SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(For the Quarter ended September 30, 1998)
Commission File Number 1-12689
Genisys Reservation Systems, Inc. And Subsidiaries
-----------------------
(Exact Name of registrant as specified in its charter)
New Jersey
22-2719541
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification no.)
2401 Morris Avenue, Union, New Jersey 07083
(Address of principal executive offices) (Zip Code)
(908) 810-8767
Issuer's Telephone Number including Area Code
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter periods that the registrant was required to
file such
reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the
Exchange Act after the distribution of securities under a
plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable
date: As of September 30, 1998: 5,655,594 shares of Common Stock
Transitional Small Business Disclosure Format (check one)
Yes X No
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
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<S> <C> <C> <C> <C> <C> <C>
September September December
30, 1998 30, 1998 31, 1997
--------------- --------------- ---------------
(Proforma) (unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $606,121 $606,121 $2,207,841
Accounts receivable 32,615 32,615 8,784
Prepaid expenses 5,029 12,448 5,127
--------------- --------------- ---------------
---------------
Total Current Assets 643,765 651,184 2,221,752
--------------- --------------- ---------------
EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION 74,655 285,918 261,643
--------------- --------------- ---------------
INVESTMENT IN NEWCO 730,287 - -
OTHER ASSETS:
Computer software costs, less accumulated
amortization 1,417,964 1,992,376 581,193
Debt issue costs, less accumulated amortization 12,521 12,521 26,609
Deposits and Other 56,555 56,555 61,669
Licenses and Intellectual Property, less
accumulated amortization 975,000 975,000 -
--------------- --------------- ---------------
--------------- --------------- ---------------
2,462,040 3,036,452 669,471
--------------- --------------- ---------------
=============== =============== ===============
$3,910,747 $3,973,554 $3,152,866
=============== =============== ===============
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $48,958 $103,114 $114,957
Accounts payable and accrued expenses 214,872 223,523 189,712
Accrued interest payable - related party 177,006 177,006 163,296
Accrued consulting fees - related party 3,000 3,000 3,000
--------------- --------------- ---------------
Total current liabilities 443,836 506,643 470,965
LONG-TERM DEBT:
Long-term debt, less current maturities 63,542 63,542 982,742
--------------- --------------- ---------------
Total Liabilities 507,378 570,185 1,453,707
--------------- --------------- ---------------
COMMITMENTS:
STOCKHOLDERS EQUITY (DEFICIENCY):
Preferred Stock, $.0001 par value: 25,000,000 shares
authorized: Series A preferred stock, 706,000
shares authorized:1,481,777 shares issued and
outstanding 148 148 -
Common Stock, $.0001 par value; 75,000,000 shares
authorized; 5,655,594 shares and 4,355,594 shares
issued and outstanding 566 566 436
Additional paid in capital 8,281,073 8,281,073 4,933,851
Deficit Accumulated During the Development Stage (4,878,418) (4,878,418) (3,235,128)
--------------- --------------- ---------------
Total Stockholders Equity 3,403,369 3,403,369 1,699,159
--------------- --------------- ---------------
$3,910,747 $3,973,554 $3,152,866
=============== =============== ===============
See Accompanying Notes to Financial Statements
2
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
DURING THE DEVELOPMENT STAGE
(Unaudited)
From Inception
Nine Months Nine Months Three Months Three Months March 7, 1994
Ended Ended Ended Ended Through
Sept. 30,1998 Sept. 30,1997 Sept. 30,1998 Sept. 30,1997 Sept. 30,1998
SERVICE REVENUE $ 52,002 $ 2,225 $ 22,128 $ 2,225 $77,865
EXPENSES:
Cost of Service 111,490 6,800 64,276 6,800 136,482
General and Administrative 1,205,173 927,670 421,330 454,432 3,881,071
Depreciation and Amortization 397,091 128,230 201,014 64,174 730,985
Interest Expense (Income), net (18,462) 52,648 (15,461) (2,102) 207,745
1,695,292 1,115,348 671,159 523,304 4,956,283
NET (LOSS) INCURRED DURING
THE DEVELOPMENT STAGE ($1,643,290) ($1,113,123) ($649,031) ($521,079) ($4,878,418)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,961,089 4,042,041 5,655,594 4,355,594 3,091,315
BASIC AND DILUTED LOSS PER
COMMON SHARE ($0.33) ($0.28) ($0.11) ($0.12) ($1.58)
See Accompanying Notes to Financial Statements
3
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS EQUITY
(Unaudited)
Deficit
Accumulated
Additional During the
Common Stock Series A Preferred Paid-in Development
Shares Par Value Shares Par Value Capital Stage Total
