PRELIMINARY COPY
GENISYS RESERVATION SYSTEMS, INC.
2401 MORRIS AVENUE
UNION, NEW JERSEY 07083
Notice of Annual Meeting of Stockholders
To our Stockholders:
The Annual Meeting of Stockholders of Genisys Reservation Systems,
Inc., a New Jersey corporation (the "Corporation" or "Company"), will be held on
Tuesday, February 17, 1999.
, 1999, at 11:00 a.m. local time, at the offices of the Corporation at
2401 Morris Avenue, 3rd Floor, Union, New Jersey, 07083, to consider and act
upon the following matters. A proxy card for your use in voting on these matters
is also enclosed.
1. Electing seven (7) directors as recommended by the Board of
Directors.
2.
Approval of the issuance of 1,100,000 shares of Common Stock and two Warrants,
each in the amount of 800,000 shares, to United Internet Technologies, Inc.
(formerly known as United Leisure Interactive, Inc.,) and ratification of the
acquisition of the assets from United Internet Technologies, Inc., as
recommended by the Board of Directors.
3. Ratification of the sale of the Limousine Reservation System
business to a newly organized corporation, as recommended by
the Board of Directors.
4. Approval of an amendment to the Corporation's Certificate of
Incorporation to change the name of the Corporation to
netcruisetravel.com, inc. and to restate the provisions of the
Corporation's authorized Preferred Stock to correct certain
inconsistencies, as recommended by the Board of Directors.
5. Ratifying the appointment of independent auditors to examine
and report on the financial statements of the Corporation for
fiscal 1998 and fiscal 1999, as recommended by the Board of
Directors.
6. Transacting any other business that may properly come before
the meeting or any adjournment thereof.
All stockholders of record at the close of business on January 8, 1999,
are entitled to notice of and to vote at the meeting.
Dated: January 8, 1999
By Order of the Board of Directors
John H. Wasko
Secretary
- ----------------------------------------------------------
Your Proxy is important no matter how many shares you own. Please mark your
vote, fill in the date, sign and mail it today in the accompanying
self-addressed envelope which requires no postage if mailed in the United
States.
2
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
GENISYS RESERVATION SYSTEMS, INC.
February 17, 1999
-----------------
PROXY STATEMENT
-----------------
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of common stock, $.0001
par value per share ("Common Stock") and Series A Preferred Stock ("Series
A Preferred Stock") of Genisys Reservation Systems, Inc. and Subsidiaries
("Company") in connection with the solicitation of proxies on behalf of the
Board of Directors of the Company for use at the Annual Meeting of
Stockholders ("Annual Meeting") to be held on February 17, 1999, or at any
continuation or adjournment thereof, pursuant to the accompanying Notice of
Annual Meeting of Stockholders. The purpose of the meeting and the matters
to be acted upon are set forth in the accompanying Notice of Annual Meeting
of Stockholders. The Board of Directors knows of no other business which
will come before the meeting.
Proxies for use at the meeting will be mailed to stockholders on or about
January 11, 1999 and will be solicited chiefly by mail, but additional
solicitation may be made by telephone, telegram or other means of
telecommunications by directors, officers, consultants or regular employees
of the Company. The Company may enlist the assistance of brokerage houses,
fiduciaries, custodians and other like parties in soliciting proxies. All
solicitation expenses, including costs of preparing, assembling and mailing
the proxy material, will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the meeting and a return envelope
for the proxy are enclosed. Stockholders may revoke the authority granted by
their execution of proxies at any time before the Annual Meeting by filing with
the Secretary of the Company a written revocation or duly executed proxy bearing
a later date or by voting in person at the meeting. Such consents or revocations
can be submitted by facsimile to 1-908-810-8769. Shares represented by executed
and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote "FOR" each of the nominees for director as described in Proposal
No. 1,"FOR" the approval of the issuance of 1,100,000 shares of Common Stock and
two Warrants, each to purchase 800,000 shares of common stock of the Company, to
United Internet Technologies, Inc. formally known as United Leisure Interactive,
Inc. ("UIT") and the ratification of the acquisition of certain assets from UIT
as described in Proposal No. 2, "FOR" the ratification of the sale of the
Limousine Reservation System business to a newly organized company as described
in Proposal No. 3, "FOR" the approval of an amendment to the Company's
Certificate of Incorporation to change the name of the Company to
netcruisetravel.com, inc. and to amend and restate the provisions of the
Company's authorized Common and Preferred Stock to correct certain
inconsistencies as described in Proposal No. 4, and "FOR" the ratification of
the appointment of Auditors as described in Proposal No. 5. Proxies marked as
abstaining will be treated as present for purposes of determining a quorum for
the Annual Meeting, but will not be counted as voting in respect of any matter
as to which abstinence is indicated. If any other matters properly come before
the meeting or any continuation or adjournment thereof, the proxies intend to
vote in accordance with their best judgment.
Record Date and Voting Rights
Only stockholders of record at the close of business on January 8, 1999 are
entitled to notice of and to vote at the Annual Meeting or any continuation
or adjournment thereof. On that date there were 6,298,094 shares of the
Company's Common Stock and 381,177 shares of the Company's Series A
Preferred Stock outstanding. Each share of Common and Series A Preferred
Stock is entitled to one vote per share. Any share of Common or Series A
Preferred Stock held of record on January 8, 1999 shall be assumed, by the
Board of Directors, to be owned beneficially by the record holder thereof
for the period shown on the Company's stockholder records. The affirmative
vote of a majority of the votes cast by the stockholders present in person
or by proxy at the meeting and entitled to vote thereon is required for the
election of the directors, to approve the issuance of 1,100,000 shares of
Common Stock and two Warrants, each to purchase 800,000 shares of the
Company's common stock , to UIT and the ratification of the acquisition of
certain assets from UIT, to ratify the sale of the Limousine Reservation
System business to a newly formed company, to approve an amendment to the
Company's Articles of Incorporation to change the name of the Company to
netcruisetravel.com, inc. and to restate the provisions of the Company's
authorized Common and Preferred Stock to correct certain inconsistencies
and to ratify the appointment of auditors.
In the event that a stockholder does not designate his or her broker to
vote in their place, brokers may be precluded from exercising their voting
discretion with respect to certain matters to be acted upon and thus, in the
absence of specific instructions from the beneficial owner of the shares, will
not be empowered to vote the shares on such matters and therefore will not be
counted in determining the number of shares necessary for approval. Shares
represented by such broker non-votes will, however, be counted for the purpose
of determining whether there is a quorum. The brokers will only be allowed to
vote for the election of Directors and the ratification of the appointment of
independent auditors. Since broker non-votes are not counted, it could be more
difficult to obtain the required approval to approve the issuance of 1,100,000
shares of Common Stock and two Warrants, each to purchase 800,000 shares of the
Company's common stock, to UIT and to ratify the acquisition of certain assets
from UIT, to ratify the sale of the Limousine Reservation System business to a
newly formed company to approve an amendment to the Company's Articles of
Incorporation to change the name of the Company to netcruisetravel.com, inc. and
to restate the provisions of the Company's authorized Common and Preferred Stock
to correct certain inconsistencies.
Directors and officers of the Company and certain other Shareholders holding
approximately 39.8% of the outstanding Common Stock and all of the Series A
Preferred Stock of the Company intend to vote "FOR" the slate of directors,
"FOR" the ratification of the sale of the Limousine Reservation System business
to a newly formed company, "FOR" the approval of an amendment to the Company's
Articles of Incorporation to change the name of the Company to
netcruisetravel.com, inc. and to restate the provisions of the Company's
authorized Common and Preferred Stock to correct certain inconsistencies and
"FOR" the ratification of the appointment of auditors. Directors and Officers of
the Company and certain other shareholders holding approximately 26.1% of the
outstanding common stock and all of the Series A Preferred Stock of the Company
intend to vote "FOR" the approval of the issuance of 1,100,000 shares of common
stock and two warrants, each to purchase 800,000 shares of the Company's common
stock, to UIT and the ratification of the acquisition of certain assets from
UIT.
Forward Looking Statements
When used in this Proxy Statement, 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, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended regarding events, conditions
and financial trends that may affect the company's future plans of operations,
business strategy, operating results and financial position. Shareholders 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.
Advantages and Disadvantages of Approval of Proposals
The Company believes that the issuance of the 1,100,000 shares of
common stock and the two warrants to UIT and the ratification of the acquisition
of certain assets from UIT and ratification of the sale of the assets of the
Limousine Reservation System business are in the best interest of the Company,
as the expected growth rate of the internet travel business is anticipated to be
faster than that for the reservations systems business. If the proposed warrants
become exercisable, it will mean that the performance goals will be met, which
will be a benefit to the shareholders. The limousine reservation business has
not met the objectives that were established by management and it appears
additional funds would be required to be invested before such goals could be
achieved. If shareholders do not approve the issuance of the 1,100,000 shares of
common stock and the two warrants and ratification of the acquisition of certain
assets from UIT, the Company would be required to invest more funds in the
limousine reservation system business, with no assurance that the business will
achieve the goals set by management. The advantages to approving the amendment
to the Company's Certificate of Incorporation to change the name of the Company
to netcruisetravel.com, inc. and to restate the provisions of the Company's
authorized Common and Preferred Stock as described in proposal No. 4 is that the
Certificate of Incorporation will become clearer because certain inconsistencies
existing in the previous version will be corrected. Changing the name of the
Company to netcruisetravel.com, inc. will allow the Company to be more
identified with its operating business. The disadvantage to the name change is
that the name recognition of "Genisys Reservation Systems" will be lost.
Interested Parties
As more fully described in Proposal No. 2, the Company recently
acquired certain assets and a technology license from UIT. In connection with
this acquisition the Company is seeking Shareholder approval for the issuance of
1,100,000 shares of Common Stock and two Warrants, each to purchase 800,000
shares of the Company's Common Stock, to UIT. Messrs. Brian Shuster and Harry
Shuster are currently directors of UIT and were also elected as Directors of the
Company pursuant to the acquisition agreement. In connection with this
transaction, Mr. Brian Shuster received two warrants, each entitling him to
purchase 200,000 shares of Common Stock of the Company if certain performance
goals are met. UIT will not vote the 900,000 shares of Common Stock of the
Company currently held by UIT, nor will these votes be counted for the purpose
of obtaining a quorum for Proposal No. 2. The 900,000 shares of Common Stock of
the Company currently held by UIT will be counted for quorum purposes and will
be eligible to vote on all other matters at the 1998 Annual Meeting.
Mr. Mark A. Kenny, a former director and officer of the Company, and currently a
shareholder, is a principal of the purchaser of the assets sold by the Company,
as more fully described in Proposal No. 3. Mr. Kenny will not vote the shares of
Common Stock held by him in connection with Proposal No. 3.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide for a Board of Directors of
not less than three (3) members. The Board of Directors currently consists of
seven (7) members. The Board of Directors has fixed the number of directors at
seven (7) in accordance with the provisions of the Company's By-laws. At the
1998 Annual Meeting, seven (7) directors will be elected to serve until the next
Annual Meeting of Stockholders and until their successors have been elected and
qualified. Any vacancy or vacancies which occur during the year may be filled by
the Board of Directors, and any directors so appointed must stand for election
at the next annual meeting of stockholders.
All nominees have consented to be named and have indicated their intent
to serve if elected. The Company has no reason to believe that any of these
nominees are unavailable for election. However, if any of the nominees become
unavailable for any reason, the persons named as proxies may vote for the
election of such person or persons for such office as the Board of Directors of
the Company may recommend in the place of such nominee or nominees. It is
intended that proxies, unless marked to the contrary, will be voted in favor of
the election of the nominees.
Election of the directors requires the affirmative vote of a majority
of the votes cast at the meeting by holders of the Company's Common and Series A
Preferred Stock.
The Board of Directors recommends that the stockholders vote "FOR" the
election of the following seven nominees (Item No. 1 on the proxy card).
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NOMINEES FOR ELECTION
Name Age Position
Lawrence E. Burk 57 President, Chief Executive Officer and Director
John H. Wasko 60 Chief Financial Officer,
Secretary, Treasurer and Director
David W. Sass 63 Director
==
S. Charles Tabak 66 Director
Warren D. Bagatelle 60 Chairman
Harry Shuster 63 Director
Brian Shuster 40 Director
</TABLE>
The Company's Audit and Compensation Committees consist of Messrs. Warren D.
Bagatelle, S. Charles Tabak and David W. Sass. All officers of the Company
devote their full time to the Company's business.
Lawrence E. Burk joined the Company on June 23, 1997, as President,
Chief Executive Officer, and Director following a 27 year career with Alexander
& Alexander Services. From 1993 to early 1996, Mr. Burk served as Chairman and
CEO of Alexander & Alexander, Inc., the U.S. Retail Subsidiary of A & A
Services, and from early 1996 until the company's acquisition by AON Corporation
in late 1996, Mr. Burk served as President and Chief Operating Officer of A & A
International, the company's global retail operation. Mr. Burk served on the
company's Global Retail Board from 1985; on A & A Services Operations Board from
1989; and on A & A Inc.s' Executive Committee and Operations Board from 1989. A
& A was a NYSE listed Financial Services firm with revenues of over $1.3
billion. Mr. Burk has a B.A. degree in Economics from Southern Illinois
University and is a member of the schools' Advisory Board.
