1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(For the Quarter ended June 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 June 30, 1998: 6,755,594 shares
of Common Stock
Transitional Small Business Disclosure Format (check one)
Yes X No
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
June December
30, 1998 31, 1997
--------------- ---------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,152,873 $2,207,841
Accounts receivable 18,721 8,784
Prepaid expenses 19,129 5,127
--------------- ---------------
Total Current Assets 1,190,723 2,221,752
--------------- ---------------
EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION 310,601 261,643
--------------- ---------------
OTHER ASSETS:
Computer software costs, less accumulated
amortization 2,035,592 581,193
Debit issue costs, less accumulated amortization 17,217 26,609
Deposits and Other 57,604 61,669
Licenses and Intellectual Property 1,000,000 -
--------------- ---------------
--------------- ---------------
3,110,413 669,471
--------------- ---------------
=============== ===============
$4,611,737 $3,152,866
=============== ===============
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Current maturities of long-term debt $118,379 $114,957
Accounts payable and accrued expenses 158,552 189,712
Accrued interest payable - related party 174,475 163,296
Accrued consulting fees - related party 9,000 3,000
--------------- ---------------
Total current liabilities 460,406 470,965
LONG-TERM DEBT:
Long-term debt, less current maturities 98,931 982,742
--------------- ---------------
Total Liabilities 559,337 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: 381,177 shares issued and
outstanding 38 -
Common Stock, $.0001 par value; 75,000,000 shares
authorized; 6,755,594 shares issued and
outstanding 676 436
Additional paid in capital 8,281,073 4,933,851
Deficit Accumulated During the Development Stage (4,229,387) (3,235,128)
--------------- ---------------
Total Stockholders Equity 4,052,400 1,699,159
--------------- ---------------
$4,611,737 $3,152,866
=============== ===============
See Accompanying Notes to Financial Statements
2
<PAGE>
From Inception
Six Months Six Months Three Months Three Months March 7, 1994
Ended Ended Ended Ended Through
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 June 30, 1998
SERVICE REVENUE $ 29,874 $ - $ 15,053 $ - $55,737
EXPENSES:
Cost of Service 47,214 - 27,549 - 72,206
General and Administrative 783,843 473,238 371,081 258,221 3,459,741
Depreciation and Amortization 196,077 64,056 100,045 32,184 529,971
Interest Expense (Income), net (3,001) 54,750 (10,327) 7,932 223,206
1,024,133 592,044 488,348 298,337 4,285,124
NET (LOSS) INCURRED DURING
THE DEVELOPMENT STAGE ($994,259) ($592,044) ($473,295) ($298,337) ($4,229,387)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,614,158 3,882,666 4,777,572 4,330,660 2,942,322
BASIC AND DILUTED LOSS PER
COMMON SHARE ($0.22) ($0.15) ($0.10) ($0.07) ($1.44)
See Accompanying Notes to Financial Statements
3
<PAGE>
Deficit
Accumulated
Additional During the
Series A Preferred Stock 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 FOR ACQUISITION
OF UNITED LEISURE INTERACTIVE 2,000,000 200 - - 2,499,800 - 2,500,000
NET LOSS - - - - - ($994,259) ($994,259)
BALANCE AT JUNE 30, 1998 6,755,594 $ 676 381,177 $ 38 $8,281,073 ($4,229,387) $4,052,400
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
Six Months Ended Six Months Ended Activities to
------------------ -------------------
June 30,1998 June 30, 1998 June 30,1998
------------------ ------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (994,259) $ (592,044) $ (4,229,387)
Adjustments to reconcile net loss to net
cash flows from operating activities
Depreciation and amoritization 196,077 64,056 529,971
Contribution to capital of services rendered - - 49,600
Changes in operating assets and liabilities
Accounts receivable (9,937) - (18,721)
Prepaid expenses (14,002) (26,575) (19,369)
Deposits and other 3,945 - (58,378)
Accounts payable and accrued expenses (13,981) (225,077) 326,001
------------------ ------------------- ------------------
Net cash flows from operating acctivities (832,157) (779,640) (3,420,283)
------------------ ------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (189,922) (181,649) (1,294,896)
Acquisition of Prosoft, Inc. - (34,602) (34,602)
------------------
Net cash flows from investing activities (189,922) (216,251) (1,329,498)
------------------ ------------------- ------------------
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 4,507,915
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 - (9,500) -
Proceeds from issuance of notes payable - - 955,000
Payments under computer equipment leases (42,541) (38,972) (105,617)
Proceeds from sale and lease-back - - 294,644
Proceeds from issuance of common stock - - 110,000
Contribution to capital - stockholder/officer - 19,700 205,400
