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 March 31, 1999)
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 March 31, 1999: 7,295,409
shares of Common Stock
Transitional Small Business Disclosure Format (check one)
Yes X No
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GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
CONSOLIDATED BALANCE SHEETS
March December
31, 1998 31, 1997
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,634,396 $2,207,841
Accounts receivable 9,779 8,784
Prepaid Expenses 19,097 5,127
----------- -----------
Total Current Assets 1,663,272 2,221,752
EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION 257,073 261,643
OTHER ASSETS
Computer software costs, less accumulated
amortization 587,725 581,193
Debt issue costs, less accumulated amortization 21,913 26,609
Deposits and Other 61,609 61,669
-------- --------
671,247 669,471
----------- ------------
$2,591,592 $ 3,152,866
=========== ============
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 109,843 $ 114,957
Accounts payable and accrued expenses 151,627 189,712
Accrued interest payable - related parties 174,533 163,296
Accrued consulting fees - related parties 3,000 3,000
------------- -----------
Total current liabilities 439,003 470,965
LONG-TERM DEBT:
Long-term debt, less current maturities 126,894 982,742
------------ -----------
Total Liabilities 565,897 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 Issued and Outstanding 38
Common Stock, $.0001 Par Value; 75,000,000
Shares Authorized; 4,755,594
Shares Issued and Outstanding 476 436
Additional Paid in Capital 5,781,273 4,933,851
Deficit Accumulated During the Developmental Stage (3,756,092) (3,235,128)
----------- -----------
Total Stockholders Equity 2,025,695 1,699,159
----------- -----------
$2,591,592 $ 3,152,866
========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
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GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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Period From
March 7, 1994
(Commencement of
Three Months Ended Development Stage
March 31 March 31 Activities ) to
1998 1997 March 31, 1998
SERVICE REVENUE $ 14,821 $ -- $ 40,684
------------ -------------- ---------------
EXPENSES:
Cost of Service 19,665 --- 44,657
General and Administrative 412,761 215,017 3,088,660
Depreciation and Amortization 96,032 31,872 429,926
Interest Expense, net 7,327 46,818 228,571
--------- -------- ----------
535,785 293,707 3,791,814
---------- ----------- ------------
NET (LOSS) INCURRED DURING
THE DEVELOPMENT STAGE ($520,964) ($293,707) ($3,751,130)
============= ============ ============
BASIC AND DILUTED LOSS PER ($ .12 ) ($ .09 ) ($ 1.33 )
COMMON SHARE ============= ============== =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,378,927 3,420,594 2,825,616
============= =========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
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GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
DEVELOPMENT STAGE COMPANIES
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS EQUITY
(Unaudited)
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Deficit
Accumulated
Additional During the
Common Stock 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
NET LOSS --- --- --- --- ------ (520,964) (520,964)
------------ ------- ----------- ---------- ------------- ---------- -----------
BALANCE AT MARCH 31, 1998 4,735,594 $476 381,177 $38 $5,781,273 ($3,756,092) $2,025,695
========= ==== ======= ==== ========== ============ ==========
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See Accompanying Notes to Financial Statements
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GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
Development Stage Companies
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Period From
March 7, 1994
(Commencement of
Development Stage
Three Months Ended Three Months Ended Activities to
March 31,1998 March 31,1997 March 31, 1998
------------------- -------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(520,964) $ (293,707) $(3,756,092)
Adjustments to reconcile net loss to net
cash flows from operating activities
Depreciation and amoritization 96,032 31,872 429,926
Contribution to capital of services rendered 0 0 49,600
Changes in operating assets and liabilities:
Accounts receivable (995) 0 (9,779)
Prepaid expenses (13,970) (154) (19,337)
Deposits and other 0 0 (62,323)
Accounts payable and accrued expenses (26,848) 351,736 313,134
------------------- -------------------- -------------------
Net cash flows from operating acctivities (466,745) 89,747 (3,054,871)
------------------- -------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (93,238) (37,039) (1,198,212)
Acquisition of Prosoft, Inc. 0 0 (34,602)
------------------- -------------------- -------------------
Net cash flows from investing activities (93,238) (37,039) (1,232,814)
------------------- -------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 9,093 0 14,093
Payments on long-term debt (847,500) (65,000) (925,840)
Proceeds from public offering of common stock
and warrants net of deffered offering costs 0 4,512,291 4,507,915
Conversion of convertible notes payable
to common stock 37,500 0 67,500
Conversion of long-term debt to Series A
Preferred Stock 810,000 0 810,000
