PRELIMINARY COPY
GENISYS RESERVATION SYSTEMS, INC.
2401 MORRIS AVENUE
UNION, NEW JERSEY 07083
Notice of Annual Meeting of Stockholders
To our Stockholders:
The Annual Meeting of Stockholders of Genisys Reservation Systems,
Inc., a New Jersey corporation (the "Corporation" or "Company"), will be held on
September 29, 1999, at 10:00 a.m. local time,
at __________________, ________________, __________, _____, to
consider and act upon the following matters. A proxy card for your use in voting
on these matters is also enclosed.
1. Electing six (6) directors as recommended by the Board of Directors.
2. Ratification of the acquisition of a technology license and
certain related assets from United Internet Technologies,
Inc.(formerly known as United Leisure Interactive, Inc.,) and
the approval of the issuance of 1,100,000 shares of Common
Stock and two Warrants, each in the amount of 800,000 shares,
to United Internet Technologies, Inc., as recommended by the
Board of Directors.
3. Ratification of the sale of the Limousine Reservation System
business to Gen O2, Inc., a newly organized corporation formed
by Mark A. Kenny, a former Director and founder of the
Company, as recommended by the Board of Directors.
4. Approval of an amendment to the Corporation's Certificate of
Incorporation to change the name of the Corporation to
netcruise.com, inc., as recommended by the Board of Directors.
5. Approval of an amendment to the Corporation's Certificate of
Incorporation to restate the provisions of the Corporation's
authorized Preferred Stock to correct certain inconsistencies,
as recommended by the Board of Directors.
6. Ratifying the appointment of independent auditors to examine
and report on the financial statements of the Corporation for
fiscal 1998 and fiscal 1999, as recommended by the Board of
Directors.
7. Transacting any other business that may properly come before
the meeting or any adjournment thereof.
All stockholders of record at the close of business on August 25, 1999, are
entitled to notice of and to vote at the meeting.
Dated: August 25, 1999
By Order of the Board of Directors
John H. Wasko
Secretary
- ----------------------------------------------------------
Your Proxy is important no matter how many shares you own. Please mark your
vote, fill in the date, sign and mail it today in the accompanying
self-addressed envelope which requires no postage if mailed in the United
States.
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
GENISYS RESERVATION SYSTEMS, INC.
August 25, 1999
-----------------
PROXY STATEMENT
-----------------
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of common
stock, $.0001 par value per share ("Common Stock") and Series A Preferred Stock
("Series A Preferred Stock") of Genisys Reservation Systems, Inc. and
Subsidiaries ("Company") in connection with the solicitation of proxies on
behalf of the Board of Directors of the Company for use at the Annual Meeting of
Stockholders ("Annual Meeting") to be held on September 29, 1999, or at any
continuation or adjournment thereof, pursuant to the accompanying Notice of
Annual Meeting of Stockholders. The purpose of the meeting and the matters to be
acted upon are set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Board of Directors knows of no other business which will come
before the meeting.
Proxies for use at the meeting will be mailed to stockholders
on or about August 25, 1999 and will be solicited chiefly by mail, but
additional solicitation may be made by telephone, telegram or other means of
telecommunications by directors, officers, consultants or regular employees of
the Company. The Company may enlist the assistance of brokerage houses,
fiduciaries, custodians and other like parties in soliciting proxies. All
solicitation expenses, including costs of preparing, assembling and mailing the
proxy material, will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the meeting and a return envelope
for the proxy are enclosed. Stockholders may revoke the authority granted by
their execution of proxies at any time before the Annual Meeting by filing with
the Secretary of the Company a written revocation or duly executed proxy bearing
a later date or by voting in person at the meeting. Such consents or revocations
can be submitted by facsimile to 1-908-810-8769. Shares represented by executed
and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote "FOR" each of the nominees for director as described in Proposal
No. 1, "FOR" the ratification of the acquisition of a technology license and
certain related assets from United Internet Technologies, Inc. formally known as
United Leisure Interactive, Inc. ("UIT") and the approval of the issuance of
1,100,000 shares of Common Stock and two Warrants, each to purchase 800,000
shares of Common Stock of the Company, to UIT as described in Proposal No. 2,
"FOR" the ratification of the sale of the Limousine Reservation System
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business to GEN O2, Inc., a newly organized company formed by Mark A. Kenny, a
former director and founder of the Company, as described in Proposal No. 3,
"FOR" the approval of an amendment to the Company's Certificate of Incorporation
to change the name of the Company to netcruise.com, inc. as described in
Proposal No. 4, "FOR" the approval of an amendment to the Company's Certificate
of Incorporation to amend and restate the provisions of the Company's authorized
Common and Preferred Stock to correct certain inconsistencies as described in
Proposal No. 5 and "FOR" the ratification of the appointment of Auditors as
described in Proposal No. 6. Proxies marked as abstaining will be treated as
present for purposes of determining a quorum for the Annual Meeting, but will
not be counted as voting in respect of any matter as to which abstinence is
indicated. If any other matters properly come before the meeting or any
continuation or adjournment thereof, the proxies intend to vote in accordance
with their best judgment.
