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 Wednesday, March 3, 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. Ratification of the acquisition of a technology license and certain related
assets from United Internet Technologies, Inc.(formerly known as United Leisure
Interactive, Inc.,) and the 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., as recommended by the Board of Directors.
3. Ratification of the sale of the Limousine Reservation System business to Gen
O2, Inc., a newly organized corporation formed by Mark A. Kenny, a former
Director and founder of the Company, 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. , as recommended
by the Board of Directors.
5. Approval of an amendment to the Corporation's Certificate of Incorporation to
restate the provisions of the Corporation's authorized Preferred Stock to
correct certain inconsistencies, as recommended by the Board of Directors.
6. 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.
7. Transacting any other business that may properly come before the meeting or
any adjournment thereof.
<PAGE>
All stockholders of record at the close of business on February 2,
1999, are entitled to notice of and to vote at the meeting.
Dated: February 2, 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.
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
GENISYS RESERVATION SYSTEMS, INC.
MARCH 3, 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 March 3, 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 February 2, 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 ratification of the acquisition of a technology
<PAGE>
license and certain related assets from United Internet Technologies, Inc.
formally known as United Leisure Interactive, Inc. ("UIT") and 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 UIT as described in
Proposal No. 2, "FOR" the ratification of the sale of the Limousine Reservation
System business to Gen O2, Inc., a newly organized company formed by Mark A.
Kenny, a former director and founder of the 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. as
described in Proposal No. 4, "FOR" the approval of an amendment to the Company's
Certificate of Incorporation to amend and restate the provisions of the
Company's authorized Common and Preferred Stock to correct certain
inconsistencies as described in Proposal No. 5 and "FOR" the ratification of the
appointment of Auditors as described in Proposal No. 6. 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 February 2, 1999 are
entitled to notice of and to vote at the Annual Meeting or any continuation or
adjournment thereof. On that date there were 6,334,694 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 February 2, 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
ratify the acquisition of a technology license and certain related assets from
UIT and 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 sale of the Limousine Reservation System business to Gen O2,
Inc., a newly organized company formed by Mark A. Kenny, a former director and
founder of the Company, to approve an amendment to the Company's Certificate of
Incorporation to change the name of the Company to netcruisetravel.com, inc., to
approve an amendment to the Company's Certificate of Incorporation 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
<PAGE>
difficult to obtain the required approval to ratify the acquisition of a
technology license and certain related assets from UIT and 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 sale of
the Limousine Reservation System business to Gen O2, Inc., a newly organized
company formed by Mark A. Kenny, a former director and founder of the Company,
to approve an amendment to the Company's Certificate of Incorporation to change
the name of the Company to netcruisetravel.com, inc. , and to approve an
amendment to the Company's Certificate of Incorporation 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 39.7% of the outstanding Common Stock (including UIT) 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 Gen O2, Inc., a newly organized company formed by
Mark A. Kenny, a former director and founder of the Company, "FOR" the approval
of an amendment to the Company's Certificate of Incorporation to change the name
of the Company to netcruisetravel.com, inc. , "FOR" the approval of an amendment
to the Company's Certificate of Incorporation 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% of the outstanding Common Stock (excluding UIT) and all of the
Series A Preferred Stock of the Company intend to vote "FOR"the ratification of
the acquisition of a technology license and certain related assets from UIT and
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.
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
Proposal No. 2
The Company believes that the ratification of the acquisition of a technology
license and certain related assets from UIT and approval of the issuance of
1,100,000 shares of Common Stock and the two warrants to UIT and ratification of
<PAGE>
the sale 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.
Management is of the opinion that the costs to develop the new line of business
is less than the costs required to maintain the limousine reservation business
until such time as revenues will be able to cover the costs of operation.
Further, it is management's opinion that the internet travel business will
provide, on a long term basis, a greater return to shareholders.
Although there is a lack of operating history with respect to the
software relating to the internet travel business, management expects the system
to be operational by mid-year 1999. The budgeted cost is expected to be
approximately $1,342,000 to complete the development of the web site, produce a
television video infomercial and purchase media time. The Company plans to sell
additional stock to raise the funds needed. 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 ratify the acquisition of a technology license and certain
related assets from UIT and approve the issuance of the 1,100,000 shares of
Common Stock and the two Warrants and, the Company would be required to invest
more funds (in excess of $1,500,000 to offset net operating losses) in the
limousine reservation system business, with no assurance that the business will
achieve the goals set by management.
Proposal No. 3
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 addition, although the Company had begun to generate revenues, the
Company found that many limousine providers were resisting the payment of
commissions or fees in connection with bookings on the Company's system until
such time as the potential benefits of the Company's system could be better
quantified. This resulted in a much slower development of revenues for the
Company than was originally anticipated. Management estimated the cost of
operations for a more extended period of time and determined that the Company's
available funds would be better spent in other areas of the travel business. It
therefore determined to expand into the Internet travel business. As a result,
if the shareholders approve the acquisition of the technology license and
certain related assets from UIT and the sale of the limousine reservation
business, the effect to shareholders is a fundamental change in the nature of
the business of the Company from the limousine reservation business to an
Internet travel business.