Issuance of common stock upon exercise of option 0 0 15,000
Loans and advances from related parties 0 6,500 0
Proceeds from issuance of notes payable 0 70,000 955,000
Payments under computer equipment leases (22,555) (9,195) (85,631)
Proceeds from sale and lease-back 0 0 294,644
Proceeds on Payments of convertible notes 0 0 0
Proceeds from sale of common stock 0 0 110,000
Contribution to capital - stockholder/officer 0 19,700 205,400
Proceeds from issuance of 10% promissory notes 0
and related warrants, less related costs 0 0 517,500
Payments on 10% promissory notes and related 0
warrants 0 0 (563,500)
------------------- ------------------- -----------------
Net cash flows from financing activities (13,462) 4,534,296 5,922,081
------------------- -------------------- -------------------
NET CHANGE IN CASH AND EQUIVALENTS (573,445) 4,587,004 1,634,396
CASH AND EQUIVALENTS, BEGINNING OF YEAR 2,207,841 91,548 0
------------------- -------------------- -------------------
CASH AND EQUIVALENTS, END OF PERIOD $ 1,634,396 $ 4,678,552 $ 1,634,398
------------------- -------------------- -------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 13,506 $ 537 $ 154,004
------------------- -------------------- -------------------
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 $ - $ 37,500
------------------- -------------------- -------------------
See Accompanying Notes to Financial Statements
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<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.
In accordance with AICPA Statement of Position 98-1 the Company capitalizes the
direct cost of materials, services and interest consumed in the development of
computer software. Such costs, as well as the cost of acquired technology
licenses and related assets, are being amortized over five years, subject to
periodic evaluation for impairment.
Note 2 Activities of the Company
The accompanying financial statements of the Company have been presented on the
basis that it is a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company has reported net losses since inception and expects to incur additional
operating losses over the next several quarters. The Company has also
experienced liquidity difficulties since inception, and in order to continue the
marketing and sales efforts of the Company's Internet travel business may need
additional financing. The Company has financed its operations since inception
with the proceeds from the issuance of long-term debt, with the proceeds from
its public and private offerings and loans from a related party.
As of November 5, 1998, the Company began generating revenues from shared
commissions earned by the network of Sterling Travel Consultants recently
acquired, although these revenues were not significant through the fiscal
quarter ended March 31, 1999. Management of the Company expects the Internet
travel business to be fully operational in mid-1999 and is planning to begin
television marketing of the Company's products in mid-1999. These efforts are
expected to significantly increase revenues in 1999. The Company plans to
continue an 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 has also begun to
receive contingent payments from GEN 02 although these payments were not
significant through the fiscal quarter ended March 31, 1999. The Company
completed a private placement of common stock in January 1999 and received gross
proceeds of $1,500,000 . Of this figure, $200,000 was received by the Company in
1998, $510,000 between January, 1999 and March, 1999 and the remaining $790,000
was received by the Company in June 1999. With these proceeds and anticipated
cash to be received from revenues, the Company believes 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 to continue to enhance and upgrade
the web-site or to fund cash shortfalls should anticipated revenues not be
achieved. In the event the Company decides to purchase significant amounts of
media time for the television infomercial, it will need to raise additional
funds. No assurance can be made that the Company will be able to raise such
funds.
Additionally, as a result of the sale of the limousine reservation business to
GEN 02, Inc., the Company has limited its post-December 31, 1998 cash outflow
for the limousine reservation business to $140,000 (which is the balance
remaining on the Company's loan commitment to GEN 02, Inc.) As the Company moves
from the development stage to the operating stage of the internet travel
business and continues its aggressive marketing campaign to build its network of
independent travel consultants, revenues are expected to increase. The Company
is completing production of its TV infomercial and intends to begin its
television media campaign in September 1999. Based upon estimates received from
marketing consultants hired by the Company (which marketing consultants are not
affiliated with the persons making the informercial), test marketing of the
informercial is expected to produce 2,000 new independent travel consultants
over a two month period., as well as commissions derived from the increased
volume of travel booked by the independent travel consultants will also
contribute to increased revenues.
Reference should be made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" include elsewhere herein for additional
information.