Proceeds from issuance of 10% promissory notes
and related warrants, less related costs - - 517,500
Payments on 10% promissory notes and related
warrants - (563,500) (563,500)
------------------- ------------------
Net cash flows from financing activities (32,889) 4,088,852 5,902,654
------------------ ------------------- ------------------
NET CHANGE IN CASH AND EQUIVALENTS (1,054,968) 3,092,961 1,152,873
CASH AND EQUIVALENTS, BEGINNING OF YEAR 2,207,841 91,548 -
------------------ ------------------- ------------------
CASH AND EQUIVALENTS, END OF PERIOD $ 1,152,873 $ 3,184,512 $ 1,152,873
------------------ ------------------- ------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 22,203 $ 60,463 $ 162,701
------------------ ------------------- ------------------
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 to acquire travel
related assets $ 2,500,000 $ - $ 2,500,000
------------------ ------------------- ------------------
See Accompanying Notes to Financial Statements
</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
Although planned principal operations have commenced, revenues to date have not
been significant; accordingly, the Company and its subsidiaries continue to be
in the development stage. The Company has developed a computerized limousine
reservation and payment system for the business traveler. The Company
anticipates that the proprietary software will enable a system of limousine
reservations to be completely computerized and operate without human
intervention, except for the initial inputting of travel information.
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.
6
<PAGE>
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 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 United Leisure Corporation subsidiary was issued 2,000,000 shares of the
Company's restricted common stock plus two common stock purchase warrants for
restricted common shares of the Company as consideration for the transaction.
Both warrants are exercisable between April 1, 2002 and June 30, 2002, if
NetCruise achieves certain profit levels, as defined in the purchase agreement.
One warrant is exercisable for 800,000 shares at $2.50 per share and the other
warrant is exercisable for 800,000 shares at $6.00 per share.
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 will become Chairman and Brian Shuster will become President of
NetCruise and both will be appointed directors of the Company. Brian Shuster
will be issued two warrants to purchase restricted common shares of the Company,
exercisable between April 2, 2002 and June 30, 2002, if NetCruise achieves
certain profit levels, as defined in the warrants. One warrant is exercisable
for 200,000 shares at $2.50 per share and the other warrant is exercisable for
200,000 shares at $6.00 per share.
Note 5 Contingencies
On February 20, 1997, two individuals filed an action against the Company and
Corporate Travel Link ("Travel Link") in the Superior Court of New Jersey
seeking, among other things, damages in the amount of 8% of any financing
secured by Travel Link resulting from plaintiffs efforts and as well as 5% of
the Company's Common Stock allegedly due for services rendered in connection
with the Company's acquisition of Travel Link in 1995. The claim for monetary
damages is based upon an alleged written agreement between Travel Link and
plaintiffs, while the claim for the shares of the Company's Common Stock is
based upon alleged oral representations and promises made by a former officer of
Travel Link. The Company believes that the plaintiff's claim are without merit
and intends to vigorously defend the action and to assert numerous defenses in
its answer. 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,
currently a 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.
In August 1996, the Company gave notice to one of its former officers that it
was canceling the 333,216 shares of Common Stock issued to him at the inception
of Corporate Travel Link, Inc. for services he was to have provided. The Company
believes that the former officer never provided such services. Pending return of
the shares, they are considered outstanding for all periods presented herein. On
April 17, 1997, the former officer of the Company filed an action in the United
States District Court, District of New Jersey, against the Company, Travel Link,
the officers of both companies and various related and unrelated parties seeking
among other things a declaratory judgment that the former officer is the owner
of the 333,216 shares of Common Stock of the Company which had been issued to
him at the inception of Travel Link for
7
<PAGE>
services he was to have provided and for unspecified compensatory and punitive
damages. The Company believes that the plaintiff's claims are without merit and
intends to vigorously defend the action and to assert numerous defenses and
counterclaims in its answer.
