UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Registration No.__________
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Genisys Reservation Systems, Inc.
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(Exact name of registrant as specified in its charter)
New Jersey
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(State or other jurisdiction of incorporation or organization)
22-2719541
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(I.R.S. Employer Identification Number)
2401 Morris Avenue, 3rd Floor, Union, NJ 07083 (908) 810-8767
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(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
John H. Wasko c/o Genisys Reservation Systems, Inc.
2401 Morris Ave., 3rd Fl., Union, NJ 07083, (908) 810-8767
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
Registration Statement is declared effective.
If the only securities being registered on this Form are
being offered pursuant to dividend or interest
reinvestment plans, please check the following box: o
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: o
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: o
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: o
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CALCULATION OF REGISTRATION FEE
Title of each class of securities to be Amount to be Proposed Proposed maximum Amount of
registered registered maximum aggregate offering registration
offering price fee(3)
price per
share
Shares of Common Stock 1,000,000 $3.84375 $3,843,750 $1,068.57
$.0001 par value shares (1)
Shares of Common Stock 1,500,000 shares $5.75 (2) $8,625,000 $2,397.75
underlying Class A
Redeemable Warrants
Shares of Common Stock 900,000 shares $6.75 (2) $6,075,000 $1,688.85
underlying Class B
Redeemable Warrants
TOTAL
paid on account $5,155.17
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(1) Calculated, pursuant to Rule 457(c), as the average of the high and
low prices as of the closing of trading on March 25, 1999.
(2) Calculated, pursuant to Rule 457(g)(1), as securities to be offered
pursuant to warrants at the price at which the warrants may be
exercised.
(3) Calculated pursuant to section 16a of the Securities Act of 1933,
the aggregate proceeds multiplied by .000278 to arrive at the
registration fee.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
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PROSPECTUS
GENISYS RESERVATION SYSTEMS, INC.
3,400,000 SHARES OF COMMON STOCK
We are registering 3,400,000 shares of our common stock. The 2,400,000
to be registered represent shares of our common stock underlying already issued
redeemable warrants and the remaining 1,000,000 of these shares are being
offered by certain selling shareholders as listed below. 1,500,000 of the
2,400,000 shares underlie Class A Redeemable Warrants and 900,000 of the
2,400,000 shares underlie Class B Redeemable Warrants. These warrants were
initially offered pursuant to our public offering in March 1997. Since that
time, there has been a public market for our company's common stock and the
warrants. While we cannot guarantee that such market can be sustained, currently
the common stock is being traded on the NASDAQ SmallCap Market under the symbol
"NETC", the Class A Redeemable Warrants are being traded under the symbol
"NETCW", and the Class B Redeemable Warrants are being traded under the symbol
"NETCZ". See Risk Factors "No Assurance of Public Market or Continued NASDAQ
SmallCap Market Listing," and "Risk of Penny Stock Regulations" on pages 13-14.
Here are the Selling Shareholders Who are Offering the 1,000,000 Shares:
Yeshiva Beth Hillel of Krasna, Inc. - 400,000
James N. Jannello - 100,000
Carmine N. Stella - 60,000
Lunt Legacy L.C. - 23,250
Key L.C. - 176,750
Aaron Jungreis - 10,000
C.P. Holding Corp. - 100,000
Jeffrey Pasenkoff - 10,000
Flossie Switzer Deneka - 10,000
Steven Deneka - 10,000
Giuseppe Pappalardo - 100,000
Total Shares = 1,000,000
The 1,000,000 shares being offered by the selling shareholders listed
above may be sold at anytime. The 2,400,000 shares underlying the Class A
Redeemable Warrants and the Class B Redeemable Warrants may be exercised by the
holders of the warrant at any time until September 20, 2001. No underwriting
arrangements have been entered into by any of the selling shareholders. However,
the selling shareholders and those intermediary companies or persons through
whom the shares may be sold, may be considered "underwriters" within the meaning
of the Securities Act of 1933. Therefore, any profits made or commissions
received by the shares offered, may be considered to be underwriting
compensation.
These shares have not been approved by the SEC or any state securities
commission, nor have these organizations determined that this prospectus is
accurate or complete. It's illegal for anyone to tell you otherwise. Also, you
should know, that any investment made in these shares offered involves a high
degree of risk and you should not invest in them unless you can afford the risk
of losing your entire investment. Please read the Risk Factors section on pages
6-15 of this prospectus carefully.
March __, 1999
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
The following documents, filed by our company with the Securities and
Exchange Commission, are incorporated in this prospectus by reference:
(a) The company's Annual Report on Form 10-KSB for the year ended
December 31, 1997, as amended;
(b) The company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998;
(c) The company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1998, as amended;
(d) The company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998, as amended;
(e) The company's Form 8-Ks dated October 29, 1998 and January 23, 1999.
(f) The company's Definitive Proxy Statement dated April __, 1999.
(g) The company's Annual Report on Form 10-KSB for the year ended December 31,
1998.
(h) The description of the company's securities contained in the company's
Registration Statement under Section 12 of the Exchange Act, and any
and all amendments and reports filed for the purpose of updating such
description.
All documents filed by our company have been filed pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
prospectus and prior to the termination of the offering of the common stock
offered hereby, shall be deemed to be incorporated by reference into this
prospectus and to be a part of this prospectus from the date of filing of such
documents. Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
We will provide without charge to each person to whom this prospectus
is delivered, including a beneficial owner, on the written or oral request of
such person, a copy of any or all of the documents incorporated by reference
(other than exhibits to such documents), but not delivered with the prospectus.
Requests for such copies should be directed to the principal offices of our
company at Genisys Reservation Systems, Inc., 2401 Morris Ave., 3rd Fl., Union,
NJ 07083, the telephone number is (908) 810-8767.
If any of the information that is incorporated by reference in the
prospectus is sent to security holders, the company will also send any exhibits
that are specifically incorporated by reference in
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that information. The company will identify the reports and other information
that it files with the SEC. The public may read and copy any materials the
company files with the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an internet website that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC, the address of that site is http://www.sec.gov.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling shareholders will
not make an offer of these shares in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of those documents.
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OUR COMPANY
Until June 1998, our main business activity had been the operation of a
computerized limousine reservation and payment system for business travelers.
The software that we developed enables limousine reservations to be completely
computerized which basically means the limousine reservations are entirely
automatic and operate without human intervention except for the initial
inputting of travel information. We found that this area of business was very
specific and we believe that the limousine reservation business was too narrow a
business for a public company to continue in and achieve a level of
profitability that was satisfactory. We therefore decided, after careful
analysis, that it would be better and more profitable for our company to enter
into the broader market of the internet travel industry. From November 1998, we
have focused exclusively on this new area of the internet travel business
following our sale of our computerized limousine reservation system.
On June 30, 1998, Genisys, through NetCruise Interactive, Inc.,
acquired a technology license and certain related assets from United Internet
Technologies, Inc. (a company formally known as United Leisure Interactive,
Inc.) and intellectual properties relating to the travel industry, including the
travel web site called "Netcruise.com", in consideration of 2,000,000 shares of
Genisys' common stock and two warrants. NetCruise Interactive, Inc., is a New
Jersey corporation and a wholly owned subsidiary of our company, formed on July
21, 1998 for the purpose of operating an internet travel business. Each Genisys
warrant entitles its holder to purchase 800,000 shares of the common stock of
Genisys. 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 Million for the years 1999, 2000 and
2002. The other warrant is exercisable for 800,000 shares at $6.00 per share and
may be exercised between April 1, 2001 and June 30, 2002, but only if NetCruise
achieves profits equal to or exceeding $10 Million for the years 1999, 2000 and
2001. Finalization of this transaction is subject to the approval of
shareholders of Genisys. See "Material Changes and Recent Developments" on pages
15-21.
Subsequently, on November 5, 1998, in order to facilitate and improve our
company's entry into the internet travel business, Genisys purchased all of the
assets of Sterling AKG Corp., also known as Sterling Travel, for a total
purchase price of 25,000 shares of Genisys' common stock. An additional 17,500
shares will be held in escrow by counsel to Genisys. If Genisys does not achieve
$3 Million of gross sales from the Sterling Travel consultants over the initial
twelve month period beginning on November 1, 1998 and ending on October 31,
1999, the shares being held in escrow shall immediately be returned to Genisys.
If Genisys achieves $3 Million of gross sales from Sterling Travel consultants
over that twelve month period, the shares being held in escrow will be released
by Genisys. The assets we purchased consist principally of a network of
independent travel consultants. Soon thereafter, we also acquired Sammy's Travel
World Inc., a full service travel agency, which we hope will add additional
licensing and servicing capabilities to our network of Sterling Travel
consultants which we acquired through the purchase of the assets of Sterling
Travel. See "Material Changes and Recent Developments" on pages 21-23.