The shareholders are being asked to ratify the sale of the limousine business to
Mark A. Kenny, a former director of the Company. Mr. Kenny did not participate
in the directors analysis and decision to sell the business to Mr. Kenny. As
part of the sale, the Company will be retaining 32.66% interest in Gen O2, Inc.,
<PAGE>
the Company organized by Mr. Kenny to purchase the limousine reservation
business. As part of the transaction, the Company will be loaning to Gen O2,
Inc. a $135,000 installment loan and a $40,000 bridge loan. The Transponet
Companies, Inc., ("TranspoNet") another 32.66% shareholder of Gen O2, Inc. is
providing an aggregate of $240,000 to Gen O2, Inc. TranspoNet is not affiliated
with the Company or any of its shareholders.
Proposal No. 4
Since the Company proposes to fundamentally change its business from
that of the limousine reservation business to an internet travel business, the
Company determined that it would be appropriate to change the name of the
Company to more properly reflect this. Management does not believe that there
are any significant disadvantages to changing the name to netcruisetravel.com,
inc.
The advantages to approving the amendment to the Company's Certificate
of Incorporation to change the name of the Company to netcruisetravel.com, inc.
is that the Company's name will be more identified with that of its operating
business.
Proposal No. 5
The advantages of amending the Company's Certificate of Incorporation
to restate the provisions of the Company's authorized common and preferred stock
as described in Proposal No. 5 is that the Certificate of Incorporation will
become clearer because certain inconsistencies existing in the previous revision
will be corrected.
If shareholders do not approve the change in the amended Certificate of
Incorporation, it may be difficult for the Company to utilize the authorized
preferred shares for acquisitions, financing, and other proper corporate
purposes.
If shareholders do not approve the name change or the amendment to the
Company's Certificate of Incorporations restating the provisions of the common
and preferred stock,
managements present intention is to leave the name of
the Company and the Certificate of Incorporation as they now are.
1
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 (Unaudited)
The following statements are based upon the balance sheets appearing in
the Company's Form 10- QSB for the nine months ended September 30, 1998
to show the effect on the Company's balance sheet of the shareholders'
approval or non-approval of the following:
Proposal No. 2 -Ratification of the acquisition of a technology license and
certain related assets from UIT AND approval of the issuance of 1,100,000 shares
of Common Stock and two Warrants to UIT and
Proposal No. 3 - Ratification of the sale of the limousine reservation business
for a non- controlling interest in Gen O2, Inc.
Referenceshould be made to Proposal Nos. 2 and 3 appearing elsewhere herein.
The following statements should be read in conjunction with Proposal
Nos. 2 and 3 and with the Company's financial statements and notes
thereto incorporated by reference to this Proxy Statement.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Assuming Assuming Assuming Assumes
Proposal Nos. Proposal No. Proposal No. Neither
2 and 3 are 2 but not No. 3 but not No. Proposal 2 or 3
are Approved 3 is Approved 2 is Approved are Approved
(Note A) (Note B) (Note C) (Note D)
ASSETS
Current assets $ 643,765 $ 651,184 $ 643,765 $ 651,184
Equipment, net of accumulated depreciation 74,655 285,918 27,155 238,418
Investment in Gen O2, Inc. 730,287 - 730,287 -
Computer software costs, less accumulated amortization
1,417,964 1,992,376 - 574,412
Licenses and intellectual property, less accumulated
amortization 975,000 975,000 - -
Other 69,076 69,076 69,076 69,076
--------------
$ 3,910,747 $3,973,554 $ 1,470,283 $ 1,533,090
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 443,836 $ 506,643 $ 493,836 $ 556,643
------------
Long-term debt 63,542 63,542 63,542 63,542
--------------
Stockholders' Equity:
Preferred stock 148 148 38 38
Common stock 566 566 476 476
Paid-in capital 8,281,073 8,281,073 5,781,273 5,781,273
Deficit accumulated during the
development stage (4,878,418) (4,878,418) (4,868,882) (4,868,882)
------------
3,403,369 3,403,369 912,905 912,905
$ 3,910,747 $ 3,973,554 $ 1,470,283 $1,533,090
===========
Book value per common share (Note F) $ .22 $ .22 $ .02 $ .02
================
See notes to pro forma financial statements.
2
</TABLE>
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO PRO FORMA BALANCE SHEETS
Note A - The proforma statement assuming Proposals No. 2 and 3 are approved is
derived from the proforma balance sheet appearing at page 2 to the Company's
Form 10-QSB for the nine months ended September 30, 1998 which gives effect to
the sale of assets relating to the limousine reservation business for a
non-controlling equity investment in Gen 02, Inc. Such financial statements also
reflect the acquisition of the technology license and certain related assets
from UIT and the issuance of the 1,100,000 shares of Common Stock and two
warrants to UIT.