John H. Wasko has served the Company as a Director since April, 1986, 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 Lasers, Inc., presently an inactive company, 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.
David W. Sass has been a Director since April, 1997 and has been a practicing
attorney in New York City for the past 38 years and is currently a senior
partner in the law firm of McLaughlin & Stern, LLP, securities counsel to the
Company. Mr. Sass is also a director of Pallet Management Systems, Inc., a
company engaged in the manufacture and repair of wooden pallets and other
packaging services and a director of The Harmat Organization, Inc., a New York
based construction company and a member and Vice Chairman of the Board of
Trustees of Ithaca College. Mr. Sass earned a B.A. from Ithaca College, a J.D.
from Temple University School of Law and an L.L.M. (in taxation) from New York
University School of Law.
S. Charles Tabak has been a Director since April, 1997. Since 1991 he has
been the Chief Executive Officer of Arc Medical & Professional, Inc., an
employment agency specializing in placement of scientific, medical and
office personnel. From 1969 to 1990, he was the Executive Vice President
and General Counsel for Channel Home Centers Inc. From 1967 to 1969, he was
the Director of Finance of J.J. Newbury Co. Mr. Tabak is a past member of
the Board of Directors of Channel Home Centers, Inc. and Charge A Plate
Group of Greater New York. He is a graduate of both NYU School of Business
and School of Law, and is admitted to practice law in New York state and
before the U.S. Supreme Court.
Warren D. Bagatelle has been a Director and Chairman of the Board of the
Company since August, 1995. He served as Chief Executive Officer of the
Company from December 1996 through June, 1997. Since 1988, he has been a
Managing Director at Loeb Partners Corporation, a New York City investment
banking firm. 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 and a director of Evercell, Inc., a
company engaged in the development and commercialization of batteries. Mr.
Bagatelle has a B.A. in economics from Union College and an M.B.A. from
Rutgers University.
Harry Shuster is currently Chairman of the Board of NetCruise Interactive,
Inc. ("NetCruise"), a wholly owned subsidiary of the Company. Mr. Shuster
has served as Chairman ofthe Board, President and Chief Executive Officer
of United Leisure Corporation ("ULC"), a public company engaged in
children's recreational activities and interactive technology development,
since April, 1975. Mr. Shuster is also the Chairman of the Board, President
and Chief Executive Officer === of Grand Havana Enterprises, Inc., a public
company primarily engaged in the business of ownership and operation of
private membership restaurants and cigar clubs. Mr. Shuster is also the
Chairman of the Board of United Film Distributors, Inc., a privately held
independent motion picture production corporation and the General Partner
of HEP II, Inc., a limited partnership engaged in the motion picture
production business. Mr. Shuster is the father of Mr. Brian Shuster.
Brian Shuster is currently President of NetCruise. He has served as
Chief Executive Officer, President and a director of United Film Distributors,
Inc. since its inception in May, 1995. Since he has been with United Film
Distributors, Inc. he has served as the producer of seven films. Prior to
joining United Film Distributors, Inc., he served as President of Beverly Hills
Producers Group, a private production company, where he produced one motion
picture, served as executive producer of another motion picture, and oversaw
production of three other films. From 1990 until 1993 Mr. Shuster served as Vice
President of Worldwide Entertainment Group, where he also produced three motion
pictures. He is also currently a director of ULC and President of UIT and
NetCruise, Inc. Mr. Shuster is the son of Mr. Harry Shuster.
Messrs. Harry Shuster and Brian Shuster are currently directors of UIT.
The Company recently acquired certain assets and a technology license from UIT,
which is a wholly owned subsidiary of ULC, as more fully described in Proposal
No. 2. Messrs. Harry Shuster and Brian Shuster were elected as directors of the
Company following this transaction pursuant to the acquisition agreement and
will so serve for three (3) years, if so elected. In connection with this
transaction, Mr. Brian Shuster received two warrants, each entitling him to
purchase 200,000 shares of the Common Stock of the Company. One warrant is
exercisable for 200,000 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 200,000 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.
Executive Compensation
The following tabulation shows the total compensation paid by the
Company for services in all capacities in fiscal years 1995, 1996 and 1997 to
the officers of the Company. <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> <C>
Name and Principal Year Salary Bonus Other Annual
Position Compensation
Lawrence E. Burk 1997 $75,000 (1) $0 $0
President & Chief 1996 $0 $0 $0
Executive Officer 1995 $0 $0 $0
Joseph Cutrona (2) 1997 $41,639 $0 $6,667
1996 $73,500 $0 $5,000
1995 $45,000 $0 $3,840
Mark A. Kenny(3) 1997 $64,231 $0 $28,967
1996 $42,000 $0 $16,250
1995 $44,795 $0 $ 3,840
John H. Wasko 1997 $81,247 $0 $20,000
Chief Financial Officer, 1996 $10,000 $0 $49,500
Secretary & Treasurer 1995 $0 $0 $ 2,500
(1) Salary paid to Mr. Burk for the period June 23, 1997 thru December 31, 1997. Mr. Burk's Annual salary is $150,000.
(2) As of May 12, 1997, Mr. Cutrona was no longer an employee, Officer or Director of the Company.
</TABLE>
(3) Mr. Kenny formerly was the Company's Executive Vice President . He
resigned as an employee and a Director of the Company as of
November 6 , 1998.
The Company and Mr. Lawrence E. Burk entered into an Employment Agreement
on June 23, 1997 whereby the Company agreed to pay Mr. Burk a salary of
$150,000 per year. The
Employment Agreement is of continuous duration and may be terminated by
either party. Mr. Burk is also entitled to an incentive bonus to be
determined in the sole discretion by the Board of Directors of the Company.
The Company and Mr. John Wasko entered into an Employment Agreement on
October 16, 1996 whereby the Company agreed to pay Mr. H. Wasko a salary of
$80,000 per year. The Employment Agreement is of continuous duration and
may be terminated by either party. Mr. Wasko is also entitled to an
incentive bonus to be determined in the sole discretion by the Board of
Directors of the Company. The Company and Loeb Partners Corporation entered
into a three year consulting and investment banking agreement dated
September 5, 1995 whereby the Company agreed to pay
Loeb Partners Corporation a consulting fee of $3,000 per month, which contract
has been extended for an additional three (3) years. Loeb Partners Corporation
also receives 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. The Company and Mr. Mark
A. Kenny entered into an Employment Agreement on May 1, 1997 whereby the
Company agreed to pay Mr. Kenny a salary of $100,000 per year. This
contract was terminated in November, 1998 by the resignation of Mr. Kenny.
See Proposal No. 3.
Pursuant to the Asset Purchase Agreement the Company agreed that
Messrs. Harry Shuster and Brian Shuster would serve as directors of the Company
for three years and that Mr. Harry Shuster would serve as Chairman and Mr. Brian
Shuster would serve as President of NetCruise. In addition, the Company agreed
to pay Mr. Brian Shuster $5,000 per month for his services as President and
Director of NetCruise. Mr. Brian Shuster also received two warrants, each
entitling him to purchase 200,000 shares of the Common Stock of the Company. One
warrant is exercisable for 200,000 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 200,000 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.
On May 12, 1997 the Company adopted the Genisys Reservation Systems,
Inc. 1997 Omnibus Stock Incentive Plan (the "Plan"). The Plan provides for the
granting of stock options to directors, officers and employees of the Company or
any subsidiary of the Company to purchase, or to exercise certain rights with
respect to shares of Common Stock of the Company. The following table sets forth
the options granted by the Company to the officers and directors of the Company:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name No. of Percent of total Exercise or Expiration Date
==== ====== ================ =========== ===============
Securities options granted to base price
Underlying employees in the per share
Options fiscal year
John H. Wasko 25,000 $6.00 January 2003
============= ====== ===== ============
Lawrence E. Burk 200,000 $6.00 September 2002
================ ======= ===== ==============
2
<PAGE>
S. Charles Tabak 10,000 $6.00 September 2002
================ ====== ===== ==============
David W. Sass 10,000 $6.00 September 2002
============= ====== ===== ==============
</TABLE>
During 1998 the Board of Directors held four meetings and acted one
time by unanimous written consent.
Outside directors receive $1,000 for each board meeting attended in
person and $250 for each committee meeting attended in person, as compensation
for serving in such capacities during the fiscal year ending December 31, 1998.
CERTAIN TRANSACTIONS
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 ("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.
On August 11, 1995, Robotic Lasers, Inc. 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, which
option has been exercised. In November, 1996 the Company granted Mr. Wasko a
five (5) year option to purchase 35,000 shares of Common Stock at a price of
$2.00 per share, and in January 1998 the Company granted Mr. Wasko a five (5)
year option to purchase an aggregate of 25,000 shares of Common Stock at a price
of $6.00 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. This banking agreement has been extended by the
Company for three (3) years on the same terms. 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. 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.
In March 1998 the holder of two Term Convertible Promissory 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.
The holder of the term promissory notes is Loeb Holding Corporation, as
escrow agent for Warren D. Bagatelle, Managing Director of Loeb Partners Corp.,
HSB Capital (of which Mr. Bagatelle is a partner), trusts for the benefit of
families of two principals of Loeb Holding Corporation and three unaffiliated
persons. Loeb Holding Corporation disclaims any beneficial interest in these
shares. Warren D. Bagatelle is Chairman of the Company.
The Term Promissory Note in the amount of $25,000 and the Term
Promissory Note in the amount of $12,500 issued in December 1995 were converted
in March 1998 into 400,000 shares of the Common Stock of the Company at a price
of $0.09375 per share.
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 in
August of 1995. It is the Company's position that the Common Stock should be
canceled because, among other reasons, Mr. Pollan failed to provide the services
to the Company which were to be the consideration for the issuance of the
shares. Mr. Pollan has commenced an action against the Company and others in the
New Jersey Federal Court which contests the Company's effort to cancel the
shares issued to him, and which seeks monetary damages and other relief. The
action is in its preliminary stages, and no assurance can be given as to its
ultimate outcome.
During November and December 1996, the Company and Loeb Holding
Corporation signed four eighteen (18) month Convertible 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%, matured on May 11, 1998, May 25, 1998, June 2, 1998 and June 9, 1998. In
March 1998, Loeb, converted the total principal amount of the four Convertible
Promissory 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 connection with the acquisition of the assets and technology license
from UIT by NetCruise, Mr. Brian Shuster received two warrants, each entitling
him to purchase 200,000 shares of the Common Stock of the Company. One warrant
is exercisable for 200,000 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 200,000 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.
In November 1998 the Company entered into a Purchase and Sale Agreement
with a company newly formed by a management group led by Mark A. Kenny, a
Genisys founder and former director. This new company was organized for the
purpose of this acquisition. Mr. Kenny is still a shareholder of the Company.
The terms of this sale are more fully discussed in Proposal No. 3.
For the year ended December 31, 1997 the Company paid to the firm of
McLaughlin & Stern, LLP the sum of $145,762 for legal services. Mr. Sass, a
director of the Company, is a member of said firm.
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 hereof, 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.
PROPOSAL NO. 2
APPROVAL OF THE ISSUANCE OF 1,100,000 SHARES OF COMMON STOCK AND TWO STOCK
PURCHASE WARRANTS TO UNITED INTERNET TECHNOLOGIES, INC. AND RATIFICATION OF
THE ACQUISITION OF CERTAIN ASSETS FROM UNITED INTERNET TECHNOLOGIES, INC.
Pursuant to an agreement dated as of June 30, 1998 (the "Asset Purchase
Agreement"), NetCruise acquired certain 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 since 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 2,000,000 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 as a result of such
violation. The Company requested a hearing on the delisting which was held on
November 20, 1998, and is awaiting the ruling of the Nasdaq hearing panel.
The Company and UIT have restructured the transaction so that UIT will
return to the Company 1,100,000 shares of the Company's Common Stock (retaining
900,000 shares that are not in violation of the Nasdaq MarketPlace Rule) 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 is non-voting stock and
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 1,100,000 shares Common Stock and Warrants prior to the time
that the dividend is payable.
In the event shareholders do not approve the issuance and ratify the
acquisition of the assets, the transaction will be terminated. In such event the
Company estimates that the cost to undo the transaction will not exceed $50,000.
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.
NetCruise will launch an aggressive marketing campaign inviting
consumers to become NetCruise travel consultants. The Company will share all
commissions earned for air, hotel, car rental and cruise bookings with travel
consultants. An attractive package, including a CD ROM library of video
destinations, marketing kit, and full-service support from live travel agents,
will be marketed to the consumer through a combination of direct response, TV,
print, radio, and web-based advertising.