On November 6, 1998, we sold the assets of our computerized limousine
reservation system which had been our main business activity, to Gen 02, Inc.
Gen O2, Inc. is a company newly formed by a management group led by Mark A.
Kenny, a founder, shareholder and a former director of Genisys. This transaction
has allowed us to focus our efforts on developing our business into an internet
travel business, while still maintaining an interest in the computerized
limousine reservation business, through our status as a 32.66% minority
shareholder of Gen 02, Inc. See "Material Changes and Recent Developments" on
pages 23-26.
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Subsequent to the above described events, a Definitive Proxy Statement
was filed with the Securities and Exchange Commission on April ___, 1999, and a
shareholders meeting is expected to take place in May 1999. Until that time, we
cannot predict whether the shareholders will approve the transactions described
above (and in more detail later in this prospectus) thus, making them effective.
The Proxy Statement sets forth various items that are to be voted upon in
addition to the above described events.
Additional Items to be voted upon as described in Proxy Statement:
(1) Ratify the November 6, 1998 sale of our limousine reservation
system business to Gen 02, Inc., a newly organized corporation formed by Mark A.
Kenny, a former director and founder of the company;
(2) Amend our company's certificate of incorporation to change its name
from Genisys Reservation Systems, Inc. to netcruisetravel.com, inc.;
(3) Amend and restate our company's authorized common and preferred
stock to correct certain inconsistencies in our company's certificate of
incorporation;
(4) Elect our Board of Directors; and
(5) Ratify the appointment of independent auditors.
We believe that all these transactions and proposals are in the best interest of
Genisys.
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 our company from the limousine reservation business to an
internet travel business.
Genisys's executive offices are located in Union, New Jersey and the
telephone number is (908) 810-8767.
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RISK FACTORS
The shares offered in this prospectus involve a high degree of risk.
You should only purchase these shares if you can afford the risk of losing your
entire investment. Therefore, prior to purchasing any such shares as an
investment, you should read the following principal risk factors very carefully.
You should also read all of the other information set forth in this prospectus
very carefully, including any financial statements, notes to financial
statements and any documents referenced in this prospectus. Please remember that
there may be other risks and uncertainties not presently known to us or that we
currently believe are immaterial.
Our qualified independent auditor's report lists financial losses and our
ability to continue as a going concern
The financial statements have been prepared assuming that we will
continue as a going concern. At December 31, 1998, we had incurred an
accumulated deficit of $5,579,617 and a working capital deficit of $196,212.
There is therefore, substantial doubt as to our ability to continue as a going
concern. Furthermore, no assurance can be given that our business strategy will
prove successful or that we will operate profitably.
We have limited operations and revenues
Up to July 1, 1997, our operations were limited to market research and
development of a software and hardware system for computerizing the limousine
reservation and payment process. Since July 1, 1997, we generated limited
revenues from the limousine reservation business, particularly in light of our
sale of limousine reservation system to Gen 02, Inc. in November 1998. Revenues
for the year ended December 31, 1998 were $33,290, representing the initial
revenues we generated from our internet travel business. From November 1998 we
have focused our operations on the internet travel business, following our sale
of our computerized limousine reservation system. No assurance can be given that
our internet travel business will achieve commercial feasibility or enable us to
achieve profitable operations. See "Material Changes and Recent Developments" on
pages 15-26.
Our company is in the development stage.
We are not sufficiently established to fully evaluate or forecast our
prospects for entering into the internet travel business and exiting the
limousine reservation business. We are subject to all the risks associated with
the creation of a new business and there is no assurance that we will be able to
continue to function as a viable entity.
We expect to experience rapid technological changes and experience an increase
in cost and competition.
The computer hardware and software industry is relatively new and has undergone,
and is expected to continue to undergo, significant and rapid technological
changes. Market penetration and customer acceptance of our business will depend
upon our ability to develop successful marketing strategies competent marketing
force as well as our ability to adapt to rapid technological changes
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in the industry. We also expect that new competitors may introduce systems or
services that are directly or indirectly competitive with those of our
company's. Such competitors may succeed in developing systems and services that
have greater functionality or are less costly than our systems and services and
may be more successful in marketing such systems and services.
We intend to use new internet technology.
We intend to operate an internet travel agency featuring the licensed technology
and assets acquired by NetCruise, our wholly owned subsidiary, from UIT. The
internet travel industry is relatively new and is expected to experience rapid
changes in its technology and service. There are a number of sizable established
companies with much greater resources than Genisys' offering travel reservations
on the internet; among them are Preview Travel, Travelocity and Expedia Travel.
We cannot predict how successful we will be in this new area of operations or,
if by focusing a majority of our efforts on this area, we will be able to
generate sufficient revenues. Although our newly acquired technology, the
"Parallel Addressing Video Technology", which is described more fully on page 17
herein, is fully operational, the internet web site utilizing this technology is
currently still being developed. Our management team expects the web site to be
fully operational by mid 1999.
We have limited operations of newly acquired internet travel business.
We have only signed up a limited number of travel consultants acquired
from Sterling Travel and have only recently acquired additional licensing and
servicing capabilities from Sammy's Travel World Inc. In addition, we do not yet
have any internet travel customers. The budgeted cost of becoming operational is
expected to be approximately $1,342,000. Of such amount, approximately $198,000
is needed to complete the internet travel web-site. The remainder will be used
to produce a television video commercial and purchase media time. Our company
believes that it will be able to finance such development, substantially from
proceeds of our recent private placement, but there can be no assurance that
such funds will be sufficient. No assurance can be given that we will be able to
raise any additional funds that may be needed. We cannot predict that a
successful transition will be made from the limousine reservation business to
the internet travel business.
We may have possible need for additional financing.
We intend to fund our operations and other capital needs for the next
twelve (12) months from the date of this Prospectus substantially from revenues
generated by our planned operations and the proceeds of our recent private
placement, but there can be no assurance that such funds will be sufficient for
these purposes. There can be no assurance that any additional financing will be
available, or that it will be available on acceptable terms.
We have no assurance of market acceptance.
We believe that our internet travel business will gain acceptance among
internet users. However, there can be no assurance that a sufficient number of
internet users will be willing to utilize our specific technology to enable us
to achieve profitable operations. It is impossible to
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predict whether the technology, licenses and business plan we develop will
appeal as a package to internet users. Wide market acceptance will be necessary
to generate profits and enable us to continue in the market place.
We are dependent on the internet and third party internet booking systems.
We are dependent on the internet as a platform to conduct our business.
If the internet were to experience technical difficulties that limited the
ability of our company to serve information through its world wide web site,
limited our customers' access to its world wide web site, or impaired our
ability to effectively process information through the internet, our business
would be adversely affected.
In addition, we have and will continue to enter into agreements with
outside companies to provide travel content and travel reservation capabilities
for integration with our company's world wide web site. There can be no
assurance that such agreements will be renewed or, if renewed, will be on
favorable terms after their expiration. Moreover if such agreements were to
terminate, or if such systems experienced technical difficulties and we were to
lose access to such systems, our business would be materially and adversely
affected.
We may experience the adverse effect of economic downturn.
Our system is dependent upon our customers' travel habits and ability
to access the internet. In the event there is an economic downturn or change in
travel patterns, the company's business could be adversely affected. For
example, if the economy declines, the public's ability and desire to travel or
take vacations may significantly decrease. A shift in the economic environment
may cause the public to limit the number of vacations they take. In addition,
the economic strength of the dollar abroad may affect the public's desire to
travel abroad, thus possibly limiting their need to search and reserve travel
plans on line.
Our current officers and directors can act together to control the actions of
our company.
As of the date hereof, the management of our company owns 2,561,843
shares of common stock. Our officers and directors therefore own or control the
voting of 40.4% of our company's then issued and outstanding common stock. There
are no cumulative voting rights and directors must be elected by a plurality of
the outstanding voting securities entitled to vote. Management is therefore in a
position to control the actions of our company. The above does not assume our
shareholder approval of the issuance to UIT of 1,100,000 shares of common stock.
If shareholders approve the issuance of such shares, then management will own
3,661,843 shares of common stock and will own or control the voting of 57.8% of
the company's outstanding common stock. See "Material Changes and Recent
Developments" on pages 27-31.
We depend upon our ownership of our travel website and technology license.