Note 3 Acquisition
Net Cruise - As of June 30, 1998, the Company's newly formed subsidiary,
NetCruise
Interactive, Inc. ("NetCruise") acquired computer software, a technology license
and related assets from United Leisure Interactive, Inc. ("UIT") in exchange for
2,000,000 shares of the Company's stock and two warrants ("Warrants").
Subsequently, the Company was advised that because the issuance of 2,000,000
shares and warrants exceeded 20% of the Issued and outstanding shares,
shareholder approval was required by a NASDAQ rule. NASDAQ has agreed to
continue listing the Company's securities on the NASDAQ Small Cap Market
pursuant to the following conditions: (i) the UIT Transaction must be unwound in
the event shareholders do not ratify the acquisition of the software, technology
license and certain related assets from UIT and approve the issuance of
1,100,000 shares of Common Stock and two 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 April 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 the technology license and certain related assets from
UIT. The Company has requested an extension from NASDAQ with respect to the
deadline to August 31, 1999.
The Company and UIT have restructured the transactions 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 Market Place Rule) and the Warrants. The
Company will issue to UIT 1,100,000 shares of Convertible Series B Preferred
Stock (the "Series B Preferred Stock"), which Series B Preferred Stock is
automatically convertible into 1,100,000 shares of the Company's Common Stock
upon Shareholder approval of the issuance of the 1,100,000 shares of Series B
Preferred 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. The Company was not able to obtain such
Shareholder approval, and will therefore be required to pay the dividend. The
total purchase 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 Convertible
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 of 1,100,000 shares of Common Stock and two stock purchase
warrants, the UIT Transaction will be unwound. In such event, the Company
estimates that the cost to undo the transaction will not exceed $50,000. This
estimate includes accounting fees, legal fees, recording fees and employee
termination fees. In the event that the UIT Transaction must be unwound, (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 and warrants received pursuant to
the UIT Transaction and (iii) Mr. Brian Shuster will return the warrants issued
to him by the Company; and (iv) Mr. Brian Shuster will resign from any officer
or director position held by him. 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.
In February 1999, the Company acquired Sammy's Travel World. Inc. a travel
agency for 36,600 shares of common stock valued at $1.50 per share ($54,900).
Accounting - For accounting purposes, the fair value of the shares has been
allocated to the assets acquired based upon management's estimate of the
relative fair values. No value has been placed on the warrants issued UIT or on
the contingent shares issuable to Sterling, as the value is contingent upon
future earnings. When the contingency is resolved, the fair value of the
warrants and shares will be treated as an additional cost of the acquisitions.
Pro forma results assuming the acquisitions had occurred as of January 1, 1998
have not been presented, as the acquisitions of Sterling and Sammy's were not
deemed significant and the acquisition of assets from UIT was not of a business.
The acquisition of assets from UIT is subject to ratification by the
shareholders. (Reference should be made to "Pro Forma Financial Statements"
appearing elsewhere herein for description of the effects recission.
Note 4 - Stockholders' Equity
Cancellation of Shares - In August 1996, the Company gave notice to a former
officer and director of the Company that it was canceling the 333,216 shares of
its common stock which had been issued to the former officer in connection with
services to be provided at the inception of Travel Link. Such cancellation
relates to various claims made by the Company against the former officer and
failure to provide services to the Company. The former officer has contested the
attempt by the Company to cancel his shares. Pending return of the shares, they
are considered outstanding for all periods presented herein. (See Note 5 for
information concerning litigation commenced by the former officer.)
Contingent Shares - In connection with the Sterling acquisition described in
Note 3, an additional 17,500 shares were placed in escrow and will be released
in the event the Company achieves $3,000,000 of gross sales during the twelve
months ended October 31, 1999.
Note 5 Contingencies
On April 17, 1997, a 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 judgement that the former officer is
the owner of the 333,216 shares of Common Stock of the Company which had been
issued to him at the inception of Travel Link for services he was to have
provided and for unspecified compensatory and
punitive damages.
The Company believes that the plaintiff's claims are without merit and intends
to vigorously defend the action and to assert numerous defenses and
counterclaims in its answer. (See note 4 - Cancellation of Shares.)
On December 23, 1997, an individual filed an action in the Superior Court of New
Jersey against the Company and the former President of the Company, alleging
that the former President of the Company induced such person to lease 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
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. A former officer and director has agreed to hold the
Company harmless and indemnify the Company from any and all claims. Management
believes that there will be no material effect on the Company as a result of
this action.