The NetCruise license for "Parallel Addressing Video Technology" allows
its travel consultants to see a destination in full motion video and stereo
audio never before available on the internet, without waiting for a lengthy file
download. Utilizing this proprietary technology the NetCruise web site interacts
with the individual's PC, finds the requested video clip on its CD ROM, and
plays it locally in a crystal clear, full screen mode. Included in the assets
acquired by NetCruise is an extensive library of video clips complete with music
and narratives in stereo, which brings views of cruise ships, hotels, and
destinations from around the world to the consumer in seconds. When the travel
consultant is ready, airline, hotel, car rental and cruise bookings will all be
made quickly and easily via NetCruise's intuitive reservation interface. If at
any point the individual requires additional expertise, a personal NetCruise
travel agent will be available to guide then through the process.
The "Parallel Addressing Video Technology" provides intranet and
internet web sites with zero-wait time, full motion video and stereo audio, to
the interactive audience. Unlike various forms of streaming video, live media
and internet video broadcasts, this technology does not rely on bandwidth as the
medium for delivery of video. UIT and its parent, ULC, developed this technology
and filed for patents in July 1997.
Harry Shuster has been appointed Chairman and Brian Shuster the
President of NetCruise. Pursuant to the Asset Purchase 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.
Effective as of November 7, 1998, the Company sold the assets of its
computerized limousine reservation system to a company newly formed by a
management group lead by Mark A. Kenny, a founder, shareholder and former
Director of the Company. This transaction allows the Company to concentrate its
resources and efforts on the continued build-up of its NetCruise internet travel
business, acquired in June 1998. The Company owns a 32.66% minority interest in
the new company and will receive certain contingent payments on transactions
processed by the new company for a period of five years. A 32.66% minority
interest in the new company is also owned by The TranspoNet Companies, Inc.
("TranspoNet"), a leading developer and owner of software technology for the
ground transportation industry. The Company and TranspoNet will provide limited
working capital to the new company. See Proposal No. 3.
Management of the Company had been exploring a number of ways to more
fully and quickly develop its internet travel business, while maintaining an
interest in the limousine reservation business, but with a significant reduction
in the resources the Company had to commit to the reservation operation.
Management of the Company believes that the NetCruise internet travel business,
which is not compatible with the limousine reservation business, provides the
Company's shareholders with a potential for a greater return.
On November 5 , 1998, in order to augment the Company's entry into the
internet travel business, the Company entered into an Asset Purchase Agreement
with Sterling AKG Corp. d/b/a Sterling Travel ("Sterling") , in which the
Company purchased all the assets relating to Sterling's network of independent
travel consultants ("Sterling Travel Consultants") for a purchase price of
42,500 shares of the Company's Common Stock. Of the total aggregate purchase
price of 42,500 shares paid to the Company at closing, 17,500 shares ("Escrow
Shares") will be held in escrow by counsel to the Company. If the Company does
not achieve $3,000,000 of gross sales from Sterling Travel Consultants over the
initial twelve month period beginning on November 1, 1998 and ending on October
31, 1999, the Escrow Shares shall immediately be returned to the Company. If the
Company achieves $3,000,000 of gross sales from Sterling Travel Consultants over
the initial twelve month period as described herein, the Escrow Shares will be
released by the Company.
International Data Corporation ("IDC") has estimated that by the end of
1998 there will be over 51 million users of the World Wide Web in the U.S. and
over 97 million worldwide. IDC projects that by the end of 2001, the number of
World Wide Web users will increase to over 106 million in the U.S. and over 227
million worldwide. Experts believe that the number of World Wide Web users and
the amount of time users spend on the Web will continue to increase as internet
access becomes more widely available, as internet bandwidth and reliability are
enhanced and as Internet content improves and becomes more multimedia intensive.
Since on-line transactions can be faster, less expensive and more
convenient than transactions conducted via traditional means, a growing number
of consumers are transacting business over the World Wide Web. Examples of such
transactions include buying consumer goods, trading securities, purchasing
airline tickets and paying bills. Jupiter Communications has estimated that 27%
of adult World Wide Web users made on-line purchases in 1997 and that 50% of
adult World Wide Web users will make on-line purchases in 2000. IDC estimates
that purchases of goods and services over the internet will increase from $32.4
billion in 1998 to $237.2 billion 2001. Many believe that as electronic commerce
expands, advertisers and direct marketers will increasingly seek to use the
World Wide Web to locate customers, advertise their products and services and
facilitate transactions.
Experts in electronic commerce on the World Wide Web assert that
lodging and airline travel will be a major leader in this market with total
on-line travel revenues possibly reaching over $50 billion by 2001. With travel
taking such a large portion of on-line sales, management of the Company expects
that the enhanced travel services offered by NetCruise will attract a wide range
of internet using consumers enabling NetCruise to become a significant
participant in internet travel.
Management of the Company is confident that there were no conflicts of
interest in negotiating the acquisition of the internet travel business and that
all negotiations with UIT were at "arms length".
Based upon the presently outstanding number of shares of Common Stock
of the Company, UIT would hold approximately 40% of the stock of the Company,
assuming issuance of 1,100,000 shares and exercise of the Warrants, all the
warrants will be exercisable only if the Company achieves profits equal to or
exceeding $10,000,000 for the years 1999, 2000 and 2001. Achieving this level of
profitability will likely increase the market value of the Company's Common
Stock several fold to the benefit of all shareholders.
Approval of the issuance of 1,100,000 shares of Common Stock of the
Company and two Warrants to UIT and the ratification of the acquisition of
assets from UIT requires the affirmative vote of a majority of the votes cast at
the meeting by holders of the Company's Common and Series A Preferred Stock
entitled to vote thereon. Pursuant to an Amendment Agreement made in connection
with the Asset Purchase Agreement, directors, officers and certain principal
shareholders of the Company, who in the aggregate hold approximately 26.1% of
the Company's outstanding Common Stock and all of the Company's Preferred Stock,
have agreed to vote "FOR" Proposal No. 2.
IN THE EVENT SHAREHOLDERS DO NOT APPROVE THE ISSUANCE AND RATIFICATION,
THE COMPANY'S SHARES OF COMMON STOCK WILL BE DELISTED FROM THE NASDAQ SMALL CAP
MARKET.
The Board of Directors recommends that the stockholders vote "FOR" approval
of the issuance of Common Stock and Warrants to UIT and ratification of the
acquisition of assets from UIT. (Item No. 2 on the proxy card).
PROPOSAL NO. 3
RATIFICATION OF THE SALE OF THE LIMOUSINE RESERVATION SYSTEM
BUSINESS TO A NEWLY ORGANIZED CORPORATION
On November 6, 1998 the company entered into an Acquisition Agreement
(the "Sales Agreement") by and between the Company and Corporate Travel Link,
Inc. ("Travel Link"), a wholly owned subsidiary of the Company (the sellers in
the transaction) and TranspoNet, Mark A. Kenny, Paul Murray and Gen 02, Inc.,
(the purchaser in the transaction). This sale will allow the Company to
concentrate its resources and efforts on the continued build-up of its internet
travel business.
Prior to the current sale, the principal business of the Company had
been the development of a computerized reservation and payment system known as
"Genisys Reservation System". The System accepts and processes reservations and
payments for ground transportation services made by its customers through
computerized reservations systems owned and operated by others, using the trade
name "Genisys Reservation System".
Under the terms of the Sale Agreement, the sellers will sell and transfer
certain contractual rights and obligations of the Company, all of the
assets of Travel Link which are utilized in connection with the ownership,
operation and marketing of Genisys Reservation Systems, Inc. and its entire
ownership interest in ProSoft to the purchaser in the transaction,
constituting approximately 27% of the total assets of the Company. The
purchase price consists of 2,450 shares of Series A Convertible Preferred
Stock of purchaser, constituting a 32.66% interest in the purchaser, and
certain contingent payments, under the terms described below:
a. For each completed limousine transaction through the current system from
corporate users, a payment of $0.20 per transaction with a $100,000 maximum
payment per year.
b. For each completed limousine transaction through the Almost
Real Time System (the "ART System") under development by the
sellers that will be directed toward leisure customers, a
payment of $0.20 per transaction with a $100,000 maximum
payment in the first year and a $0.30 payment per transaction
with a $120,000 maximum payment per year thereafter.
c. If the system and the ART System are merged at any time in the future,
the sellers shall receive a payment of $0.25 per completed transaction with
a $200,000 maximum payment in the first year and a $220,000 maximum payment
per year thereafter.
d. If the payments are not reached in a particular year, the payments
defined in letters a-c above will have a carry-over to the following
year.
e. In no event shall any payments defined in letters a-c above be due to
the sellers for transactions completed after December 10, 2003.
f. For the transfer of the assets by the sellers and the assumption of
certain liabilities of the sellers by the purchaser as described above
along with the agreement by the sellers to provide the purchaser with a
series of loans, the purchaser will grant an equity interest to the sellers
in Gen O2, Inc. equal to 32.66% of the equity of Gen O2, Inc. subject to a
Shareholder Agreement. The loans provided by the sellers will include a
ninety day secured bridge loan in the amount of $40,000 secured by 22,857
shares of Common Stock of the Company owned by Mr. Kenny, a secured loan of
$135,000 payable commencing in the second year and secured by 77,143 shares
of common stock of the Company owned by Mr. Kenny. Mr. Kenny has also
pledged 23,428 shares of the Company's Common Stock owned by him to secure
the return of a security deposit to the Company and 68,000 shares of the
Company's Common Stock to secure minimum payments which are required to be
made by the Company under certain contracts which were transferred to the
purchaser in connection with the sale.
g. A 32.66% shareholder of the purchaser, TranspoNet has committed to
provide funding for the purchaser of up to $240,000 in the form of a series
of loans. TranspoNet has a right to convert the unpaid principal of the
loans at any time into a maximum number of shares of common stock of the
purchaser not to exceed an additional 6% equity interest in the purchaser.
The Series A Preferred Stock issued to the Company and TranspoNet in
accordance with the transaction are part of a class of preferred stock of Gen
O2, Inc. designated as "Series A Preferred Convertible Stock" and the number of
shares of preferred stock constituting such class is 4,900. The shares of Series
A Preferred Stock issued to the Company together with the shares of Series A
Preferred Stock issued to TranspoNet constitute all of the authorized shares of
the Series A Preferred Stock of Gen O2, Inc. So long as any share of Series A
Preferred Stock remains outstanding, Gen O2, Inc. shall not authorize the
issuance or issue any additional shares of Series A Preferred Stock or any
shares of any series or class of stock ranking senior to, or on a parity with,
the Series A Preferred Stock as to rights upon liquidation, dissolution or
winding up of Gen O2, Inc. without the prior written consent of at least a
majority of the holders of the Series A Preferred Stock.
The par value of the Series A Preferred Stock is $0.01 per share and no
dividends shall be declared or paid on the Series A Preferred Stock. In the
event of a voluntary or involuntary liquidation, dissolution or winding up of
Gen O2, Inc., the holders of the Series A Preferred Stock shall be entitled to
receive out of the assets of Gen O2, Inc. available for distribution to
stockholders, before any distribution of assets is made to the holders of any
other series or class of stock of Gen O2, Inc., a liquidating preferential
distribution in an amount equal to $400.00 per share of Series A Preferred
Stock. The holders of the Series A Preferred Stock shall be entitled to vote on
all matters submitted to a vote of the shareholders of Gen O2, Inc. and shall be
entitled to one vote for each share of Series A Preferred Stock. The holders of
the Series A Preferred Stock shall not have cumulative voting rights. At any
time and from time to time, upon notice to Gen O2, Inc., the holders of the
Series A Preferred Stock shall be entitled to convert each share of Series A
Preferred Stock into one fully paid and non-assessable share of common stock of
Gen O2,, Inc. subject to adjustments for any stock splits, stock dividends,
reverse stock splits or recapitalization.
Upon conversion of the Series A Preferred Stock into common stock of
Gen O2, , Inc. the Company and TranspoNet will each own 2,450 shares or 32.66%
of the issued and outstanding common stock of Gen O2, Inc. It is anticipated
that the Purchaser will issue an additional 2,500 shares of common stock in the
near future, thereby diluting the ownership interest of the Company and
TranspoNet in Gen O2, Inc. to 24.5%.
Shareholders are being asked to ratify the sale of the Limousine
Reservation System business since it represented the primary focus of the
Company. Since the Limousine Reservation business did not meet its revenue
objectives and would require additional capital infusion, management decided it
would be in the best interest of the shareholders if the Company were to
concentrate its efforts on the NetCruise internet travel business.
Ratification of the sale of the Limousine Reservation System business
requires the affirmative vote of a majority of the votes cast at the meeting by
the holders of the Company's Common and Series A Preferred Stock entitled to
vote thereon.
The Board of Directors recommends that the Shareholders vote "for" the
ratification of the sale of the Limousine Reservation System business.