We own the travel website called "Netcruise.com" and the license for
"Parallel Addressing Video Technology", along with all of the software, computer
systems and licensed intellectual
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properties related to the travel industry. Our ability to generate revenues
depends mainly upon our continued use and ownership rights to this intellectual
property. There is no assurance that these intellectual properties will remain
free of any infringement nor is there any assurance that the legal protections
and precautions taken by us, or available remedies available to us, will be
adequate to prevent misappropriation of our company's proprietary information.
In addition, these protections do not prevent independent third-party
development of functionally equivalent or superior systems, products or
methodologies. Moreover, there can be no assurance that third parties will not
assert infringement claims against the our
There are limitations upon our product protection and possibility of
infringement.
We do not have any patents on any of our technology and we rely largely
on copyright, our license agreements with customers and our own security
procedures, including confidentiality and employee nondisclosure agreements to
maintain the trade secrecy of its proprietary information. There can be no
assurance that the legal protections and precautions taken by us, or the
available remedies, will be adequate to prevent misappropriation of our
company's proprietary information. In addition, these protections do not prevent
independent third-party development of functionally equivalent or superior
systems, products or methodologies. Moreover, there can be no assurance that
third parties will not assert infringement claims against our company.
We will experience a high level of competition in the internet travel business.
The internet travel market is a new and rapidly emerging area. There
are a number of sizeable established competitors with much greater resources
than our company, offering travel reservations on the internet. Among them are
Preview Travel, Travelocity and Expedia Travel. We expect competition to
intensify in the future. As the internet continues to displace the traditional
travel agency system, we believe that the number of companies involved in
providing online travel fulfillment, including travel suppliers, traditional
travel agencies and consumer oriented online travel agencies, will increase
their efforts to develop services and marketing programs that compete with the
company's approach. Many airlines and hotels offer travel services directly
through their own world wide web sites, eliminating the need to pay commissions
to third parties. Our company is unable to anticipate which other companies are
likely to offer competitive services and marketing approaches in the future.
The failure of becoming adequately Year 2000 compliant could materially
adversely affect us.
We are conducting a comprehensive review of our computer systems to
identify the systems that could be affected by the "Year 2000" issue and have
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 our programs that have time- sensitive
software may recognize the 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 risk for us from
unforseen problems in its own computer systems and from third parties with whom
the company deals on financial transactions. Such failures of our and/or third
parties
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computer systems could have a materially adverse impact on our ability to
conduct our business, and especially to process and account for the transfer of
funds electronically.
With the goal of making our Year 2000 compliant, we have developed a
four phase implementation plan as follows:
1. Inventory phase
2. Vendor contact phase
3. Reintegration phase
4. Testing phase
We have budgeted approximately $15,000 to implement this plan and have
assigned overall responsibility for the project to our Director of Information
Technology. All software currently being developed by us or through third party
contractors is being written to be Year 2000 compliant. Our company, with the
assistance of outside software contractors, is in the process of changing our
accounting system from non-compliant MAS-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.
Our 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 our operations.
We have a need for highly qualified personnel.
The success of our businesses will depend upon our ability to attract
and retain personnel with a wide range of technical capabilities. Competition
for such personnel is intense, and is expected to increase in the future. No
assurance can be given that we will be able to attract and retain such
personnel.
We have not paid dividends on our common stock since inception.
We have not paid any dividends on our common stock since our company's
incorporation and we anticipate that, for the foreseeable future, working
capital and earnings, if any, will be retained for use in our business
operations and in the expansion of our business. We have no present intention to
pay cash dividends on our common stock.
We may potentially have the presence of outside party at directors' meetings
The underwriting agreement in connection with our March 1997 public
offering grants the underwriter the right to appoint a designee to attend all of
our directors' meetings for a period of five years. Such person would not owe us
or our stockholders any fiduciary duty under state law as would our actual
directors and executive officers. While no such person has been appointed to
date, no assurance can be given that our company or our stockholders would have
any legal remedy against such potential designee if such person were to take any
action, such as usurping a corporate opportunity, that might be found to be a
breach of fiduciary duty had such action been taken by an
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actual Director.
We may experience a possible adverse effect of future sales of stock by
stockholders
Of our company's 6,734,694 outstanding shares of common stock prior to
the offering of shares contemplated hereby, 2,845,667 shares are "restricted
securities" as that term is defined under the Securities Act and in the future
may only be sold in compliance with Rule 144 under the Securities Act or
pursuant to an effective registration statement. Rule 144 provides, in essence,
that a person (including a group of persons whose shares are aggregated) who has
satisfied a one-year holding period for such restricted securities may sell
within any three-month period, under certain circumstances, an amount of
restricted securities which does not exceed the greater of 1% of that class of
the company's outstanding securities or the average weekly trading volume of
that class of securities during the four calendar weeks prior to such sale. In
addition, pursuant to Rule 144, persons who are not affiliated with our company
and who have held their restricted securities for at least two years are not
subject to the quantity limitations or the manner of sale restriction of the
rules.
To the extent that the holders of such shares of common stock elect to
sell them in the public market, there is likely to be a negative effect on the
market price of our company's securities and on our ability to obtain additional
equity financing. In addition, to the extent that such shares of common stock
enter the market, the value of the common stock in the over-the-counter market
may be reduced. No predictions can be made as to the effect, if any, that sales
or availability for sale of the securities will have on the market price of any
such securities, which may prevail from time to time. Nevertheless, the
foregoing could adversely affect such prevailing market prices.
We are a party to a pending litigation and intend to indemnify certain persons
from our company in relation to such pending litigation.
In August 1996, we gave notice to one of our former officers, Mr.
Steven E. Pollan, that we were canceling 333,216 shares of common stock issued
to him at the inception of Corporate Travel Link, Inc., a wholly owned
subsidiary of our company, for services he was to have provided to Travel Link
and to us. We believe that Mr. Pollan never provided such services. On April 17,
1997, Mr. Pollan filed an action in the United States District Court, District
of New Jersey, against our 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 W. Sass, McLaughlin & Stern, LLP and Wiss & Company,
LLP. (no longer named a defendant), seeking among other things a declaratory
judgment that Mr. Pollan is the owner of the 333,216 shares of common stock and
for an award of unspecified compensatory and punitive damages.
Pursuant to an order dated on or about May 22, 1997, Mr. Pollan was
permitted to sell 40,000 shares of common stock, and pursuant to a consent order
dated on or about August 21, 1997, we agreed to pay a credit card bill in the
amount of approximately $22,000 representing allegedly authorized business
expenses. Such payment was made without prejudice to our right to seek
restitution from other parties for payment of such charges and in November 1998,
we received
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approximately $22,000 in restitution for such payment from a third party.
We have agreed to indemnify and hold harmless (i) our officers and
directors who are named as defendants in such action against any reasonable
legal or other expenses incurred in defending this action and (ii) the other
defendants in the action, to the fullest extent permitted by law, from any
losses, claims, damages, or liabilities arising from such action as well as
against any reasonable legal or other expenses incurred in defending such
action. No assurances can be given that the company will prevail in this matter
or that the company will not be required to pay substantial sums pursuant to
such indemnification.
On December 23, 1997, an individual, Victoria Vogel, filed an action in
the Superior Court of New Jersey against us and Joseph Cutrona, a former officer
and director of our company, alleging that Mr. Cutrona induced such person to
leave her place of employment to assume employment with us. The claim seeks
monetary damages based upon an oral promise of employment allegedly made by Mr.
Cutrona. We intend to vigorously defend the action and to assert numerous
defenses in our answer, however, this action is in its preliminary stages and no
assurance can be given as to its ultimate outcome. Mr. Cutrona has agreed to
hold us harmless and to indemnify our company from any and all claims of the
plaintiff in this action.
There may be possible adverse effects of authorization of preferred stock and
anti-takeover effects.
Our Certificate of Incorporation authorizes the issuance of a maximum
of 25,000,000 shares of preferred stock, $.0001 par value, on terms which may be
fixed by our Board of Directors without further stockholder action. On March 10,
1998, our board of directors designated 706,000 shares of Series A Preferred
Stock. The Series A Preferred Stock which is convertible, in whole or in part,
into fully paid and nonassessable common stock is entitled to receive dividends
on the same basis with the holders of our common stock. At our sole option, we
have 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.
Our Board of Directors has unanimously adopted, subject to shareholder
approval, a resolution amending and restating the first paragraph and paragraphs
(a) and (b) of Article FOURTH of our Certificate of Incorporation to amend and
restate the provisions of our 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, description of
the dividend rights is contradictory, as dividends are described as being both
cumulative and non-cumulative. The new provision eliminates both descriptions
and simply provides that the Board of Directors has the right to determine if
dividends will be 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
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to determine the liquidation preference. These corrections are needed for the
Series B Preferred Stock to be issued to UIT as described herein under the
section entitled "Material Changes and Recent Developments" on pages 15-20. The
amended version also differs from the current Articles 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.
