of Common Stock registered in the Registration
Statement, of which this Prospectus forms a part, may not be sold for eighteen
(18) months from the date of this Prospectus, subject, however, to earlier
release at the sole discretion of the Underwriter. Such shares are being
registered for resale purposes only and will be offered pursuant to an alternate
prospectus. The certificates representing the 287,500 Class A Redeemable
Warrants and 287,500 shares of Common Stock issuable on exercise of the Class A
Redeemable Warrants will have legends affixed setting forth such restrictions.
The Underwriter may release these securities from this eighteen (18) month
restriction at any time after the Securities offered hereby have been sold. See
"Underwriting."
The resale of securities by the Selling Stockholders are subject to
prospectus delivery and other requirements of the Securities Act. Sales of these
securities, or even the potential for such sales at any time, would likely have
an adverse effect on the market prices of the Common Stock and the Redeemable
Warrants.
The Company will not receive any proceeds from the sale of the
securities by the Selling Stockholders. If all of the Class A Redeemable
Warrants issued in the private placement are exercised, of which there is no
assurance, the Company will receive gross proceeds therefrom aggregating up to
an additional $1,653,125.
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Set forth below is a list of the Selling Stockholders and the number
of Class A Redeemable Warrants and shares of Common Stock issuable upon their
exercise which are being registered pursuant to the Registration Statement, of
which this Prospectus forms a part:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
No. of Shares No. of Shares Percentage
Owned Before issuable upon Owned After
Name (1) Offering exercise of Offering(3)
- -------- -------- ----------- ------------
Class A Redeemable No. Of
------------------ ------
Warrants (2) Warrants
Steven C. Wright 0 12,500 12,500 0
Keith C. Kammer 0 12,500 12,500 0
Paul W. Leblanc 0 12,500 12,500 0
Mildred J. Geiss 0 12,500 12,500 0
Terry Nash 0 12,500 12,500 0
Joel B. Pipe 0 25,000 25,000 0
Theodore E. Hanson 0 25,000 25,000 0
Dennis Lafer 0 25,000 25,000 0
Vincent A. Ferranti 0 25,000 25,000 0
Jason J. Leinwand 0 12,500 12,500 0
James R. Welch 0 12,500 12,500 0
Daniel Churchill 0 25,000 25,000 0
Glen Cadrez, Jr. 0 12,500 12,500 0
John Albanese Numismatics 0 12,500 12,500 0
Giuseppe Pappalardo 0 25,000 25,000 0
Joseph Perri 0 25,000 25,000 0
- --------------------------
</TABLE>
(1) The persons named in the above table have sole voting and investment power
with respect to all of the Common Stock shown as beneficially owned by them,
except as otherwise indicated.
(2) Pursuant to an agreement with the Underwriter, the Class A Redeemable
Warrants and underlying shares may not be sold for eighteen (18) months from the
date of this prospectus, subject, however, to earlier release at the sole
discretion of the Underwriter.
(3) Assumes all Class A Redeemable Warrants and underlying
shares held by the Selling Stockholders are sold.
After making the investment in the private placement, the investors
did not own, nor did any of them have any right to acquire, any other securities
of the Company. None of the investors were affiliated with the Company at the
time of making their investment, at the time of this offering, or at any other
time.
Plan of Distribution
Subject to the eighteen (18) month restriction on the offer and sale
of the 287,500 Class A Redeemable Warrants and the 287,500 shares of Common
Stock issuable on their exercise the securities
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<PAGE>
offered hereby may be sold from time to time directly by the Selling
Stockholders. Alternatively, the Selling Stockholders may, from time to time,
offer such securities through underwriters, dealers and/or agents. The
distribution of securities by the Selling Stockholders may be effected in one or
more transactions, privately-negotiated transactions or through sales to one or
more broker-dealers for resale of such securities as principals, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling Stockholders
in connection with such sales. The Selling Stockholders, and intermediaries
through whom such securities are sold, may be deemed "underwriters" within the
meaning of the Securities Act with respect to the securities offered, and any
profits realized or commissions received may be deemed underwriting
compensation.
At the time a particular offer of securities is made by or on behalf
of the Selling Stockholders to the extent required, a prospectus will be
distributed which will set forth the number of securities being offered and the
terms of the offering, including the name or names of any underwriter, dealer or
agent, the purchase price paid by the underwriter for securities purchased from
the Selling Stockholders and any discounts, commissions or concessions allowed
or reallowed or paid to dealers and the proposed selling price to the public.
Under the Exchange Act and the regulations promulgated thereunder,
any person engaged in the distribution of the securities of the Company offered
by this Prospectus may not simultaneously engage in market-making activities
with respect to such securities of the Company during the applicable "cooling
off" period (which is nine (9) days) prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act, and
the rules and regulations promulgated thereunder, including without limitation,
Rules 10b-6 and 10b-7 in connection with transactions in such securities, which
provisions may limit the timing of purchases and sales of such securities by the
Selling Stockholders.
Sales of securities by the Selling Stockholders or even the potential
of such sales, would likely have an adverse effect on the market prices of the
securities offered hereby. Following the closing of this offering, the freely
tradeable securities of the Company ("public float"), including this offering,
will be 1,159,101 shares of Common Stock, 1,500,000 Class A Redeemable Warrants
and 900,000 Class B Redeemable Warrants. This does not including an aggregate of
287,500 Class A Redeemable Warrants and the 287,500 shares of Common Stock
issuable upon exercise of the Class A Redeemable Warrants owned by the Selling
Stockholders,
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<PAGE>
which are not transferable for eighteen (18) months commencing on the date of
this Prospectus or at such earlier date as may be permitted by the Underwriter,
which may release such securities at any time after all securities subject to
this offering have been sold and assuming no exercise of the Underwriter's
Purchase Option. See "Descriptions of Securities" and "Underwriting".
DESCRIPTION OF SECURITIES
Common Stock
The Company is currently authorized to issue 75,000,000 shares of
Common Stock, having a par value of $.0001 per share of which 3,280,594
(including 333,216 shares issued to Mr. Pollan) are outstanding prior to the
offering contemplated hereby. Each share of Common Stock entitles the holder
thereof to one vote on each matter submitted to the stockholders of the Company
for a vote thereon. The holders of Common Stock: (I) have equal ratable rights
to dividends from funds legally available therefor when, as and if declared by
the Board of Directors; (ii) are entitled to share ratably in all of the assets
of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) as noted above, are entitled to one
non-cumulative vote per share on all matters submitted to stockholders for a
vote at any meeting of stockholders. The Company has not paid any dividends on
its Common Stock to date. The Company anticipates that, for the foreseeable
future, it will retain earnings, if any, to finance the continuing operations of
its business. The payment of dividends will depend upon, among other things,
capital requirements and operating and financial conditions of the Company.
Redeemable Common Stock Purchase Warrants
The Company is offering 2,400,000 Redeemable Warrants, 1,500,000 of
which will be "Class A Redeemable Warrants" and 900,000 of which will be "Class
B Redeemable Warrants," at an anticipated public offering price of $.20 per
Class A Redeemable Warrant and $.10 per Class B Redeemable Warrant. Each
Redeemable Warrant shall be exercisable for a period of 48 months, commencing
six (6) months from the date hereof.
Class A Redeemable Warrants
Each Class A Redeemable Warrant shall entitle the holder to acquire
one share of Common Stock at a price equal to $5.75 per share. Commencing twelve
months after the Effective Date, the Company will have the right at any time to
redeem all, but not less
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<PAGE>
than all, of the Class A Redeemable Warrants at a price equal to twenty cents
($.20) per Redeemable Warrant, provided that the closing bid price of the Common
Stock equals or exceeds $6.25 per share for any twenty (20) trading days within
a period of thirty (30) consecutive trading days ending on the fifth trading day
prior to the date of the notice of redemption.
Class B Redeemable Warrants
Each Class B Redeemable Warrant shall entitle the holder to acquire
one share of the Common Stock at a price equal to $6.75 per share. Commencing
twelve months after the Effective Date, the Company will have the right at any
time to redeem all, but not less than all, of the Class B Redeemable Warrants at
a price equal to ten cents ($.10) per Redeemable Warrant, provided that the
closing bid price of the Common Stock equals or exceeds $7.25 per share for any
twenty (20) trading days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the date of the notice of redemption.