(Item no. 3 on the Proxy Card)
PROPOSAL NO. 4
TO AMEND ARTICLE FIRST AND FOURTH OF THE COMPANY'S CERTIFICATE OF INCORPORATION
The Board of Directors of the Company has unanimously adopted, subject
to stockholder approval, a resolution to amend Articles FIRST and FOURTH of the
Company's Certificate of Incorporation to (i) change the name of the Company
from Genisys Reservation Systems, Inc. to netcruisetravel.com, inc. and (ii)
restate the provisions of the Company's authorized Common and Preferred Stock to
correct certain inconsistencies.
Reasons for the Proposal
With the acquisition of certain assets and the technology license from
UIT, the Company expanded its travel business such that the current name is no
longer descriptive of the Company's business. Management is of the opinion that
the proposed new name is more descriptive. Through NetCruise the Company plans
to become a provider of Internet travel services and the Board of Directors has
determined that it is in the Company's best interest to change its name to be
more identified with that of the Company's business, and has adopted a
resolution amending Article FIRST of the Certificate of Incorporation to reflect
this change.
The resolution approved by the Board of Directors amending Article
FIRST is as follows:
"FIRST: The name of the Corporation is netcruisetravel.com, inc."
The Board of Directors adopted the resolution amending and restating
the first paragraph and paragraphs (a) and (b) of Article FOURTH of the
Company's Certificate of Incorporation to amend and restate the provisions of
the Company's authorized Preferred Stock to correct certain inconsistencies in
such provisions as they now exist. The restated Article FOURTH contains a
description of the rights of the holders of Common Stock not included in the
current version of the Company's Articles of Incorporation. The description of
the Preferred Stock has also been amended to correct certain inconsistencies
found in the current version. These include conflicting descriptions of the
dividends. Currently the dividends are described as being both cumulative and
non-cumulative. Also, in the prior version the Preferred Shares are given
liquidation preferences in an amount equal to the par value of the Preferred
Shares. This provision is eliminated in the amended version. These corrections
are needed for the Series B Preferred Stock to be issued to UIT as described in
Proposal No. 2. The amended version also differs from the current Article of
Incorporation in that it gives the Board of Directors the power to determine and
fix voting power, declare dividend rights without limitation and to determine
the rank of any series of Preferred Stock issued.
The resolution approved by the Board of Directors amending and
restating Article FOURTH is as follows:
"FOURTH: The total number of shares of stock which the Corporation
shall be authorized to issue shall be 100,000,000 shares consisting of
75,000,000 shares of Common Stock with a par value per share of $.000l
("Common Stock"), and 25,000,000 shares of Preferred Stock with a par
value per share of $.0001 ("Preferred Stock"). The following is a
statement of the designations and the powers, privileges, rights,
qualifications, limitations or restrictions in respect of each class of
capital stock of the Corporation:
(a) The voting, dividend, liquidation and other rights and privileges
of the holders of the Common Stock are subject to and qualified by any and all
rights and privileges of the holders of Preferred Stock of any series as may be
designated by the Board of Directors upon any issuance of the Preferred Stock of
any series. The holders of Common Stock are entitled to one vote for each share
of Common Stock held at all meetings of stockholders (and written actions in
lieu of meetings). There shall be no cumulative voting of shares of the Common
Stock. Dividends shall be declared and paid on the Common Stock from funds
legally available therefor when, as and if declared by the Board of Directors of
the Corporation. Upon the dissolution or liquidation of the Corporation, all
assets of the Company available for distribution to the holders of Common Stock
shall be distributed ratably among the holders of the Preferred Stock, if any,
and the holders of the Common Stock, subject to any preferential rights of any
then outstanding Preferred Stock.
(b) Preferred Stock may be issued at any time from time to time in one or
more series, each of such series to have such powers, designations,
preferences, rights, qualifications, limitations
or restrictions as provided in this Certificate of Incorporation or by law or in
the resolution or resolutions providing for the issuance of such series adopted
by the Board of Directors of the Corporation as hereinafter provided. Authority
is hereby granted to the Board of Directors from time to time to issue the
Preferred Stock in one or more series, and in connection with the creation of
any such series, by resolution or resolutions providing for the issuance of' the
shares thereof, to determine and fix such voting powers, full or limited, or no
voting powers, and such designations, preferences, powers and relative
participating, optional or other special rights and qualifications, limitations
or restrictions thereof, including, without limitation, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolution or resolutions, all to the full
extent now or hereafter permitted by law. Without limiting the generality of the
foregoing, the resolutions providing for issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be
junior to the Preferred Stock of any other series to the extent permitted by
law. The resolutions providing for issuance of any series of Preferred Stock may
provide that such resolutions may be amended by subsequent resolutions adopted
in the same manner as the preceding resolutions. All shares of Preferred Stock
of the same series shall be identical with each other in all respects."
Approval of the amendment to Articles FIRST and FOURTH of the Company's
Certificate of Incorporation requires the affirmative vote of a majority of the
votes cast at the meeting by holders of the Company's Common and Series A
Preferred Stock entitled to vote thereon.
The Board of Directors recommends that the stockholders vote "FOR" approval
of this Proposal No. 4.
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Wiss & Company, LLP as independent
auditors to examine and report on the consolidated financial statements of
the Company for the year ending December 31, 1998 and 1999, subject to
stockholder ratification.
During the year ending December 31, 1997 and 1998, Wiss & Company, LLP
provided the Company with audit services, including examinations of and
reporting on the Company's consolidated financial statements, as well as those
of its subsidiaries. Audit services also included a review of filings with the
Securities and Exchange Commission and the Company's annual report on Form
10-KSB.
Ratification of the appointment of Wiss & Company, LLP as independent
auditors requires the affirmative vote of a majority of the votes cast at the
meeting by holders of the Company's Common and Series A Preferred Stock entitled
to vote thereon.
A representative of Wiss & Company, LLP will be present at the Annual
Meeting.
The Board of Directors recommends that the stockholders vote "FOR"
ratification of this appointment (Item No. 5 on the proxy card).
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following tabulation shows the security ownership as of January 8, 1999
of (i) each person known to the Company to be the beneficial owner of more
than 5% of the Company's outstanding Common Stock. The Company contends it
has the right to cancel such shares, because of certain disputes it has
with Mr. Pollan. See "Certain Transactions," below ), (ii) each Director
and Officer of the Company and (iii) all Directors and Officers as a group.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF PERCENT
NAME & ADDRESS SHARES OWNED OF CLASS
Loeb Holding Corporation
As Escrow Agent (1)
61 Broadway
New York, NY 10006 1,188,973 18.8%
Loeb Holding Corporation (2)
61 Broadway
New York, NY 10006 98,824 1.56%
United Internet Technologies, Inc. (3)
18081 Magnolia Avenue
Fountain Valley, CA 92708 900,000 14.29%
Warren D. Bagatelle (1)(2)
Loeb Partners Corporation
61 Broadway
New York, NY 10006 1,287,797 20.4%
Mark A. Kenny
Gen O2, Inc.
15 Clyde Road, Suite 201
Somerset, NJ 08873 324,175 5.14%
John H. Wasko (4)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 137,046 2.17%
Lawrence E. Burk (5)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 205,000 3.25%
S. Charles Tabak (6)
ARC Medical Professional Personnel
36 Route 10W, Suite D
East Hanover, NJ 07936 17,000 *
David W. Sass (6)
McLaughlin & Stern, LLP
260 Madison Ave. 18th Fl.
New York, NY 10016 15,000 *
4
<PAGE>
Harry Shuster
United Internet Technologies, Inc.
18081 Magnolia Avenue
Fountain Valley, CA 92708 0 *
Brian Shuster (7)
United Internet Technologies, Inc.
18081 Magnolia Avenue
Fountain Valley, CA 92708 0 *
Yeshiva Beth Hillel of Krasner, Inc. 600,000 9.52%
1371 42nd Street
Brooklyn, New York 11219
All Officers and Directors
as a group (7 persons) 2,886,018 45.8%
- ---------------------
* less than 1%
</TABLE>
(1) Includes 853,679 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 Mr. Bagatelle is a partner), trusts for
the benefit of families of two principals of Loeb Holding Corporation and three
unaffiliated persons, 282,353 shares of Common Stock issuable upon conversion of
282,353 shares of Series A Preferred Stock of the Company and 52,941 shares of
Common Stock issuable upon conversion of two Convertible Notes aggregating
$112,500. Loeb Holding Corporation disclaims any beneficial interest in these
shares.
(2) Includes 98,824 shares of Common Stock issuable upon conversion of
98,824 shares of Series A Preferred Stock of the Company.
(3) UIT will also receive 1,100,000 shares of Series B Preferred Stock,
convertible into 1,100,000 shares of Common Stock if Shareholders approve the
issuance of 1,100,000 shares of Common Stock and two Warrants, each entitling
the holder to purchase 800,000 shares of Common Stock. 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.
(4) Includes 14,362 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, 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, a five (5) year option
to purchase an aggregate of 25,000 shares of Common Stock at a price of $6.00
per share granted on January 1, 1998 and 5,333 shares of Common Stock issuable
upon conversion of Mr. Wasko's prorata share of a Convertible Note in the
principal amount of $12,500.
(5) Includes a five (5) year option to purchase an aggregate of 200,000
shares of Common Stock at a price of $6.00 per share granted on September 23,
1997.
(6) Includes a five (5) year option to purchase 10,000 shares of Common
Stock at a price of $6.00 per share granted on September 23, 1997.
(7) Does not include two warrants issued in connection with the
acquisition of assets from UIT, each entitling Mr. Shuster to purchase 200,000
shares of the Company's Common Stock. One warrant is exercisable for 200,000
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 200,000 shares at $6.00 per share an 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.
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of
no other business to be presented for action at the Annual Meeting of
Stockholders. As for any business that may properly come before the Annual
Meeting or any continuation or adjournment thereof, the Proxies confer
discretionary authority to the person named therein. These persons will vote or
act in accordance with their best judgment with respect thereto.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report on Form 10-KSB for the year ended December 31, 1997
and the quarterly report for the quarter ended September 30, 1998 are being
mailed to Stockholders with this Proxy Statement and are incorporated herein by
reference.
STOCKHOLDER PROPOSAL - 1999 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion
in the proxy material for the 1999 Annual Meeting of Stockholders must be
received by the Company at its principal executive offices by April 30, 1999.
The prompt return of your proxy is appreciated and will be helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
meeting, please sign the proxy and return it in the enclosed envelope.
BY ORDER OF
THE BOARD OF DIRECTORS
JOHN H. WASKO, Secretary
New York, New York
January 8, 1999
<PAGE>
GENISYS RESERVATION SYSTEMS, INC.
P R O X Y
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Lawrence E. Burk and Warren D. Bagatelle as
Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the
shares of the common and preferred stock of Genisys Reservations Systems,
Inc. held of record by the undersigned on January 8, 1999, at the Annual
Meeting of Stockholders to be held on February 17, 1999, or any adjournment
thereof.
1. ELECTION OF DIRECTORS
Lawrence E. Burk, John H. Wasko, David W. Sass, S. Charles Tabak, Warren D.
Bagatelle, Harry Shuster and Brian Shuster.
To withhold authority to vote for any nominee, a line must be drawn
through the nominee's name.
2. APPROVAL OF THE ISSUANCE OF 1,100,00 SHARES OF COMMON STOCK AND TWO
WARRANTS EACH IN THE AMOUNT OF 800,000 SHARES TO UNITED
INTERNET TECHNOLOGIES, INC. AND RATIFICATION OF THE ACQUISITION OF
CERTAIN ASSETS FROM UNITED INERNET TECHNOLOGIES, INC.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF THE SALE OF THE LIMOUSINE RESERVATION BUSINESS SYSTEM TO
A NEWLY FORMED COMPANY.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE CORPORATION TO NETCRUSETRAVEL.COM, INC. AND
TO RESTATE THE PROVISIONS RELATING TO THE CORPORATION'S AUTHORIZED
PREFERRED STOCK AS THEY RELATE TO DIVIDENDS AND LIQUIDATION
PREFERENCES.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3, 4 AND 5.
Please sign name exactly as appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 1999
Signature
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY USING THE ENCLOSED
ENVELOPE
If you have had a change of address, please print or type your new address(s) on
the line below.
- ---------------------------
- ---------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10- KSB/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
X Annual Report Pursuant to Section 13 or
15(d) of The Securities Exchange Act of
1934
For the fiscal year ended December 31, 1997
or
Transitional Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the transition period from to
Commission File Number 033-19522-NY
GENISYS RESERVATION SYSTEMS, INC.
(formerly Robotic Lasers, Inc.)
(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)
Registrant's telephone number, including area code: (908) 810-8767 Securities
registered pursuant to Section 12(b) of the Act: NONE Securities registered
pursuant to Section 12(g) of the Act:
Common Stock, par value $.0001 per share
Class A Redeemable Warrants
Class B Redeemable Warrants
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes - X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
1
<PAGE>
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing.
$8,258,954 as of the close of business on March 25, 1998
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. The number of shares
outstanding of the registrant's Common Stock as of March 25, 1998 was 4,355,594
shares.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated: (1) any annual report to security-holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes.