BALANCE - DECEMBER 31, 1997 4,355,594 $436 - - $4,933,851 ($3,235,128) $1,699,159
CONVERSION OF LONG-TERM
DEBT INTO SERIES A PREFERRED
STOCK AT $2.125 PER SHARE - - 381,177 38 809,962 - 810,000
CONVERSION OF NOTES PAYABLE
INTO COMMON STOCK AT
$0.09375 PER SHARE 400,000 40 - - 37,460 - 37,500
ISSUANCE OF COMMON STOCK
AT $1.25 PER SHARE AND PREFERRED
STOCK FOR ACQUISITION OF UNITED
LEISURE INTERACTIVE 900,000 90 1,100,000 110 2,499,800 - 2,500,000
NET LOSS - - - - - (1,643,290) ($1,643,290)
BALANCE AT SEPTEMBER 30, 1998 5,655,594 $ 566 1,481,177 $ 148 $8,281,073 ($4,878,418) $3,403,369
See Accompanying Notes to Financial Statements
4
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Period From
March 7, 1994
(Commencement of
Development Stage
Nine Months Ended Nine Months Ended Activities to
------------------ ------------------ -------------------
Sept. 30,1998 Sept. 30,1997 Sept. 30,1998
------------------ ------------------ -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (1,643,290) (1,113,123) (4,878,418)
Adjustments to reconcile net loss to net
cash flows from operating activities
Depreciation and amoritization 397,091 128,230 730,985
Contribution to capital of services rendered - - 49,600
Changes in operating assets and liabilities
Accounts receivable (23,831) 0 (32,615)
Prepaid expenses (7,321) (1,729) (12,448)
Deposits and other 4,934 - (58,703)
Accounts payable and accrued expenses 47,521 (256,069) 403,529
------------------ ------------------ -------------------
Net cash flows from operating acctivities (1,224,896) (1,242,691) (3,798,070)
------------------ ------------------ -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (293,281) (333,232) (1,611,207)
Acquisition of Prosoft, Inc. 0 (34,602) (34,602)
------------------ ------------------ -------------------
Net cash flows from investing activities (293,281) (367,834) (1,645,809)
------------------ ------------------ -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 9,652 70,000 14,652
Payments on long-term debt (847,500) (65,000) (925,840)
Proceeds from public offering of common stock
and warrants net of deferred offering costs - 4,661,124 4,705,915
Conversion of convertible notes payable
to common stock 37,500 - 67,500
Conversion of long-term debt to Series A
Preferred Stock 810,000 - 810,000
Issuance of common stock upon exercise of option - 15,000 15,000
Loans and advances from related parties - - (14,518)
Proceeds from issuance of notes payable - - 955,000
Payments under computer equipment leases (93,195) (71,260) (156,271)
Proceeds from sale and lease-back - - 294,644
Proceeds from issuance of common stock - - 110,000
Contribution to capital - stockholder/officer - 128,700 205,400
Proceeds from issuance of 10% promissory notes
and related warrants, less related costs - (563,500) 517,500
Payments on 10% promissory notes and related
warrants - - (563,500)
------------------ ------------------ -------------------
Net cash flows from financing activities (83,543) 4,160,546 6,050,000
------------------ ------------------ -------------------
NET CHANGE IN CASH AND EQUIVALENTS (1,601,720) 2,550,021 606,121
CASH AND EQUIVALENTS, BEGINNING OF YEAR 2,207,841 91,548 -
------------------ ------------------ -------------------
CASH AND EQUIVALENTS, END OF PERIOD $ 606,121 $ 2,641,569 $ 606,121
------------------ ------------------ -------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 29,000 $ 65,699 $ 169,498
------------------ ------------------ -------------------
Net liabilities assumed in reverse acquisition $ $ - $ 14,087
------------------ ------------------ -------------------
Conversion of related party debt to common stock $ $ - $ 20,109
------------------ ------------------ -------------------
Conversion of long-term debt to Series A Preferred
Stock $ 847,500 $ - $ 847,500
------------------ ------------------ -------------------
Conversion of notes payable to common stock $ 37,500 $ 30,000 $ 67,500
------------------ ------------------ -------------------
Issuance of common stock and preferred stock
to acquire travel related assets $ 2,500,000 $ - $2,500,000
------------------ ------------------ -------------------
See Accompanying Notes to Financial Statements
5
</TABLE>
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 Basis of Presentation
The consolidated balance sheet at the end of the preceding
fiscal year has been derived from the audited consolidated balance sheet
contained in the Company's Form 10-KSB and is presented for comparative
purposes. All other financial statements are unaudited. In the opinion of
management, all adjustments which include only normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows of all periods presented have been made. The results of operations
for interim periods are not necessarily indicative of the operating results for
the full year.