Record Date and Voting Rights
Only stockholders of record at the close of business on August
25, 1999 are entitled to notice of and to vote at the Annual Meeting or any
continuation or adjournment thereof. On that date there were 6,749,068 shares of
the Company's Common Stock and 381,177 shares of the Company's Series A
Preferred Stock outstanding. Each share of Common and Series A Preferred Stock
is entitled to one vote per share. Any share of Common or Series A Preferred
Stock held of record on June 30, 1999 shall be assumed, by the Board of
Directors, to be owned beneficially by the record holder thereof for the period
shown on the Company's stockholder records. The affirmative vote of a majority
of the votes cast by the stockholders present in person or by proxy at the
meeting and entitled to vote thereon is required for the election of the
directors, to ratify the acquisition of a technology license and certain related
assets from UIT and approve the issuance of 1,100,000 shares of Common Stock and
two Warrants, each to purchase 800,000 shares of the Company's Common Stock, to
UIT and to ratify the sale of the Limousine Reservation System business to GEN
O2, Inc., a newly organized company formed by Mark A. Kenny, a former director
and founder of the Company, to approve an amendment to the Company's Certificate
of Incorporation to change the name of the Company to netcruise.com, inc., to
approve an amendment to the Company's Certificate of Incorporation to restate
the provisions of the Company's authorized Common and Preferred Stock to correct
certain inconsistencies and to ratify the appointment of auditors.
In the event that a stockholder does not designate his or her broker to
vote in their place, brokers may be precluded from exercising their voting
discretion with respect to certain matters to be acted upon and thus, in the
absence of specific instructions from the beneficial owner of the shares, will
not be empowered to vote the shares on such matters and therefore will not be
counted in determining the number of shares necessary for approval. Shares
represented by such broker non- votes will, however, be counted for the purpose
of determining whether there is a quorum. The brokers will only be allowed to
vote for the election of Directors and the ratification of the appointment of
independent auditors. Since broker non-votes are not counted, it could be more
difficult to obtain the required approval to ratify the acquisition of a
technology license and certain related assets from UIT and to approve the
issuance of 1,100,000 shares of Common Stock and two Warrants, each to purchase
800,000 shares of the Company's Common Stock, to UIT and to ratify the sale of
the Limousine Reservation System business to GEN O2, Inc., a newly organized
company formed by Mark A. Kenny, a former director and founder of the Company,
to approve an amendment to the Company's Certificate of Incorporation to change
the name of the Company to netcruise.com, inc., and to approve an amendment to
the Company's Certificate of Incorporation to restate the
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provisions of the Company's authorized Common and Preferred Stock to correct
certain inconsistencies.
Directors and officers of the Company and certain other Shareholders
holding approximately 36.5% of the outstanding Common Stock (including UIT) and
all of the Series A Preferred Stock of the Company intend to vote "FOR" the
slate of directors, "FOR" the ratification of the sale of the Limousine
Reservation System business to GEN O2, Inc., a newly organized company formed by
Mark A. Kenny, a former director and founder of the Company, "FOR" the approval
of an amendment to the Company's Certificate of Incorporation to change the name
of the Company to netcruise.com, inc., "FOR" the approval of an amendment to the
Company's Certificate of Incorporation to restate the provisions of the
Company's authorized Common and Preferred Stock to correct certain
inconsistencies and "FOR" the ratification of the appointment of auditors.
Certain Directors and Officers of the Company and certain other shareholders
holding approximately 23.2% of the outstanding Common Stock (excluding UIT) and
all of the Series A Preferred Stock of the Company intend to vote "FOR"the
ratification of the acquisition of a technology license and certain related
assets from UIT and the approval of the issuance of 1,100,000 shares of Common
Stock and two warrants, each to purchase 800,000 shares of the Company's Common
Stock, to UIT.