Preferred Stock
The Certificate of Incorporation of the Company authorizes the
issuance of up to 25,000,000 shares of Preferred Stock, $.0001 par value per
share. None of such Preferred Stock has been designated or issued. The Board of
Directors is authorized to issue shares of Preferred Stock from time to time in
one or more Class and, subject to the limitations contained in the Certificate
of Incorporation and any limitations prescribed by law, to establish and
designate any such Class and to fix the number of shares and the relative
conversion rights, voting rights and terms of redemption (including sinking fund
provisions) and liquidation preferences. If shares of Preferred Stock with
voting rights are issued, such issuance could affect the voting rights of the
holders of the Common Stock by increasing the number of outstanding shares
having voting rights, and by the creation of class or series voting rights. If
the Board of Directors authorizes the issuance of shares of Preferred Stock with
conversion rights, the number of shares of Common Stock outstanding could
potentially be increased by up to the authorized amount. Issuance of shares of
Preferred Stock could, under certain circumstances, have the effect of delaying
or preventing a change in control of the Company and may adversely affect the
rights of holders of Common Stock. Also, the Preferred Stock could have
preferences over the Common Stock (and other series of preferred stock) with
respect to dividends and liquidation rights.
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<PAGE>
Private Placement
The terms and conditions of the Common Stock Purchase Warrants issued
by the Company in the private placement are identical to the terms and
conditions of the Class A Redeemable Warrants. All of the securities issued in
the private placement are being registered in the Registration Statement, of
which this Prospectus forms a part. Pursuant to an agreement with the
Underwriter, such warrants and shares of Common Stock may not be sold until
eighteen (18) months from the date of this Prospectus, subject, however, to
earlier release at the sole discretion of the Underwriter. The certificates
representing the 287,500 Class A Warrants and the 287,500 shares of Common Stock
issuable on exercise of the Class A Redeemable Warrants will have legends
affixed setting forth such restrictions. The Underwriter may release these
securities from this eighteen (18) month restriction at any time after all of
the Securities offered hereby have been sold. See "Underwriting."
Transfer and Warrant Agent
Continental Stock Transfer & Trust Company is the Registrar
and Transfer Agent for the Common Stock and the Registrar and
Warrant Agent for the Redeemable Warrants.
MARKET INFORMATION
The Common Stock and Class A Redeemable Warrants and Class B
Redeemable Warrants are expected to be listed for quotation on NASDAQ under the
symbols: "GENS," "GENSW" and "GENX" respectively. In order to maintain such
listings, the Company must have under the current rules of the National
Association of Securities Dealers, Inc. ("NASD"),among other things, $2,000,000
in total assets, $1,000,000 in total capital and surplus, $1,000,000 in market
value of public float and a minimum bid price of $1.00 per share. Should the
Company be unable to satisfy the requirements for continued quotation, trading,
if any, in the Securities would be conducted in the over-the-counter market in
what are commonly referred to as the "pink sheets" of the National Quotation
Bureau, Inc. or on the NASD OTC Electronic Bulletin Board. If this were to
occur, an investor may find it more difficult to dispose of or to obtain
accurate quotations as to the price of such securities.
On November 6, 1996, NASDAQ approved changes to its listing
requirements which will be submitted to the Securities and Exchange Commission
("Commission") for final approval. If the current proposal is approved without
modification, continued listing on NASDAQ would require that the Company meet
certain more stringent qualifications with respect to either market value or net
income as well as criteria regarding the number of shares of Common Stock in the
public float and the bid price per share of Common Stock. The
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<PAGE>
Company must also have a minimum of two independent directors and meet other
corporate governance criteria. The Company intends to nominate two independent
directors and believes that it will be able to meet the remaining criteria for
continued listing.
UNDERWRITING
General
Subject to the terms and conditions set forth in the Underwriting
Agreement by and between the Company and the Underwriter ("Underwriting
Agreement"), the Underwriter has agreed to purchase on a "firm commitment"
basis, an aggregate of 900,000 shares of Common Stock and 2,400,000 Redeemable
Warrants (exclusive of the 135,000 shares of Common Stock and 360,000 Redeemable
Warrants subject to the Over-Allotment Option).
The Underwriter has advised the Company that it proposes to offer the
Common Stock and Redeemable Warrants to the public at the public offering price
set forth on the cover page of this Prospectus. The Securities are offered by
the Underwriter subject to: (I) approval of certain legal matters by counsel to
the Underwriter; and (ii) certain other conditions typical of such agreements
specified in the Underwriting Agreement.
The Company has agreed to sell the Securities to the Underwriter at a
discount of 10% of the public offering price thereof. The Company has also
agreed to pay the Underwriter the Non-Accountable Expense Allowance (as
previously defined) equal to 3% of the aggregate offering price of the
Securities ($50,000 of which was advanced to the Underwriter). Pursuant to the
provisions of the Underwriting Agreement, in the event that the Company's public
offering is terminated for any reason, the Underwriter shall be reimbursed for
all its accountable expenses. Any amounts previously paid shall be credited
against any amounts due.
The Underwriter has informed the Company that it does not intend to
confirm sales to any accounts over which it exercises discretionary authority.
Prior to the Company's public offering, there has been no public
trading market for the Securities. The offering price of the Common Stock and
the offering and exercise prices of the Redeemable Warrants were determined by
negotiation between the Company and the Underwriter. The factors considered by
the Company and the Underwriter in determining the public offering price of the
Common Stock and the offering and exercise prices of the Redeemable Warrants, in
addition to prevailing market conditions, were
65
<PAGE>
management's assessment of the Company's business potential and earning
prospects and the prospects for growth in the industry in which the Company
operates. The public offering price may not bear any relationship to the
Company's assets, book value, net worth or other criteria of value applicable to
the Company.
The Underwriter has required that all officers and directors and
holders of 5% or more of the issued and outstanding shares of Common Stock and
securities exercisable, convertible or exchangeable for shares of Common Stock,
other than Mr. Pollan and 200,000 of the shares held by Loeb, agree to a lock-up
of their securities for a period of not less than eighteen (18) months in order
for the Underwriter to engage in the Offering as well as in order to maintain a
more orderly trading market. Such shares will have a legend placed on the
certificates to express the lock-up.
The Underwriting Agreement prohibits the Company from issuing any
capital stock or other securities without the Underwriter`s prior consent for a
period of eighteen (18) months following the Effective Date of the Registration
Statement. The Underwriter has no present intention of waiving such restriction.
This provision may limit the Company's ability to raise additional equity
capital.
The Over-Allotment Option
The Company has granted to the Underwriter the Over-Allotment Option
which is exercisable for a period of forty-five(45) days from the date hereof to
purchase up to an additional 135,000 shares of Common Stock and 360,000
Redeemable Warrants (equal to an aggregate of up to 15% of the number of shares
of Common Stock and Redeemable Warrants offered by the Company to the public)
for the purpose of covering over-allotments. The Over-Allotment Option is
exercisable upon the same terms and conditions as are applicable to the sale of
the Securities. The Underwriter has agreed to immediately exercise the
Over-Allotment Option in full.
The Underwriter's Purchase Option
As part of the consideration to the Underwriter for its services in
connection with the public offering described herein, the Company has agreed to
issue and sell to the Underwriter, at the closing, for nominal consideration,
five (5) year warrants to purchase such number of shares of Common Stock and
Redeemable Warrants as shall equal 10% of the number of shares of Common Stock
and Redeemable Warrants (excluding the Over-Allotment Option) being underwritten
for the account of the Company at a price of $.0001 per warrant ("Warrants").
The Warrants shall be exercisable at any time during a period of four(4) years
commencing at the beginning of the second year after their issuance and sale at
a price equaling 120% of the public offering price of the shares of Common
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<PAGE>
Stock and Redeemable Warrants.
During the period in which the Underwriter's Purchase Option is
exercisable, the holders thereof are given the opportunity to profit from a rise
in the market price of the Securities which may result in a dilution of the
interest of the stockholders. The Company may find it more difficult to raise
additional equity capital if it should be needed for the business of the Company
while the Underwriter's Purchase Option is outstanding. At any time when the
holders thereof might be expected to exercise such Warrants, the Company would
probably be able to obtain additional equity capital on terms more favorable
than those provided by the Underwriter's Purchase Option. Any profit realized on
the sale of securities issuable upon the exercise of the Underwriter's Purchase
Option may be deemed additional underwriter compensation.
Registration Rights
In connection with the underwriting of the Company's public offering,
the Company has granted to the Underwriter certain "piggy back" and "demand"
registration rights. Pursuant to the terms of the Underwriting Agreement, the
Company agrees that, for a period of seven (7) years from the effective date of
the public offering of the shares of Common Stock and Redeemable Warrants, if
the Company intends to file a Registration Statement or Statements for the
public sale of securities for cash (other than a Form S-8, Form S-4 or
comparable Registration Statement), it will notify all of the holders of the
Warrants and/or underlying securities and if so requested it will include
therein material to permit a public offering of the securities underlying the
Warrants at the expense of the Company (excluding fees and expenses of the
holder's counsel and any underwriting or selling commissions). In addition, for
a period of five (5) years from such effective date, upon the written demand of
holder(s) representing a majority of the Warrants, the Company agrees, on one
occasion, to promptly register the underlying Securities at the expense of the
Company (excluding fees and expenses of the holder's counsel and any
underwriting or selling commissions).