Footnote disclosures normally included in financial statements
prepared in accordance with the generally accepted accounting principles have
been omitted in accordance with the published rules and regulations of the
Securities and Exchange Commission. These consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Form 10-KSB for the most recent fiscal year.
Note 2 Activities of the Company
Through September 30, 1998 the principal activity of the
Company has been the development of a computerized limousine reservation and
payment system for the business traveler. The Company's proprietary software
enables a system of limousine reservations to be completely computerized and
operate without human intervention, except for the initial inputting of travel
information. Although planned operation of this system has commenced, revenues
to date have not been significant; accordingly, the Company and its subsidiaries
continue to be in development stage.
As of June 30, 1998, the Company acquired the exclusive and
worldwide rights and license for "Parallel Addressing Video Technology" for all
travel related applications. In addition, the Company acquired software,
computer systems and intellectual properties related to the travel business,
including the Travel Web Site called "NetCruise.com". The Company intends to
operate an internet travel agency featuring the technology and assets acquired.
See Note 4.
In order to concentrate its resources and efforts on its
NetCruise internet travel business, in November, 1998 the Company agreed to sell
the assets of its computerized limousine reservation and payment system to a
company newly formed by a management group lead by Mark A. Kenny, a Company
founder and Director. The Company will own a minority interest in the new
company and will receive royalties on transactions processed by the new company
for a period of five years. See Note 6.
Note 3 Stockholders Equity
Preferred Stock - The Company's Certificate of Incorporation authorizes the
issuance of up to 25,000,000 shares of Preferred Stock. On March 10, 1998, the
Board of Directors designated 706,000 shares of Series A Preferred Stock which
are convertible, in whole or in part, into fully paid and nonassessable Common
Shares on a one-for-one basis at the option of the respective holders thereof.
Holders of Series A Preferred Stock are entitled to receive dividends on a pari
passu basis with the holders of the Company's Common Stock. The Company, at its
sole option, has the right to redeem all or, from time to time, any number of
the then outstanding shares of Series A Preferred Stock at a redemption price of
$2.125 per share plus a 10% per year increase in the redemption rate.
6
In March 1998, the holder of two Term Promissory Convertible
Notes in the principal amounts of $475,000 and $237,500 converted $400,000 of
the principal amount of the former note and $200,000 of the principal amount of
the latter note into 188,235 shares and 94,118 shares respectively of the Series
A Preferred Stock of the Company at a price of $2.125 per share.
In March 1998, the holder of four eighteen month Convertible
Promissory Notes aggregating $210,000, converted the total principal amount of
the four notes ($210,000) into 98,824 shares of the Series A Preferred Stock of
the Company at a price of $2.125 per share.
Note 4 Asset Acquisition
As of June 30, 1998, the Company through NetCruise
Interactive, Inc. (NetCruise), a wholly owned subsidiary, acquired the exclusive
and worldwide rights and license for "Parallel Addressing Video Technology" for
all travel related applications from United Internet Technologies, Inc. formerly
known as United Leisure Interactive, Inc., ("UIT") a wholly owned subsidiary of
United Leisure Corporation. In addition, the Company acquired all of the
software, computer systems and intellectual properties related to the travel
business, including the Travel Web Site called "NetCruise.com" . The Company
intends to operate an internet travel agency featuring the technology and assets
acquired.
The purchase of these assets has been recorded as of the date
of purchase at the total purchase price of $2,500,000 which includes $1,450,000
of computer software, $1,000,000 of licenses and intellectual properties and
$50,000 of computer equipment.