Forward Looking Statements
When used in this Proxy Statement, the words "may," "will,"
"expect," "anticipate," "continue," "estimate," "project," "intend" and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended regarding events, conditions
and financial trends that may affect the company's future plans of operations,
business strategy, operating results and financial position. Shareholders are
cautioned that any forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties and that actual results
may differ materially from those included within the forward-looking statements
as a result of various factors.
Advantages and Disadvantages of Approval of Proposals
Proposal No. 2: Ratification of the acquisition of a technology license and
certain related assets from United Internet Technologies, Inc. and approval of
the issuance of 1,100,000 shares of Common Stock and two stock purchase warrants
to United Internet Technologies, Inc.
The Company believes that the ratification of the acquisition of a
technology license and certain related assets from UIT and approval of the
issuance of 1,100,000 shares of Common Stock and the two warrants to UIT is in
the best interest of the Company, as the expected growth rate of the internet
travel business is anticipated to be faster than that for the limousine
reservations systems business. Management is of the opinion that the costs to
develop the new line of business is less than the costs required to maintain the
limousine reservation business until such time as revenues will be able to cover
the costs of operation. Further, it is management's opinion that the internet
travel business will provide, on a long term basis, a greater return to
shareholders.
Disadvantages to Proposal No. 2 include a lack of operating history with respect
to the software relating to the internet travel business. Although management
expects web-site development to continue through mid-1999, the internet web-site
is currently operational and
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independent travel consultants can view videos and book car, air and hotel
reservations directly through the web-site as well as research vacation packages
and cruise itineraries. The Company's independent travel consultants are
currently not able to book vacation and cruise packages in an automated fashion
through the web-site. In order to make these types of reservations, the
independent travel consultant is instructed to contact the Company's service
center, (operated through Sammy's Travel World, a wholly owned subsidiary of the
Company) via toll-free telephone, fax or e-mail, whereby a live NetCruise
Interactive, Inc. (a wholly owned subsidiary of the Company formed on July 21,
1998 for the purpose of operating an internet travel business) ("NetCruise")
travel agent will then make the vacation or cruise reservation. The Company
intends to continually enhance its technology to automate the booking process
for cruise and vacation reservations through its web-site. There can be no
assurance, though, that the Company will be able to achieve the technological
advancements necessary to automate the booking of cruise and vacation
reservations.
At the present time the Company only has a limited number of
individuals who have subscribed to be independent travel consultants. It is
important to note that the Company's customers consists of the independent
travel consultants as well as the clients of the independent travel consultants
for whom travel is booked. The Company initially acquired 280 independent travel
consultants as a result of the Company's acquisition of the assets of Sterling.
The Company is honoring the agreements the independent travel consultants made
with Sterling which were in place at the time the Company purchased Sterling's
assets. The subscription fees charged by the Company are significantly less than
those which had been charged by Sterling, although the renewal fees are the
same. This is true even though NetCruise will be providing additional services
not offered by Sterling, such as automated web-site booking capability and video
technology. As the independent travel consultants subscription agreements come
up for renewal, there is no guarantee that the independent travel consultants
will renew their agreements with the Company. Additionally, although the Company
believes that its national marketing campaign will be successful in the
recruitment of new independent travel consultants, there can be no assurance of
the effectiveness of the campaign.
The budgeted cost of launching the Company's marketing campaign, which
includes the development of a data base and networking capability, is expected
to be approximately $1,342,000. Of such amount, approximately $198,000 was
allocated to complete development of the web-site, which is currently
operational. The Company intends to use $75,000 of the $198,000 to continue to
enhance and upgrade the web-site. Such improvements will include providing
additional features to the site, such as personal web pages for the independent
travel consultants, chat capability, on-line accounting information for the
independent travel consultants as well as client profiling. The Company expects
to continue upgrading the web-site as appropriate. The remainder of the
$1,342,000 will be used to produce a television video infomercial and purchase
media time. The Company recently completed a private placement in the amount of
$1,500,000. The funds of the private placement were received by the Company as
follows: $200,000 in 1998, $510,000 between January 1999 and February 1999 and
$790,000 in June, 1999. With these proceeds and anticipated cash to be received
from revenues, the Company believed it would have sufficient resources to
provide for its planned operations for the next twelve months. However, there
was a four month delay from mid-February to mid-June in receiving the balance of
the private placement proceeds in the amount of $790,000 and a corresponding
delay in launching the Company's marketing campaign, which resulted in a much
lower than anticipated growth in the Company's revenues. As a result, during the
delay the Company was forced to divert approximately $600,000 of the private
placement proceeds to cover general and administrative expenses. The $600,000
was taken out of the $710,000 the Company had received from the private
placement as of February 1999, which the
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Company had originally planned on using for marketing purposes. The remaining
$110,000 of the private placement proceeds received as of February 1999 were
used for web-site development, as originally planned.