Note B - Assuming Proposal No. 2 is approved but Proposal No. 3 is not approved,
this statement is derived from the historical consolidated balance sheet
appearing at page 2 to the Company's Form 10-QSB for the nine months ended
September 30, 1998. Such statement does not reflect the sale of assets relating
to the limousine reservation business for a non-controlling equity investment in
Gen O2, Inc. but does reflect the acquisition of a technology license and
certain related assets from UIT and the related issuance of 1,100,000 shares of
Common Stock and two warrants to UIT.
Note C - Reflects the impact of approving Proposal No. 3 but not approving
Proposal No. 2, i.e. the unwinding of the UIT Transaction, including the return
of Common and Preferred shares and warrants to the Company and the return of the
technology license and certain related assets to UIT.
The balance sheet derived from the statement described in Note A
has been adjusted to reflect the effect of the shareholders not
approving Proposal No. 2 as follows:
Amounts assigned to securities that would be returned to the
Company:
Common Stock (900,000 shares) $ 90
Preferred Stock (1,100,000 shares) 110
Paid-in capital 2,499,800
-----------
$2,500,000
Amounts assigned to licenses and
intellectual property $1,417,964
Amounts assigned to computer
software costs 975,000
Equipment 47,500
Depreciation and amortization to
September 30, 1998 59,536
-------------
$2,500,000
In addition, estimated costs to undo the transaction, which have been estimated
not to exceed $50,000, have been accrued.
3
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO PRO FORMA BALANCE SHEETS
Note D - Reflects the impact of the shareholders not approving both Proposal
Nos. 2 and 3. The statement has been derived from the balance sheet described in
Note B and has been adjusted as indicated in Note C. It reflects the Company
retaining 100% of the limousine reservation business and UIT returning the
Common and Preferred Stock and the two Warrants to the Company in exchange for
the return of the technology license and certain related assets to UIT.
Note E - Had these assets not been acquired as of June 30, 1998, net loss would
have been reduced by $59,536 ($.01 per share) for the nine months (as well as
the three months) ended September 30, 1998.
Note F - Book value per common share has been determined by deducting amounts
attributable to preferred shares.
4
<PAGE>
Interested Parties
As more fully described in Proposal No. 2, the Company recently acquired a
technology license and certain related assets from UIT. In connection with this
acquisition the Company is seeking Shareholder approval for ratification of that
acquisition and payment therefor, in the form 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. Messrs. Brian Shuster and Harry Shuster are
currently directors of UIT and were also elected as Directors of the Company
pursuant to an Asset Purchase Agreement, dated as of June 30, 1998, between the
Company and UIT (the "Asset Purchase 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 1999 Annual Meeting.
Mr. Mark A. Kenny, a former director and officer of the Company, and currently a
shareholder, is a principal of Gen O2, Inc., 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).
5
<PAGE>
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
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
<PAGE>
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 has been Chairman of the Board of NetCruise Interactive, Inc. , a
wholly owned subsidiary of the Company and a Director of the Company since July,
1998. Mr. Shuster has served as Chairman of the 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 has been President of NetCruise Interactive, Inc. and a Director
of the Company since July, 1998. 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 .
Mr. Shuster is the son of Mr. Harry Shuster.
Messrs. Harry Shuster and Brian Shuster are currently directors of UIT. The
Company recently acquired a technology license and certain related assets 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
<PAGE>
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 Interactive, Inc. ("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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
The following tabulation shows the total compensation paid by the
Company for services in all capacities in fiscal years 1996 , 1997 and 1998 to
the officers of the Company.
Name and Principal Year Salary Bonus Other Annual
Position Compensation
Lawrence E. Burk 1998 $147,500 $0 $0
President & Chief 1997 $75,000 (1) $0
Executive Officer 1996 $0 $0 $0
$0
Joseph Cutrona (2) 1998 $0 $0 $0
1997 $41,639 $0 $6,667
1996 $73,500 $0 $5,000
Mark A. Kenny(3) 1998 $88,462 $0 $0
1997 $64,231 $0 $28,967
1996 $42,000 $0 $16,250
John H. Wasko 1998 $80,000 $0 $0
Chief Financial Officer, 1997 $81,247 $0 $20,000
Secretary & Treasurer 1996 $10,000 $0 $49,500
</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 was no longer an employee, Officer or
Director of the Company.
(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 H. Wasko entered into an Employment Agreement on
October 16, 1996 whereby the Company agreed to pay Mr. Wasko a salary of $80,000
per year. The Employment Agreement is of continuous duration and may be
<PAGE>
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 Interactive, Inc. In addition, the
Company agreed to pay Mr. Brian Shuster $5,000 per month for his services as
President and Director of NetCruise Interactive, Inc. 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 Interactive, Inc. 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 35,000 $2.00 November 2001
25,000 $6.00 January 2003
Lawrence E. Burk 200,000 $6.00 September 2002
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.
<PAGE>
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.