Finder's Fees
The Company believes that no finder has been associated with the
Company's public offering as described herein and that the Company does not have
any obligation to pay a finder's fee to anyone in connection with this Offering
or any of its other pending transactions. A action has been commenced against
the Company seeking such a fee, however. See "Business-Litigation."
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<PAGE>
Warrant Solicitation Fee
Pursuant to the Underwriting Agreement, the Company has agreed that
the Underwriter shall act as the Company's exclusive agent with respect to the
solicitation of the Redeemable Warrants, and receive from the Company a
commission equal to 4% of the exercise price of the Redeemable Warrants
("Warrant Solicitation Fee") commencing twelve (12) months after the effective
date of the Registration Statement, payable upon exercise, if; (I) the market
price of the Common Stock on the date that any such Redeemable Warrant is
exercised is greater than the exercise price of the Redeemable Warrant; (ii) the
exercise of such Redeemable Warrant was solicited by a member of the National
Association of Securities Dealers, Inc.; (iii) the Redeemable Warrant is not
held in a discretionary account; (iv) disclosure of this compensation
arrangement is made both at the time of the public offering and at the time of
the exercise of such Redeemable Warrant; and (v) solicitation of the exercise is
not in violation of Rule 10b-6 of the Exchange Act. No commission will be paid
to the Underwriter on Redeemable Warrants voluntarily exercised within one (1)
year of the Effective Date or on Redeemable Warrants voluntarily exercised at
any time without solicitation by the Underwriter.
In addition, unless granted an exemption by the Commission from Rule
10b-6 under the Exchange Act, the Underwriter will be prohibited from engaging
in any market making activities or solicited brokerage activities with respect
to the Company's securities for the period from nine business days prior to any
solicitation of the exercise of any Redeemable Warrant or nine (9) business days
prior to the exercise of any Redeemable Warrant based on a prior solicitation
until the later of the termination of such solicitation activity or the
termination (by waiver or otherwise) of any right the Underwriter may have to
receive such a fee for the exercise of the Redeemable Warrants following such
solicitation. As a result, the Underwriter may be unable to continue to provide
a market for the Company's securities during certain periods while the
Redeemable Warrants are exercisable.
Other Terms of the Underwriting
The Company has agreed not to issue, sell, offer to sell, grant any
option relating to the sale of or otherwise dispose of (directly or indirectly)
any of the Company's equity securities (including securities convertible into,
exercisable for or exchangeable into equity securities) without the
Underwriter's prior written consent, except for issuances pursuant to: (I) the
exercise of the Underwriter's Purchase Option; (ii) the Company's public
offering of securities as described herein; (iii) a declaration of dividends,
recapitalization, reorganization or similar transaction; or (iv) a currently
existing stock incentive or option plan, for eighteen (18) months from the
Effective Date.
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<PAGE>
In addition, each officer, director and stockholder who owns 5% or more of the
Company's equity securities, other than Mr. Pollan and other than 200,000 of the
shares held by Loeb has agreed not to sell, transfer, convey, pledge,
hypothecate or otherwise dispose of any of the respective securities of the
Company owned by them for a period of eighteen (18) months from the Effective
Date without the Underwriter's prior approval.
In connection with and as consideration for the Underwriter's
participation in the Company's public offering, the Company has given the
Underwriter the right, upon completion of such public offering, to designate a
person to attend all meetings of the Company's Board of Directors for a period
of five (5) years. Such person need not be a director but shall be entitled to
attend all such meetings and to receive all notices and other correspondence and
communications sent by the Company to members of its Board of Directors. As of
the date hereof, the Underwriter has not identified a designee nor has it
expressed to the Company the desire to exercise its right to select such a
designee.
The Company has agreed to retain the Underwriter as its financial
consultant for a period of twenty-four (24) months commencing upon consummation
of this Offering at a monthly retainer of $2,000, all of which is payable in
advance upon such consummation.
Loeb Holding Corporation made a subordinated loan to the Underwriter
in the principal amount of $1,500,000 in order for the Underwriter to meet its
net capital requirements under applicable Commission and NASD regulations. The
loan is evidenced by NASD Form SL-4 (Temporary Secured Demand Note Collateral
Agreement) dated February 7, 1997 and effective March 11, 1997. The Note bears
interest at 10% per annum and is due and payable within forty-five (45) days.
Indemnification
The Company has agreed to indemnify the Underwriter and others
against certain liabilities, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be provided to officers, directors or persons controlling the Company, the
Company has been informed that, in the opinion of the Commission, such
indemnification is against public policy and is therefore unenforceable. The
Underwriter has agreed to indemnify the Company, its directors, and each person
who controls it within the meaning of Section 15 of the Securities Act with
respect to any statement in or omission from the Registration Statement, the
Prospectus or any amendment or supplement thereto if such statement or omission
was made in reliance upon information furnished in writing to the Company by the
Underwriter specifically for or in connection with the
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<PAGE>
preparation of the Registration Statement, the Prospectus, or any
such amendment or supplement thereto.
The foregoing summaries of certain terms and conditions of the
Underwriting Agreement and the Underwriter's Purchase Option state all the
material elements of such documents. Copies of the foregoing documents have been
filed with the Commission as exhibits to the Registration Statement of which
this Prospectus forms a part and are also on file at the offices of the
Underwriter and the Company. Reference is hereby made to each such exhibit for a
detailed description of the provisions thereof which have been summarized above.
See "Available Information."
LEGAL MATTERS
Certain legal matters in connection with the issuance of the
securities being offered by the Company will be passed upon for the Company by
McLaughlin & Stern, LLP, New York, New York. A member of the firm of McLaughlin
& Stern, LLP owns 5,000 shares of the Company's Common Stock. Legal matters for
the Underwriter will be passed upon by Scheichet & Davis, P.C., New York, New
York.
EXPERTS
The Financial Statements of the Company included in this Prospectus
to the extent and for the periods indicated in their report have been reported
on by Wiss & Company, LLP, independent certified public accountants, as stated
in their report appearing herein in reliance upon such report given on the
authority of that firm as experts in accounting and auditing. Their report
contains an explanatory paragraph regarding an uncertainty as to the Company's
ability to continue as a going concern.
sass/genisys/sb2
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<PAGE>
No dealer, salesperson or other
person has been authorized to give any
information or to make any representations
in connection with this Offering
other than those contained in this
Prospectus and, if given or made, such
information or representations must not be
relied on as having been
authorized by the Company. This GENISYS RESERVATIONS
Prospectus does not constitute an offer SYSTEMS, INC.
to sell or a solicitation of an offer to
buy any security other than the
securities offered by this Prospectus,
or an offer or solicitation of an offer
to buy any securities by any person in
any jurisdiction in which such offer or
solicitation is not authorized or is
unlawful. The delivery of this
Prospectus shall not, under any circum
stances, create any implication that the
information herein is correct as of any
time subsequent to the date of this
Prospectus.
- ----------------------------
TABLE OF CONTENTS Page
Available Information
Prospectus Summary
Risk Factors 900,000 Shares Of Common Stock
Use of Proceeds 1,500,000 Class A Redeemable Warrants
Capitalization 900,000 Class B Redeemable Warrants
Dilution
Dividend Policy R.D. WHITE & CO., INC.
Management's Discussion
and Analysis of
Financial Condition
and Results of
Operations
Business
Management
Certain Transactions
Principal Stockholder
Selling Stockholders
Description of Securities
Market Information
Underwriting
Legal Matters
Experts
Financial Statements
Until _________, 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Securities offered hereby, whether or not
participating in the distribution, may be required to deliver a Prospectus. This
is in addition to the obligation of dealers to deliver a Prospectus when acting
as underwriters and with regard to their unsold allotments or subscription.
<PAGE>
Alternate Cover Page - The Offering
SUBJECT TO COMPLETION, DATED MARCH 13, 1997
PROSPECTUS
287,500 Class A Redeemable Warrants and
287,500 Shares of Common Stock Underlying such Warrants
GENISYS RESERVATION SYSTEMS, INC.
This Prospectus relates to the offering of 287,500 Class A Redeemable
Warrants and 287,500 shares of common stock ("Common Stock"), par value $.0001
per share, of Genisys Reservation Systems, Inc. a New Jersey corporation
("Company") issuable upon exercise of Class A Redeemable Warrants issued in a
private placement. The securities offered hereby may not be transferred for
eighteen (18) months from the date hereof, subject to earlier release at the
sole discretion of R.D. White & Co., Inc. which is acting as the underwriter in
connection with a public offering of the Company's securities ("Underwriter").
The certificates evidencing such securities include a legend with such
restrictions. The Underwriter may release the securities held by the Selling
Stockholders at any time.