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Note 6 Exchange of Assets
In November 1998, the Company decided to exchange the assets of its computerized
limousine reservation and payment system for a 32.7% interest in Gen 02, Inc., a
Company newly formed by a former director and founder of the Company, and
contingent payments for a period of five years (up to a maximum total of
$1,080,000). For financial reporting purposes, this exchange resulted in a
change in reporting from consolidated (for periods prior to November 6, 1998) to
the equity basis (for periods since November 6, 1998). (See "Pro Forma
Statements of Operations appearing elsewhere herein for assumed exchange as of
January 1, 1998.)
Summarized information on Gen 02, Inc. for the three months ended March 31, 1999
is as follows:
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March 31,
1999
Revenues from external domestic customers $ 72,906
---------
Expenses:
Cost of services 22,560
General and administrative 141,804
Depreciation and amortization 102,852
-------
Net loss 267,216
$(194,310)
Current assets $ 71,758
Property and equipment 181,897
Computer software costs 441,216
Other assets 43,129
$738,000
Current liabilities $146,662
Due to Company and Transponet 122,000
Equity 469,338
$738,000
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The principal business activity of the Company is the Internet Travel business
which generates revenues from people who have paid a subscription fee and signed
up as Independent travel consultants. In addition, airlines, hotels, car rental
companies, cruise lines, tour operators and other travel vendors will pay the
Company commissions for all sales generated by the Company's network of
independent travel consultants. Such commissions are then shared with the
independent travel consultants.
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 the
computerized limousine and payment system to GEN 02, Inc. a company newly formed
by a management group lead by Mark A. Kenny, former director and founder of the
Company. The Company owns a minority interest in the new company and will
receive royalties on transactions processed by the new company for a period of
five years.
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, in which the Company purchased all
the assets relating to Sterling's network of independent travel consultants.
As of February, 1999, the Company acquired Sammy's Travel World, Inc. a full
service travel agency serving the northern New Jersey and New York City areas.
The purchase price for the acquisition was 36,600 shares of the company's common
stock which, for accounting purposes, is being valued at $1.50 per share or an
aggregate of $54,900. The company believes that this agency with its team of
travel agents will provide the company with licensing and servicing capabilities
that will augment and extend the current capabilities of the company,
particularly the Sterling Travel consultants. The Company believes that this
combination of experience and expertise will accelerate its entry into the
Internet travel business.
As indicated above, revenues and related costs of fiscal 1999
differ from those of fiscal 1998, as revenues from its former computerized
limousine reservation and payment system represented all of the Company's
revenues until November 5, 1998 and thereafter, all revenues relate to its
internet travel business. Reference should be made to Pro Forma Statement of
Operations, which assumes the sale of the computerized limousine reservation and
payment system as of January 1, 1998.
The Company has been in the development stage and has only
generated limited revenues. The Company has been unprofitable since inception
and expects to incur additional operating losses over the next several fiscal
quarters. Total revenues for the three months ended March 31, 1999 were $80,533
compared to $14,821 for the 1998 period.
The corresponding cost of sales for the three months ended March 31, 1999 was
$31,299 compared to $19,665 for the1998 period. The net loss for the three
months ended March 31, 1999 was $950,120 or $0.13 cents a share compared to a
loss of $520,964 or $.12 cents a share for the 1998 period. As reflected in the
accompanying financial statements, the Company has incurred losses totaling
$6,529,737 since inception and at March 31, 1999, had a working capital deficit
of $436,698.
General and administrative expenses were $584,204 for the
three months ended March 31, 1999 as compared to 412,761 for the 1998 period.
The primary reason for the difference between the two periods is an increase in
legal expenses related to litigations.
Cost increase during the 1999 period consist of consulting
fees ($52,200), professional fees ($194,500) and other administrative costs
($2,900). Costs decreases during the 1999 period consist of payroll costs
($11,500), travel costs ($5,400), insurance costs ($1,000), and marketing costs
($30,500).
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, two private offerings and a public offering.