<PAGE>
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 technology license and the
assets 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 an Acquisition Agreement with
a company newly formed by a management group led by Mark A. Kenny, a Company
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
<PAGE>
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
RATIFICATION OF THE ACQUISITION OF A TECHNOLOGY LICENSE AND CERTAIN RELATED
ASSETS FROM UNITED INTERNET TECHNOLOGIES, INC. AND APPROVAL OF THE ISSUANCE OF
1,100,000 SHARES OF COMMON STOCK AND TWO STOCK PURCHASE WARRANTS TO UNITED
INTERNET TECHNOLOGIES, INC.
Pursuant to the Asset Purchase Agreement, NetCruise (a wholly owned
subsidiary of the Company formed on July 21, 1998) acquired a technology license
and certain related assets 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 (the "UIT
Transaction"). 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. For a more detailed description of the Company's Common Stock
please see Proposal No. 5.
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 advised the Company
that the Company's Common Stock would be delisted as a result of such violation.
The Company requested a hearing on the delisting which was held on November 20,
1998. Nasdaq issued its written determination on January 12, 1999 to continue
listing the Company's securities
on The Nasdaq SmallCap Market pursuant to
the following conditions: (i) the UIT Transaction must be unwound in the event
shareholders do not ratify the acquisition of the technology license and certain
related assets from UIT and approve the issuance of 1,100,00 shares of Common
Stock and tow Stock Purchase Warrants to UIT; (ii) the Company must file a
Definitive Proxy Statement with the Securities and Exchange Commission and
Nasdaq on or before February 15, 1999; and (iii) the Company must submit
documentation to Nasdaq on or before March 15, 1999 evidencing either the
receipt of shareholder approval of the issuance of additional shares to UIT or
the unwinding of the issuance of additional shares to UIT and purchase of a
technology license and certain related assets from UIT.
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
<PAGE>
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. Therefore, the total purchase price in the UIT
Transaction is 900,000 shares of the Company's Common Stock and 1,100,000 shares
of the Company's Series B Convertible Preferred Stock. If shareholders ratify
the acquisition, the Series B Preferred Stock will automatically be converted
into 1,100,000 shares of the Company's Common Stock and the Company will issue
two warrants, each to purchase 800,000 shares of Common Stock, as outlined
above.
In the event shareholders do not ratify the acquisition of the assets
and approve the issuance, the transaction will be unwound. In such event the
Company estimates that the cost to undo the transaction will not exceed $50,000.
In the event that the UIT Transaction must be undone, the following shall occur:
(i) the Company shall reassign the technology license and return the related
assets to UIT; (ii) UIT will return to the Company all stock certificates
received pursuant to the UIT Transaction and (iii) Mr. Brian Shuster will return
the warrants issued to him by the Company; and (iv) Messrs. Brian and Harry
Shuster will resign from any officer or director position held by them. In
addition, Mr. Brian Shuster's consulting fee shall be pro-rated to the date of
his resignation and shall cease as of such date. Reference should be made to Pro
Forma Condensed Consolidated Financial Statements as of September 30, 1998 and
for the nine months then ended for the effect of undoing the UIT Transaction.
The Company determined to expand into the internet travel business for
several reasons. Although the Company had begun to generate revenues, the
Company found that many limousine providers were resisting the payment of
commissions or fees in connection with bookings on the Company's system
resulting in a much slower development of revenues for the Company than was
originally anticipated. Management evaluated the cost of operations for a more
extended period of time and determined that the Company's available funds would
be better spent in other areas of the travel business. It therefore determined
to expand into the internet travel business. As a result, if the shareholders
approve the acquisition of the technology license and certain related assets and
the sale of the limousine reservation business, the effect to shareholders is a
fundamental change in the nature of the business of the Company from the
limousine reservation business to an Internet travel business.
Although there is a lack of operating history with respect to the
software relating to the internet travel business, management expects the system
to be operational by mid-year 1999. The budgeted cost is expected to be
approximately $1,342,000 to complete the development of the web site, produce a
television video infomercial and purchase media time. The Company plans to sell
additional stock to raise the funds needed.
As a result of the transaction the Company acquired the Travel Web site
called "Netcruise" and the technology license for "Parallel Addressing Video
Technology" for all travel related
applications, along with all of the
related software, computer systems and intellectual properties . This includes
<PAGE>
computer equipment, various agreements with search engines, multiple MPEG CD's
source video tapes, UFD Trailer Reel Video Tape, and cruise video master
footage. The Company formed NetCruise as a wholly owned subsidiary for the
purpose of operating an internet travel business featuring the technology
obtained through this acquisition.
The Company intends to launch, through television advertising, an
aggressive marketing campaign inviting consumers to become NetCruise travel
consultants. The travel consultants will use the NetCruise web site and the
"Parallel Addressing Video Technology" to access reservation information on air,
hotel, car rental and cruise bookings. In exchange for the right to access the
travel information on the NetCruise web site and the "Parallel Addressing Video
Technology," 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 reservation web site. If at any
point the individual requires additional expertise, a personal NetCruise travel
agent will be available by phone to guide them through the process. The Company
has acquired a travel agency to provide, when necessary, full service support
via telephone to the travel consultants.