The Securities offered by this Prospectus may be sold from time to time
by the Selling Stockholders, or by their transferees. No underwriting
arrangements have been entered into by the Selling Stockholders. The
distribution of the securities by the Selling Stockholders may be effected in
one or more transactions that may take place on the over-the-counter market
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more dealers for resale of such shares as principals at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Stockholders in connection with sales of such securities. Transfers of the
securities may also be made pursuant to applicable exemptions under the
Securities Act of 1933 ("Securities Act") including but not limited to sales
under Rule 144 under the Securities Act.
The Selling Stockholders and intermediaries through whom such
securities may be sold may be deemed "underwriters" within the meaning of the
Securities Act with respect to the securities offered, and any profits realized
or commissions received may be deemed underwriting compensation. The Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act.
On the date hereof, the Company commenced pursuant to the Registration
Statement of which this Prospectus is a part of a public offering of 900,000
shares of Common Stock, 1,500,000 Class A Redeemable Warrants, and 900,000 Class
B Redeemable Warrants. (Collectively "Redeemable Warrants") See "Concurrent
Sales."
The Company will not receive any of the proceeds from the sale of the
securities by the Selling Stockholders, but will receive proceeds upon the
exercise of the Class A Redeemable Warrants included herein. All costs in
incurred in the registration of the securities of the Selling Stockholders are
being borne by the Company. See "Selling Stockholders."
The Company intends to furnish its security holders with annual reports
containing audited financial statements and the audit report of the independent
certified public accountants and such interim reports as it deems appropriate or
as may be required by law. The Company's fiscal year ends December 31.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION OF THE BOOK VALUE OF THE COMMON STOCK
AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS", WHICH BEGINS ON PAGE , AND "DILUTION" PAGE .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------------
The date of this Prospectus ______ __ , 1997
71
<PAGE>
The Offering
Securities Offered by
Selling Stockholders............287,500 Class A Redeemable Warrants
and 287,500 Shares Issuable
upon exercise of outstanding
Class A Redeemable Warrants
Securities Outstanding
Prior to the Company`s
Offering:
Common Stock(3).............. 4,330,594 Shares
Class A Warrants............. 2,012,500 Warrants
Class B Warrants............. 1,035,000 Warrants
Securities Outstanding
After the Company`s
Offering:
Common Stock(1)(3)............ 4,618,094 Shares
Class A Warrants(2)........... 2,300,000 Warrants
Class B Warrants(2)........... 1,035,000 Warrants
Use of Net Proceeds........... See "Use of Proceeds"
Proposed Symbol(4)
Common Stock.................GENS
Class A Warrants..... .......GENSW
Class B Warrants.............GENSZ
- ------------------------------
(1) Does not include 2,400,000 shares of Common Stock issuable upon
exercise of the Redeemable Warrants but does include the 135,000 shares
of Common Stock issuable upon exercise of the Over-Allotment Option
(but not the 360,000 shares of Common Stock issuable upon the exercise
of the Redeemable Warrants contained therein). See "Description of
Securities," "Principal Stockholders," and "Underwriting."
(2) Does not include the issuance of 360,000 Redeemable Warrants issuable
upon exercise of the Over-Allotment Option. See "Underwriting" and
"Description of Securities."
(3) Includes 15,000 shares of Common Stock issuable upon the conversion of
two promissory notes at the completion of this Offering in the
principal amounts of $20,000 and $10,000 respectively ("Convertible
Notes").
(4) The Shares of Common Stock and the Redeemable Warrants and are expected
to be listed for quotation on NASDAQ under the symbols: "GENS", "GENSW"
and "GENSZ", respectively. There can be no assurance given that the
Company will be able to satisfy on a continuing basis the requirements
for quotation of such securities on NASDAQ. See "Risk Factors" and
"Market for the Company's Securities and Other Related Stockholder
Matters."
72
<PAGE>
No dealer, salesperson or other person
has been authorized to give any
information or to make any representations
in connection with this Offering
other than those contained in this
Prospectus and, if given or made, such
information or representations must
not be relied on as having been GENISYS RESERVATIONS
authorized by the Company. This SYSTEMS, INC.
Prospectus does not constitute an
offer to sell or a solicitation of
an offer to buy any security other
than the securities offered by this
Prospectus, or an offer or solicita
tion of an offer to buy any securities
by any person in any jurisdiction in
which such offer or solicitation is
not authorized or is unlawful. The
delivery of this Prospectus shall not,
under any circumstances, create any
implication that the information
herein is correct as of any time
subsequent to the date of this
Prospectus.
____________________________ 287,500 Class A Warrants
TABLE OF CONTENTS Page and
287,500 Shares Of
Available Information Common Stock Issuable
Prospectus Summary upon exercise of
Risk Factors outstanding Class A
Use of Proceeds Warrants
Capitalization
Dilution
Dividend Policy
Management's Discussion
and Analysis of
Financial Condition
and Results of
Operations
Business
Management
Certain Transactions
Principal Stockholder
Selling Stockholders
Description of Securities
Market Information
Underwriting
Legal Matters
Experts
Financial Statements
Until _________, 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Securities offered hereby, whether or
not participating in the distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with regard to their unsold
allotments or subscription.
73
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Balance Sheet at December 31, 1996 F-3
Consolidated Statements of Operations for the
Year Ended December 31, 1996, the
Four Months Ended December 31, 1995, the Year
Ended August 31, 1995, and the
Period From March 7, 1994 (commencement of
development stage activities) to
December 31, 1996
F-4
Consolidated Statements of Changes in Stockholders'
Equity (Deficiency) for the Year Ended December 31, 1996,
the Four Months Ended December 31, 1995, and Year
Ended August 31, 1995
Consolidated Statements of Cash Flows for the Year
Ended December 31, 1996, the Four Months Ended
December 31, 1995, the Year Ended August 31, 1995,
and the Period From March 7, 1994 (commencement
of development stage activities) to December 31 ,1996
Notes to Consolidated Financial Statements F-7 to F-16
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Genisys Reservation Systems, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheet of Genisys
Reservation Systems, Inc. and Subsidiary (formerly Robotic Lasers, Inc. and a
Development Stage Company) as of December 31, 1996 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
year ended December 31, 1996, the four months ended December 31, 1995, the year
ended August 31, 1995, and for the period from March 7, 1994 (commencement of
development stage activities) to December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Genisys Reservation
Systems, Inc. and Subsidiary (formerly Robotic Lasers, Inc. and a Development
Stage Company) at December 31, 1996 and the results of their operations and
their cash flows for the year ended December 31, 1996, the four months ended
December 31, 1995, the year ended August 31, 1995 and for the period from March
7, 1994 (commencement of development stage activities) to December 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage company and has
suffered recurring losses from operations that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
WISS & COMPANY, LLP
Woodbridge, New Jersey
January 31, 1997 (except as to the waiver of default described in Note 3, for
which the date is February 21, 1997)
F-2
<PAGE>
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 91,548
Prepaid expenses 1,081
--------------
Total Current Assets $ 92,629
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF $65,102
235,285
OTHER ASSETS:
Computer software costs, less accumulated amortization of $35,215
312,171
Deferred offering costs 153,210
Debt issue costs, less accumulated amortization
of $10,957 45,393
Deposits and other 64,910
-------------
575,684
$ 903,598
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 161,282
Accounts payable and accrued expenses 304,490
Due to related parties 29,652
Accrued interest payable - related parties 95,748
Accrued consulting fees - related parties 101,500
-----------
Total Current Liabilities $ 692,672
LONG-TERM DEBT:
Long-term debt, less current maturities 1,009,757
10% Promissory notes payable 563,500
Convertible notes payable 30,000
-------------
1,603,257
Total Liabilities 2,295,929
COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.0001 par value: 25,000,000 shares authorized; none
outstanding -
Common stock, $.0001 par value: 75,000,000 shares authorized; 3,280,594
shares issued and outstanding 328
Additional paid-in capital 252,344
Deficit accumulated during development stage (1,645,003)
Total Stockholders' Equity (Deficiency) (1,392,331)
$ 903,598
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Period From
March 7, 1994
Year Four Months Year (Commencement of
Ended Ended Ended Development
December 31, December 31, August 31, Stage Activities) to
1996 1995 1995 December 31, 1996
----------------- ---------------- --------------- --------------------
REVENUES AND EXPENSES DURING THE DEVELOPMENT
STAGE:
Revenues $ - $ - $ - $ -
---------------- ---------------- ---------------- -----------
Expenses:
General and administrative 819,205 250,454 256,621 1,357,696
Depreciation and 97,721 18,453 240 116,508
amortization
Interest expense 134,277 24,303 12,219 170,799
------------ ------------- ------------- ------------
1,051,203 293,210 269,080 1,645,003
----------- ------------ ------------ -----------