1. Rule 424(b) Prospectus dated March 20, 1997 is incorporated by reference into
Parts I, II and III
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
Warrant 10.2 Consulting Agreement dated October 18, 1996 between
Registrant and Mark Kenny. 10.3 Employment Agreement dated October 17,
1996 between Registrant and John 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.
10.8 Copy of Script Consulting Agreement dated June 21, 1995 between Worldspan,
LP and Corporate Travel Link, Inc.
2
<PAGE>
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 and certain executives of the Registrant 10.14 Prosoft
Consulting Agreement 21 List of Subsidiaries
All of the above referenced documents, are incorporated herein by references to
the Exhibit bearing the same number in the Registrant's Registration Statement
on Form SB-2, File No. 333-15011.
3
<PAGE>
Part I
Item 1. Business
History
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 Common Stock of the Company (after July
16, 1996 one-for-two reverse split. See Notes 1 and 3 to December 31, 1996
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.
On March 20, 1997, the Company consummated a public offering of its
securities consisting of 1,035,000 shares of Common Stock at $5.00 per share,
1,725,000 Class A Redeemable Warrants at $.20 per Class A Redeemable Warrant and
1,035,000 Class B Redeemable Warrants at $.10 per Class B Redeemable Warrant.
Total Proceeds from the public offering, net of related costs of $1,115,619,
were $4,507,914.
On June 20, 1997, the Company acquired 80% of the outstanding common
stock of Prosoft, Inc. for an aggregate purchase price of $34,602. This
Transaction has been accounted for as a purchase and is included in the
Company's consolidated financial statements as of the date of acquisition. The
assets acquired consist principally of cash and equipment.
Presently the Company's business and operations consist solely of the
business and operations of Travel Link and Prosoft which continue to operate as
subsidiaries of the Company.
General
The principal business activity of the Company is operating a
computerized limousine reservation and payment system for the business traveler.
The proprietary software that the Company developed enables limousine
reservations to be completely computerized i.e., be entirely automatic and
operate without human intervention except for the initial inputting 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 reservation system referred to hereinafter as " 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 a rental car 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, prior to the
introduction of the Company's system there was 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, 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.
The Company works with travel agents and corporate travel departments
by providing a computerized system for securing limousine reservations.
A typical reservation with the Company's 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 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 adds the data necessary to secure a
hotel reservation. The information is transmitted to the CRS' 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 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. Confirmed reservations cannot be made quickly or efficiently.
The Company's system remedies this dilemma. The Company has created its
own computerized system which is linked with the SABRE CRS'. The company is
completing development of the interfaces to the Apollo and Worldspan CRS' and
expects to bring them on-line in mid 1998. Limousine reservations made through
the SABRE CRS are 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 is confirmed. In the event that the client has
no relationship with a service provider or has no preference, they soon 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.
In January 1998, the Company signed a participation agreement with
Carlson Wagonlit Travel, one of the world leaders in business travel management
with $9.5 billion in annual worldwide sales. Under this agreement, all Carlson
Wagonlit offices worldwide are licensed to install and operate the Company's
software to facilitate the delivery of limousine/car service reservations to the
CRS'. Using the Company's proprietary software, Carlson Wagonlit agents can make
fast and accurate ground transportation reservations for corporate customers and
their preferred suppliers directly through the Sabre CRS. Several Carlson
accounts in the northeast are currently utilizing Genisys through the Sabre CRS.
The Company is currently field testing its application for the Apollo CRS.
In February 1998, the Company and the TranspoNet Companies, Inc signed a
contractual revenue sharing agreement to fully automate the limousine booking
process from the CRS directly into the computerized back office system of
service providers. Under this agreement which renews automatically after the
initial two year term, the Company and TranspoNet have developed the technology
to channel the limousine reservation from the Corporate travel agents directly
into the back office dispatch system of contracted service providers utilizing
an existing TranspoNet product.
Employees
The Company presently has 2 executive officers and 11 non-executive
employees, including 4 employees of the Company's majority-owned subsidiary.
None of these employees is covered by a collective bargaining agreement. The
Company utilizes several software and marketing consultants on a part-time
basis. The company believes its personnel relations to be satisfactory.
Item 2. Properties
The Company and its subsidiaries presently lease approximately 2,380
square feet of office space at 2401 Morris Avenue, Union, New Jersey, 07083, and
1,750 square feet of office space at 15 Clyde Road, Somerset, New Jersey, 08873.
The five-year Union lease expires in March 2002 and provides for a monthly
rental of $3,731.53. The Somerset lease expires in November 2002 and provides
for a monthly rental of $1,968.76 though November 30, 1999 and $2,012.50 though
November 30, 2002.
The properties have been leased from unaffiliated third parties and
adequately satisfy the present needs of the Company and its subsidiaries.
Item 3. Legal Proceedings
On February 20, 1997, two individuals John White and John E. Michaels
d/b/a Corporate Planning Services, 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 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
Common Stock is based upon alleged oral representations and promises made by a
former officer of Travel Link. On March 4, 1998, Travel Link filed an
application with the Court to assert a claim for indemnification against Joseph
Cutrona and Steven Pollan, two former directors and officers of Travel Link and
the Company, and Mark A. Kenny, a former director and employee of the Company
and Travel Link, based upon a 1995 agreement whereby such individuals agreed to
hold Loeb Holding Corporation and Travel Link harmless and to indemnify them
from any and all claims or liabilities for brokerage commissions or finder's
fees incurred by reason of any action taken by it or them, including the claims
of the plaintiffs in this action.
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 Stephen Pollan a former officer and
director, that it was canceling the 333,216 shares of Common Stock issued to him
at the inception of Corporation Travel Link, Inc. for services he was to have
provided. The Company believes that Mr. Pollan never provided such services.
Pending return of the shares, they are considered outstanding for all periods
presented herein. On April 17, 1997, Mr. Pollan filed an action in the United
States District Court, District of New Jersey, against the Company,
Travel
Link, Joseph Cutrona, Mark A. Kenny, John H. Wasko, Warren D. Bagatelle, Loeb
Partners Corp., John Piscapo, R.D. White & Co., Inc., David Sass, McLaughlin &
Stern, LLP and Wiss & Company, LLP., seeking among other things a declaratory
judgement that Mr. Pollan 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 intends to vigorously defend the action and to assert
numerous defenses and counterclaims in its answer, however, the action is in its
preliminary stages and no assurance can be given as to its ultimate outcome.
On December 23, 1997, an individual, Victoria Vogel, filed an action in
the Superior Court of New Jersey against the Company and Joseph Cutrona, a
former officer and director of the Company, alleging that Mr. Cutrona, 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 Mr. Cutrona. The Company intends to vigorously
defend the action and to assert numerous defenses in its answer, however, the
action is in its preliminary stages and no assurance can be given as to its
ultimate outcome. Mr. Cutrona has agreed to hold the Company harmless and to
indmenify the Company from any and all claims of the plaintiff in this action.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held at the offices of
Corporate Travel Link, Inc., 2401 Morris Avenue, 3rd floor, Union, New Jersey,
07083, on Wednesday, December 17, 1997 at 10:30a.m. Of the 4,355,654 shares
entitled to vote at the meeting, the holders of 3,503,698 shares were present at
the meeting in person or by proxy.
Following are the results of the balloting for the election of the nominees to
the Board of Directors:
NAME VOTES IN FAVOR VOTES WITHHELD
Lawrence E. Burk 3,184,621 319,076
John H. Wasko 3,185,621 318,076
Mark A. Kenny 3,184,633 319,064
David W. Sass 3,185,633 318,064
S. Charles Tabak 3,178,733 324,964
Warren D. Bagatelle 3,183,721 319,976
The six directors have been elected to serve until their successors are
elected at the 1998 annual meeting of shareholders of the Company and have
qualified.
The shareholders approved the Company's 1997 Stock Incentive Plan dated
May 12, 1997 by a vote of 1,851,932 in favor, 367,999 against and 12,529
withheld.
The shareholders ratified the appointment of Wiss & Company as the
independent auditor to examine and report on the Financial Statements of the
Company for fiscal 1997 by a vote of 3,496,142 in favor and 606 against.
4
<PAGE>
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Market Information
Prior to 1997, the Company's Common Stock was eligible to trade in the
over-the counter market, however, the Company was unable to locate a quoted
price for its stock. The Following table indicates the quarterly high and low
bid prices for the last two years for the Company's Common Stock.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Bid Price Bid Price
1997 1996
Quarter Ended High Low High Low
------------- ---- --- ---- ---
March 31 6.5 5.75 Not Available
June 30 9 5.75 Not Available
September 30 9 3.875 Not Available
December 31 5.375 2.75 Not Available
The foregoing prices were provided by National Quotation Bureau.
As of March 20, 1997, the Effective Date of the Company's Registration
Statement, it's Common Stock, Class A Redeemable Warrants and Class B Redeemable
Warrants trade on The NASDAQ Stock MarketSM under the symbols, GENS, GENSW and
GENSZ respectively.
Approximate Number of Equity Security Holders
Approximate Number of
Holders of Record as
Title of Class of March 5, 1998
-------------- ---------------------------
Common Stock,
$.0001 par value 1,100
</TABLE>
Included in the number of stockholders of record are shares held in
"nominee" or "street" name.
Dividends
The Company has never paid any cash dividends. The Company presently
intends to retain any future earnings for use in its operations and, therefore,
does not expect to pay cash dividends in the foreseeable future.
5
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Components of Revenues and Expenses Revenues. The Company has been in the
development-stage, and just commenced generating limited revenues in August
1997. The Company did not generate any revenues from operations during the
fiscal year ended December 31, 1996. The Company brought its Genisys Reservation
and Payment Systems on-line through the Sabre CRS in August 1997 at which time
the Company commenced generating limited revenues. The Company is completing
development of the interfaces to the Apollo and Worldspan CRS' and expects to
bring them on-line in the 1st half of 1998, which will accelerate the rate of
growth of the Company's revenues.
The Genisys Reservation and Payment Systems 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 the limousine service providers who
utilize the Genisys Reservation and Payment Systems.
Expenses. Cost of service includes all costs directly attributable to the
Company's provision of services to its corporate clients and the limousine
service providers. The most 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 charges 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 administrative expenses include salaries, commissions and
benefits, travel costs, professional fees, rent, telephone and other operating
costs of the Company. The only internal expenditures capitalized with respect to
the costs of developing and implementing the Genisys Reservation and Payment
Systems have been $94,780 of salaries paid to Prosoft employees subsequent to
its acquisition in June 1997.
Results of Operations
The Company has been in the development stage and just commenced
generating limited revenues in August 1997. The Company has been unprofitable
since inception and expects to incur additional operating losses over the next
several fiscal quarters. Total revenues for the year ended December 31, 1997
were $25,863 compared to no revenues for the years ended December 31, 1996 and
August 31, 1995. The corresponding cost of sales for fiscal 1997 was $24,992.
The net loss for the year ended December 31, 1997 amounted to $1,590,125 or $.39
cents a share compared to a loss of $1,051,203 or $.36 cents a share for the
year ended December 31, 1996 and $269,080 or $.16 cents a share for the year
ended August 31, 1995. As reflected in the accompanying financial statements,
the Company has incurred losses totaling $3,235,128 since inception and at
December 31, 1997, had working capital of $1,350,787.
General and administrative expenses were $1,318,203 for the year ended
December 31, 1997 as compared to $819,205 for the year ended December 31, 1996
and $256,621 for the year ended August 31, 1995. The primary reason for the
difference between the two years ended December 31, 1997 and December 31, 1996
is the early stage of operations during the earlier period when the Company had
only 5 full-time employees, while during the latter period the Company was fully
operational and by the end of the period had increase its staff to 13 employees.
The primary reason for the difference between the year ended December 31, 1996
and August 31, 1995 is the commencement of development stage activities 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 had 5
full-time employees.
Payroll and payroll-related costs increased approximately $266,000
during the fiscal year ended December 31, 1997. Other approximate cost increases
during fiscal 1997 consist of consulting fees ($60,000), travel costs ($21,000),
marketing costs ($41,000), insurance costs ($24,000) and other administrative
costs ($97,000) . Professional fees decreased $11,000 during fiscal 1997.
Professional and consulting fees for the year ended December 31, 1997 totaled
$286,000. Such amount consisted of attorneys fees of $110,000, accounting fees
of $20,000, outside bookkeeping fees of $28,000, consulting fees of $51,000
payable to Loeb partners, $29,000 in consulting fees to Mark A. Kenny and
miscellaneous fees of $48,000.
Payroll and payroll related cost increased approximately $229,000
during the fiscal year ended December 31, 1996. Other approximate cost increases
during fiscal 1996 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 $23,370, outside bookkeeping fees of $18,630, 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.