If shareholders do not approve the change in the amended Certificate of
Incorporation, it may be difficult for us to utilize the authorized preferred
shares for acquisitions, financing, and other proper corporate purposes.
In addition, the terms of any series of preferred stock, could
adversely affect the rights of holders of the common stock. The issuance of
preferred stock could make the possible takeover of our company or the removal
of our management more difficult, discourage hostile bids for control of our
company in which stockholders may receive premiums for their shares of common
stock or otherwise dilute the rights of holders of common stock and the market
price of the common stock.
There is no assurance of public market or our continued NASDAQ SmallCap Market
listing.
Subsequent to our March 1997 public offering, there has been a public
market for our securities. No assurance can be given, however, that such market
will be sustained. Our common stock and two classes of redeemable warrants are
quoted on the NASDAQ SmallCap Market under the symbols: NETC, NETCW, and NETCZ,
respectively. No assurance can be given, however, that we will be able to
satisfy the requirements for continued quotation on the NASDAQ SmallCap Market
or that such quotation will otherwise continue. If, for any reason, any of such
securities become ineligible for continued listing and quotation or a public
trading market does not continue, purchasers of such securities may have
difficulty selling their securities should they desire to do so.
In addition, we have inadvertently caused a violation of a Nasdaq
MarketPlace Rule because the issuance of the 2,000,000 shares and warrants to
UIT pursuant to the June 1998 acquisition by NetCruise (see "Material Changes
and Recent Developments" on page 15), amounted to more than 20% of the issued
and outstanding shares of our company and were not approved by shareholders as
required by such rule. NASDAQ advised us that our common stock would be delisted
as a result of such violation.
We 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:
Conditions to Continued Listing NASDAQ SmallCaps Market
1. The UIT transaction must be unwound if shareholders do not ratify
the acquisition of the 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;
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2. We must file a Definitive Proxy Statement with the SEC and NASDAQ on
or before a deadline as approved by the SEC. We have requested a July 31, 1999
deadline, but have not received a confirmation of this date; and
3. We must submit documentation to NASDAQ on or before a deadline as
approved by the SEC, 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. We have not yet received a firm deadline date from the
SEC, but expect to have one in April, 1999.
We cannot predict that the shareholders will vote in favor of the
issuance of additional shares to UIT nor that even if the shareholders vote in
favor of the issuance of the additional shares, we will be able to continue our
listing on the NASDAQ SmallCaps Market. See "Material Changes and Recent
Developments" on pages 15-20.
There is a risk of "penny stock" regulations.
The SEC has adopted regulations which define a "penny stock" to be any
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions. In the future, it is possible that the common stock and/or
the redeemable warrants may be deemed to be "penny stocks" as defined by the
Securities and Exchange Act and the rules and regulations promulgated
thereunder. For any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a disclosure schedule
prepared by the SEC relating to the penny stock market. The broker-dealer also
must disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities, information on
the limited market in penny stocks and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. In addition, the broker-dealer must obtain a
written acknowledgment from the customer that such disclosure information was
provided and must retain such acknowledgment from the customer for at least
three years.
Further, monthly statements must be sent to the customer disclosing
current price information for the penny stock held in the account. While many
NASDAQ-listed securities would otherwise be covered by the definition of penny
stock, transactions in a NASDAQ-listed security would be exempt from all but the
sole market-maker provision for: (1) issuers who have $2 Million in tangible
assets ($5 Million if the issuer has not been in continuous operation for three
years); (2) transactions in which the customer is an institutional accredited
investor; and (3) transactions that are not recommended by the broker-dealer. In
addition, transactions in a NASDAQ-listed security directly with a NASDAQ
market-maker for such securities would be subject only to the sole market-maker
disclosure, and the disclosure with respect to commissions to be paid to the
broker-dealer and the registered representative.
The above described rules may materially adversely affect the liquidity
for the market of our securities. Such rules may also affect the ability of
broker-dealers to sell our securities and may impede the ability of holders
(including, specifically, purchasers in this offering) of the common stock, the
redeemable warrants and the common stock underlying the redeemable warrants to
sell
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such securities in the secondary market.
Forward-looking statements in this prospectus may prove to be materially
inaccurate
This prospectus contains forward-looking statements that involve risks
and uncertainties. The words "anticipate," "estimate," "will," "could," "may,"
and similar words are intended to identify forward-looking statements. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks
described above and elsewhere in this prospectus.
USE OF PROCEEDS
All net proceeds from the sale of any of the 1,000,000 shares offered
by any of the selling shareholders, will go to the selling shareholders who are
offering and selling their shares. Accordingly, Genisys will not receive any
proceeds from the sale of any of such shares.
In the event the Class A Redeemable Warrant holders exercise all
1,500,000 of their warrants to purchase 1,500,000 shares of Genisys common stock
at $5.75 per share, Genisys will receive in the aggregate, $8,625,000 in
proceeds which will be used for general working capital. Similarly, in the event
the Class B Redeemable Warrant holders exercise all 900,000 of their warrants to
purchase 900,000 shares of Genisys common stock at $6.75 per share, Genisys will
receive in the aggregate, $6,075,000 in proceeds which will be used for general
working capital.
MATERIAL CHANGES AND RECENT DEVELOPMENTS
The Business changes and developments set forth below are pending
shareholder approval. The company has filed a proxy statement as of ______,
1999, and an annual meeting of shareholders is expected to occur in May, 1999.
Business
June 30, 1998 Acquisition of Certain Assets of UIT by NetCruise
As of June 30, 1998, Genisys through NetCruise, a New Jersey
corporation and a wholly owned subsidiary of Genisys formed on July 21, 1998,
for the purpose of operating an internet travel business, acquired a technology
license and certain related assets from UIT in consideration of 2,000,000 shares
of Genisys' common stock and two warrants. For purposes of this section, we
shall refer to those two warrants granted to UIT by Genisys, as the UIT warrants
in order to distinguish them from the Class A Redeemable Warrants and the
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Class B Redeemable Warrants, as also described in this prospectus. We hope this
will avoid any confusion.
The UIT Warrants:
UIT Warrant #1 - entitles holder to purchase 800,000 shares of
Genisys' common stock at $2.50 per share between April 1, 2002 and June
30, 2002, but only if NetCruise achieves profits equal to or exceeding
$5 Million for the years 1999, 2000 and 2001.
UIT Warrant #2 - entitles holder to purchase 800,000 shares of
Genisys' common stock at $6.00 per share between April 1, 2001 and June
30, 2002, but only if NetCruise achieves profits equal to or exceeding
$10 Million for the years 1999, 2000 and 2001.
No value has been placed on the UIT warrants since they are each
contingent upon future earnings. Genisys was advised that this issuance of the
common stock and the UIT warrants has caused Genisys to inadvertently be in
violation of a NASDAQ MarketPlace Rule because the issuance of the shares and
UIT warrants amounted to more than 20% of the issued and outstanding shares of
Genisys and were not approved by shareholders as required by such rule. NASDAQ
advised Genisys that its common stock would be delisted as a result of such
violation. Genisys 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:
Conditions to Continued Listing NASDAQ SmallCaps Market
1. If our shareholders do not ratify the acquisition of the technology
license and certain related assets from UIT and approve the issuance of
1,100,000 shares of common stock and two warrants to UIT, the UIT transaction
must be unwound;
2. We must file a Definitive Proxy Statement with the SEC and NASDAQ on
or before a deadline as approved by the SEC. We have requested a July 31, 1999
deadline but have not received a confirmation of this date; and
3. We must submit documentation to NASDAQ on or before a deadline as
approved by the SEC, 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. We have not yet received a firm deadline date from the
SEC, but expect to have one by April, 1999.
Genisys and UIT will restructure the transaction by UIT returning to Genisys
1,100,000 shares of common stock (retaining 900,000 shares that are not in
violation of the Nasdaq Market Place Rule) and the UIT warrants. Genisys will
issue to UIT 1,100,000 shares of non-voting Convertible Series B Preferred
Stock, which Series B Preferred Stock is automatically
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convertible into 1,100,000 shares of Genisys' common stock upon shareholder
approval of the issuance of the 1,100,000 shares of common stock and the UIT
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 common stock and UIT warrants prior to the time that the
dividend is payable. Therefore, the total purchase price in the UIT transaction
is 900,000 shares of Genisys' common stock and 1,100,000 shares of its Series B
Convertible Preferred Stock. This entire transaction depends upon shareholder
approval. If shareholders ratify the acquisition, the Series B Preferred Stock
will automatically be converted into 1,100,000 shares of Genisys' common stock
and it will issue two UIT warrants, each to purchase 800,000 shares of common
stock, the following outline should illustrate the above transaction more
clearly:
Outline of UIT Transaction
1. Initial Transaction :
(a) Genisys gives 2,000,000 shares of its common stock and 2 warrants to UIT.