NET LOSS INCURRED DURING THE
DEVELOPMENT STAGE $(1,051,203) $ (293,210) $ (269,080) $(1,645,003)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE $(.36) $(.11) $(.16) $(.74)
===== ===== ===== =====
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 2,904,482 2,594,503 1,694,611 2,230,821
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Total Shares Par Value Capital Stage
BALANCE, AUGUST 31, 1994 $ (21,510) 1,682,924 $ - $ 10,000 $ (31,510)
YEAR ENDED AUGUST 31, 1995:
Contribution of services rendered 9,600 - - 9,600 -
Net assets received (liabilities assumed)
in reverse acquisition of Robotic Lasers, Inc. (14,087) 280,487 28 (14,115) -
Change in par value - - 168 (168) -
Net loss (269,080) - - - (269,080)
---------- ---------------- ------------- -------------- ----------
BALANCE, AUGUST 31, 1995 (295,077) 1,963,411 196 5,317 (300,590)
PERIOD ENDED DECEMBER 31, 1995:
Conversion of related party debt into
term note and common stock 13,406 841,455 84 13,322 -
Net loss (293,210) - - - (293,210)
---------- ---------------- ------------- ----------- -----
BALANCE, DECEMBER 31, 1995 (574,881) 2,804,866 280 18,639 (593,800)
YEAR ENDED DECEMBER 31, 1996:
Issuance of common stock:
For cash 110,000 55,000 6 109,994 -
For conversion of stockholder note
into term note
and common stock 6,703 420,728 42 6,661 -
Contribution to capital by
stockholder/officer 76,700 - 76,700 -
Issuance of warrants, less
related costs of $1,150 10,350 - 10,350 -
Common stock (15,000 shares)
transferred to certain
employees by a stockholder in
consideration of services rendered
30,000 - - 30,000 -
Net loss (1,051,203) - - (1,051,203)
----------- ------------------ ---------------- ------------------
BALANCES, DECEMBER 31, 1996 $(1,392,331) 3,280,594 $ 328 $ 252,344 $(1,645,003)
See accompanying notes to consolidated financial statements.[
</TABLE>
F-5
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C>
Period from
March 7, 1994
Four Months Year (Commencement of
Year Ended Ended Ended Development
December 31, December 31, August 31, Stage Activities) to
1996 1995 1995 December 31, 1996
-------------- -------------- ------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,051,203) $ (293,210) $ (269,080) $(1,645,003)
Adjustment to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 97,721 18,453 240 116,508
Contribution of services
rendered 30,000 - 9,600 49,600
to capital
Changes in operating assets
and liabilities:
Prepaid (378) 3,031 (3,734) (1,081)
expenses
Other assets (38,162) 218,053 (243,255) (65,564)
Accounts
payable and accrued expenses 365,630 27,649 94,372 487,651
------------ ----------- ----------- ------------
Net cash flows from operating activities (596,392) (26,024) (411,857) (1,057,889)
----------- ----------- ---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES -
Acquisition of equipment and software (327,999) (319,774) - (647,773)
------------ ---------- ----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans and advances from related parties 10,526 7,506 (12,001) 29,652
Proceeds from issuance of notes payable 305,000 215,000 435,000 955,000
Payments under computer equipment leases (53,352) (9,724) - (63,076)
Proceeds from sale and lease-back 150,162 144,482 - 294,644
Proceeds from issuance of convertible notes 30,000 - _ 30,000
Proceeds from sale of common stock 110,000 - - 110,000
Contribution to capital - stockholder/officer 76,700 - - 76,700
Proceeds from issuance of 10% promissory notes
and related warrants 575,000 - - 575,000
Costs paid upon issuance of promissory notes
and warrants (57,500) - - (57,500)
Deferred offering costs (153,210) - - (153,210)
----------- ----------------- ---------------------------
Net cash flows from financing activities 993,326 357,264 422,999 1,797,210
----------- ----------- ---------- -----------
NET CHANGE IN CASH 68,935 11,466 11,142 91,548
CASH, BEGINNING OF PERIOD 22,613 11,147 5 -
------------ ------------ ------------- -----------
CASH, END OF PERIOD $ 91,548 $ 22,613 $ 11,147 $ 91,548
=========== =========== ========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 37,250 $ 8,426 $ - $ 45,676
=========== ============ ============== ============
Net liabilities assumed in reverse acquisition
$ - $ - $ 14,087 $ 14,087
=============== =============== ========== ============
Conversion of related party debt into common
stock
$ 6,703 $ 13,406 $ - $ 20,109
============ =========== ============== ============
See accompanying notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARY
(Formerly Robotic Lasers, Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - History of the Company, Nature of the Business and Summary of
Significant Accounting Policies:
History of the Company and Nature of the Business - Genisys
Reservation Systems, Inc. (the "Company") was originally
incorporated in April 1986 as JECO2 Lasers, Inc., changed its
name to Robotic Lasers, Inc. in December 1987 and further
changed to its current name in July 1996. In March 1995, the
Company sold all of its assets, rights and properties relating
to a certain laser research and development agreement (subject
to certain liabilities). On August 11, 1995, the Company
acquired Corporate Travel Link, Inc. ("Travel Link") a
development stage company, by issuing 1,682,924 shares of its
restricted common stock in exchange for all of the then issued
and outstanding shares of common stock of Travel Link. For
accounting purposes, the share exchange transaction and
combination of Travel Link with the Company has been treated as
a reverse acquisition by, and a recapitalization of, Travel
Link. The net assets of the Company of $(14,000) consisted
primarily of accounts payable of $14,000. The previous
historical financial statements of the Company are no longer
reported and the financial statements of Travel Link (since its
formation in March 1994) are now reported as the historical
consolidated financial statements of the Company and its
subsidiary.
The Company is a development stage company and is developing
computerized limousine reservation and payment systems for the
business traveler. The Company anticipates that the proprietary
software being developed will enable a system of limousine
reservations to be completely computerized and operate without
human intervention.
The Company has generated no revenues and has no commercial
operations to date. The Company has been unprofitable since
inception and expects to incur additional operating losses over
the next several quarters. The Company expects to commence
generating revenue from operations during the fiscal year ending
December 31, 1997.
Estimates and Uncertainties - 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, as
determined at a later date, could differ from those estimates.
Principles of Consolidation - As indicated above, the
consolidated financial statements include the accounts of the
Company's wholly-owned subsidiary, Travel Link and, since August
11, 1995, those of the Company. Retroactive effect has been
given to the exchange of shares for Travel Link to March 7,
F-7
<PAGE>
1994. All significant intercompany transactions and accounts
have been eliminated in consolidation.
Financial Instruments - Financial instruments include cash and
equivalents, other assets, accounts payable, accrued expenses
and long-term debt. The amounts reported for financial
instruments are considered to be reasonable approximations of
their fair values, based on market information available to
management.
Cash and Equivalents - The Company considers all highly liquid
debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Concentration of Credit Risk - The Company maintains its cash
balances in several financial institutions. The accounts at each
institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1996, there were no
uninsured balances.
Property and Equipment - Property and equipment is stated at
cost and depreciated using the straight-line method over
an estimated useful life of 5 years.
Computer Software Costs Relating to Reservation and Payment
Systems - The Company capitalizes the external direct costs of
materials and services and interest consumed in the development
of the Genisys Reservation and Payment Systems (no internal
direct costs are anticipated). Such costs will be amortized on a
straight-line basis over three years, subject to periodic
evaluation for impairment.
Deferred Offering Costs - Offering costs have been deferred,
pending the outcome of the offering contemplated herein. If the
offering is successful, these costs will be charged against
additional paid-in capital, otherwise, they will be charged to
expense.
Debt Discount and Debt Issue Costs - Costs related to the
issuance of debt are capitalized. Such costs and any related
debt discount are amortized over the term of the related debt.
Income Taxes - Deferred tax assets and liabilities are computed
annually for temporary differences between the financial
statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which
the temporary differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
F-8
<PAGE>
Stock Options - The Company accounts for stock option grants
using the intrinsic value based method prescribed by APB Opinion
No. 25. Since the exercise price equalled or exceeded the
estimated fair value of the underlying shares at the date of
grant, no compensation was recognized in 1996 and 1995.
Had compensation cost been based upon the fair value of the
option on the date of grant, as prescribed by Statement of
Financial Accounting Standards No. 123, the Company's proforma
net loss and net loss per share would have been approximately
$(1,086,000) ($.37 per share) in 1996 and $(313,000) ($.12 per
share) for the period ended December 31, 1995, using the Black
Sholes option pricing model.
Fiscal Year - In December 1995, the Board of Directors voted to
change the Company's fiscal year to a calendar year, effective December 31,
1995.
Net Income (Loss) Per Common Share - Net income (loss) per
common share is based upon the weighted average number of
outstanding common shares. The shares issuable upon the exercise
of outstanding warrants and options or upon conversion of
outstanding debt have been excluded since the effect would be
antidilutive, due to net losses for all periods presented.