On December 23, 1997, an individual filed an action in the Superior Court of New
Jersey against the Company and a former officer of the Company alleging that the
former officer of the Company induced such person to leave her place of
employment to assume employment with the Company. The claim seeks monetary
damages based upon an oral promise of employment allegedly made by the same
former officer of the Company. The Company believes that the plaintiff's claim
is without merit and intends to vigorously defend the action and to assert
numerous defenses in its answer.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company is in the development stage, and just commenced generating revenues
in August 1997. 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 $4,229,387 since inception
and at June 30, 1998, had working capital of $730,317.
Revenues for the three and six month periods ended June 30, 1998 were $15,053
and $29,874, as compared to no revenues for the 1997 periods. The corresponding
cost of service for the three and six month periods ending June 30, 1998 were
$27,549 and $47,214.
General and administrative expenses were $783,842 for the six months ended June
30, 1998, as compared to $473,238 during the six months ended June 30, 1997.
Cost increases during the 1998 period consist of payroll and payroll related
costs ($191,300), professional fees ($84,200), travel costs ($14,300), insurance
costs ($8,700), marketing costs ($35,700) and other administrative costs
($35,300). Consulting costs decreased $58,900 during the 1998 period.
General and administrative expenses were $371,081 for the three months ended
June 30,1998, as compared to $258,221 during the three months ended June 30,
1997. Cost increases during the 1998 period consist of payroll and payroll
related costs ($70,200), professional fees ($55,800), travel costs ($4,800),
insurance costs ($6,900) and marketing costs ($8,800). Cost decreases during the
1998 period consist of consulting fees ($22,000), and other administrative
($11,700).
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.
8
<PAGE>
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.
On 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 restricted common stock valued at $1.25 per share and two common
stock purchase warrants for restricted common shares of the Company as
consideration for the transaction. Both warrants are exercisable between April
1, 2002 and June 30, 2002, if NetCruise meets certain profit levels, as defined
in the purchase agreement. One warrant is exercisable for 800,000 shares at $3
per share and the other warrant is exercisable for 800,000 shares at $6 per
share. See Note 4 to the financial statements.
On June 30, 1998, the Company had cash of $1,152,873 and working capital of
$730,317 Management of the Company estimates that is has resources including
anticipated cash to be received from revenues, to provide for its planned
operations for the next twelve months.
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Asset Purchase Agreement dated June 30, 1998
(b) Reports on Form 8-K
NONE
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_____________________ ____________________________________
Lawrence E. Burk
President and Chief Executive Officer
Date_____________________ ____________________________________
John H. Wasko
Secretary, Treasurer and
Chief Financial Officer
9
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of June 30th, 1998
(together with the Exhibits attached hereto, the "Agreement"), by
and among United Leisure Interactive, Inc., a Delaware corporation
("Seller"), NetCruise Interactive, Inc., a New Jersey Corporation
and a wholly-owned subsidiary of Genisys ("Purchaser"), GENISYS
RESERVATION SYSTEMS, INC., a New Jersey corporation ("Genisys"),
and United Leisure Corporation, A Delaware corporation ("ULC").
W I T N E S S E T H:
WHEREAS, ULC is the sole shareholder of Seller and the owner
of certain interactive technology which is the subject of a patent
application (No. 08/899.712) filed by ULC with the United States
Patent Office in July, 1997 (the "Technology"); and which amongst
other things allows the consumer to "Be Your Own Travel Agent," and
WHEREAS, ULC has granted to Seller an exclusive, world-wide
and perpetual license to use the Technology for all travel related
applications (but for no other applications whatsoever), which
grant has been confirmed by a writing between ULC and Seller dated
June 19, 1998, a copy of which is attached as Exhibit A hereto (the
"License"); and
WHEREAS, Seller wishes to sell to Purchaser, and Purchaser
wishes to purchase from Seller, all of Seller's right, title and
interest in and to (i) the business of Netcruise and technology
which allows the consumer to "Be Your Own Travel Agent" (ii) the
License, and (iii) the assets owned by Seller and described in
Exhibit B hereto (collectively, the "Assets") upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, the parties hereby agree as follows:
1. Upon the terms and subject to the conditions of this
Agreement, Seller shall sell to Purchaser, and Purchaser shall
purchase from Seller, the Assets, free and clear of all liens and
encumbrances, for an aggregate price of 2,000,000 shares of Genisys
Restricted Common Stock (the "Shares") as described hereinafter.