As a result of these delays, the Company needs to raise an additional
$725,000 to continue the launch of the Company's marketing campaign.
Additionally, the Company is obligated by contract to pay a mandatory dividend
in the amount of $275,000 to United Internet Technologies, Inc. on September 30,
1999, bringing the total amount of additional funds required to $1,000,000. The
$1,000,000 in additional funds, if and when received, will be allocated as
follows: $90,000 to continue upgrading and enhancing the web-site, $510,000 to
complete development of a television infomercial and purchase media time;
$125,000 for general working capital and $275,000 to pay the mandatory dividend.
The Company is obligated to pay this dividend if funds are legally available for
such purpose. State law prohibits the payment of a dividend if, as a result
thereof, the Company would be unable to pay its debts as they become due in the
usual course of its business or the Company's total assets would be less than
its total liabilities. The Company is seeking to raise the additional funds, but
if such funds are not available the Company will be forced to curtail its
marketing campaign. In addition to the funding requirement stated above, should
the Company decide to purchase significant additional media time for the
television informercial, additional funds will be required. No assurance can be
made that the Company will be able to raise any additional funds.
Initially, revenues from the web-site will be derived from
subscriptions from the independent travel consultants along with commissions
from bookings shared with the independent travel consultants. As the Company
develops it believes that the majority of the it's revenue will be derived from
commissions earned from the sale of travel through the independent travel
consultants. The Company's business model is built around the sharing of
commissions with the independent travel consultants generated from travel
industry vendors such as airlines, hotels, car rental companies, resort
properties, tour operators and cruise lines. The Company believes that
commission sharing with the independent travel consultant, which ranges from 50%
to 60% of the commissions received by NetCruise is a key enticement for
individuals to subscribe to become independent travel consultants. The
subscription and annual renewal fee for all independent travel consultants,
including the former Sterling Travel Consultants, is currently $95.00. While the
Company believes it will benefit from its portion of the commission revenues
generated, it also believes that significant revenues will be derived from other
key areas such as annual subscription fees from its independent travel
consultants, advertising through its web-site and incentive arrangements with
travel vendors and travel related product vendors (in addition to its share of
the standard travel commissions). However, a significant change in the
prevailing commission structure in the travel industry could have a detrimental
effect on the Company's ability to attract and retain independent travel
consultants and to benefit from the other revenue sources listed above, which
are substantially created through this core distribution system.
In the event shareholders do not ratify the acquisition of a technology
license and certain related assets from UIT and approve the issuance of
1,100,000 shares of the Company's Common Stock to UIT and two warrants, each to
purchase 800,000 shares of the Company's Common Stock, the Company intends to
continue its 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
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utilizing alternative technologies. In the event that Proposal No. 2 is not
approved by the Shareholders and Proposal No. 3 is approved by the Shareholders,
the Company will not own the limousine reservation business but will continue to
expand into the internet travel business.
Proposal No. 3: Ratification of the sale of the limousine reservation system
business to GEN O2, Inc., a newly organized corporation formed by Mark A. Kenny,
a former director and founder of the Company.
Management of the Company set revenue objectives for the limousine
reservation business and made the decision to review the operation at the end of
the third quarter 1998 to determine the best approach to maximize utilization of
the Company's resources. The limousine reservation business did not meet its
revenue objectives and in early September 1998, the Company decided to seek a
buyer or joint venture partner for its limousine reservation business.
In addition, although the Company had begun to generate revenues, the
Company found that many limousine providers were resisting the payment of
commissions or fees in connection with bookings on the Company's system until
such time as the potential benefits of the Company's system could be better
quantified. This resulted in a much slower development of revenues for the
Company than was originally anticipated. Management estimated the cost of
operations for a more extended period of time and determined that the Company's
available funds would be better spent in other areas of the travel business.