Harry Shuster has been appointed Chairman and Brian Shuster
the President of NetCruise. Pursuant to the acquisition agreement, Mr. Brian
Shuster will receive $5,000 per month for his services as a consultant to the
Company. In addition, Messrs. Harry Shuster and Brian Shuster have been serving
as directors of the Company since the transaction closed and both have been
nominated for election as directors of the Company. Brian Shuster has been
issued two warrants to purchase restricted common shares of the Company,
exercisable between April 2, 2002 and June 30, 2002, if NetCruise achieves
certain profit levels, as defined in the warrants. One warrant is exercisable
for 200,000 shares at $2.50 per share and the other warrant is exercisable for
200,000 shares at $6.00 per share.
Note 5 Contingencies
On February 20, 1997, two individuals filed an action against the Company and
Corporate Travel Link ("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 and 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 an alleged 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 a former officer of
Travel Link. On September 28, 1998 this matter was settled and the Company
agreed to pay the plaintiffs the sum of $20,000.
In August 1996, the Company gave notice to one of its former
officers that it was canceling the 333,216 shares of Common Stock issued to him
at the inception of Corporate Travel Link, Inc. for services he was to have
provided. The Company believes that the former officer never provided such
services. Pending return of the shares, they are considered outstanding for all
periods presented herein. On April 17, 1997, the former officer of the Company
filed an action in the United States District Court, District of New Jersey,
against the Company, Travel Link, the officers of both companies and various
related and unrelated parties seeking among other things a declaratory judgment
that the former officer is the owner of the 333,216 shares of Common Stock of
the Company which had been issued to him at the inception of Travel Link for
services he was to have provided and for unspecified compensatory and punitive
damages. The Company believes that the plaintiff's claims are without merit and
intends to vigorously defend the action and to assert numerous defenses and
counterclaims in its answer.
7
On December 23, 1997, an individual filed an action in the
Superior Court of New Jersey against the Company and a former officer of the
Company alleging that the former officer of the Company induced such person to
leave her place of employment to assume employment with the Company. The claim
seeks monetary damages based upon an oral promise of employment allegedly made
by the same former officer of the Company. The Company believes that the
plaintiff's claim is without merit and intends to vigorously defend the action
and to assert numerous defenses in its answer. The former officer of the Company
has agreed to hold the Company harmless and to indemnify the Company from any
and all claims of the plaintiff in this action
Note 6 Subsequent Event
In November 1998, the Company agreed to sell the assets of its
computerized reservation and payment system to a company newly formed by a
management group lead by Mark A. Kenny, a Genisys founder and Director. When
completed, this transaction will allow Genisys to concentrate its resources and
efforts on its NetCruise internet travel business, which commenced on June 30,
1998.
Genisys will own a minority interest in the new company
("Newco") and will receive royalties on transactions processed by Newco for a
period of five years. A minority interest in Newco will also be owned by the
TranspoNet Companies, Inc. a leading developer and owner of software technology
for the ground transportation industry. Genisys and TranspoNet will provide
limited working capital to Newco. The new entity will include the officers of
Prosoft, Inc., Thomas Gregory and Paul Murray, who originally developed the
proprietary software for the reservation and payment system.
The accompanying proforma balance sheet at September 30, 1998
assumes that this contemplated transaction had occurred on that date. The
effects on the historical consolidated statement of operations would be to
reclassify all service revenue and cost of service, as well as a significant
portion of general and administrative expenses and depreciation and amortization
to a separate line item (with no impact on net income); no gain or loss is
expected to be realized.
MANAGEMENT?S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Through September 30, 1998, the principal activity of the
Company has been the development of a computerized limousine reservation and
payment system for the business traveler. Although planned operation of this
system commenced in August 1997, revenues to date have not been significant;
accordingly, the Company and its subsidiaries continue to be in the development
stage. The Company has been unprofitable since inception and expects to incur
additional operational losses. As reflected in the accompanying financial
statements, the Company has incurred losses totaling $4,878,418 since inception
and at September 30, 1998, had working capital of $144,541.
Revenues for the three and nine month periods ended September
30, 1998, for the limousine reservation business were $22,128 and $52,002, as
compared to $0 and $2,225 for the 1997 periods. The corresponding cost of
service for the three and nine month periods ending September 30, 1998 were
$62,792 and $111,490 as compared to $0 and $6,800 for the 1997 periods. To date
the Company has not yet commenced generating revenues from its internet travel
business.