(b) This is a Violation of NASDAQ MarketPlace Rules.
(c) End Result: No shareholder approval and UIT owns 2,000,000 shares of Genisys
common stock which is above 20% of total outstanding shares of Genisys.
2. Remedy Transaction:
a) UIT returns 1,100,000 shares of Genisys' common stock and 2 warrants
to Genisys.
b) UIT retains 900,000 shares of the common stock (2,000,000 - 1,100,000 =
900,000).
c) Genisys will give 1,100,000 shares of non voting convertible Series B
Preferred Stock which is convertible into 1,100,000 shares of common stock and
the 2 warrants upon shareholder approval of the initial transaction to UIT.
(d) This transaction does NOT violate NASDAQ MarketPlace Rules.
(e) End Result: Shareholder approval and UIT owns 2,000,000 shares of
Genisys common stock which is above 20% of total outstanding shares of Genisys.
If there is no shareholder approval the remedy transaction must be unwound.
(f) If shareholders do not approve the transaction, the remedy transaction must
be unwound.
If shareholders do not ratify the acquisition of the assets and approve
the issuance of 2,000,000 shares of common stock and two UIT warrants, the UIT
transaction will be unwound. In such event Genisys 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.
If the UIT transaction must be unwound, the following shall occur:
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Unwinding of UIT Transaction
(1) Genisys shall reassign the technology license it has acquired
through the transaction and return the related assets to UIT;
(2) UIT will return to Genisys all stock certificates received pursuant
to the UIT transaction;
(3) Mr. Brian Shuster will return the warrants issued to him by
Genisys; and
(4) 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 December 31, 1998 and for the year then ended in
Genisys' Form 10-KSB filed as of December 31, 1998, for the effect of
undoing the UIT Transaction.
We are determined to expand into the internet travel business for
several reasons. Although we had begun to generate revenues, we found that many
limousine providers were resisting the payment of commissions or fees in
connection with bookings on its system resulting in a much slower development of
revenues for Genisys than was originally anticipated. Management evaluated the
cost of operations for a more extended period of time and determined that its
available funds would be better spent in other areas of the travel business. We
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.
However, it should be noted that Genisys has a lack of operating history with
respect to the software relating to the internet travel business, and our web
site netcruise.com is still being developed and the site is currently not fully
operational, although we expect the site to be fully operational by mid 1999. In
addition, Genisys has only signed up a limited number of travel consultants
acquired from Sterling Travel and does not yet have any internet travel
customers. The budgeted cost of becoming operational is expected to be
approximately $1,342,000. Of such amount, approximately $198,000 is needed to
complete the web-site. The remainder will be used to produce a television video
commercial and purchase media time. Our company believes that it will be able to
finance such development substantially from proceeds of our recent private
placement, but there can be no assurance that such funds will be sufficient. No
assurance can be given that our company will be able to raise any additional
funds that may be needed.
Other Assets Acquired By NetCruise in Addition to the "Parallel Addressing Video
Technology":
X the Travel Web Site called "Netcruise.com"
X travel related software, computer systems and intellectual
properties
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X computer equipment
X multiple video CD's containing cruise information
X source video tapes of footage of locations and cruise ships.
In addition, UIT transferred to Genisys its agreement with Internet
Travel Network (ITN), of Palo Alto, CA. This agreement provides for a "private
label" site on the ITN "booking engine". The agreement expires in April, 1999
and automatically renews for successive one year periods unless either party
gives notice, no later than 30 days prior to the end of the period, of its
intent not to renew. The ITN "booking engine" is essentially a world wide web
based graphical user interface to the airline owned Apollo computerized
reservation system. This technology allows a layperson with access to the
internet to access the databases and pricing systems used by travel agents to
research and procure air, car rental and hotel reservations. By "private
labeling" this functionality, Genisys is able to offer its travel consultants
access to a leading travel system, while not having to expend Genisys' capital
resources which would be required to create its own access. Genisys formed
NetCruise as a wholly owned subsidiary for the purpose of operating an internet
travel business featuring the technology obtained through this acquisition.
We intend to launch through radio, newspaper, internet and television
advertising an aggressive marketing campaign, inviting the general public, along
with existing travel agents, to become NetCruise travel consultants, although
the "Parallel Addressing Video Technology" is fully operational, the internet
web site is still still in the development, and Genisys only has a limited
number of travel consultants acquired from Sterling Travel and does not yet have
any internet travel customers to date. The goal of Genisys' marketing campaign
is to encourage individuals to enroll as independent travel consultants by
paying a fee to Genisys. The independent travel consultants, together with the
licensing and servicing capabilities acquired by the company through Sammy's
Travel World Inc., will then be able to make reservations either through the
password protected members only section of the NetCruise website or via fax to,
or telephone conversations with, travel agents who work directly for NetCruise.
Non-members who visit the NetCruise website will have access to a portion of the
site which contains general information about our company, describes the
independent travel consultant program and allows the public to request
information or enroll as an independent travel consultant. To date, the web site
is being used for demonstration purposes and is only accessible by authorized
individuals using a password. Genisys expects that the web site will not be
fully integrated to support the independent travel consultants until mid 1999.
We believe we will be successful in encouraging people to pay the
subscription fee and sign up as independent travel consultants because as an
independent travel consultant, individuals will have an opportunity to earn a
commission on all reservations made by them. Airlines, hotels, car rental
companies, cruise lines, tour operators and other travel vendors will pay
Genisys commissions for all sales generated by it. Such commissions will be
shared with the independent travel consultants. We hope to enroll both the
general public and existing travel agents. We believe that there is an emerging
trend in the travel industry, whereby individuals who are presently travel
agents are leaving their salaried positions and moving into positions similar to
that of an independent travel consultant with their own home based travel
business. We believe that existing travel agents will be drawn to the
opportunity to earn commissions, create their own flexible hours, maintain their
client base and utilize their existing skills. Other
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advantages of a home based travel business are no commuting to an office, low
overhead, no need to rent expensive airline owned computer reservation system
equipment and personal travel benefits. However, there can be no assurance that
Genisys' marketing strategy directed to existing travel agents will be
successful. The company plans to offer, through a combination of direct response
TV, print, radio, and web-based advertising, a CD ROM library of video
destinations, a marketing kit which includes a guide to marketing an at-home
business, a training manual describing the travel industry, a welcome letter
containing a password for the web site and an outline of NetCruise policies and
procedures, and full-service support from Genisys' live travel agents.
We believe that it is important for you to understand our business and
the components of our business, especially the "Parallel Addressing Video
Technology." This technology consists of a compact disc read only memory or CD
ROM, which when used and inserted into a computer, allows the computer's user to
access detailed sites on the computer screen of major cruise lines, hotels and
travel destinations in a full motion video with stereo sounds. Computer users
may view a selected cruise line's banquet room, pool area or ports of the cruise
line's destination. For example, a cruise line that goes to Aruba may have a
short video on Aruba accessible by simply clicking the computer's mouse on the
computer's screen. The NetCruise license for "Parallel Addressing Video
Technology" will be accessed through our web site solely by its affiliated
travel consultants to see a particular 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 will interact with the individual's personal computer, find the requested
video clip on its CD ROM, and play it locally in a clear, full screen mode.
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 developed this technology and filed for patents in July
1997. Our web site, netcruise.com, is still in development and management
expects it to be fully operational by mid-1999. Although the general public will
be able to access much of the site to obtain information and enroll as an
independent travel consultant, the company intends that only participating
travel consultants who have paid a fee to the company and received a password
will be able to access the reservation area of the 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.
On November 6, 1998, we sold the assets of our 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 Genisys.
This transaction allows us to concentrate our resources and efforts on the
continued build-up of our NetCruise internet travel business. Genisys 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 TranspoNet
Companies, Inc., a leading developer and owner of software technology for the
ground transportation industry. Genisys and TranspoNet will provide limited
working capital to Gen O2, Inc. See "November 6, 1998 Acquisition by Gen 02,
Inc. of Travel Link" on pages 21-24.