Management has determined that the funds needed to develop the internet travel
business would be less than those required to bring the limousine business to
full operation. It therefore determined to expand into the internet travel
business. As a result, if the shareholders approve the acquisition of the
technology license and certain related assets from UIT and the sale of the
limousine reservation business, the effect to shareholders is a fundamental
change in the nature of the business of the Company from the limousine
reservation business to an internet travel business.
Disadvantages to ratification of Proposal No. 3 include the fact that
as part of the sale, the Company will be retaining a 32.66% interest in GEN 02,
Inc. and will be loaning to GEN 02, Inc. a $135,000 installment loan and a
$40,000 bridge loan. The TranspoNet Companies, Inc. ("TranspoNet") another
32.66% shareholder of GEN 02, Inc., is providing, commencing December 10, 1998,
$20,000 per month to GEN 02, Inc., for an aggregate of $240,000. TranspoNet is
not affiliated with the Company or any of its shareholders. The primary
capitalization of GEN 02, Inc., is being provided by the loans from the Company
and TranspoNet. In addition, the sole asset of GEN 02, Inc. is the limousine
reservation business. As a result, the Company will absorb all losses to the
extent of the assets transferred ($744,122). Although there are no minimum
contingent payments, the Company has begun to receive minimal contingent
payments from GEN 02, Inc., consisting of two payments totaling $3,656.20.
However, it is possible that the Company will not receive significant contingent
payments from GEN 02, Inc. over the 5 year period. Shareholders should note that
they are being asked to ratify the sale of the limousine business to GEN 02,
Inc., a company newly organized by Mark A. Kenny, who is a former director of
the Company. The sale of the limousine reservation business was negotiated with
GEN 02, Inc. while Mr. Kenny was still a director of the Company, although he
did not participate in the directors analysis and decision to sell the business
to GEN 02, Inc.
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In the event that shareholders do not approve Proposal No. 3, the
Company will be required to either find another purchaser of the limousine
reservation business or raise additional capital to bring the limousine
reservation business to full operation. No assurance can be given that the
Company will be able to raise such funds.
Proposal No. 4: To amend Article First of the Company's Certificate of
Incorporation.
Since the Company proposes to fundamentally change its business from
that of the limousine reservation business to an internet travel business, the
Company determined that it would be appropriate to change the name of the
Company to more properly reflect this. Management does not believe that there
are any significant disadvantages to changing the name to netcruise.com, inc.
The advantages to approving the amendment to the Company's Certificate of
Incorporation to change the name of the Company to netcruise.com, inc. is that
the Company's name will be more identified with that of its operating business.
Proposal No. 5: To amend Article Fourth of the Company's Certificate of
Incorporation.
The advantages of amending the Company's Certificate of Incorporation
to restate the provisions of the Company's authorized Common and Preferred Stock
as described in Proposal No. 5 is that the Certificate of Incorporation will
become clearer because certain inconsistencies existing in the previous revision
will be corrected.
If shareholders do not approve the change in the amended Certificate of
Incorporation, it may be difficult for the Company to utilize the authorized
preferred shares for acquisitions, financing, and other proper corporate
purposes.
If shareholders do not approve the name change or the amendment to the
Company's Certificate of Incorporations restating the provisions of the common
and preferred stock, managements present intention is to leave the name of the
Company and the Certificate of Incorporation as they now are.
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GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
(Development Stage Companies)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999
(Unaudited)
The following statements are based upon the historical balance sheet of the
Company appearing elsewhere herein to show the effect on the Company's balance
sheet if the shareholders approve or do not approve (1) the issuance of
1,100,000 shares of Series B Convertible Preferred Stock which automatically
converts into 1,100,000 shares of Common Stock and the related ratification of
the Acquisition of software, a technology license and related assets from United
Internet Technologies, Inc. ("UIT Transaction") and (2) the ratification of the
exchange of the Company's limousine reservation business for a noncontrolling
interest in Gen 02, Inc. ("Gen 02 Transaction"). Reference should be made to
Note 3 to the Company's financial statements appearing in the Company's Form
10-KSB for the year ended December 31, 1998 for additional information. These
statements should be read in conjunction with the Company's financial statements
and notes thereto appearing elsewhere herein.