General and administrative expenses were $1,205,173 for the
nine months ended September 30, 1998, as compared to $927,670 during the nine
months ended September 30, 1997. Cost increases during the 1998 period consist
of payroll and payroll related costs ($175,000), professional fees ($57,200),
travel costs ($5,600), insurance costs ($8,200), marketing costs ($28,300) and
other administrative costs ($72,100). Consulting costs decreased $68,900 during
the 1998 period.
8
General and administrative expenses were $421,330 for the
three months ended September 30,1998, as compared to $454,432 during the three
months ended September 30, 1997. Cost increases during the 1998
period consist of marketing costs ($3,600) and other administrative costs
($25,700). Cost decreases during the 1998 period consist of payroll and payroll
related costs ($16,200), consulting fees ($10,000), professional fees ($27,000),
travel costs ($8,700) and insurance costs ($500).
Management of the Company believes that the NetCruise internet
travel business, which is not compatible with the limousine reservation
business, provides the shareholders of the Company a potential opportunity for a
greater return. Therefore, in order to concentrate its resources and efforts on
its NetCruise internet travel business, in November, 1998 the Company agreed to
sell the assets of its computerized limousine reservation and payment system to
a company newly formed by a management group lead by Mark A. Kenny, a Company
founder and Director. The Company will own a minority interest in the new
company and will receive royalties on transactions processed by the new company
for a period of five years.
The Company has launched an aggressive marketing campaign
inviting customers to become NetCruise Travel Consultants. An attractive
package, including a CD-ROM library of video destinations, marketing kit, and
full service support from on-line travel agents, will be marketed to the
consumer through a combination of direct response, TV, print, radio and
web-based advertising. NetCruise.com a travel web site designed to support
outside travel consultants, will be launched in mid December.
Liquidity and Capital Resources
The Company's funds have principally been provided from Loeb
Holding Corp. as escrow agent, Loeb Holding Corp., LTI Ventures Leasing
Corporation, a private offering and a public offering.
In March 1998, the holder of two Term Promissory Convertible
Notes in the principal amounts of $475,000 and $237,500 converted $400,000 of
the principal amount of the former note and $200,000 of the principal amount of
the latter note into 188,235 shares and 94,118 shares respectively of the Series
A Preferred Stock of the Company at a price of $2.125 per share.
In March 1998, the holder of four eighteen month Convertible
Promissory Notes aggregating $210,000, converted the total principal amount of
the four notes ($210,000) into 98,824 shares of the Series A Preferred Stock of
the Company at a price of $2.125 per share.
In March 1998, the holder of two Term Promissory Convertible
Notes aggregating $37,500, converted the total principal amount of the notes
($37,500) into 400,000 shares of the Common Stock of the Company at a price of
$0.09375 per share.
As of June 30, 1998, the Company through NetCruise
Interactive, Inc. (NetCruise), a wholly owned subsidiary, acquired 100% of the
assets of a wholly owned subsidiary of United Leisure Corporation, which was
issued 2,000,000 shares of the Company's Common Stock and two warrants
("Warrants"), each entitling the holder to purchase 800,000 shares of the Common
Stock of the Company. One warrant is exercisable for 800,000 shares at $2.50 per
share and may be exercised between April 1, 2002 and June 30, 2002, but only if
NetCruise achieves profits equal to or exceeding $5,000,000 for the years 1999,
2000 and 2001. The other Warrant is exercisable for 800,000 shares at $6.00 per
share and may be exercised between April 1, 2002 and June 30, 2002, but only if
NetCruise achieves profits equal to or exceeding $10,000,000 for the years 1999,
2000 and 2001. The Company has been advised that the issuance of such securities
has caused the Company to inadvertently be in violation of a Nasdaq MarketPlace
Rule because the issuance of the shares and Warrants amounted to more than 20%
of the issued and outstanding shares of the Company and were not approved by
Shareholders as required by such Rule. Nasdaq has advised the Company that the
Company's Common Stock will be delisted unless the Company obtains Shareholder
approval for these issuances to the extent that they violate the Rule. The
Company and UIT have restructured the transaction by UIT returning to the
Company 1,100,000 shares of Common stock (retaining 900,000 shares) and the
Warrants. The Company will issue to UIT 1,100,000 shares of non-voting
Convertible Series B Preferred
9
Stock (the "Series B Preferred Stock"), which Series B Preferred Stock is
automatically convertible into 1,100,000 shares of the Company's Common Stock
upon Shareholder approval of the issuance of the 1,100,000 shares of Common
stock and the Warrants. The Series B Preferred Stock carries a mandatory
dividend of $275,000, payable on September 30, 1999 and a mandatory quarterly
dividend at the rate of $68,750 commencing with the quarter ended December 31,
1999. No dividend will be payable if the Shareholders approve the issuance of
the Common Stock and Warrants prior to the time that the dividend is payable.