In booking reservations with airlines, hotels, car rental companies and
cruise ships, commissions are paid by the airlines, cruise lines, hotels, etc.
These commissions will be shared with the travel consultants. In addition,
customers of the travel consultant will be charged a small fee for domestic
airline tickets (which is currently customary in the industry) which fee will
also be shared with the travel consultant.
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. The "Parallel Addressing Video Technology"
is currently in the start-up stage. It is intended to be used by the independent
travel consultants and will not be accessible by the general public.
Mr. Harry Shuster has been appointed Chairman and Brian Shuster the President of
NetCruise Interactive, Inc. 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.
<PAGE>
Effective as of November 7, 1998, the Company sold the assets of its
computerized limousine reservation system to Gen O2, Inc. a company newly formed
by a management group led 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. The Company owns a 32.66% minority interest in Gen O2, Inc. and will
receive certain contingent payments on transactions processed by Gen O2, Inc.
for a period of five years. A 32.66% minority interest in the new company is
also owned by The TranspoNet , a leading developer and owner of software
technology for the ground transportation industry. The Company and TranspoNet
will provide limited working capital to Gen O2, Inc. 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 still maintaining
an interest in the limousine reservation business, through its ownership
interest in Gen O2, Inc., 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 total purchase price of
42,500 shares of the Company's Common Stock valued at $3.00 per share or an
aggregate of $127,500. Included in these assets were a list of all the
independent travel consultants (both active and inactive) and all related
agreements, contacts, files, correspondence, earning records, a data base
estimate at 20,000 plus entries, property and equipment, including computers and
miscellaneous office supplies. 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.
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. Based upon its research and discussions with
individuals knowledgeable in electronic commerce on the World Wide Web,
management believes 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. Management believes 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.
The Company also believes 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
<PAGE>
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 (6,334,694), UIT would hold 3,600,000 shares (9,934,694 shares
outstanding) or approximately 36.2% of the stock of the Company, assuming
issuance of the full 2,000,000 shares of Common Stock (consisting of 900,000
shares of Common Stock currently held by UIT and an additional 1,100,000 shares
of Common Stock to be issued to UIT upon conversion of the Series B Preferred
stock in the event the Shareholders approve Proposal No. 2) and exercise of the
Warrants. 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 acquisition of the technology license and certain related assets as
described in this Proposal No. 2 will have no immediate tax effect on the
Company.
Ratification of the acquisition of the technology license and certain
related assets from UIT and the approval of the issuance of 1,100,000 shares of
Common Stock of the Company and two Warrants to 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.
The Board of Directors recommends that the stockholders vote "FOR" the
ratification of the acquisition of a technology license and certain related
assets from UIT and for the approval of the issuance of Common Stock and
Warrants to UIT and. (Item No. 2 on the proxy card).
PROPOSAL NO. 3
RATIFICATION OF THE SALE OF THE LIMOUSINE RESERVATION SYSTEM
BUSINESS TO GEN O2, INC., A NEWLY ORGANIZED CORPORATION FORMED BY
MARK A. KENNY, A FORMER DIRECTOR AND FOUNDER OF THE COMPANY.
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 (a non-affiliated company) , Mark A. Kenny, Paul
Murray and Gen 02, Inc. This sale will allow the Company to concentrate its
resources and efforts on the continued build-up of its internet travel business.
<PAGE>
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". This 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".
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 addition, although the Company has begun to generate revenues, the
Company found that many limousine providers were resisting the payment of
commissions or fees in connection with bookings on the Company's system until
such time as the potential benefits of the Company's system could be better
qualified. This resulted in a much slower development of revenues for the
Company than was originally anticipated. Management estimated the cost of
operations for a more extended period of time and determined that the Company's
available funds would be better spent in other areas of the travel business. It
therefore determined to expand into the internet travel business. As a result of
the shareholders approval, the acquisition of the technology license and certain
related assets and the sale of the limousine reservation business the effect to
shareholders is a fundamental change in the nature of the business of the
Company from the limousine reservation business to an Internet travel business.
The shareholders are being asked to ratify the sale of the limousine business to
Mark A. Kenny, a former director of the Company. Mr. Kenny did not participate
on the directors analysis and decision to sell the business to Mr. Kenny. As
part of the sale, the Company will be retaining 32.66% interest in Gen O2, Inc.,
the Company organized by Mr. Kenny to purchase the limousine reservation
business. As part of the transaction, the Company will be loaning to Gen O2,
Inc. a $135,000 installment loan and a $40,000 bridge loan. TranspoNet, another
32.66% shareholder of Gen O2, Inc. is also providing an aggregate of $240,000 to
Gen O2, Inc. TranspoNet is not affiliated with the Company or any of its
shareholders.
Management is of the opinion that the costs to developing the new line
of business is less than the costs required to maintain the limousine
reservation maintain business until such time as revenues will be able to cover
the costs of operation. Further, it is managements opinion that the internet
travel business can be brought to market sooner and will provide, on a long term
basis, a greater return to shareholders.