The Company is conducting a comprehensive review of its computer
systems to identify the systems that could be affected by the "Year 2000" issue
and is developing an implementation plan to resolve the issue. The Year 2000
problem is the result of computer programs being written using two digits rather
than four to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. No easy technological "quick fix" has yet been developed for
this problem. This Year 2000 problem creates risk for the Company from
unforeseen problems in its own computer systems and from third parties with whom
the Company deals on financial transactions. Such failures of the Company's
and/or third parties computer systems could have a material impact on the
Company's ability to conduct its business, and especially to process and account
for the transfer of funds electronically.
Liquidity and Capital Resources
Since commencement of its development stage activities, the Company has
incurred losses and net cash out-flows from operations. The Company has
developed a computerized limousine reservation and payment system for the
business traveler. Although planned operations have commenced, revenues to date
have not been significant. However, management expects the Company will have
sufficient liquidity at least until March 1999 even if significant revenues from
operations are not generated and no additional financing is obtained.
The Company's funds have principally been provided from 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, LTI Ventures Leasing
Corporation, a private offering and a public 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 through 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.
In September 1995, January 1996 and December 1996, the Company entered
into sale and lease-back arrangements 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 sales, the Company received
a total of $295,000 and agreed to lease back the hardware and software for
varying terms at a monthly rental totaling $11,960.
Pursuant to a private offering, the Company issued 11.5 units to
sixteen unaffiliated third parties in May and June 1996. Each $50,000 unit
consisted of a $49,000 promissory note and a Class A Redeemable Warrant valued
at $1,000 per 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 February 1997, Joseph Cutrona, who at the time was President of the
Company, made a capital contribution to the Company in the amount of $19,700.
In February and March 1997, the Company borrowed a total of $65,000
from three unaffiliated third parties pursuant to three eighteen (18) month
Promissory Notes bearing interest at 10% per annum payable at maturity. These
notes were secured by 16,250 shares of the Company's restricted Common Stock
owned by Joseph Cutrona and 16,250 shares owned by Mark A. Kenny. In April 1997,
the Company paid the principal and interest due on these Promissory Notes in
full.
On March 26, 1997, the Company consummated a public offering of its
securities consisting of 1,035,000 shares of Common Stock at $5.00 per share,
1,725,000 Class A Redeemable Warrants at $.20 per Class A Redeemable Warrant and
1,035,000 Class B Redeemable Warrants at $.10 per Class B Redeemable Warrant.
The net proceeds of such offering totaled $4,507,914.
In May 1997, two convertible notes payable, issued in April and June
1996 when the Company borrowed a total of $30,000 from two unaffiliated third
parties, were converted into 15,000 shares of Common Stock of the Company.
On May 29, 1997, an officer of the Company exercised stock options for
25,000 shares of Common Stock of the Company at $.60 per share, resulting in
total proceeds of $15,000.
On July 28, 1997, pursuant to an agreement dated October 10, 1996,
Joseph Cutrona and Mark Kenny each contributed 14,533 shares of the Company's
Common Stock owned by them and valued at $109,000, to Prosoft in payment of
computer software design and other consulting services provided to the Company
by Prosoft.
On October 14, 1997, the Company registered under the Securities Act of 1933, as
amended, 442,098 shares of common stock, par value $.0001 per share. 22,098
shares of Common Stock offered underlie certain outstanding warrants held by
LTI. The remaining 420,000 shares of the Common Stock offered may not be
transferred until September 20, 1998, subject to earlier release at the sole
discretion of R.D. White & Co., Inc. which acted as the underwriter in
connection with the March 1997 public offering of the Company's securities. The
certificates evidencing such 420,000 shares of Common Stock include a legend
evidencing such restriction. The Underwriter may release such 420,000 shares of
Common Stock held by certain of the Selling Stockholders at any time.
The Company did not receive any of the proceeds from the sales of the
Common Stock by the Selling Stockholders but may receive proceeds upon the
exercise of certain outstanding warrants. All costs incurred in the registration
of the securities of the Selling Stockholders was borne by the Company.
Inflation is not expected to have any material effect on the Company.
6
<PAGE>
Item 7. Financial Statements and Supplementary Data.
See Pages F-1 through F-18.
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosures
Not applicable
7
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant
The following table sets forth certain information with respect to each
of the Company's directors and executive officers.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NAME AGE POSITION
Lawrence E. Burk 56 President, Chief Executive Officer
and Director
John H. Wasko 59 Chief Financial Officer,
Secretary, Treasurer
and Director
Warren D. Bagatelle 59 Chairman of the
Board of Directors
Mark A. Kenny 44 Director
David W. Sass 62 Director
S. Charles Tabak 65 Director
</TABLE>
The Company's Audit and Compensation Committees consist of Messrs. Warren D.
Bagatelle, S. Charles Tabak and David W. Sass. All officers of the Company
devote their full time to the Company's business.
Lawrence E. Burk joined the Company on June 23, 1997, as President, Chief
Executive Officer, and Director following a 27 year career with Alexander &
Alexander Services. From 1993 to early 1996, Mr. Burk served as Chairman and CEO
of Alexander & Alexander, Inc., the U.S. Retail Subsidiary of A & A Services,
and from early 1996 until the company's acquisition by AON Corporation in late
1996, Mr. Burk served as President and Chief Operating Officer of A & A
International, the company's global retail operation. Mr. Burk served on the
company's Global Retail Board from 1985; on A & A Services Operations Board from
1989; and on A & A Inc.'s Executive Committee and Operations Board from 1989. A
& A was a NYSE listed Financial Services firm with revenues of over $1.3
billion. Mr. Burk has a B.A. degree in Economics from Southern Illinois
University and is a member of the schools' Advisory Board.
John H. Wasko has served the Company as a Director since April 1986, 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 Lasers, Inc.
("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.
Warren D. Bagatelle has been a Director and chairman of the Board of Directors
of the Company since August 1995. He also served as Chief Executive Officer of
the Company from December 1996 through June 1997. Since 1998, he has been a
Managing Director at Loeb Partners Corporation, a New York City investment
banking firm. 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. Mr. Bagatelle has a BA in economics from Union College and a MBA from
Rutgers University.
Mark A. Kenny, currently an employee of 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 1974 to November 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.
David W. Sass has been a Director since April, 1997 and has been a practicing
attorney in New York City for the past 37 years and is currently a senior
partner in the law firm of McLaughlin & Stern, LLP, securities counsel to the
Company. Mr. Sass is also an officer of Ionic Fuel Technology, Inc., a company
engaged in the sale and distribution of emission control systems, a director of
The Harmat Organization, Inc., a New York based construction company and a
member and Vice Chairman of the Board of Trustees of Ithaca College. Mr. Sass
earned a B.A. from Ithaca College, a J.D. from Temple University School of Law
and an L.L.M. (in taxation) from New York University School of Law.
S. Charles Tabak has been a Director since April, 1997. Since 1991 he
has been the Chief Executive Officer of Arc Medical & Professional, Inc., an
employment agency specializing in placement of scientific, medical and office
personnel. From 1969 to 1990, he was the Executive Vice President and General
Counsel for Channel Home Centers Inc. From 1967 to 1969, he was the Director of
Finance of J.J. Newbury Co. Mr. Tabak is a past member of the Board of Directors
of Channel Home Centers, Inc. and Charge A Plate Group of Greater New York. He
is a graduate of both NYU School of Business and School of Law, and is admitted
to practice law in New York state and before the U.S. Supreme Court.
8
<PAGE>
Item 10. Executive Compensation
The following tabulation shows the total compensation paid by the
Company for services in all capacities during the years ended December 31,
1997,1996 and 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>
Annual Compensation Long Term Compensation
Awards Payout
Other Restricted All
Annual Stock Options LTIP Other
Name and Year Salary Bonus Compensation Awards /SAR's Payout Compensation
- -------- ---- ------ ----- ------------ ------ ------ ------ ------------
Principal
- ---------
Position (Mgmt. Fee)
Lawrence E. Burk 1997 $75,000 (1) $0 $0 $0 $0 $0 $0
President, & Chief 1996 $0 $0 $0 $0 $0 $0 $0
Executive Officer 1995 $0 $0 $0 $0 $0 $0 $0
Joseph Cutrona(2) 1997 $41,639 $0 $ 6,667 $0 $0 $0 $0
1996 $73,500 $0 $ 5,000 $0 $0 $0 $0
1995 $45,000 $0 $ 3,840 $0 $0 $0 $0
Mark A. Kenny (3) 1997 $64,231 $0 $28,967 $0 $0 $0 $0
1996 $42,000 $0 $16,250 $0 $0 $0 $0
1995 $44,795 $0 $ 3,840 $0 $0 $0 $0
John H. Wasko 1997 $81,247 $0 $ 20,000 $0 $0 $0 $0
Chief Financial Officer, 1996 $10,000 $0 $ 49,500 $0 $0 $0 $0
Secretary & Treasurer 1995 $0 $0 $ 2,500 $0 $0 $0 $0
Warren D. Bagatelle 1997 $0 $0 $59,500(4) $0 $0 $0 $0
Chairman 1996 $0 $0 $36,000(5) $0 $0 $0 $0
1995 $0 $0 $0 $0 $0 $0 $0
</TABLE>
(1) Salary paid to Mr. Burk for the period June 23, 1997 thru December 31, 1997.
Mr. Burk's annual salary is $150,000. (2) As of May 12, 1997, Mr. Cutrona is no
longer an employee, officer or Director of the Company.
(3) Mr. Kenny formerly was the Company's Executive Vice President and is
currently an employee and a Director of the Company but, not an officer
of the Company. (4) Includes $51,000 of consulting fees paid to Loeb
Partners Corporation of which Warren D. Bagatelle is Managing Director.
(5) Represents consulting fees paid to Loeb Partners Corporation.
9
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following tabulation shows the security ownership as of December 31, 1997 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 E. Pollan which the Company has given notice of cancellation 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
NAME & ADDRESS SHARES OWNED OF CLASS
Loeb Holding Corporation
As Escrow Agent (1)
61 Broadway
New York, NY 10006 1,053,679 22.16%
Warren D. Bagatelle (1)
Loeb Partners Corporation
61 Broadway
New York, NY 10006 1,053,679 22.16%
Joseph Cutrona
Corporate Travel Marketing
PO Box 1180
Sayerville, NJ 08872 377,350 8.66%
Mark A. Kenny
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 574,175 13.18%
John H. Wasko (2)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 112,046 2.54%
Lawrence E. Burk (3)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 205,000 4.50%
S. Charles Tabak (4)
ARC Medical Professional Personnel
36 Route 10W, Suite D
East Hanover, NJ 07936 14,000 *
David W. Sass (4) McLaughlin & Stern, LLP 260 Madison Avenue, 18th FL.
New York, NY 10016 15,000 *
All Officers and Directors
as a group (6 persons) 1,973,900 39.39%
- --------------------------
* less than 1%
(1) Includes 653,679 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
16
Bagatelle is a partner), trusts for the benefit of families of two principals of
Loeb Holding Corporation and three unaffiliated persons and 400,00 shares of
Common Stock issuable upon conversion of two Convertible Notes aggregating
$37,500. Loeb Holding Corporation disclaims any beneficial interest in these
shares.
(2) Includes 14,362 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 and 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 Mr. Wasko's prorate share of a
Convertible Note in the principal amount of $12,500.
(3) Includes a five (5) year option to purchase an aggregate of 200,000
shares of Common Stock at a price of $6.00 per share issued on September 23,
1997.
(4) Includes a five (5) year option to purchase 10,000 shares of Common
Stock at a price of $6.00 per share issued September 23, 1997.
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 and February 1995, 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 have been provided to the Company. See "Certain
Transactions."
Item 12. Certain Relationships and Related 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 Term Promissory Note in the principal amount of $475,000 and an
additional Term Promissory Note in the principal amount of $237,500 issued in
December 1995 and described 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 quarterly installments, commencing September 1,
1998, or on such earlier date as such notes provide. The notes and the unpaid
interest accrued thereon, are convertible at the sole option of the holder into
shares of Series A Preferred Stock of the Company at a conversion price of
$2.125 per share.
The shares of Series A Preferred Stock 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 notice of shareholders' meetings and are entitled to vote
in common with the Common Stock of the Company. The Series A Preferred Stock is
not entitled to the declaration or payment of dividends. 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, such amount to be increased at the rate of ten (10%) percent
per annum for the period such Series A Preferred Shares are outstanding.
17
In March 1998, the holder of the notes converted $400,000 of the
principal amount of such notes into 188,235 shares of the Series A Preferred
Stock of the Company.
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 September 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 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 Corporate Travel Link, Inc.
by issuing 1,682,924 shares of restricted Common Stock of the Company in
exchange for the shares of the common stock of Corporate Travel Link owned by
Joseph Cutrona, Mark A. Kenny and Steven E. Pollan which represented all the
authorized, issued and outstanding shares of common stock of Corporate Travel
Link.
On September 5, 1995, the Company entered into a three year consulting
and investment banking agreement with Loeb Partners Corporation which has been
extended for an additional three year period. 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 (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.