Note 2 - Operating and Liquidity Difficulties and Management's Plans to
Overcome:
The accompanying financial statements of the Company have been
presented on the basis that it is a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has
reported net losses since inception and expects to incur
additional operating losses over the next several quarters. The
Company has also experienced liquidity difficulties since
inception, and in order to continue the development of the
Company's reservation and payment system, needs significant
additional financing. The Company has financed its operations
since inception with the proceeds from the issuance of long-term
debt.
Since inception, the operations of the Company have been limited
to market research and developing a software and hardware system
for computerizing the limousine reservation and payment system.
The development of both the reservation and payment systems have
been completed and are currently undergoing testing. No
assurance can be given that the Company's reservation and
payment system will achieve commercial feasibility.
The Company's working capital and its capital requirements will
depend upon numerous factors, including, without limitation, the
progress of the Company's system development and testing,
competition, industry technological advances and the ability of
the Company to market its limousine reservation system. The
Company will require additional significant financing to
complete the system development and testing, cover anticipated
F-9
<PAGE>
losses and sustain operations in 1997 and beyond and, in
addition, to satisfy the repayment of long-term debt. There can
be no assurance that the financing needed for attaining
commercial viability of the Company's reservation and payment
system will be obtained. If the Company is unable to raise
sufficient capital, it will delay and could prevent the
Company's ability to bring the reservation and payment systems
on-line.
The Company intends to fund its operations and other capital
needs for the next twelve months substantially from the net
proceeds of additional borrowings and a contemplated public
offering, but there can be no assurance that the net proceeds of
such contemplated offering, if successful, will be sufficient
for these purposes. There is also no assurance that such
financing will be available, or that it will be available on
acceptable terms.
Reference should be made to "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
included elsewhere herein for additional information.
Note 3 - Long-term Debt:
Notes Payable - Stockholder - In February 1995, the Company
signed an agreement with a then unrelated party pursuant to
which the Company borrowed $500,000 as evidenced by a series of
Convertible Promissory Notes. In September 1995, the Convertible
Promissory Notes were converted into 841,455 shares of the
Company's common stock and two Promissory Notes with principal
amounts of $475,000 and $25,000, respectively. Such 841,455
shares had been contributed back to the Company by its original
stockholders who acquired the shares in March 1994, For
accounting purposes, such transaction has been treated as a 2
for 3 reverse stock split. The common stock issued upon
conversion and the related debt discount ($13,406) have been
recorded based upon their estimated fair values and that of the
notes.
The $475,000 note is to be repaid in twelve equal quarterly
installments commencing two years from the date of such note.
This note bears interest at nine percent (9%) per annum payable
quarterly. The $25,000 promissory note accrues interest at nine
percent (9%) per annum (payable quarterly) and is convertible at
the sole option of the note holder into 266,667 shares of common
stock of the Company. Unless previously converted, this $25,000
note will be repaid by the Company in twelve equal quarterly
installments commencing on April 1, 1998.
In December 1995, the Company and this stockholder signed an
additional loan agreement whereby the stockholder agreed to loan
the Company up to an additional $250,000. In December 1995, the
stockholder loaned the Company $150,000 and, during the first
quarter of 1996, the stockholder loaned the Company an
F-10
<PAGE>
additional $100,000. In November 1996, the stockholder converted
these additional loans, totaling $250,000, into two 9% term
notes ($237,500 and $12,500) and 420,728 shares of common stock
of the Company. The common stock issued upon conversion and the
related debt discount ($6,703) have been recorded based upon
their estimated fair values and that of the notes. The $237,500
note is to be repaid in 12 equal quarterly installments
commencing two (2) years from the date of such note. The $12,500
note is convertible into 133,333 shares of common stock of the
Company. Unless previously converted, this $12,500 note will be
repaid by the Company in twelve equal quarterly installments
commencing on April 1, 1998.
Total borrowings from the stockholder totalled $750,000 at
December 31, 1996 and accrued interest was $94,003. The Company
has not paid any interest under these loan agreements to date.
In February 1997, the stockholder agreed that interest payments
on its notes, which are currently in default, would be deferred
until September 1997. The stockholder also waived any defaults
on the notes through February 1997.
Notes Payable - Related Party - During November and December
1996, the Company and the investment banking firm described in
Note 4 signed four 18 month Promissory Notes whereby the
investment banking firm loaned the Company a total of $210,000,
of which $205,000 was received by December 31, 1996. Such Notes
bear interest at 10% and mature in May and June 1998. Accrued
interest totalled $1,745 at December 31, 1996.
Capital Leases - In September 1995, January 1996 and December
1996, the Company entered into sale and lease-back arrangements
whereby the Company sold the bulk of its computer hardware and
commercially purchased software to a lessor for amounts
totalling $295,000 and agreed to lease back such equipment for
initial terms ranging from 24 to 30 months. The obligations
under these leases at December 31, 1996 are summarized as
follows:
Imputed
Interest
Description Rate
Capital leases payable in monthly
installments totalling
$11,960 through various expiration dates,
collateralized by the computer equipment 25.4% to
and software 26.6% $321,670
Less: Amount representing interest 90,102
Present value of minimum lease payments 231,568
Less: Current maturities 88,515
----------
$143,053
F-11
<PAGE>
A summary of long-term debt follows:
Notes payable - stockholder, less unamortized
debt discount of $15,529 $ 734,471
Notes payable - related party 205,000
Capital leases 231,568
------------
1,171,039
Less: Current maturities 161,282
$1,009,757
Long-term debt matures as follows:
Year Ending December 31,
1997 $ 161,282
1998 465,557
1999 296,259
2000 186,045
2001 61,896
------------
$1,171,039
Convertible Notes Payable - In April and June 1996, the Company
borrowed a total of $30,000 from two unaffiliated parties. These
notes bear interest at 7% per annum, payable on the last day of
each calendar quarter, commencing March 31, 1997. The maturity
dates are the earlier of January 1, 1998 or upon the
consummation of a public offering of the Company's common stock.
If the maturity dates of these notes occur prior to January 1,
1998, the notes will be converted into 15,000 shares of the
Company's common stock.
Note 4 - Commitments:
Leases - The Company leases its administrative facilities under
a five-year lease expiring in November 2000. The lease provides
for annual rent of $25,500.
Rent expense totalled $26,000, $7,000, $14,000 and $54,000 for
the year ended December 31, 1996, the four months ended December
31, 1995, the year ended August 31, 1995 and the period from
March 7, 1994 (date of commencement of development stage
activities) to December 31, 1996, respectively.
F-12
<PAGE>
Employment Agreements - The Company entered into employment
agreements with its President in September 1995 (modified in
October 1996), and with its Secretary/Treasurer in October 1996.
The agreements provide for aggregate annual compensation of
$125,000 effective October 1996 and $180,000 effective January
1997, until modified by the Company.
Consulting Agreements - In October 1996, the Company executed a
consulting agreement to develop software to operate the Genisys
Payment system for a total price of $218,000 of which $109,000
would be paid in cash and $109,000 in shares of the Company's
common stock at a negotitated price of $3.75/share. The
shares are to be transferred by two stockholders and,
accordingly, will be considered a contribution to capital. The
The Company has agreed to issue an equal number of new shares
of restricted Common Stock to such stockholders in
six equal installments if the Company meets certain performance
criteria on six specific dates.
The Company entered into a consulting agreement in October 1996
with a director, who formerly served as the Company's Executive
Vice-President. The agreement provides for monthly consulting
fees of $6,500 through February 1997 and $8,400 per month
thereafter, until modified by the Company. Fees accrued during
1996 pursuant to this agreement totalled $16,000.
In September 1995, the Company entered into a three year
consulting agreement with an investment banking firm whose
managing director is a stockholder and the Chairman of the Board
of Directors of the Company. The agreement provides for a
consulting fee of $3,000 per month. During 1996, fees totalled
$36,000 and are included in accrued consulting fees at December
31, 1996. Also included in accrued consulting fees is $49,500 of
fees for consulting services provided to the Company in 1996 by
its current Chief Financial Officer.
Note 5 - Income Taxes:
Deferred income taxes reflect the net effects of temporary
differences between the amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The principal temporary difference arises from the net
operating loss carryforwards and results in a deferred tax asset
of approximately $600,000 at December 31, 1996.
A valuation allowance is provided when it is more likely than
not that some portion of the deferred tax asset will not be
realized. The Company has determined, based on its recurring net
losses, lack of a commercially viable product or system and it
being a development stage company, that a full valuation
allowance is appropriate at December 31, 1996.
F-13
<PAGE>
A reconciliation of the provision (benefit) for income taxes
computed at the federal statutory rate of 34% and the effective
tax rate of income (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year Ended Period Ended Year Ended
December 31, December 31, August 31,
1996 1995 1995
----------------- ---------------- ---------
Computed tax benefit on net loss at federal statutory rate
$ (347,000) $ (99,000) $ (91,000)
State income tax benefit, net of federal income tax effect
(61,000) (17,000) (16,000)
Tax effect of net operating losses not currently usable
408,000 116,000 107,000
----------- ------------ ----------
Provision (benefit) for income taxes
$ - $ - $ -
================ ================ =========
</TABLE>
At December 31, 1996, the Company had net operating loss
carryforwards of approximately $1,600,000 expiring through 2010.