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 System and its entire ownership
interest in ProSoft to the purchaser in the transaction, constituting
approximately 20% of the total assets of the Company. (At September 30, 1998 the
Company had total assets of $3,973,505, of which $796,043 were sold to Gen O2,
Inc. ) ProSoft is an 80% owned subsidiary of the Company which was acquired by
the Company in June, 1997. ProSoft is a software development
company which developed the software for the Company's computerized limousine
reservation and payment system. Paul Murray, a former employee of the Company
and President and Shareholder of ProSoft, is also a shareholder of Gen O2, Inc.
<PAGE>
The purchase price consists of (i) 2,450 shares of Series A Convertible
Preferred Stock of
Gen O2, Inc., constituting a 32.66% interest in Gen O2, Inc., which the Company
carries on its balance sheets at an asset value of $730,287; (ii) certain
contingent payments, totaling $1,080,00 if all payments to the Company are
realized and (iii) other significant terms as 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 Gen O2, Inc., 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
<PAGE>
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%. The Company's influence in Gen O2, Inc. is
limited to the right to elect one member of a five (5) member Board of
Directors.
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. Reference
should be made to the Pro Forma Balance Sheet as of September 30, 1998 and notes
thereto contained in the Company's Form 10- QSB (which gives effect to this
transaction as of this date) and to the last paragraph of Note 6 thereto.
Management of the Company believes that the sale of the limousine reservation
business to Gen O2, Inc. as described in this Proposal No. 3 will have no
material tax effect on the Company.
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)
6
<PAGE>
PROPOSAL NO. 4
TO AMEND ARTICLE FIRST 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 Article FIRST of the Company's
Certificate of Incorporation to change the name of the Company from Genisys
Reservation Systems, Inc. to netcruisetravel.com, inc.
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. Management does not believe that there are any significant
disadvantages to changing the name to netcruisetravel.com, inc.
The resolution approved by the Board of Directors amending Article
FIRST is as follows:
"FIRST: The name of the Corporation is netcruisetravel.com, inc."
Approval of the amendment to Article FIRST 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
TO AMEND ARTICLE 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 Article FOURTH of the Company's
Certificate of Incorporation to change the name of the Company from Genisys
Reservation Systems, Inc. to netcruisetravel.com, inc.
Reasons for the Proposal
The Board of Directors of the Company has unanimously adopted, subject to
stockholder approval, a resolution amending and restating the first paragraph
and paragraphs (a) and (b) of Article FOURTH of the Company's Certificate of
<PAGE>
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 prior version of the Certificate of Incorporation does not
describe the rights of the holders of Common Stock . The restated version sets
forth clearly the voting, dividend, dissolution and liquidation of the Common
Stock consistent with the laws of the State of New Jersey. The description of
the Preferred Stock has also been amended to correct certain inconsistencies
found in the current version. These included conflicting descriptions of the
dividends. Currently the dividends are described as being both cumulative and
non-cumulative. The new provisions provide that the Board of Directors has the
right to determine if the dividends are cumulative or non-cumulative. Also, in
the prior revision the Board of Directors has the right to determine liquidation
preferences in an amount equal to the par value . This provision is eliminated
in the amended version, with the Board of Directors having the right to
determine the liquidation preference. 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. Management does not believe that there are any
significant disadvantages to amending the Certificate of Incorporation to
restate the provisions of the Preferred and Common Stock of the Company.
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
<PAGE>
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."
The Company is currently authorized to issue 75,000,000 shares of
Common Stock, having a par value of $.0001 per share of which 6,334,694 are
outstanding. Each share of Common Stock entitles the holder thereof to one vote
on each matter submitted to the stockholders of the Company for a vote thereon.
The holders of Common Stock: (i) have equal ratable rights to dividends from
funds legally available therefor when, as and if declared by the Board of
Directors; (ii) are entitled to share ratably in all of the assets of the
Company available for distribution to holders of Common Stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not have
preemptive, subscription or conversion rights, or redemption or sinking fund
provisions applicable thereto; and (iv) as noted above, are entitled to one
non-cumulative vote per share on all matters submitted to stockholders for a
vote at any meeting of stockholders. The Company has not paid any dividends on
its Common Stock to date. The Company anticipates that, for the foreseeable
future, it will retain earnings, if any, to finance the continuing operations of
its business. The payment of dividends will depend upon, among other things,
capital requirements and operating and financial conditions of the Company.
Approval of the amendment to Article 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. 5.
PROPOSAL NO. 6
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.
<PAGE>
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, will have an opportunity to make a statement if he or she so desires
and is expected to be available to respond to appropriate questions.
The Board of Directors recommends that the stockholders vote "FOR"
ratification of this appointment (Item No. 6 on the proxy card).
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following tabulation shows the security ownership as of February 2, 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, (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 1,188,973 18%
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 14.2%
Warren D. Bagatelle (1)(2)
Loeb Partners Corporation
61 Broadway
New York, NY 10006 1,287,797 20.3%
Mark A. Kenny
Gen O2, Inc.