Upon tender to Purchaser of a bill of sale for the Assets,
Purchaser shall deliver to Seller certificates for the shares which
shall bear the appropriate legends describing the restrictions
which shall apply (see Exhibit E).
2. As an inducement to the Purchaser to enter into this
Agreement, Seller hereby represents and warrants to the Purchaser
as follows:
<PAGE>
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. Seller has its shareholder approval to consummate this
Agreement. This Agreement constitutes the valid and legally
binding obligation of Seller and ULC, enforceable in accordance
with its terms and conditions. This transaction does not involve
the sale of a significant percentage of the business or assets of
ULC and does not require the approval of the ULC shareholders.
(b) Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgement, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court
to which Seller or ULC are subject or any provision of Seller or
ULC's charter or bylaws or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument or other arrangement to which Seller or ULC are
a party or by which they are bound or to which any of their assets
are subject (or result in the imposition of any Security Interest
upon any of their assets) other than in connection with the
provisions of the Securities Exchange Act, the Securities Act and
states securities laws. Neither Seller nor ULC need to give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in
order for the parties to consummate the transactions contemplated
by this Agreement.
(c) Attached as Exhibit B hereto is a true, correct
and complete copy of the list of Assets and the cost incurred by
Seller of acquiring each of such Assets. Seller is the sole owner
of the Assets and such Assets are free and clear of any Security
interests. Such assets consist of all material assets necessary to
conduct the business being purchased pursuant to this Agreement.
(d) The Seller will provide to Purchaser
substantially all invoices, accounting records and such other
evidence supporting the information contained in Exhibit B.
(e) Exhibit B attached hereto sets forth a true and
complete list and a brief description of all intellectual property
owned by or licensed to Seller which are being transferred to
Purchaser. All owned intellectual property is owned by the Seller
free and clear of any encumbrance, and the Seller has a valid
license to use all licensed intellectual property in the manner in
which it is currently being used. No claims have been made,
asserted or threatened against the Seller relating to its ownership
or use of any intellectual property. The Seller has the right to
transfer any licenses included in this transaction.
<PAGE>
(f) There are no claims, actions, suits,
proceedings or investigations pending before any federal, state,
municipal or other court, governmental body or arbitration
tribunal, or threatened against or affecting Seller's business or
assets or the transactions contemplated by this Agreement, or any
of the other documents or agreements among the parties referred to
in this Agreement. There is no order, decree or judgement of any
kind in existence enjoining or restraining Seller or its officers
or employees or requiring any of them to take any action of any
kind in respect of Seller's business.
(g) Purchaser shall be indemnified and held
harmless by Seller for any losses or liabilities incurred by
Purchaser arising out of or resulting from the inaccuracy of any
representation or warranty contained in this Section 2.
(h) Seller and ULC have prepared and filed and
will file on a timely basis with the appropriate federal, state,
local and foreign governmental agencies all tax returns required to
be filed; such returns as filed were true and correct in all
material respects and Seller has paid or made provision for the
payment of all taxes shown on such returns to be payable or which
have or may become due pursuant to any assessment heretofore
received by it.
3. As an inducement to the Seller to enter into this
Agreement, Purchaser and Genisys hereby represent and warrant to
the Seller as follows:
(a) Purchaser and Genisys are corporations duly
organized, validly existing and in good standing under the laws of
the State of New Jersey and have all necessary corporate power and
authority to execute and deliver this Agreement and to perform
their obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of Purchaser and Genisys,
enforceable in accordance with its terms and conditions.
(b) The Shares shall be issued as fully paid and
non-assessable Common Stock, having a par value of $.0001 per share
out of authorized and unissued stock of Genisys, subject to the
provisions of Exhibit E.
(c) Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgement, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court
to which Purchaser or Genisys are subject or any provision of
Purchaser's or Genisys' charter or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other
arrangement to which Purchaser or Genisys is a party or by which
<PAGE>
they are bound or to which any of their assets are subject (or
result in the imposition of any Security Interest upon any of their
assets) other than in connection with the provisions of the
Securities Exchange Act, the Securities Act and states securities
laws. Neither Purchaser nor Genisys needs to give any notice to,
make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the
parties to consummate the transactions contemplated by this
Agreement.