See Note 4 to the financial statements.
On September 30, 1998, the Company had cash of $606,121 and
working capital of $144,541. Management of the Company estimates that is has
resources including anticipated cash to be received from revenues, to provide
for its planned operations for the next twelve months.
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Report on Form 8-K dated October 29, 1998
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
GENISYS RESERVATION SYSTEMS, INC.
Date: November 18, 1998 By: /s/ Lawrence E. Burk
President and Chief Executive Officer
Date: November 18, 1998 By: /s/ John H. Wasko
Secretary, Treasurer and
Chief Financial Officer
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(Replace this text with the legend)
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-1-1998
<PERIOD-END> SEP-30-1998
<CASH> 606
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 651
<PP&E> 479
<DEPRECIATION> 193
<TOTAL-ASSETS> 3,974
<CURRENT-LIABILITIES> 507
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,403
<TOTAL-LIABILITY-AND-EQUITY> 3,974
<SALES> 52
<TOTAL-REVENUES> 111
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (18)
<INCOME-PRETAX> (1,643)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,643)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,643)
<EPS-PRIMARY> (.33)
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</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) October 28, 1998
GENISYS RESERVATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New Jersey
(State or Other Jurisdiction of Incorporation)
1-12689 22-2719541
(Commission File Number) (I.R.S. Employer Identification No.)
2401 Morris Avenue, Union, New Jersey 07083
(Address of principal executive offices) (Zip Code)
(908) 810-8767
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. Other Events
On June 30, 1998 NetCruise (a wholly owned subsidiary of the Company)
acquired assets and a technology license from UIT in consideration of 2,000,000
shares of the Company's Common Stock and two warrants ("Warrants"), each
entitling the holder to purchase 800,000 shares of the Common Stock of the
Company. One warrant is exercisable for 800,000 shares at $2.50 per share and
may be exercised between April 1, 2002 and June 30, 2002, but only if NetCruise
achieves profits equal to or exceeding $5,000,000 for the years 1999, 2000 and
2001. The other Warrant is exercisable for 800,000 shares at $6.00 per share and
may be exercised between April 1, 2002 and June 30, 2002, but only if NetCruise
achieves profits equal to or exceeding $10,000,000 for the years 1999, 2000 and
2001. The Company has been advised that the issuance of such securities has
caused the Company to inadvertently be in violation of a Nasdaq MarketPlace Rule
because the issuance of the shares and Warrants amounted to more than 20% of the
issued and outstanding shares of the Company and were not approved by
Shareholders as required by such Rule. Nasdaq has advised the Company that the
Company's Common Stock will be delisted unless the Company obtains Shareholder
approval for these issuance to the extent that they violate the Rule. The
Company and UIT have restructured the transaction by UIT returning to the
Company 1,100,000 shares of Common Stock (retaining 900,000 shares) and the
Warrants. The Company will issue to UIT 1,100,000 shares of Convertible Series B
Preferred Stock (the "Series B Preferred Stock"), which Series B Preferred Stock
is automatically convertible into 1,100,000 shares of the Company's Common Stock
upon Shareholder approval of the issuance of the 1,100,000 shares of Common
Stock and the Warrants. The Series B Preferred Stock carries a mandatory
dividend of $275,000, payable on September 30, 1999 and a mandatory quarterly
dividend at the rate of $68,750 commencing with the quarter ended December 31,
1999. No dividend will be payable if the Shareholders approve the issuance of
the Common Stock and Warrants prior to the time that the dividend is payable.