Assuming
Assuming Shareholders Assuming Shareholders Assuming
Shareholders Approve UIT Approve Gen 02 Shareholders Do
Approve Both Transaction Transaction But Not The Not Approve
Transactions But Not The UIT Transaction Either
ASSETS (Note A) Gen 02 Transaction (Note C) Transaction
- ------ -------- --------
(Note B) (Note D)
Current assets $ 166,597 $ 238,355 $ 166,597 $ 238,355
Investment in, and advances to, Gen 02, Inc. 547,184 - 547,184 -
Property and equipment 112,429 294,326 112,429 294,326
Computer software and related assets 2,328,014 2,769,230 203,014 644,230
Other assets 77,303 116,278 77,303 116,278
------ ------- ------ -------
$3,231,527 $3,418,189 $1,106,527 $1,293,189
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 603,295 $ 749,957 $ 653,295 $ 799,957
Long-term debt 81,250 121,250 81,250 121,250
Stockholders' equity 2,546,982 2,546,982 371,982 371,982
--------- --------- ------- -------
$3,231,527 $3,418,189 $1,106,527 $1,293,189
========== ========== ========== ==========
Note A - Represents the historical balance sheet at March 31, 1999, as both
transactions were recorded as completed transactions.
Note B - Reflects the consolidation of Gen 02, Inc.'s balance sheet appearing in
Note 6 to the March 31, 1999 Form 10-Q and the elimination of intercompany
balances.
Note C - Reflects the elimination of the $2,125,000 book value of the assets
acquired from UIT at March 31, 1999, the related $2,500,000 value ascribed to
the common stock issued and accumulated depreciation and amortization of
$375,000. In addition, the estimated costs of $50,000 to unwind the UIT
transaction have been accrued.
Note D - Reflects both the consolidation and elimination entries described in
Notes B and C.
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GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
(Development Stage Companies)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Unaudited)
The following statements are based upon the historical consolidated statement of
operations of the Company appearing elsewhere herein to show the effect on the
Company's statement of operations if the shareholders approve or do not approve
(1) the issuance of 1,100,000 shares of Series B Convertible Preferred Stock
which automatically converts into 1,100,000 shares of Common Stock and the
related ratification of the acquisition of software, a technology license and
related assets from United Internet Technologies, Inc. ("UIT Transaction") and
(2) the ratification of the exchange of the Company's limousine reservation
business for a noncontrolling interest in Gen 02, Inc. ("Gen 02 Transaction").
Reference should be made to Note 3 to the Company's financial statements
appearing in the Company's Form 10-KSB-A, incorporated by reference for
additional information. These statements should be read in conjunction with the
Company's financial statements and notes thereto appearing in the Company's Form
10-KSB-A, incorporated by reference.
Assuming Assuming
Shareholders Shareholders Assuming Assuming
Approve UIT Approve Gen 02 Shareholders Shareholders
Assuming Transaction But Not Transaction But Not Do Not Approve
Shareholders The Gen 02 The UIT Transaction Either Transaction
Approve Both Transaction (Note C) (Note D)
-------- --------
Transactions (Note B)
(Note A)
SERVICE REVENUES $ 33,290 $ 129,970 $ 33,290 $ 129,970
------------ ------------
EXPENSES:
Cost of services 19,306 156,072 19,306 156,072
General and administrative 963,122 1,718,189 963,122 1,718,189
Depreciation and
amortization 228,563 620,705 3,563 395,705
Interest expense (income),
net (20,507) (20,507) (20,507) (20,507)
------- -------
1,190,484 2,474,459 965,484 2,249,459
--------- ---------
LOSS BEFORE EQUITY IN
GEN 02, INC. (1,157,194) (2,344,489) (932,194) (2,119,489)
EQUITY IN LOSS OF GEN 02,
INC. (1,187,295) - (1,187,295) -
NET LOSS INCURRED DURING
THE DEVELOPMENT STAGE ---------- ---------- --------- -
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES (2,344,489) (2,344,489) (2,119,489) (2,119,489)
OUTSTANDING ----------- -----------
BASIC AND DILUTED LOSS PER 5,561,000 5,561,000 4,561,000 4,561,000
COMMON SHARE ============ ============
$ (.42) $ (.42) $ (.46) $ (.46)
========= ==========
Note A - Represents the historical statement of operations for the year ended at
December 31, 1998, as both transactions were recorded as completed transactions,
with the operations of the business of Gen 02, Inc. prior to November 6,1998
reclassified to equity in the loss of Gen 02, Inc. as follows:
Service Revenues $ 82,387
------------
Expenses
Cost of services 134,972
General and administrative 689,241
Depreciation and amortization 325,551
-------
1,149,764
Net loss $1,067,377
Note B - Reflects the consolidation of Gen 02, Inc.'s statement of operations
(as reported in Note 3 to the Company's financial statements appearing in the
Company's Form 10-KSB-A, incorporated by reference) with the Company's
statementof operations. Note C - Reflects the elimination of the $225,000 of
amortization on the assets acquired from UIT during the year ended December 31,
1998 and the weighted average number of shares of common stock issued to UIT.