15 Clyde Road, Suite 201
Somerset, NJ 08873 324,175 5.1%
John H. Wasko (4)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 137,046 2.1%
<PAGE>
Lawrence E. Burk (5)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 205,000 3.2%
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 *
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. 400,000 6.3%
1371 42nd Street
Brooklyn, New York 11219
All Officers and Directors
as a group (7 persons) 2,886,018 45.5%
- ---------------------
* less than 1%
(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
<PAGE>
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.
<PAGE>
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
New York, New York JOHN H. WASKO, Secretary
February 2, 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 February 2, 1999, at the Annual Meeting of
Stockholders to be held on March 3, 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. RATIFICATION OF THE ACQUISITION OF A TECHNOLOGY LICENSE AND CERTAIN
RELATED ASSETS FROM UNITED INTERNET TECHNOLOGIES, INC. ANDAPPROVAL 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
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF THE SALE OF THE LIMOUSINE RESERVATION BUSINESS SYSTEM
TO GEN O2, INC., A NEWLY ORGANIZED COMPANY FOUNDED BY MARK A. KENNY, A
FORMER DIRECTOR AND FOUNDER OF THE 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.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO RESTATE THE PROVISIONS RELATING TO THE CORPORATION'S AUTHORIZED
PREFERRED STOCK AS THEY RELATE TO DIVIDENDS AND LIQUIDATION
PREFERENCES.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. 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, 5 AND 6.
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-QSB/A
(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.
As of June 30, 1998, the Company through NetCruise
Interactive, Inc. (NetCruise), its wholly owned subsidiary, acquired the
exclusive and worldwide rights and license for "Parallel Addressing Video
Technology" for all travel related applications from United Internet
Technologies, Inc. formerly known as United Leisure Interactive, Inc., ("UIT") a
wholly owned subsidiary of United Leisure Corporation. In addition, the Company
acquired all of the software, computer systems and intellectual properties
related to the travel business, including the Travel Web Site called
"NetCruise.com" . The Company intends to operate an internet travel agency
featuring the technology and assets acquired. The purchase price for the assets
acquired consisted of 2,000,000 shares of the Company's restricted common stock
valued at $1.25 per share and two common stock purchase warrants fro 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: January 22, 1999 ____________________________________
Lawrence E. Burk
President and Chief Executive Officer
Date: January 22, 1999 ____________________________________
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 six months ended June 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-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-PRIMARY> (.22)
<EPS-DILUTED> 0
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSBA-2
(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>
<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
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 . The site is
currently being used for demonstration and is only accessible by authorized
individuals using a password. The Company intends that only participating travel
consultants who have paid a fee to the Company will be able to access this web
site in order to make reservations. However, the Company expects that the web
site will not be fully integrated to support the NetCruise Travel Consultants
until the end of the 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 which could cause a system failure or other computer errors,
leading to a disruption in operations. No easy technological "quick fix" has yet
been developed for this problem. This Year 2000 problem creates
<PAGE>
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.
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.
All software currently being developed by the Company or through third party
contractors is being written to be Year 2000 compliant. The Company, with the
assistance of outside software contractors, is in the process of changing its
accounting system from non-compliant Mass-90 software to a compliant software
system. Final implementation of fully tested and operational Year 2000 compliant
systems is projected to be completed by the end of the second quarter of 1999.
The Company's banks and lenders have communicated that they will be Year 2000
compliant by the end of 1999. No other third party's Year 2000 compliance is
expected to have a material impact on the operations of the Company.
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.
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.
<PAGE>
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 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.
<PAGE>
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 Gen O2, Inc., a company newly
formed by a management group lead by Mark A. Kenny, a Genisys founder and
director. When completed, this transaction will allow Genisys to concentrate its
resources and efforts on its NetCruise internet travel business, which commenced
on June 30, 1998.
The sales price of the Company's computerized limousine
reservation and payment system paid by Gen O2, Inc. to the Company for the
purchased assets consists of (i) royalty payments to be made by Gen O2, Inc. 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 Gen O2, Inc. (the "Series A Preferred Stock"), as more fully described
below, which represents 32.66% of the voting stock of Gen 02, Inc. This Series A
Preferred Stock is carried on the Company's balance sheets at an asset value of
$730,287 in total U.S. dollars. If all contingent payments are realized in their
maximum amounts, payments to the Company could total $1,080,000. The Company's
influence in Gen O2, Inc. is limited to the right to elect one member of a five
(5) member Board of Directors.
The Contingent Payments to be paid by Gen O2, Inc. shall be calculated as
follows:
( a) The Company shall receive a Contingent Payment in an amount equal to twenty
cents ($.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. 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).
<PAGE>
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 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 and 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 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 recapitalizations.
Upon conversion of the Series A Preferred Stock into Common Stock of
the Gen O2, Inc., the Company and TranspoNet will each own 2450 shares or 32.66%
of the issued and outstanding Common Stock of Gen O2, Inc.