Our management had been exploring a number of ways to more fully and quickly
develop
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our 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 our resources we had to commit to the
reservation operation. Our management believes that the NetCruise internet
travel business, which is not compatible with the limousine reservation
business, provides Genisys' shareholders with a potential for a greater return
in profits and business for Genisys.
November 5, 1998 Purchase of Assets by Genisys of Sterling Travel
On November 5, 1998, in order to augment our entry into the internet travel
business, we entered into an Asset Purchase Agreement with Sterling AKG Corp.
d/b/a Sterling Travel, in which we purchased all the assets relating to Sterling
Travel's network of independent travel consultants for a total purchase price of
25,000 shares of our common stock which, for accounting purposes, is being
valued at $1.50 per share for an aggregate of $37,500. An additional 17,500
shares will be held in escrow by counsel to Genisys. If Genisys does not achieve
$3 Million of gross sales from the Sterling Travel consultants over the initial
twelve month period beginning on November 1, 1998 and ending on October 31,
1999, the shares being held in escrow shall immediately be returned to Genisys.
If Genisys achieves $3 Million of gross sales from Sterling Travel consultants
over that twelve month period, the shares being held in escrow will be released
by Genisys. The valuation of our stock at $1.50 per share was a negotiated price
based upon the value of the stock at the time of the negotiation. It differs
from the valuation given to its common stock in the UIT transaction because the
valuation was negotiated at a time when the common stock was trading at a lower
price.
Included in the assets purchased by Genisys were a list of the
independent (not employees of Sterling Travel) travel consultants (both active
and inactive) that had done or are doing business with Sterling Travel and
related agreements with such independent travel consultants setting forth the
commissions to be earned and operational matters, contacts, files,
correspondence, earning records, a data base of former and current customers of
Sterling Travel estimated at approximately 20,000 entries, property and
equipment, including computers and miscellaneous office supplies.
Through this November 5, 1998 purchase of Sterling Travel's assets, we
will be gaining an additional insight into the online travel business. Sterling
Travel's consultants, already experienced in the travel consulting business,
will work for us using the newly acquired "Parallel Addressing Video Technology"
and speak with potential travelers in setting up travel packages and vacations
which will be reserved through a third party affiliated travel reservationist.
Sterling Travel consultants will be able to use the "Parallel Addressing Video
Technology" to describe to clients, first hand, exactly what the accommodations
of a particular hotel or cruise line will look like without having actually
visited the destination. This will provide clients with a direct and accurate
account of the vacation packages offered to them.
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As of February 12, 1999, we also 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.
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, 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.
Genisys also believes that lodging and airline travel will be a major leader in
this market with total on-line travel revenues possibly increasing from $2.1
Billion in 1998 to over $29 Billion by 2003. With travel taking such a large
portion of on-line sales, our management expects that the enhanced travel
services offered by NetCruise will affect a wide range of internet using
consumers enabling NetCruise to become a significant participant in internet
travel.
If our shareholders do not approve the UIT acquisition, we intend to
continue our entry into the internet travel business either by negotiating a
licensing agreement with UIT for the use of its technology license and certain
related assets or by utilizing alternative technologies. In the event that the
UIT acquisition is not approved by our shareholders and the November 6, 1998
acquisition by Gen 02, Inc. of Travel Link is approved, Genisys will not own the
limousine reservation business but will continue to expand into the internet
travel business.
Our management 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 Genisys (6,734,694), UIT would hold 3.6 Million shares (9,434,694 shares
outstanding) or approximately 37.7% of its stock, assuming issuance of the full
2 Million shares of common stock (consisting of 900,000 shares of common stock
currently held by UIT and an additional 1.1 Million shares of common stock to be
issued to UIT upon conversion of the Series B Preferred stock in the event the
shareholders approve the UIT acquisition) and exercise of the UIT warrants.
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The acquisition of the technology license and certain related assets as
described in the UIT acquisition section herein, will have no immediate tax
effect on Genisys.
November 6, 1998 Acquisition by Gen 02, Inc. of Limousine Reservation System
On November 6, 1998 we entered into an acquisition agreement along with
Corporate Travel Link, Inc., a wholly owned subsidiary of Genisys and TranspoNet
Companies, Inc., a non-affiliated company, Mark A. Kenny, Paul Murray and Gen
02, Inc. Gen 02, Inc., the purchaser in the transaction, is a newly organized
corporation formed by Mark A. Kenny, a former director and founder of Genisys,
purchased the limousine reservation business from Genisys. This sale will allow
Genisys to concentrate its resources and efforts on the continued build-up of
its internet travel business.
Prior to the current sale, the principal business of Genisys has been
the development of a computerized reservation and payment system known as
"Genisys Reservation System". The System accepts and processes reservations and
payments for ground transportation services made by its customers through
computerized reservations systems owned and operated by others, using the trade
name "Genisys Reservation System".
Our management team 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 its
resources. The limousine reservation business did not meet its revenue
objectives and in early September 1998, so we decided to seek a buyer or joint
venture partner for our limousine reservation business.
In addition, although we have begun to generate revenues, we found that
many limousine providers were resisting the payment of commission or fees in
connection with bookings on its system, resulting in a much slower development
of revenues for our company than was originally anticipated. We evaluated the
cost of operations for a more extended period of time and determined that our
available funds would be better spent in other areas of the travel business. We
therefore, determined we would expand into the internet travel business. The
acquisition of the technology license and certain related assets and the sale of
the limousine reservation business is a fundamental change in the nature of the
business of Genisys, from the limousine reservation business to an internet
travel business.
Mr. Kenny, is a former director of Genisys and did not participate in the
directors analysis and decision to sell the business to Mr. Kenny. As a part of
the sale, Genisys will retain 32.66% interest in Gen O2, Inc. and 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 providing, commencing
December 10, 1998, $20,000 per month to Gen O2, Inc. for an aggregate of
$240,000. TranspoNet is not affiliated with Genisys or any of its shareholders.
The primary capitalization of Gen 02, Inc., is being provided by the loans from
Genisys and TranspoNet. In addition, the sole asset of Gen 02, Inc., is the
limousine reservation business. As a result, Genisys will absorb all losses to
the extent of the assets transferred. Although there are no minimum
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contingent payments, the company has begun to receive limited contingent
payments from Gen 02, Inc. However, it is possible that Genisys will not receive
significant contingent payments from Gen 02, Inc. over the 5 year period. You
should note that shareholders are currently being asked to ratify the sale of
the limousine reservation business to Gen 02, Inc.
If the shareholders do not approve the November 6, 1998 acquisition
described above, Genisys will have to raise additional capital to bring the
limousine reservation business to full operation. No assurance can be given that
we will be able to raise such funds.
We believe that the costs in developing 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, we believe 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, as described above, we will sell and
transfer certain contractual rights and obligations of Genisys, all of the
assets of Travel Link which are utilized in connection with the ownership,
operation and marketing of the Genisys Reservation System and its entire
ownership interest in ProSoft, Inc. to GenO2, Inc. constituting approximately
20% of the total assets of our company. (At December 31, 1998 Genisys had total
assets of $3,440,437. From those total assets, $664,204 were made up of
third party investments and advances to Gen O2, Inc.). ProSoft is an 80%
owned subsidiary of Genisys which we acquired in June, 1997. ProSoft is a
software development company which developed the software for our computerized
limousine reservation and payment system. Paul Murray, a former employee of
Genisys and president and shareholder of ProSoft, is also a shareholder of Gen
O2, Inc.
Terms of the November 6, 1998 Acquisition:
The purchase price for accounting purposes was recorded at the net book
value of the assets transferred which was $744,122.
The purchase price consists of:
(1) 2,450 shares of Series A Convertible Preferred Stock of
Gen O2, Inc.;
(2) certain contingent payments over a period of 5 years,
totaling $1,080,000 if all payments to Genisys are realized (Although
there are no minimum contingent payments, Genisys has begun to receive
limited contingent payments from Gen 02, Inc. It is possible however,
that we will not receive significant contingent payments from Gen 02,
Inc. over the 5 year period); and
(3) other significant terms as described below:
a. For each completed limousine transaction
through the current system from corporate
users, a royalty payment of $0.20 per
transaction with a $100,000 maximum payment
per year.
b. For each completed limousine transaction
through the Almost Real
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Time System, also called the ART System,
under development by the sellers that will
be directed toward leisure customers, a
royalty 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 reservation system and the ART System
are merged at any time in the future, the
sellers shall receive a royalty 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 payment 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. Genisys and Corporate Travel Link will
provide Gen 02, Inc. with a series of
loans. Gen 02, Inc. will grant an equity
interest to Genisys and Corporate
Travel equal to 32.66% of the equity of
Gen O2, Inc. subject to a certain
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 Genisys 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
Genisys owned by Mr. Kenny.
g. Mr. Kenny has also pledged 23,428 shares of
Genisys' common stock owned by him to secure
the return of a security deposit to the
company and 68,000 shares of Genisys' common
stock to secure minimum payments which are
required to be made by Genisys under certain
contracts which were transferred to the
Genisys and Corporate Travel in connection
with the sale.
h. TranspoNet is a 32.66% shareholder of Gen
02, Inc., and has committed to provide
funding for the purchasers 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
purchasers not to exceed an additional 6%
equity interest in the purchaser.