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 in
August of 1995. It is the Company's position that the Common Stock should be
canceled because, among other reasons, Mr. Pollan failed to provide the services
to the Company which were to be the consideration for the issuance of the
shares. Mr. Pollan has commenced an action against the Company and others in the
New Jersey Federal Court which contests the Company's effort to cancel the
shares issued to him, and which seeks monetary damages and other relief. The
action is in its preliminary stages, and no assurance can be given as to its
ultimate outcome.
During the quarters ended September 30, 1996, and December 31, 1996, in
order to raise additional working capital for the Company, Joseph Cutrona,
former 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 9,850 shares of restricted
Common Stock to 5 unaffiliated third parties at a price of $2.00 per share for
total proceeds of $19,700, which Mr. Cutrona remitted to the Company in the form
of an additional capital contribution. Mr. Mark A. Kenny has issued 23,725 of
his own shares of restricted common stock of the Company to reimburse Mr.
Cutrona for one-half of the number of shares sold by Mr. Cutrona.
On October 10, 1996, the Company, Joseph Cutrona, 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
18
development of the Genisys Payment System. Prosoft agreed to accept the 29,066
shares valued at $3.75 per share in satisfaction of $108,997.50 which would be
owned to Prosoft, Inc. by the Company upon completion of the Genisys Payment
System. This transfer has been completed. 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 specific 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.
In November 1996, the Company granted Mr. Wasko a five (5) year option
to purchase 35,000 shares of Common Stock at a price of $2.00 per share.
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 $210,000). The Promissory Notes which have been modified and
bear interest at 10%, mature on September 1, 1998. The Promissory Notes and any
unpaid interest accrued thereon, are convertible at the sole option of the
holder into shares of Series A Preferred Stock of the Company at a conversion
price of $2.125 per share.
In February and March 1997, the Company borrowed a total of $65,000 from three
unaffiliated third parties pursuant to three eighteen (18) month Promissory
Notes bearing interest at 10% per annum payable at maturity. These notes were
secured by 16,250 shares of the Company's restricted Common Stock owned by
Joseph Cutrona and 16,250 shares owned by Mark A. Kenny. In April 1997, the
Company paid the principal and interest due on these Promissory Notes in full.
The Company believes that each of these transactions was entered into
on terms at least a favorable to the Company as could have been obtained from
unaffiliated third parties.
19
<PAGE>
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-k
(a) (1) Financial Statements
Included in Part II of this report:
Balance Sheets - December 31, 1997 and 1996.
Statements of Operations During the Development Stage - For the
Period from Inception through December 31, 1997 and the Years
Ended December 31, 1997 and December 31, 1996.
Statements of Cash Flows - For the Period from Inception through
December 31, 1997 and for the Years Ended December 31, 1997 and
December 31, 1996.
Statement of Changes in Stockholders' Equity - For the Years Ended
December 31, 1997 and December 31, 1996.
Notes to Financial Statements
(2) Exhibits
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 Warrant 10.1*
Employment Agreement dated June 23, 1997 between Registrant and Lawrence E.
Burk filed herein with this report.
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. 10.8* Copy of Script Consulting
Agreement dated June 21, 1995 between Worldspan, LP and Corporate Travel Link,
Inc.
20
<PAGE>
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 and certain executives of the
Registrant.
10.14* Prosoft Consulting Agreement.
10.15* Employment Agreement dated May 1, 1997 between the Registrant an
Mark A. Kenny.
10.16* Copy of Agreement dated February 1, 1998 between the TranspoNet
Companies, Inc. and the Registrant filed herein with this report.
21* List of Subsidiaries
All of the above referenced documents, marked with an (*) are incorporated
herein by reference to the Exhibit bearing the same number in the Registrant's
Registration Statement on Form SB-2, File No. 333-15011.
(b) (1) Reports on Form 8-K
None
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
December 18, 1998 By:_________________________________
Lawrence E. Burk
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated. <TABLE> <CAPTION> <S> <C> <C>
<C> <C> <C> <C>
_______________________ President, Chief Executive Officer, December 18, 1998
Lawrence E. Burk and Director
_______________________ Secretary, Treasurer, Chief Financial December 18, 1998
John H. Wasko Officer and Director
_______________________ Chairman and Director December 18, 1998
Warren D. Bagatelle
________________________ Director December 18, 1998
Mark A. Kenny
________________________ Director December 18, 1998
David W. Sass
________________________ Director December 18, 1998
S. Charles Tabak
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSBA
(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>
<CAPTION>
<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.
The Company's web site went on line December 9, 1998 and consumers can now make
travel arrangements on the web site. However, the Company expects that the web
site will not be fully integrated to support the NetCruise Travel Consultants
until early first quarter 1999. 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.
The Company is conducting a comprehensive review of its
computer systems to identify the systems that could be affected by the "Year
2000" issue and has developed an implementation plan to resolve the issue. The
Year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. No easy technological "quick fix" has
yet been developed for this problem. This Year 2000 problem creates risk for the
Company from unforeseen problems in its own computer systems and from third
parties with whom the Company deals on financial transactions. Such failures of
the Company's and/or third parties computer systems could have a material
<PAGE>
impact on the Company's ability to conduct its business, and especially to
process and account for the transfer of funds electronically.
With the goal of making the Company Year 2000 compliant, the Company has
developed a five phase implementation plan as follows:
Initial phase
Inventory phase
Vendor - contact phase
Reintegration phase
Testing phase
The Company has budgeted approximately $15,000 to implement this plan and has
assigned overall responsibility for the project to its Systems Manager.
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.
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 purchased web site comprises two registered domain names, numerous
web pages containing information relating to the cruise industry and the
contract rights to book travel utilizing our web site operating through an
internet reservation booking system or booking engine. The Company's web site
went on line December 9, 1998 and consumers can make travel arrangements through
our web site. However, the Company expects that the web site will not be fully
integrated to support NetCruise Travel Consultants until early first quarter
1999.
7
<PAGE>
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. The Company's wholly owned subsidiary,
NetCruise Interactive, has assumed UIT's lease of approximately 1,617 square
feet (including tenant's pro rata share of common area) at 1990 Westwood Blvd.,
Penthouse, Los Angeles, CA 90025. The term of this lease is for 5 years
commencing on March 1, 1996 and ending on February 28, 2001. During the first
through 2nd year of the term of the lease, the rent is $2,587 per month and
during the 3rd through 5th year of the term of the lease the rent is $2,846 per
month.
Note 5 Contingencies
On February 20, 1997, two individuals John White and John E.
Michaels d/b/a Corporate Planning Services, 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 plaintiff's 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 claims for the
shares of Common Stock is based upon alleged oral representations and promises
made by Joseph Cutrona a former officer and director of Travel Link and the
Company. On March 4, 1998 Travel Link filed an application with the Court to
assert a claim for indemnification against Joseph Cutrona and Steven Pollan, a
former director and officer of Travel Link and the Company, and Mark A. Kenny, a
former director and employee of the Company and Travel Link, based upon a 1995
agreement whereby such individuals agreed to hold Loeb Holding Corporation and
Travel Link harmless and to indemnify them from any and all claims or
liabilities for brokerage commissions or finder's fees incurred by reason of any
action taken by it or them, including the claims of the plaintiff's in this
action. On September 28, this matter was settled and the Company agreed to pay
the plaintiff's the sum of $20,000.
In August 1996, the Company gave notice to Stephen Pollan a
former officer and director, that is 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 Mr. Pollan never provided
such services. Pending return of the shares, they are considered outstanding for
all periods presented herein. On April 17, 1997, Mr. Pollan filed an action in
the United States District Court, District of New Jersey, against the Company,
Travel Link, Joseph Cutrona, Mark A. Kenny, John H. Wasko, Warren D. Bagatelle,
Loeb Partners Corp., John Piscopo, R.D. White & Co., Inc., David Sass,
McLaughlin & Stern, LLP and Wiss & Company, LLP., seeking among other things a
declaratory judgement that Mr. Pollan 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 intends to vigorously defend the
action and to assert numerous defenses and counterclaims in its answer, however,
the action is in its preliminary stages and no assurance can be given as to its
ultimate outcome.
On December 23, 1997, an individual, Victoria Vogel, filed an
action in the superior Court of New Jersey against the Company and Joseph
Cutrona, a former officer and director of the Company, alleging that Mr. Cutrona
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 Mr. Cutrona. The Company intends to vigorously
defend the action and to asset numerous defenses in its
<PAGE>
answer, however, the action is in its preliminary stages and no
assurance can be given as to its ultimate outcome. Mr. Cutrona 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 Events
At the beginning of the third quarter 1998, Management of the
Company set revenue objectives for the limousine reservation business and made
the decision to review the operation at the end of the third quarter to
determine the best approach to maximize utilization of the Company's resources.
The Limousine reservation business did not meet its revenue objectives and in
early September 1998, the Company decided to seek a buyer or joint venture
partner for its limousine reservation business.
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
("Purchaser"). 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.
The sales price of the Company's computerized limousine
reservation and payment system paid by Purchaser to the Company for the
purchased assets consists of (i) royalty payments to be made by Purchaser in the
amounts and on the terms and conditions more fully described below (each a
Contingent Payment); and (ii) 2,450 shares of series A Convertible Preferred
Stock of Purchaser (the "Series A Preferred Stock"), as more fully described
below.
The Contingent Payments to be paid by Purchaser shall be calculated as follows:
( a) The Company shall receive a Contingent Payment in an amount equal to
twenty cents ($.20) for each reservation (excluding canceled reservations,
"no-show" reservations and those reservations for which the client is
disputing the validity or size of the charge or the quality of service)
transmitted to and processed by the Genisys Reservation System (each a
"Corporate Reservation" and, collectively, the "Corporate Reservations").
The aggregate Contingent Payment to be made to the Company for the
Corporate Reservations shall not exceed the annual sum of One Hundred
Thousand Dollars ($100,000).
(b) During the first year of the operation of the Almost Real Time
reservations system currently being developed by the Company (the "ART
Reservation System"), the Company shall receive a Contingent Payment in an
amount equal to twenty cents ($.20) for each reservation transmitted to
(excluding canceled reservations, "no-show" reservations and those
reservations for which the client is disputing the validity or size of the
charge or the quality of service) and processed by the ART Reservation
System (each an "ART Reservation" and, collectively, the "ART
Reservations"). In each year thereafter, the Company shall receive a
Contingent Payment in an amount equal to thirty cents ($.30) for each ART
Reservation. During the first year of operation of the ART Reservation
System, the aggregate Contingent Payments to be made to the Company for the
ART Reservations shall not exceed the annual sum of One Hundred Thousand
Dollars ($100,000). In each year thereafter, the Contingent Payments to be
made to the Company for the ART Reservations shall not exceed the annual
sum of One Hundred and Twenty Thousand Dollars ($120,000).
(c) In the event the Genisys Reservations system is merged with the ART
Reservation System (the "Merged Reservation System"), the Company shall
receive a Contingent Payment in an amount equal to twenty-five cents ($.25)
for each reservation transmitted to (excluding canceled reservations,
"no-show" reservations and those reservations for which the client is
disputing the validity or size of the charge or the quality of service) and
processed by the Merged Reservations System (each a "Merged Reservation"
and, collectively, the "Merged Reservations"). During the first year of
operation of the Merged Reservation System, the aggregate Contingent
Payments to be made to the Company for the Merged Reservations shall not
exceed the annual sum of Two Hundred Thousand Dollars ($200,000.
<PAGE>
In each year thereafter, the Contingent Payments to be made to the
Company for the Merged Reservations shall not exceed the annual sum of
Two Hundred and Twenty Thousand Dollars ($220,000).
In the event that the maximum aggregate annual Contingent Payment for
Corporate Reservations, ART Reservations or Merged Reservations, respectively,
is not achieved in any one year, then the difference between the amount of
Contingent Payments actually made and the respective maximum Contingent Payment
shall be carried forward into succeeding years and the allowable maximum
aggregate Contingent Payments for such succeeding years shall be duly increased
thereby.
The Series A Preferred stock issued to the Company and TranspoNet in
accordance with the transaction are part of a class of preferred stock of
Purchaser designated as "Series A Preferred Convertible Stock" and the number of
shares of preferred stock constituting such class is 4,900. The shares of Series
A Preferred Stock issued to the Company and TranspoNet constitute all of the
authorized shares of the Series A Preferred Stock of Purchaser. So long as any
share of Series A Preferred Stock remains outstanding, Purchaser shall not
authorize the issuance or issue any additional shares of Series A Preferred
Stock or any shares of any series or class of stock ranking senior to, or on a
parity with, the Series A Preferred Stock as to rights upon liquidation,
dissolution or winding up of Purchaser without the prior written consent of at
least a majority of the holders of the Series A Preferred Stock.