(d) Purchaser and Genisys have prepared and filed
and will file on a timely basis with the appropriate federal,
state, local and foreign governmental agencies all tax returns
required to be filed; such returns as filed were true and correct
in all material respects and Purchaser and Genisys have paid or
made provision for the payment of all taxes shown on such returns
to be payable or which have or may become due pursuant to any
assessment heretofore received by them.
4. ULC agrees to cooperate and assist Purchaser to maintain
and operate the Technology in consideration of the two common stock
purchase warrants attached hereto as Exhibit C to be issued to
Seller for the purchase of restricted shares of Genisys common
stock. Both warrants are exercisable between April 1, 2002 and
June 30, 2002. The services of Robert Eady shall be made available
full time for a period of three months commencing on July 15th,
1998, and thereafter as and when required by Purchaser and Genisys.
(a) The "X" warrant is for 800,000 shares
exercisable at $2.50 per share if the total pretax profits, as
defined in the warrant, for the years 1999, 2000 and 2001 from the
business and assets being purchased equal or exceed $5,000.000.
(b) The "Y" warrant is for 800,000 shares
exercisable at $6.00 per share if the total pretax profits, as
defined in the warrant, for the years 1999, 2000 and 2001 from the
business and assets being purchased equal or exceed $10,000,000.
5. For a period of three years from the date hereof,
Harry Shuster shall be Chairman of the Purchaser and Brian Shuster
shall be President. Each of them shall be elected to the Board of
Directors of Genisys promptly after the closing of the transaction
referred to herein. The Board of Directors shall nominate and
recommend to the Genisys shareholders the election of Harry Shuster
and Brian Shuster as Directors of Genisys for each of the three
years following the date hereof. Brian Shuster shall receive $5,000
per month for his services and will be expected to devote
approximately 30 - 40% of his time to the affairs of Genisys. In
addition, Brian Shuster shall receive two stock purchase warrants
attached hereto as Exhibit D each for 200,000 restricted shares of
Genisys common stock exercisable between April 1, 2002 and June
30th, 2002. The "V" warrant is exercisable at $2.50 per share if
the total pretax profits, as defined in the warrant attached hereto
as Exhibit D equal or exceed $5,000,000 for the years 1999, 2000
and 2001. The "W" Warrant is for 200,000 shares and is exercisable
<PAGE>
at $6.00 per share if such total pretax profits equal or exceed
$10,000,000.
6. Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to
the transaction contemplated by this Agreement.
7. Subject to obtaining the required consent of the
Landlord, Seller shall assign to Purchaser, and Purchaser shall
assume all of Seller's obligations under, that certain Commercial
Lease dated March 1, 1996 between Seller and 1990 Westwood Blvd.,
Inc., a copy of which is attached as Exhibit F hereto.
8. This Agreement shall be governed by and interpreted
in accordance with, the laws of the State of New Jersey. Any
litigation which may be brought by either party will be filed in a
Court of Law in the State of New Jersey.
9. ULC hereby agrees with Purchaser that now and
forever it will not enter any facet of the travel industry in
competition with Genisys or the business being purchased.
10. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date written above.
UNITED LEISURE CORPORATION UNITED LEISURE INTERACTIVE, INC.
SELLER
Harry Shuster Harry Shuster
Chairman and Chief Executive Chairman and Chief Executive
Officer Officer
NETCRUISE INTERACTIVE,INC. GENISYS RESERVATION SYSTEMS,INC.
PURCHASER
Larry Burk Larry Burk
President and Chief Executive President and Chief Executive
Officer Officer
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the six months ended June 30, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,153
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,191
<PP&E> 486
<DEPRECIATION> 175
<TOTAL-ASSETS> 4,612
<CURRENT-LIABILITIES> 460
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,052
<TOTAL-LIABILITY-AND-EQUITY> 4,612
<SALES> 30
<TOTAL-REVENUES> 47
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 977
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3)
<INCOME-PRETAX> (994)
<INCOME-TAX> 0
<INCOME-CONTINUING> (994)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (994)
<EPS-BASIC> (.22)
<EPS-DILUTED> 0
</TABLE>