The Series A Preferred Stock issued to Genisys and TranspoNet in
accordance with the transaction are part of a class of preferred stock of Gen
O2, Inc. designated as "Series A
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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 Genisys 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 recapitalizations.
Upon conversion of the Series A Preferred Stock into common stock of
Gen O2, Inc., Genisys 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 Gen
02, Inc. will issue an additional 2,500 shares of common stock in the near
future, thereby diluting the ownership interest of Genisys and TranspoNet in Gen
O2, Inc. to 24.5%. Genisys' influence in Gen O2, Inc. is limited to the right to
elect one member of a five member Board of Directors.
If shareholders don't approve the sale of the limousine reservation
business as described above, Genisys intends to either find another purchaser of
the limousine reservation business or raise additional capital to bring the
limousine reservation business to full operation while continuing its entry into
the internet travel business. No assurance can be given that Genisys will be
able to raise such funds.
We believe that the sale of the limousine reservation business to Gen
O2, Inc. as described above, will have no material tax effect on Genisys.
Other Material Changes and Recent Developments
We are currently asking shareholders to change the name of the company from
Genisys Reservation Systems, Inc. to netcruisetravel.com, inc. In addition, the
shareholders are being
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asked to amend and restate our authorized common and preferred stock to correct
certain inconsistencies in its certificate of incorporation.
During the period from December 15, 1998 to January 15, 1998, Genisys
completed a private placement of securities pursuant to which it sold 1,000,000
shares of common stock at a price of $1.50 per share or $1,500,000 in the
aggregate to the selling shareholders listed on the cover of this prospectus.
Pro Forma Balance Sheet of December 31, 1998 and notes thereto contained in
Genisys' Form 10-KSB, as amended.
Since shareholders are currently being asked to ratify the sale of the
limousine reservation system business and since it represents the primary focus
of Genisys as of the date of this prospectus, we believe it necessary for you to
examine our Pro Forma Balance Sheet as of December 31, 1998. The limousine
reservation business did not meet its revenue objectives and would require
additional capital infusion, therefore, we decided it would be in the best
interest of the shareholders if Genisys were to concentrate its efforts on the
NetCruise internet travel business. In addition, reference should be made to the
Pro Forma Balance Sheet as of December 31, 1998 and notes thereto contained in
the company's Form 10-KSB, as amended, (which gives effect to this transaction
as of this date).
Management
Mark A. Kenny has resigned as a director of Genisys as of November 6,
1998 upon the acquisition of its limousine business by Gen 02, Inc., however, he
remains a principal of Gen O2, Inc.
As part of the June 1998 acquisition, Harry Shuster and his son Brian
Shuster have become directors of Genisys and serve as Chairman of the Board and
President, respectively, of NetCruise Interactive, Inc., our wholly owned
subsidiary.
Harry Shuster and Brian Shuster are currently directors of UIT. They
were elected as directors of Genisys following the UIT transaction pursuant to
an acquisition agreement and will serve for three years. In connection with the
UIT transaction, Mr. Brian Shuster received two warrants, each entitling him to
purchase 200,000 shares of the common stock of Genisys. 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 Million 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 Million for the years 1999, 2000 and 2001. In addition, Genisys
has agreed to pay Mr. Brian Shuster $5,000 per month for his services as a
consultant of NetCruise.
The biographies of Harry Shuster and Brian Shuster as newly appointed directors
of the
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company are as follows:
Harry Shuster has been Chairman of the Board of NetCruise Interactive and a
director of Genisys since July, 1998. Mr. Shuster served as Chairman of the
Board, President and Chief Executive Officer of United Leisure Corporation, a
public company, since April, 1975. Mr. Shuster is also the Chairman of he Board,
President and Chief Executive Officer of Grand Havana Enterprise, Inc., a
publicly traded 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 and a
director of Genisys, 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 the 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.
Principal Stockholders
The following tabulation shows the security ownership as of March 25,
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. As of
March 25, 1999, the company has 6,734, 694 shares of common stock issued and
outstanding.
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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 17.6%
Loeb Holding Corporation (2)
61 Broadway
New York, NY 10006 98,824 1.46%
United Internet Technologies, Inc. (7)
18081 Magnolia Avenue
Fountain Valley, CA 92708 900,000 13.3%
Warren D. Bagatelle (1)(2)
Loeb Partners Corporation
61 Broadway
New York, NY 10006 1,287,797 19.1%
Mark A. Kenny
Gen O2, Inc.
15 Clyde Road, Suite 201
Somerset, NJ 08873 324,175 4.8%
John H. Wasko (4)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 137,046 2.0%
Lawrence E. Burk (5)
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083 205,000 3.0%
S. Charles Tabak (6)
ARC Medical Professional Personnel
36 Route 10W, Suite D
East Hanover, NJ 07936 22,000 *
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David W. Sass (6)
McLaughlin & Stern, LLP
260 Madison Ave. 18th Fl.
New York, NY 10016 20,000 *
Harry Shuster (7)(8)
United Internet Technologies, Inc.
18081 Magnolia Avenue
Fountain Valley, CA 92708 900,000(3) 13.3%
Brian Shuster(8)
United Internet Technologies, Inc.
18081 Magnolia Avenue
Fountain Valley, CA 92708 0(3) *
Yeshiva Beth Hillel of Krasna, Inc. 400,000 5.9%
1371 42nd Street
Brooklyn, NY 11219
All Officers and Directors
as a group (7 persons) 2,571,843(9) 38%
- ---------------------
* 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 Warren 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 Genisys.
(3) UIT will receive 1,100,000 shares of Series B Preferred Stock,
convertible into 1,100,000 shares of common stock if shareholders approve the
issuance of 1,100,000 shares of common stock and two Warrants, each entitling
the holder to purchase 800,000 shares of common stock. One warrant is
exercisable for 800,000 shares at $2.50 per share and may be exercised between
April 1, 2002 and June 30, 2002, but only if NetCruise achieves profits equal to
or exceeding $5,000,000 for the years 1999, 2000 and 2001. The other Warrant is
exercisable for 800,000 shares at $6.00 per share and may be exercised between
April 1, 2002 and June 30, 2002, but only if NetCruise achieves profits equal to
or exceeding $10,000,000 for the years 1999, 2000 and 2001.
(4) Includes 14,362 shares of common stock owned of record by Joan E.
Wasko, John Wasko's wife, of which Mr. Wasko disclaims beneficial ownership, but
of which he may be deemed beneficial
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owner, a five year option to purchase 35,000 shares of Genisys' common
stock at a price of $2.00 per share granted to Mr. Wasko by the company on
November 1, 1996, a five year option to purchase an aggregate of 25,000 shares
of common stock at a price of $4.75 per share granted on March 12, 1999 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 year option to purchase an aggregate of 200,000
shares of common stock at a price of $4.75 per share granted on March 12, 1999.
(6) Includes a five (5) year option to purchase 15,000 shares of common
stock at a price of $4.75 per share granted on March 12, 1999.
(7) Includes the 900,000 shares of Genisys' common stock owned by
UIT. Mr. Harry Shuster is a significant shareholder, director, and Chairman
of the Board of UIT and may be deemed the beneificial owner of these shares.
(8) 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.
(9) Includes all of the options granted to certain officers and
directors pursuant to the footnotes numbered 1 - 7 above.
SELLING STOCKHOLDERS
On December 15, 1998, the following individuals and entities purchased
shares of the company's common stock at $1.50 per share for an aggregate
purchase price of $1,500,000.
Yeshiva Beth Hillel of Krasna, Inc. - 400,000
James N. Jannello - 100,000
Carmine N. Stella - 60,000
Lunt Legacy L.C. - 23,250
Key L.C. - 176,750
Aaron Jungreis - 10,000
C.P. Holding Corp. - 100,000
Jeffrey Pasenkoff - 10,000
Flossie Switzer Deneka - 10,000
Steven Deneka - 10,000
Giuseppe Pappalardo - 100,000
Total Shares = 1,000,000
These selling shareholders are now offering those shares pursuant to this
prospectus. Before the offering the selling shareholders together will own 23.6%
of the outstanding shares of Genisys.