As a result of the transaction the Company acquired the Travel Web site
called "Netcruise" and the license for "Parallel Addressing Video Technology"
for all travel related applications, along with all of the software, computer
systems and intellectual properties related to the travel business. The Company
formed NetCruise as a wholly owned subsidiary for the purpose of operating an
Internet travel agency featuring the technology obtained through this
acquisition. Harry Shuster has been appointed Chairman and Brian Shuster the
President of NetCruise. Pursuant to the acquisition agreement, Mr. Brian Shuster
will receive $5,000 per month for his services as a consultant to the Company.
In addition, Messrs. Harry Shuster and Brian Shuster have been serving as
directors of the Company since the transaction closed and both have been
nominated for election as directors of the Company.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits
1. Copy of Agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Genisys Reservation Systems, Inc.
(Registrant)
By:___________________________
John Wasko, Treasurer
DATED: October 28, 1998
AGREEMENT
1. Initial Transaction. Reference is made to that certain Asset
Purchase Agreement dated as of June 30, 1998, pursuant to which United Internet
Technologies, Inc. (formerly known as United Leisure Interactive, Inc. and
hereafter referred to as "United") sold certain assets to Netcruise Interactive,
Inc. ("Netcruise"), in consideration of, among other things, (i) 2,000,000
shares (the "Shares") of the Common shares (the "Common Stock") of Genisys
Reservation Systems, Inc. ("Genisys"), and (ii) two warrants (the "Warrants")
each entitling the holder to purchase 800,000 shares of Common Stock.
2. Curative Action and Reasons Therefor. Genisys has advised United
that (i) the foregoing matter has caused Genisys to be in inadvertent violation
of Nasdaq Marketplace Rule 4310 (c) (25) (H) (the "Rule"), because the issuance
of the Shares and the Warrants was not approved by Genisys' shareholders as
required by the Rule; and (ii) Nasdaq has informed Genisys that it will delist
the Common Stock absent the undersigned parties taking curative action (the
"Curative Action") acceptable to Nasdaq. Accordingly, Genisys and United, by
this Agreement, have, subject to the execution of this Agreement by all
individuals and entities reflected on the signature page hereto, agreed to take
the following Curative Action:
(a) Subject to compliance by Genisys with the provisions of Section 2
(b) below, United will return (the "Return") to Genisys
(i) 11100,000 of the Shares for cancellation (the remaining Shares are
hereinafter referred to as the "Retained Shares"), and (ii) the Warrants.
(b) Simultaneously with the Return, Genisys will duly and validly
authorize, issue and deliver (the "Delivery") to United 1,100,000 Preferred
shares of Genisys having the following rights, preferences, privileges and
restrictions (the "United Preferred Shares"): (i) a par value of $.000l per
United Preferred Share; (ii) no voting rights except (A) as required by law, and
(B) that the rights, preferences, privileges and restrictions of the United
Preferred Shares shall not be amended, modified or affected without the prior
written consent of the holders thereof; (iii) the following dividend rights
(with all dividends to accrue pro rata on a daily basis from the first day of
the period with respect to which they are payable): (A) one mandatory dividend
at the total annual rate of $275,000 (accruing from October 1, 1998), payable on
September 30, 1999, (B) mandatory dividends at the total quarterly rate of
$68,750 (accruing from the first day of the relevant calendar quarter), payable
on the last day of each calendar quarter commencing with the calendar quarter
ending December 31, 1999, and (C) additional mandatory dividends computed at the
rate of 10% per annum on the amount of any dividends not paid when due (accruing
from and after such relevant due dates), payable as and when (and to the full
extent of) funds become legally available for such purpose (all of the foregoing
being referred to as the "Dividend
<PAGE>
Payment Rights"); (iv) a mandatory liquidation preference equal to the sum of
$2,750,000 plus all accrued and unpaid dividends in respect of the Dividend
Payment Rights, but not to exceed the maximum permitted by New Jersey Law,
payable upon any liquidation or dissolution of Genisys (the "Liquidation
Preference"); (v) first seniority rights for the United Preferred Shares over
all other classes and series of Genisys' capital stock in respect of dividends
or other distributions on or with respect to any shares of Genisys' capital
stock, including without limitation amounts payable upon any dissolution or
liquidation of Genisys (and, in furtherance and not by way of limitation of the
foregoing, a prohibition on Genisys paying any dividend or making any other
distribution on or with respect to or redeeming or purchasing any shares of its
capital stock, other than the United Preferred Shares, while any of the United
Preferred Shares are outstanding); (vi) automatic, mandatory conversion of the
United Preferred Shares into an equal number of shares of Common Stock (with
full anti-dilution protection), immediately prior to the consummation of any
merger, consolidation, reorganization or sale of all or substantially all of the
assets of or any similar transaction involving Genisys or any of its
subsidiaries except that Genisys can sell its travel related business, provided
that such business represents less than 30~ of the assets of Genisys on a
consolidated basis; and (vii) automatic, mandatory conversion of the United
Preferred Shares into an equal number of shares of Common Stock (with full
anti-dilution protection) upon Genisys obtaining the requisite approval of its
shareholders (other than the holders of the United Preferred Shares and the
holders of the Retained Shares) to the Transaction as contemplated by Section 4
below, hereinafter the "Requisite Approval"), with all accrued and unpaid
dividends in respect of the Dividend Payment Rights to be immediately due and
payable by Genisys to the holders of the United Preferred Shares whether or not
such dividends are otherwise yet payable (unless the Requisite Approval has been
obtained and the United Preferred Shares have been converted, as aforesaid, on
or before June 30, 1999, in which event no such dividends shall be due or
payable). For purposes of this Agreement, the term "full anti-dilution
protection" shall be applied in the same manner as the anti-dilution provisions
are to be applied in the Warrants.