In September 1995, January 1996 and December 1996, the Company
entered into sale and leaseback arrangements whereby the Company sold the bulk
of its computer hardware and commercially purchase software to a lessor for
amounts totaling $295,000 and agreed to lease back such equipment for initial
terms ranging from 24 to 30 months. Pursuant to the November 1998 exchange of
assets for a 32.7% interest in Gen 02, Inc. the obligations under the sale and
leaseback arrangements were assumed by Gen 02, Inc.
In March 1998, Loeb Holding Corp., as escrow agent for Warren
D. Bagatelle, Managing Director of Loeb Partners, Corp. HSB Capital, trusts for
the benefit of families of two principals of Loeb Holding Corporation and three
unaffiliated individuals 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, Loeb Holding Corp., as escrow agent for Warren
D. Bagatelle, Managing Director of Loeb Partners, Corp. HSB Capital, trusts for
the benefit of families of two principals of Loeb Holding Corporation and three
unaffiliated individuals 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.
In March 1998, Loeb Holding Corp., as escrow agent for Warren
D. Bagatelle, Managing Director of Loeb Partners, Corp. HSB Capital, trusts for
the benefit of families of two principals of Loeb Holding Corporation and three
unaffiliated individuals 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.
The financing of Loeb Holding Corp., and the sale and
leaseback arrangement entered into by the Company contributed to the original
capitalization of the Company.
The budgeted cost of launching the Company's marketing
campaign, which includes the development of a data base and networking
capability, is expected to be approximately $1,342,000. Of such amount,
approximately $198,000 was allocated to complete development of the web-site,
which is currently operational. The Company intends to use $75,000 of the
$198,000 to continue to enhance and upgrade the web- site. Such improvements
will include providing additional features to the site, such as personal web
pages for the independent travel consultants, chat capability, on-line
accounting information for the independent travel consultants as well as client
profiling. The Company expects to continue upgrading the web-site as
appropriate. The remainder of the $1,342,000 will be used to produce a
television video infomercial and purchase media time. The Company believes it
will be able to finance such development substantially from proceeds of a recent
private placement in the amount of $1,500,000, but there can be no assurance
that such funds will be sufficient. In the event the Company decides to purchase
significant amounts of media time for the television infomercial, it will need
to raise additional funds. No assurance can be made that the Company will be
able to raise such funds.
On March 31, 1999, the Company had cash of $101,563 and a working capital
deficit of $436,698. As if November 5, 1998, the Company has begun to generate
revenues from shared commissions earned by the network of Sterling Travel
Consultants recently acquired, although these revenues have not been
significant. Management of the Company expects the Internet travel business to
fully operational in mid 1999 and is planning to begin television marketing of
the Company's products in mid 1999. These efforts are expected to significantly
increase revenues. The Company plans to continue the aggressive marketing
campaign as well as expand its network of travel consultants throughout 1999.
Although the Company has also begun to receive contingent payments from Gen 02,
these revenues have not been significant. The Company expects its operations to
achieve break-even by the end of fiscal 1999.
The Company completed a private placement of common stock in January 1999
whereby it sold
1,000,000 shares of Common Stock for an aggregate of $1,500,000 of which
$200,000 was received in 1998 , $510,000 between January, 1999 and March, 1999
and $790,000 in June, 1999. The Company estimates, including anticipated cash to
be received from revenues, 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 continue enhancement of the web-site. In the event the Company decides
to purchase significant amounts of media time for the television infomercial, it
will need to raise additional funds. No assurance can be made that the Company
will be able to raise such funds.
PART II OTHER INFORMATION
ITEM 6. Exhibits and 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_July 19, 1999 /s/ Lawrence E. Burk
====---------- Lawrence E. Burk
President and Chief Executive Officer
Date__July 19, 1999 /s/ John H. Wasko
====--------------- 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 three months ended March 31, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 102
<SECURITIES> 0
<RECEIVABLES> 65
<ALLOWANCES> 15
<INVENTORY> 0
<CURRENT-ASSETS> 166
<PP&E> 132
<DEPRECIATION> 20
<TOTAL-ASSETS> 3,232
<CURRENT-LIABILITIES> 603
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,547
<TOTAL-LIABILITY-AND-EQUITY> 3,232
<SALES> 80
<TOTAL-REVENUES> 80
<CGS> 31
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1)
<INCOME-PRETAX> (950)
<INCOME-TAX> 0
<INCOME-CONTINUING> (950)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (950)
<EPS-BASIC> (.13)
<EPS-DILUTED> (.13)
</TABLE>