Current tax law limits the use of net operating loss
carryforwards after there has been a substantial change in
ownership (as defined) during a three year period. Because of
the possible future changes in common stock ownership, the use
of the Company's net operating loss carryforwards may be subject
to an annual limitation. To the extent amounts available under
the annual limitation are not used, they may be carried forward
for the remainder of 15 years from the year the losses were
originally incurred.
Note 6 - Stockholders' Equity:
Preferred Stock - The Company's Certificate of Incorporation
authorizes the issuance of up to 25,000,000 shares of Preferred
Stock. None of such Preferred Stock has been designated or
issued to date. The Board of Directors is authorized to issue
shares of Preferred Stock from time to time in one or more
series and to establish and designate any such series and to fix
the number of shares and the relative conversion rights, voting
rights, terms of redemption and liquidation.
Sales of Common Stock - During the quarter ended March 31, 1996,
the Company sold 5,000 shares of its restricted common stock to
a former officer and director of the Company for $10,000. In
addition, the Company sold, to an unaffiliated private investor,
25,000 shares of its restricted common stock for $50,000. In
November 1996, the Company sold 25,000 shares of the Company's
restricted common stock to another unaffiliated party for
$50,000.
F-14
<PAGE>
Stock Splits - In July 1996, the Company's stockholders approved
and effectuated a one for two reverse stock split. As indicated
in Note 3, the contribution of shares by the original
stockholders has been treated as a 2 for 3 reverse stock split.
Stock splits have been retroactively reflected in the
accompanying consolidated financial statements.
Private Offering - Pursuant to a private offering, the Company
issued 11.5 units to various unrelated parties in May and June
1996. Each $50,000 unit consists of a $49,000 three-year
promissory note (bearing interest at 10% per annum) and a Class
A redeemable common stock purchase warrant valued at $1,000 per
unit. Each warrant entitles the holder to purchase 25,000 shares
of the Company's common stock at $5.75 per share. Gross proceeds
of this private offering totalled $575,000.
The principal and interest on the promissory notes are to be
repaid at the earlier of three years from issuance of such notes
or 30 days after the closing date of the Company's first
underwritten public offering. Each Class A common stock purchase
warrant entitles the holder to purchase a share of the Company's
common stock at an exercise price of $5.75 per share. The rights
represented by this warrant are exercisable commencing 90 days
after the effective date of a public offering registration
statement until four years thereafter. The terms and conditions
of these warrants are subject to adjustment to conform with the
warrants to be registered upon the effectiveness of the
contemplated registration statement to be filed with the
Securities and Exchange Commission. Warrants to purchase 287,500
shares of the Company's common stock are currently outstanding
pursuant to this private offering.
Cancellation of Shares - In August 1996, the Company gave notice
to a former officer that it was cancelling the 333,216 shares of
its common stock which had been issued to the former officer in
connection with services to be provided at the inception of
Travel Link. Such cancellation relates to various claims made by
the Company against the former officer and failure to provide
services to the Company. The former officer has informed the
Company that he will contest any attempt by the Company to
cancel his shares. Pending return of the shares, they are
considered outstanding for all periods presented herein.
Warrants and Options - In August 1995, the Company granted an
option to purchase 25,000 shares of its common stock to an
officer, exercisable at $.60 per share through August 2000. In
November 1996, the Company granted an option to purchase 35,000
shares of its common stock to the same officer exercisable at
$2.00 per share through November 2001. These Warrants were
immediately exercisable and are fully vested.
In connection with the initial leases described in Note 3,
the Company granted to the lessor warrants to purchase
22,098 shares of common stock at an exercise price of $2
per share.
F-15
<PAGE>
Contribution to Capital - During the year ended December 31,
1996, in order to raise additional working capital, the
Company's President sold 37,600 shares of restricted common
stock of the Company owned by him to nineteen unaffiliated third
parties at prices ranging from $2.00 to $2.50 per share for
total proceeds of $76,700. Such proceeds were remitted to the
Company in the form of a capital contribution. The Company's
former Executive Vice President, has agreed to use his own
shares of restricted common stock of the Company to reimburse
the Company's President for one-half of the number of shares he
sold.
Note 7 - Subsequent Event (Unaudited):
Contingency - On February 20, 1997, two individuals filed an
action against the Company and Travel Link in
the Superior Court of New Jersey seeking, among other things,
damages in the amount of 8% of any financing secured by Travel
Link resulting from plaintiffs' efforts as well as 5% of the
Company's Common Stock allegedly due for
services rendered in connection with the Company's acquisition
of Travel Link in 1995. The claim for monetary damages is based
upon a written agreement between Travel Link and
plaintiffs while the claim for the shares of the Company's
Common Stock is based upon alleged oral representations and
promises made by officers of Travel Link. Management believes
that the plaintiffs have not introduced any financings to
the Company and intends to vigorously defend the action.
F-16
<PAGE>
PART II
Information Not Required in Prospectus
ITEM 24. Indemnification of Officers and Directors
The Company's Certificate of Incorporation provides in Article Fourth
that no Director of the Corporation shall be liable to the Corporation or
any of its shareholders for damages for breach of any duty owed to the
Corporation or its shareholders except for liability for any breach of duty
based upon an act or omission (I) in breach of such person's duty of loyalty
to the Corporation or its shareholders, (ii) not in good faith or involving
a knowing violation of law, or (iii) resulting in receipt by such person of
an improper personal benefit.
ITEM 25. Other Expenses of Issuance and Distribution
The expenses payable by Registrant in connection with the issuance and
distribution of the securities being registered (other than underwriting
discounts and commissions, non-accountable expenses of $132,600 ($152,484 if
the Over-Allotment Option is exercised) are estimated as follows:
Securities and Exchange Commission Fees..............$ 8,026.86
NASDAQ Stock Market listing fee......................$ 10,000.00
Transfer/Warrant Agent's fee and expenses............$ 3,500.00
NASD filing fee......................................$ 934.00
Accounting fees and expenses..........................$ 35,000.00
Blue Sky fees and expenses............................$ 30,000.00
Tombstone Advertisement...............................$ 10,000.00
Printing Expenses (including Securities)... ..........$ 40,000.00
Legal fees...........................................$ 90,000.00
Miscellaneous...................................... .$ 7,539.14
Total........................................$ 235,000.00
ITEM 26. Recent Sales of Unregistered Securities
During February 1995, the Company issued 45,765 shares of Common Stock
in repayment of certain liabilities totaling $251,702. Those liabilities
included notes payable to Saddle Brook Investors of $149,633, a note payable
plus accrued interest to an officer and Director of $34,273 and certain
accounts payable of $67,796.
II-1
<PAGE>
In February 1995, Loeb Holding Corporation, as escrow agent ("Loeb"),
for Warren D. Bagatelle, HSB Capital, trusts for the benefit of families of
two principals of Loeb and three unaffiliated individuals, agreed to loan
the Company $500,000 evidenced by a series of Convertible Promissory Notes.
In September 1995, Loeb converted the Convertible Promissory Notes into
841,455 shares of Common Stock and two Term Promissory Notes, one in the
principal amount of $475,000 and the other in the principal amount of
$25,000.
The principal amount of the $475,000 note is to be repaid in twelve
equal quarterly payments commencing two (2) years from the date of said
note. Prepayments may be made at any time without penalty. Interest is
accrued at a rate of 9% per annum and interest payments are to made
quarterly at the end of each calendar quarter, or at such earlier date that
the Note becomes due and payable as a result of acceleration, prepayment or
as otherwise provided therein. Interest began to run from the date that the
monies were advanced to the Company.
The Term Promissory Note in the amount of $25,000 and a Note issued in
December, 1995 in the amount of $12,500 have been modified. Such Notes
provide for accrued interest at the rate of 9% per annum payable quarterly
commencing in September 1997 and unless previously converted the principal
amount of each note is to be repaid in twelve equal quarterly installments,
commencing April 1, 1998, or on such earlier date as such notes provide.
Such notes are convertible at the sole option of the holder into an
aggregate of 400,000 common shares of Common Stock.
During March 1995, John H. Wasko, then President of the Company, upon
exercise of his own option, acquired 70,520 shares of the Common Stock of
the Company at an exercise price of $0.02145 per share.
During the quarter ended March 31, 1996, the Company sold 5,000 shares
of restricted Common Stock to a former officer and the director of the
Company for $10,000. During the same period, the Company sold 25,000 shares
of the Company's restricted Common Stock to an unaffiliated party for
$50,000.