The Delivery shall, in form and substance, be satisfactory to United.
3. Return of Warrants. If the Requisite Approval is obtained, Genisys
will immediately redeliver the Warrants to United.
4. Shareholders Meeting. Genisys will, in accordance with all
applicable legal and Nasdaq requirements, call a meeting (the "Shareholders
Meeting") of all of the holders of its voting capital stock to consider and
approve the issuance of 1,100,000 Shares and the Warrants, as well as any other
matters that may properly come before the Shareholders Meeting.
2
<PAGE>
At the Shareholders Meeting, each of the undersigned shareholders of
Genisys agrees to vote all of its, his or her shares of Genisys' capital stock
(whether owned of record and/or beneficially), and Genisys agrees to use its
best efforts to cause all of Genisys' other shareholders to vote all of their
shares of Genisys capital stock, in favor of the issuance of the 1,100,000
Shares and the Warrants.
If, for any reason whatsoever, the aforesaid 1,100,000 Shares and the
Warrants are not issued to Netcruise on or before June 30, 1999, then, in
addition to any and all other rights and remedies available to United at
United's option, up to four (4) members of the Board of Directors of Genisys
("Board"), which members shall be selected by United, shall forthwith resign
and, concurrently therewith, all of the remaining members of the Board shall
elect those persons chosen by United to replace them. By their signatures below,
those shareholders of Genisys who are also members of the Board agree to take
such action as to carry out the terms of this provision.
5. Attorneys Fees and Other Expenses. Genisys will bear all of its own
expenses (including, without limitation, attorneys' fees and expenses) in
connection with this Agreement, the subject matter hereof and the consummation
of the transactions contemplated hereby. Genisys shall also be responsible, and
shall promptly reimburse United upon demand, for all expenses (including,
without limitation, attorneys' fees and expenses) incurred by United and its
affiliates in connection with this Agreement, the subject matter hereof and the
consummation of the transactions contemplated hereby (including, without
limitation, such thereof as may be incurred by such persons in connection with
complying with any SEC reporting requirements attendant to the foregoing); and,
in furtherance and not by way of limitation of the foregoing, Genisys shall,
simultaneously with the execution hereof by United, deliver to United the sum of
$5,000 as an advance to be used against such expenses (any unused portion
thereof to be refunded by United to Genisys following the completion of the
Shareholders Meeting). <PAGE>
IN WITNESS WHEREOF, for good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, each of the undersigned has
executed and delivered this Agreement as of the
day of October, 1998.
UNITED INTERNET TECHNOLOGIES, GENISYS RESERVATION SYSTEMS,
INC. INC.
BY:_____________________ BY:__________________
PRINCIPAL GENISYS SHAREHOLDERS:
--------------- -------------------
WARREN D. BAGATELLE MARK A. KENNY
--------------- -------------------
LOEB HOLDING CORPORATION JOHN H. WASKO
--------------- -------------------
LOEB PARTNERS CORP. JOAN E. WASKO
--------------- -------------------
HSB CAPITAL LAWRENCE E. BURK
--------------- -------------------
DAVID W. SASS S. CHARLES TABAK
4