Note D - Reflects both the consolidation and elimination entries described in
Note B and C.
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GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
(Development Stage Companies)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
The following statements are based upon the historical consolidated statement of
operations of the Company appearing elsewhere herein to show the effect on the
Company's statement of operations if the shareholders approve or do not approve
(1) the issuance of 1,100,000 shares of Series B Convertible Preferred Stock
which automatically converts into 1,100,000 shares of Common Stock and the
related ratification of the acquisition of software, a technology license and
related assets from United Internet Technologies, Inc. ("UIT Transaction") and
(2) the ratification of the exchange of the Company's limousine reservation
business for a noncontrolling interest in Gen 02, Inc. ("Gen 02 Transaction").
Reference should be made to Note 3 to the Company's financial statements
appearing in the Company's Form 10-KSB for the year ended December 31, 1998 for
additional information. These statements should be read in conjunction with the
Company's financial statements and notes thereto appearing elsewhere herein.
Assuming
Shareholders Assuming
Assuming Approve UIT Shareholders Assuming
Shareholders Transaction But Approve Gen 02 Shareholders Do
Approve Both Not The Gen 02 Transaction But Not Approve
Transactions Transaction Not The UIT Either Transaction
(Note A) (Note B) Transaction (Note D)
(Note C)
SERVICE REVENUES $ 80,533 $ 153,439 $ 80,533 $ 153,439
------------ -----------
EXPENSES:
Cost of services 31,299 53,859 31, 299 53,859
General and administrative 584,204 726,008 584,204 726,008
Depreciation and amortization 221,658 324,510 96,658 199,510
Interest expense (income), net (818) (818) (818) (818)
----
836,343 1,103,559 711,343 978,559
------- -------
LOSS BEFORE EQUITY IN GEN
02, INC. (755,810) (950,120) (630,810) (825,120)
EQUITY IN LOSS OF GEN 02, INC. (194,310) - (194,310) -
-------- ------ -------- -
NET LOSS INCURRED DURING
THE DEVELOPMENT STAGE $ (950,120) $ (950,120) $ (825,120) $ (825,120)
========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 7,282,802 7,282,802 5,282,802 5,282,802
OUTSTANDING =========== ===========
BASIC AND DILUTED LOSS PER $(.13)
COMMON SHARE ===== $(.13) $(.16) $(.16)
=====
Note A - Represents the historical statement of operations for the three months
ended March 31, 1999 appearing in Form 10-QSB , as both transactions were
recorded as completed transactions.
Note B - Reflects the consolidation of Gen 02, Inc.'s statement of
operationsappearing in Note 6 to Form 10-QSB for the three months ended March
31, 1999 with the Company's statement of operations.
Note C - Reflects the elimination of the $125,000 of amortization on the assets
acquired from UIT during the three months ended March 31, 1999 and the number of
shares of common stock issued to UIT.
Note D - Reflects both the consolidation and elimination entries described in
Note B and C.
</TABLE>
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Interested Parties
As more fully described in Proposal No. 2, the Company recently
acquired a technology license and certain related assets from UIT. In connection
with this acquisition the Company is seeking Shareholder approval for
ratification of that acquisition and payment therefor, in the form of the
issuance of 1,100,000 shares of Common Stock and two Warrants, each to purchase
800,000 shares of the Company's Common Stock, to UIT. Mr. Brian Shuster is
currently a director of UIT and was also elected as a Director of the Company
pursuant to an Asset Purchase Agreement, dated as of June 30, 1998, between the
Company and UIT (the "Asset Purchase Agreement"). In connection with this
transaction, Mr. Brian Shuster received two warrants, each entitling him to
purchase 200,000 shares of Common Stock of the Company if certain performance
goals are met. UIT will not vote the 900,000 shares of Common Stock of the
Company currently held by UIT, nor will these votes be counted for the purpose
of obtaining a quorum for Proposal No. 2. The 900,000 shares of Common Stock of
the Company currently held by UIT will be counted for quorum purposes and will
be eligible to vote on all other matters at the 1999 Annual Meeting. Mr. Harry
Shuster was also elected as a director of the Company and the Chairman of
NetCruise pursuant to the Asset Purchase Agreement, but has since resigned from
both positions due to personal reasons.