The Company has agreed to loan to Gen O2, Inc. the aggregate principal
amount of One Hundred and Thirty-five Thousand Dollars ($135,000), such
aggregate amount to be disbursed to Gen O2, Inc.
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 Gen O2, Inc. 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, 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.
<PAGE>
In additional to the above installment loans made to Gen O2,
Inc., the Company has agreed to loan Gen O2, Inc. 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 Gen O2, Inc. 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.
<PAGE>
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 (valued at $3.00 per share, for an aggregate of
$127,500) 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. There would be no impact on net income, as the Company will absorb all
losses to the extent of assets transferred since there is only nominal other
capitalization. No gain or loss is to be realized.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Through September 30, 1998, the principal activity of the
Company has been the development of a computerized limousine reservation and
payment system for the business traveler. Although planned operation of this
system commenced in August 1997, revenues to date have not been significant;
accordingly, the Company and its subsidiaries continue to be in the development
stage. The Company has been unprofitable since inception and expects to incur
additional operational losses. As reflected in the accompanying financial
statements, the Company has incurred losses totaling $4,878,418 since inception
and at September 30, 1998, had working capital of $144,541.
Revenues for the three and nine month periods ended September
30, 1998, for the limousine reservation business were $22,128 and $52,002, as
compared to $0 and $2,225 for the 1997 periods. The corresponding cost of
service for the three and nine month periods ending September 30, 1998 were
$62,792 and $111,490 as compared to $0 and $6,800 for the 1997 periods. To date
the Company has not yet commenced generating revenues from its internet travel
business.
General and administrative expenses were $1,205,173 for the
nine months ended September 30, 1998, as compared to $927,670 during the nine
months ended September 30, 1997. Cost increases during the 1998 period consist
of payroll and payroll related costs ($175,000), professional fees ($57,200),
travel costs ($5,600), insurance costs ($8,200), marketing costs ($28,300) and
other administrative costs ($72,100). Consulting costs decreased $68,900 during
the 1998 period. 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
Gen O2, Inc., a company newly formed by a management group lead by Mark A.
Kenny, a Company founder and former director. The sales price of the Company's
computerized limousine reservation and payment system paid by Gen O2, Inc. to
the Company for the purchased assets consists of (i) royalty payments to be made
by Gen O2, Inc. 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 Gen O2, Inc. (the "Series A Preferred Stock"), as
more fully described below, which represents 32.66% of the voting stock of Gen
02, Inc. This Series A Preferred Stock is carried on the Company's balance
sheets at an asset value of $730,287 in total U.S. dollars. If all contingent
payments are realized in their maximum amounts, payments to the Company could
total $1,080,000. The Company's influence in Gen O2, Inc. is limited to the
right to elect one member of a five (5) member Board of Directors. .
<PAGE>
The Contingent Payments to be paid by Gen O2, Inc. shall be calculated as
follows:
(a) The Company shall receive a Contingent Payment in an amount equal to
twenty cents ($.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. 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 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 and 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 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 recapitalizations.
<PAGE>
Upon conversion of the Series A Preferred Stock into Common
Stock of the Gen O2, Inc., the Company and TranspoNet will each own 2450 shares
or 32.66% of the issued and outstanding Common Stock of Gen O2, Inc.
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.
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.
<PAGE>
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 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
publicly or privately 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. At the present time the Company does not have any
alternative plans to raise additional funds needed to market or complete
development of the web site.
<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: January 22, 1999 ____________________________________
Lawrence E. Burk
President and Chief Executive Officer
Date: January 22, 1999 ____________________________________
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 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-PRIMARY> (.22)
<EPS-DILUTED> 0
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) June 30, 1998
GENISYS RESERVATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New Jersey
(State or Other Jurisdiction of Incorporation)
1-12689 22-2719541
(Commission File Number) (I.R.S. Employer Identification No.)
2401 Morris Avenue, Union, New Jersey 07083
(Address of principal executive offices) (Zip Code)
(908) 810-8767
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
As of June 30, 1998, the Company through NetCruise Interactive, Inc.
(NetCruise), its wholly owned subsidiary, acquired the exclusive and worldwide
rights and license for "Parallel Addressing Video Technology" for all travel
related applications from United Internet Technologies, Inc. formerly known as
United Leisure Interactive, Inc., ("UIT") a wholly owned subsidiary of United
Leisure Corporation. In addition, the Company acquired all of the software,
computer systems and intellectual properties related to the travel business,
including the Travel Web Site called "NetCruise.com" . The Company intends to
operate an internet travel agency featuring the technology and assets acquired.
The purchase price for the assets acquired consisted of 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.
ITEM 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(c) Exhibits
1. Asset Purchase Agreement dated as of June 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Genisys Reservation Systems, Inc.
(Registrant)
By: John Wasko, Treasurer
DATED: January 25, 1999
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
<PAGE>
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:
(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.
<PAGE>
(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.
(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
<PAGE>
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 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.
<PAGE>
(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 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
<PAGE>
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.
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