II-2
<PAGE>
On August 11, 1995, Robotic Lasers acquired Corporate Travel Link,
Inc., by issuing 1,682,924 shares of restricted new Common Stock in exchange
for the shares of common stock of Corporate Travel Link owned by Joseph
Cutrona, Mark A. Kenny and Steven E. Pollan, which represented all the
issued and outstanding shares of common stock of Corporate Travel Link.
In August 1994 Joseph Cutrona and Mark A. Kenny each received 666,433
shares of Common Stock for contributed services to be provided to the
Company.
In August 1995 the Company granted Mr. Wasko a 5 year option to
purchase 25,000 shares of Common Stock at a price of $0.60 per share and a
5-year option to purchase 35,000 shares of Common Stock at a price of $2.00
per share was granted to Mr. Wasko by the Company on November 1, 1996.
During December, 1995, Loeb agreed to loan the Company $250,000
evidenced by a series of Convertible Promissory Notes. In November, 1996,
Loeb converted the Convertible Promissory Notes into two Term Promissory
Notes, one in the principal amount of $237,500 and the other in the
principal amount of $12,500 plus 420,728 shares of Common Stock, of which
420,000 shares are owned by four unaffiliated parties.
In May, 1996, Pursuant to a private offering, the Company issued 11.5
units to sixteen unaffiliated third parties in May and June, 1996. The
Underwriter acted as placement agent for the private placement. Each $50,000
unit consisted of a $49,000 promissory note and a Class A Redeemable Warrant
valued at $1,000 per unit. Each Redeemable Warrant entitles the holder to
purchase 25,000 shares of Common Stock at $5.75 per share. Proceeds from
this offering totaled $575,000 and Redeemable Warrants to purchase 287,500
shares of Common Stock were issued by the Company. The Underwriter was paid
a fee of $57,500 in connection with the private placement.
II-3
<PAGE>
During the quarters ended September 30, 1996 and December 31, 1996, in
order to raise additional working capital for the Company, Joseph Cutrona,
President of the Company, sold a total of 37,600 shares of restricted Common
Stock of the Company owned by him to nineteen unaffiliated third parties at
prices ranging from $2.00 to $2.50 per share for total proceeds of $76,500
which Mr. Cutrona remitted to the Company in the form of a capital
contribution. In February 1997 Mr. Cutrona sold an additional 7,850 shares
of restricted Common Stock to 5 unaffiliated third parties at a price of
$2.00 per share for total proceeds of $15,700, which Mr. Cutrona remitted to
the Company in the form of an additional capital contribution. Mr. Mark A.
Kenny has agreed to use 22,450 of his own shares of restricted Common Stock
to reimburse Mr. Cutrona for one-half of the number of shares recently sold
by Mr. Cutrona.
In November, 1996, the Company sold 25,000 shares of the Company's
restricted common stock to an unaffiliated party for $50,000.
During November and December, 1996, the Company and Loeb Holding
Corporation signed four 18 month Promissory Notes whereby Loeb Holding
Corporation loaned the Company the sums of $75,000, $30,000, $10,000 and
$95,000 (total of $210,000). The Promissory Notes which bear interest at
10%, mature on May 11, 1998, May 25, 1998, June 2, 1998 and June 9, 1998.
In February and March, 1997, the Company borrowed a total of $45,000
from two unaffiliated third parties pursuant to two eighteen (18) month
Promissory Notes bearing interest at 10% per annum payable at maturity.
These notes are secured by 11,250 shares of the Company`s restricted Common
Stock owned by Joseph Cutrona and 11,250 shares owned by Mark A. Kenny.
Neither the Company nor any person acting on its behalf offered or sold
the securities described above by means of any form of general solicitation
or general advertising. Each purchaser represented in writing that he
acquired the securities for his own account. A legend was placed on the
certificate stating that the restrictions on their transferability and sale.
Each purchaser signed a written agreement that the securities will not be
sold without registration under the Act or exemption therefrom. The
Registrant believes such issuances are exempt transactions not involving a
public offering under Section 4(2) of the Securities Act of 1933, as
amended.
II-4
<PAGE>
ITEM 27. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1*** Form of Underwriting Agreement
1.2** Selected Dealer Agreement
3.1* Registrant's Articles of Incorporation
3.2* Registrant's By-Laws
4.1** Form of Common Stock Certificate
4.2*** Redeemable Warrant Agreement with Form of
Class A and Class B Redeemable Warrants
4.3*** Underwriter's Warrant Agreement
5** Opinion of McLaughlin & Stern, LLP
10.1* Employment Agreement dated October 17, 1996
between Registrant and Joseph Cutrona.
10.2* Consulting Agreement dated October 18, 1996
between the Registrant and Mark A. Kenny.
10.3* Employment Agreement dated October 17, 1996
between Registrant and John H. Wasko.
10.4* Copy of lease dated November 1, 1995 between
Unicom and Corporate Travel Link, Inc.
10.5* Copy of Agreement dated June 22, 1995
between American Airlines, Inc., and
Corporate Travel Link, Inc., relating to
Sabre Extension Program - Associate
Distribution and Services Agreement.
10.6* Copy of Agreement dated June 30, 1995
between American Airlines, Inc. and
Corporate Travel Link, Inc., relating to
Associate Sabre Equipment Lease Agreement.
10.7* Copy of Agreement dated June 30, 1995
between American Airlines, Inc., and
Corporate Travel Link, Inc. - non-standard
system amendment to Corporate Sabre
Equipment Lease Agreement.
II-5
<PAGE>
10.8* Copy of Script Consulting Agreement dated
June 21, 1995 between Worldspan, LP and
Corporate Travel Link, Inc.
10.9* Copy of Script Services agreement dated June
21, 1995 between Worldspan, LP and Corporate
Travel Link, Inc.
10.10* Copy of Galileo Services Display and
Reservation Agreement dated August 28, 1995
between Galileo International Partnership
and Corporate Travel Link, Inc.
10.11* Copy of Ancillary Services Agreement dated
August 28, 1995 between Galileo
International Partnership and Corporate
Travel Link, Inc.
10.12* Copy of Worldspan Car Rental Associate
Reservation Agreement between Worldspan, LP
and Corporate Travel Link, Inc.
10.13* Copy of Interim Loan Agreement between the
registrant and Loeb Holding Corporation,
as escrow agent, and certain executives of
the Registrant.
10.14* Prosoft Consulting Agreement
10.15** Copy of Consulting and Investment Banking
Agreement between the Company and Loeb
Partners Corporation.
10.16** Copy of Promissory Notes of the Company
dated November 6, 1996 in the principal
amounts of $12,500 and $237,500 payable to
Loeb Holding Corporation, as escrow agent.
21* List of Subsidiaries
24.1* Consent of Wiss & Company, LLP
24.2* Consent of McLaughlin & Stern, LLP
28.1* Executive Stock Issuance
* Previously filed with Registration Statement
on Form SB-2, filed October 29, 1996.
** Previously filed with Amendment No. 1 filed
on January 22, 1997.
*** Previously filed with Amendment No. 3 filed
on March 5, 1997.
II-6
<PAGE>
Schedules other than those listed above have been omitted since they are
either not required, are not applicable or the required information is shown
in the financial statements or related notes.
ITEM 28. Undertakings
The undersigned Registrant hereby undertakes to:
(a) (1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(I) Include any prospectus required by section 10(a)
(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information
in the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of a prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) Include any additional or changed material
information on the plan of distribution;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement for the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering;
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end
of the offering; and
(b) Provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors,
II-7
<PAGE>
officers and controlling persons of the small business issuer pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business
issuer in the successful defense of any action, suite or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b) (1) or (4) or 497 (h) under the Securities Act shall be deemed to be
part of this registration as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-8
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form SB-2 of our report dated January 31,
1997, relating to the consolidated financial statements of Genisys
Reservation Systems, Inc., and Subsidiary which appears in such the
Prospectus.
We also consent to the reference to us under "Experts" in the
Prospectus.
Wiss & Company, LLP
Woodbridge, New Jersey
March 13, 1997
II-9
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements of filing on Form SB-2 and authorized
this registration statement to be signed on its behalf by the undersigned,
in the City of Union, State of New Jersey, on March 13, 1997.
GENISYS RESERVATION SYSTEMS, INC.
By: /s/ Joseph Cutrona
Joseph Cutrona
President
In accordance with the requirements of the Securities Act of
1933, this registration statement was signed by the following persons in the
capacities and on the dates stated.
/s/Joseph Cutrona President and Director March 13, 1997
Joseph Cutrona
/s/John H. Wasko Secretary, Treasurer
John H. Wasko and Director March 13, 1997
(Chief Financial Officer and
Chief Accounting Officer)
/s/Mark A. Kenny Director March 13, 1997
Mark A. Kenny
/s/Warren D. Bagatelle Chairman and Director March 13, 1997
Warren D. Bagatelle (Chief Executive Officer)
II-10
<PAGE>