In the event the warrant holders of the 1,500,000 Class A Redeemable
Warrants or the 900,000 Class B Redeemable Warrants elect to exercise their
shares, they may then sell such
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shares and be considered selling stockholders for purposes of this section. In
such an event they shall be entitled to offer those shares pursuant to this
prospectus. In the event the Class A Redeemable Warrant holders exercise all of
their warrants, they will own 23.8% of the outstanding shares of Genisys common
stock, prior to any offering of such shares. In the event the Class B Redeemable
Warrant holders exercise all of their warrants, they will own 14.3% of the
outstanding shares of Genisys common stock, prior to any offering of such
shares. The expiration date of the Class A Warrants and the Class B Warrants is
September 20, 2001.
We believe in order to fully understand your investment with our
company, the terms of the Class A and B Redeemable Warrants should be clear and
understandable.
Description of Class A and B Redeemable Warrants
X Each Class A Redeemable Warrant entitles the holder to
purchase one share of common stock at a purchase price equal to $5.75
per share.
X Each Class B Redeemable Warrant entitles the holder to
purchase one share of common stock at a purchase price equal to $6.75
per share.
X Genisys, since March 27, 1998, has had the right at any time
to redeem all, but not less than all, of :
X the Class A Redeemable Warrants at a price equal to
$.20 per Class A Redeemable Warrant
X the Class B Redeemable Warrants at a price equal to
$.10 per Class B Redeemable Warrant
X For Genisys to redeem all the Class A or B Redeemable
Warrants the following must occur:
X the closing bid price of the common stock
underlying the Class A Redeemable Warrants equals or exceeds
$6.25 per share for any 20 trading days within a period of 30
consecutive trading days ending on the fifth trading day prior
to the date the company gives its notice to redeem such stock
For example, if Genisys were to redeem the stock, between
March 31, 1999 and May 11, 1999 there are 30 consecutive days in which
the stock market is open and trading. The Class A Warrant must be
trading at or above $6.25 per share for a total of 20 days of those 30
days,which need not be consecutive. May 11, 1999 must be the fifth
trading day prior to the date Genisys gives notice of its redemption.
That means that Genisys must give its notice of redemption on May 18,
1999.
X the closing bid price of the common stock
underlying the Class B Redeemable Warrants equals or exceeds
$7.25 per share for any 20 trading days within a period of 30
consecutive trading days ending on the fifth trading day prior
to the date the company gives its notice to redeem such stock.
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The company will not receive any proceeds from the sale of the
securities by the selling stockholders.
PLAN OF DISTRIBUTION
The shares offered by the selling shareholders may be sold at any time
by them, or by pledgees, donees, transferees or other successors to their
interest, at their sole discretion. Such sales may be made on NASDAQ at prices
and on terms then prevailing or at prices related to the then current market
price, or in negotiated transactions. The shares offered by the selling
stockholders are not being underwritten.
In general, the shares may be sold by one or more of the following
means:
(1) a block trade in which the broker or dealer so engaged
will attempt to sell the securities as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
(2) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this prospectus;
(3) an exchange distribution in accordance with the rules of
such exchange (if the securities are then listed on an exchange);
(4) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; or
(5) other securities transactions.
In effecting sales, brokers or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or discounts from the selling shareholders in
amounts to be negotiated immediately prior to the sale. No commissions or other
fees shall be payable by Genisys to any broker or dealer in connection with this
offering. Such brokers or dealers and any other participating brokers or dealers
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, in connection with such sales.
The company has advised the selling shareholders that the
anti-manipulative provisions of Regulation M promulgated under the Securities
and Exchange Act may apply to their sales in the market, has furnished the
selling stockholders with a copy of Regulation M and has informed them of the
need for delivery of copies of this prospectus.
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LEGAL MATTERS
Our lawyers, McLaughlin and Stern, LLP, will issue an opinion on the
validity of the shares for the selling shareholders and for the company. David
W. Sass, a member of said firm, is a director and shareholder of Genisys.
EXPERTS
The Financial Statements of the company, for the periods indicated in
their report are incorporated by reference in this prospectus and have been
reported on by Wiss & Company, LLP, independent certified public accountants.
Their report contains an explanatory paragraph regarding an uncertainty as to
the company's ability to continue as a going concern.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant, the registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expense incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any such action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this prospectus. If given or made, you must not
rely on such information or representations as having been authorized by our
company. This prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any security other than the securities offered by this
prospectus, or an offer or solicitation of an offer to buy any securities by any
person in any jurisdiction in which such offer or solicitation is not authorized
or is unlawful. The delivery of this prospectus shall not, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date of this prospectus.
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TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . 2-3
Incorporation of Certain Documents . . . . . . . . . . . . . . . . . 2-3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Material Changes and Recent Developments . . . . . . . . . . . . . . . 15-31
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . 31
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 33
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-----------
Until ___ , 1999 (25 days after the date of this prospectus), all dealers
effecting transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
GENISYS RESERVATIONS SYSTEMS, INC.
3,400,000 Shares of Common Stock
-----------------
PROSPECTUS
-----------------
March __, 1999
35
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses of this offering which will be borne by the company are
estimated to be as follows:
Securities and Exchange Commission registration fee
SEC Registration Fee $5,407.10
Legal Services 8,000.00
Accounting Services 2,500.00
Blue Sky fees and expenses 500.00
Printing 5,000.00
Miscellaneous 1,000.00
---------
Total $22,407.10
All of the above expenses except the registration fee are estimated.
Item 15. Indemnification of Directors and Officers
The company's Certificate of Incorporation provides in Article Fourth
that no director of the company shall be liable to the company or any of its
shareholders for damages for breach of any duty owed to the company or its
shareholders except for liability for any breach of duty based upon an act or
omission (i) in breach of such person's duty of loyalty to the company or its
shareholders, (ii) not in good faith or involving a knowing violation of law, or
(iii) resulting in receipt by such person of an improper personal benefit.
Item 16. Exhibits
5 Opinion and consent of McLaughlin & Stern, LLP
23.1 Consent of Wiss & Company, LLP
23.2 Consent of McLaughlin & Stern, LLP filed as part of Exhibit 5
36
<PAGE>
Item 17. Undertakings
Paragraph designations correspond to designations in Regulation S-B,
Item 512.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(5) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided
however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registration pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expense incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any such
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on March __, 1999.
GENISYS RESERVATION SYSTEMS, INC.
By:_________________________________________
Lawrence E. Burk, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
_________________ Director, President and 3/__/99
Lawrence E. Burk Chief Executive Officer
_________________ Director 3/__/99
Harry Shuster
__________________ Director, Secretary, 3/ __/99
John H. Wasko Treasurer and
Chief Financial Officer
__________________ Director 3/__/99
S. Charles Tabak
__________________ Director and 3/__/99
Warren D. Bagatelle Chairman
___________________ Director 3/__/99
David W. Sass
___________________ Director 3/__/99
Brian Shuster
38
McLaughlin & Stern, llp
260 Madison Avenue
New York, New York 10016
(212) 448-1100
Fax (212) 448-0066
March 26, 1999
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Genisys Reservation Systems, Inc. ("Company")
Gentlemen:
Reference is made to the registration statement ("Registration Statement") on
Form S-3, filed the date hereof with the Securities and Exchange Commission by
the Company. We hereby advise you that we have examined originals or copies
certified to our satisfaction of the Certificate of Incorporation and amendments
thereto and the By-Laws and amendments thereto of the Company, minutes of the
meetings of the Board of Directors and Shareholders and such other documents and
instruments, and we have made such examination of law, as we have deemed
appropriate as the basis for the opinions hereinafter expressed.
Based on the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing and in good
standing under the laws of the State of New Jersey.
2. The 3,400,000 shares of the Company's Common Stock which are being registered
have been duly and validly authorized and issued and are fully paid and
non-assessable.
We hereby consent to the reference to our firm under the caption "Legal Matters"
in the prospectus forming a part of such Registration Statement and to the
filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
McLAUGHLIN & STERN, LLP
Wiss & Company, LLP
354 Eisenhower Parkway
Livingston, New Jersey 07039
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated March 9, 1999 appearing on page F-2 of Genisys Reservation Systems, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1998. We also
consent to the references to us under the headings "Experts" in such Prospectus.
Wiss & Company, LLP
Livingston, New Jersey
March 26, 1999