The par value of the Series A Preferred Stock is $0.01 per share and no
dividends shall be declared or paid on the Series A Preferred Stock. In the
event of a voluntary or involuntary liquidation, dissolution or winding up of
Purchaser, the holders of the Series A Preferred Stock shall be entitled to
receive out of the assets of Purchaser available for distribution to
stockholders, before any distribution of assets is made to the holders of any
other series or class of stock of Purchaser, a liquidating preferential
distribution in an amount equal to $400.00 per share of Series A Preferred
stock. The holders of the Series A Preferred Stock shall not have cumulative
voting rights. At any time and from time to time, upon notice to Purchaser, the
holders of the Series A Preferred Stock shall be entitled to convert each share
of Series A Preferred Stock into one fully paid and non-assessable share of
common stock of Purchaser, subject to adjustments for any stock splits, stock
dividends, reverse stock splits or recapitalizations.
Upon conversion of the Series A Preferred Stock into Common Stock of
the Purchaser, the Company and TranspoNet will each own 2450 shares or 32.66% of
the issued and outstanding Common Stock of the Purchaser.
The Company has agreed to loan to Purchaser the aggregate principal
amount of One Hundred and Thirty-five Thousand Dollars ($135,000), such
aggregate amount to be disbursed to Purchaser pursuant to the following
installment schedule:
Closing Date $20,000
January 10, 1999 $20,000
February 10, 1999 $20,000
March 10, 1999 $20,000
April 10, 1999 $20,000
May 10, 1999 $20,000
June 10, 1999 $15,000
The loan made to Purchaser described above bears interest at
the rate of nine percent (9%) per annum and accrues from the date of the first
disbursement set forth above and is payable on December 10, 1999 and quarterly
thereafter on March 10, 2000, June 10, 2000, September 10, 2000 and December 10,
2000. The principal of the loan is to be repaid in four (4) equal quarterly
installments payable on March 10, 2000, June 10, 2000, September 10, 2000 and
December 10, 2000. All remaining outstanding principal of and accrued interest
on the loan is due and payable on December 10, 2000.
In order to secure payment when due of any and all of the principal of and
interest on the loan,
<PAGE>
Mark A. Kenny (the "Pledgor") has pledge and granted to the Company a first
priority lien on and security interest in 77,143 shares of common stock of
Genisys owned by the Pledgor.
In additional to the above installment loans made to
Purchaser, the Company has agreed to loan Purchaser the aggregate principal
amount of Forty Thousand Dollars ($40,000), such aggregate amount to be
disbursed as follows: Ten Thousand Dollars ($10,000) on the Closing Date,
Fifteen Thousand Dollars ($15,000) on January 10, 1999 and Fifteen Thousand
Dollars ($15,000) on February 10, 1999. This bridge loan to Purchaser bears
interest at the rate of nine percent (9%) per annum and interest on the loan
accrues from the date of the first disbursement set forth above. The principal
of this loan, together with all accrued interest thereon, is due and payable in
full on March 10, 1999, unless, prior to that date, the Company shall close a
sale of its equity securities the gross proceeds to the Company of which equal
or exceed Five Hundred Thousand Dollars ($500,000), in which case, the principal
of this loan, together with all accrued interest thereon, shall be due and
payable in full on June 1, 1999.
In order to secure payment when due of the principal and
interest on the bridge loan, the Pledgor has pledged and granted to the Company
a first priority lien on and security interest in 22,857 shares of common stock
of Genisys owned by the Pledgor.
On November 5 , 1998 the Company entered into an Asset
Purchase Agreement with Sterling AKG Corp. d/b/a Sterling Travel ("Sterling") ,
in which the Company purchased all the assets relating to Sterling's network of
independent travel consultants ("Sterling Travel Consultants") for a purchase
price of 42,500 shares of the Company's Common Stock. Of the total aggregate
purchase price of 42,500 shares paid to the Company at closing, 17,500 shares
("Escrow Shares") will be held in escrow by counsel to the Company. If the
Company does not achieve $3,000,000 of gross sales from Sterling Travel
Consultants over the initial twelve month period beginning on November 1, 1998
and ending on October 31, 1999, the Escrow Shares shall immediately be returned
to the Company. If the Company achieves $3,000,000 of gross sales from Sterling
Travel Consultants over the initial twelve month period as described herein, the
Escrow Shares will be released by the Company.
The accompanying proforma balance sheet at September 30, 1998
assumes that this 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 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
<PAGE>
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. The increase of approximately $175,000 in payroll cost for the
nine months ended September 30, 1998 was due in large part to the fact that the
three highest paid employees of the Company, Thomas Gregory and Paul Murray,
President and Vice President respectively of Prosoft and Lawrence E. Burk the
Company's President were on the payroll for the full nine months of the 1998
period, but were only on the payroll for less than four months of the 1997
period. The $28,3000 increase in marketing activities is primarily due to sales
and marketing costs incurred by the limousine reservation business in an attempt
to meet its revenue objectives.
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 ($500).
Management of the Company believes that the NetCruise internet
travel business, which is not compatible with the limousine reservation
business, provides the shareholders of the Company a potential opportunity for a
greater return. Therefore, in order to concentrate its resources and efforts on
its NetCruise internet travel business, in November, 1998 the Company agreed to
sell the assets of its computerized limousine reservation and payment system to
a company newly formed by a management group lead by Mark A. Kenny, a Company
founder and former director ("Purchaser"). The sales price of the Company's
computerized limousine reservation and payment system paid by Purchaser to the
Company for the purchased assets consists of (i) royalty payments to be made by
Purchaser in the amounts and on the terms and conditions more fully described
below (each a Contingent Payment); and (ii) 2,450 shares of series A Convertible
Preferred Stock of Purchaser (the "Series A Preferred Stock"), as more fully
described below.
The Contingent Payments to be paid by Purchaser shall be calculated as follows:
(a) The Company shall receive a Contingent Payment in an amount equal to
twenty cents ($.20) for each reservation (excluding canceled
reservations, "no-show" reservations and those reservations for which
the client is disputing the validity or size of the charge or the
quality of service) transmitted to and processed by the Genisys
Reservation System (each a "Corporate Reservation" and, collectively,
the "Corporate Reservations"). The aggregate Contingent Payment to be
made to the Company for the Corporate Reservations shall not exceed the
annual sum of One Hundred Thousand Dollars ($100,000).
(b) During the first year of the operation of the Almost Real Time
reservations system currently being developed by the Company (the "ART
Reservation System"), the Company shall receive a Contingent Payment in an
amount equal to twenty cents ($.20) for each reservation transmitted to
(excluding canceled reservations, "no-show" reservations and those
reservations for which the client is disputing the validity or size of the
charge or the quality of service) and processed by the ART Reservation
System (each an "ART Reservation" and, collectively, the ("ART
Reservations"). In each year thereafter, the Company shall receive a
Contingent Payment in an amount equal to thirty cents ($.30) for each ART
Reservation. During the first year of operation of the ART Reservation
System, the aggregate Contingent Payments to be made to the Company for the
ART Reservations shall not exceed the annual sum of One Hundred Thousand
Dollars ($100,000). In each year thereafter, the Contingent Payments to be
made to the Company for the ART Reservations shall not exceed the
<PAGE>
annual sum of One Hundred and Twenty Thousand Dollars ($120,000).
(c) In the event the Genisys Reservations system is merged with the ART
Reservation System (the "Merged Reservation System"), the Company shall
receive a Contingent Payment in an amount equal to twenty-five cents ($.25)
for each reservation transmitted to (excluding canceled reservations,
"no-show" reservations and those reservations for which the client is
disputing the validity or size of the charge or the quality of service) and
processed by the Merged Reservations System (each a "Merged Reservation"
and, collectively, the "Merged Reservations"). During the first year of
operation of the Merged Reservation System, the aggregate Contingent
Payments to be made to the Company for the Merged Reservations shall not
exceed the annual sum of Two Hundred Thousand Dollars ($200,000. In each
year thereafter, the Contingent Payments to be made to the Company for the
Merged Reservations shall not exceed the annual sum of Two Hundred and
Twenty Thousand Dollars ($220,000).
In the event that the maximum aggregate annual Contingent
Payment for Corporate Reservations, ART Reservations or Merged Reservations,
respectively, is not achieved in any one year, then difference between the
amount of Contingent Payments actually made and the respective maximum
Contingent Payment shall be carried forward into succeeding years and the
allowable maximum aggregate Contingent Payments for such succeeding years shall
be duly increased thereby.
The Series A Preferred stock issued to the Company and
TranspoNet in accordance with the transaction are part of a class of preferred
stock of Purchaser designated as "Series A Preferred Convertible Stock" and the
number of shares of preferred stock constituting such class is 4,900. The shares
of Series A Preferred Stock issued to the Company and TranspoNet constitute all
of the authorized shares of the Series A Preferred Stock of Purchaser. So long
as any share of Series A Preferred Stock remains outstanding, Purchaser shall
not authorize the issuance or issue any additional shares of Series A Preferred
Stock or any shares of any series or class of stock ranking senior to, or on a
parity with, the Series A Preferred Stock as to rights upon liquidation,
dissolution or winding up of Purchaser without the prior written consent of at
least a majority of the holders of the Series A Preferred Stock.
The par value of the Series A Preferred Stock is $0.01 per
share and no dividends shall be declared or paid on the Series A Preferred
Stock. In the event of a voluntary or involuntary liquidation, dissolution or
winding up of Purchaser, the holders of the Series A Preferred Stock shall be
entitled to receive out of the assets of Purchaser available for distribution to
stockholders, before any distribution of assets is made to the holders of any
other series or class of stock of Purchaser, a liquidating preferential
distribution in an amount equal to $400.00 per share of Series A Preferred
stock. The holders of the Series A Preferred Stock shall not have cumulative
voting rights. At any time and from time to time, upon notice to Purchaser, the
holders of the Series A Preferred Stock shall be entitled to convert each share
of Series A Preferred Stock into one fully paid and non-assessable share of
common stock of Purchaser, subject to adjustments for any stock splits, stock
dividends, reverse stock splits or recapitalizations.
Upon conversion of the Series A Preferred Stock into Common
Stock of the Purchaser, the Company and TranspoNet will each own 2450 shares or
32.66% of the issued and outstanding Common Stock of the Purchase.
In July 1998, the Company began development of an aggressive
marketing campaign which, when completed will invite 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. The primary thrust of the
marketing campaign, a television infomercial, will begin to air in mid February,
1999. In the interim the Company through subcontractors is producing the
infomercial. The Company has developed NetCruise.com, a travel web site and is
continuing to refine the site. The web site NetCruise.com went on line December
9, 1998 and consumers can make travel arrangements through our web site.
However, it is expected that the web site will not be fully integrated to
support the NetCruise Travel Consultants until early first quarter 1999.
<PAGE>
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 Market Place
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 non-voting
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. See Note 4 to the financial statements. In addition,
pursuant to the acquisition agreement, Brian Shuster will receive $5,000 per
month for a period of two years for his services as consultant to the Company.
The assets purchased from UIT comprise (i) the exclusive and
worldwide rights and license for "Parallel Addressing Video Technology" for all
travel related applications, (ii) software and intellectual properties related
to the travel business, including the travel web site called NetCruise.com
comprising two registered domain names and numerous web pages containing
information relating to the cruise industry and contract rights to book travel
utilizing the web site operating through an internet reservation booking engine
(system) and (iii) computer hardware, with a book value of approximately
$50,000.
The Company's web site is up and operating enabling the
general public to make airline, hotel, car rental and cruise reservations
through our web site operating through an internet reservation booking engine,
however, the Company's web site is not yet fully integrated to support the
network of
<PAGE>
independent travel consultants which the company is developing. When the web
site is "launched" it will be fully integrated to support the independent travel
consultants. The Company has hired three experienced web programmers to complete
the development of the web site and the Company expects to launch the web site
in early first quarter 1999 in time to support the launch of its television
sales campaign. The Company has budgeted approximately $1,342,000 to (i)
complete development of the web site (ii) produce a TV video infomercial and
(iii) buy media time. The Company is planning to sell additional stock to the
public to raise the necessary funds.
On September 30, 1998, the Company had cash of $606,121 and
working capital of $144,541. As of November 1, 1998, the Company has begun to
generate revenues from shared commissions earned by the network of Sterling
Travel Consultants recently acquired, although these revenues are not expected
to be significant for the balance of the fourth fiscal quarter ending December
31, 1998. Management of the Company expects the internet travel business to be
fully operational in early first quarter 1999 and is planning to begin
television marketing of the Company's products in mid first quarter 1999. These
efforts are expected to significantly increase revenues for the first quarter.
The Company plans to continue the aggressive marketing campaign as well as
expand its network of travel consultants throughout 1999. The Company expects
its operations to achieve break-even by the end of fiscal 1999. The Company
plans to raise the needed working capital by the sale of additional stock to the
public within the next two months and therefore including anticipated cash to be
received from revenues, the Company estimates that it will have sufficient
resources to provide for its planned operations for the next twelve months.
<PAGE>
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: December 18, 1998 ____________________________________
Lawrence E. Burk
President and Chief Executive Officer
Date: December 18, 1998 ____________________________________
John H. Wasko
Secretary, Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the nine months ended September 30, 1998 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-1-1998
<PERIOD-END> SEP-30-1998
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0
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