Mr. Mark A. Kenny, a former director and officer of the Company, and currently a
shareholder, is a principal of GEN O2, Inc., the purchaser of the assets sold by
the Company, as more fully described in Proposal No. 3. Mr. Kenny will not vote
the shares of Common Stock held by him in connection with Proposal No. 3.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide for a Board of Directors of
not less than three (3) members. The Board of Directors currently consists of
six (6) members. The Board of Directors has fixed the number of directors at
seven (6) in accordance with the provisions of the Company's Bylaws. At the 1998
Annual Meeting, six (6) directors will be elected to serve until the next Annual
Meeting of Stockholders and until their successors have been elected and
qualified. Any vacancy or vacancies which occur during the year may be filled by
the Board of Directors, and any directors so appointed must stand for election
at the next annual meeting of stockholders.
All nominees have consented to be named and have indicated their intent
to serve if elected. The Company has no reason to believe that any of these
nominees are unavailable for election. However, if any of the nominees become
unavailable for any reason, the persons named as proxies may vote for the
election of such person or persons for such office as the Board of Directors of
the Company may recommend in the place of such nominee or nominees. It is
intended that proxies, unless marked to the contrary, will be voted in favor of
the election of the nominees.
Election of the directors requires the affirmative vote of a majority
of the votes cast at the meeting by holders of the Company's Common and Series A
Preferred Stock.
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The Board of Directors recommends that the stockholders vote "FOR" the election
of the following seven nominees (Item No. 1 on the proxy card).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NOMINEES FOR ELECTION
Name Age Position
Lawrence E. Burk 57 President, Chief Executive Officer and Director
John H. Wasko 61 Chief Financial Officer, Secretary, Treasurer and
Director
David W. Sass 63 Director
S. Charles Tabak 66 Director
Warren D. Bagatelle 61 Chairman
Brian Shuster 40 Director
</TABLE>
The Company's Audit and Compensation Committees consist of Messrs. Warren D.
Bagatelle, S. Charles Tabak and David W. Sass. All officers of the Company
devote their full time to the Company's business.
Lawrence E. Burk joined the Company on June 23, 1997, as
President, Chief Executive Officer, and Director following a 27 year career with
Alexander & Alexander Services. From 1993 to early 1996, Mr. Burk served as
Chairman and CEO of Alexander & Alexander, Inc., the U.S. Retail Subsidiary of A
& A Services, and from early 1996 until the company's acquisition by AON
Corporation in late 1996, Mr. Burk served as President and Chief Operating
Officer of A & A International, the company's global retail operation. Mr. Burk
served on the company's Global Retail Board from 1985; on A & A Services
Operations Board from 1989; and on A & A Inc.'s' Executive Committee and
Operations Board from 1989. A & A was a NYSE listed Financial Services firm with
revenues of over $1.3 billion. Mr. Burk has a B.A. degree in Economics from
Southern Illinois University and is a member of the schools' Advisory Board.
John H. Wasko has served the Company as a Director since April, 1986,
as Secretary since September 1995, and as Treasurer and Chief Financial Officer
since April 1996. Mr. Wasko has also served the Company as President and
Chairman of the Board since its inception to August 1995, and as Treasurer from
April 1986 to September 1987 and from May 1988 to August 1995. Mr. Wasko has
also served as Chairman of the Board, President and Director of JEC Lasers,
Inc., presently an inactive company, since it was organized in September 1977.
He was awarded a bachelor of science degree in
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physics in 1963 and a master of science degree in physics (summa cum laude) in
1965 from Fairleigh Dickinson University.
David W. Sass has been a Director since April, 1997 and has been a
practicing attorney in New York City for the past 38 years and is currently a
senior partner in the law firm of McLaughlin & Stern, LLP, securities counsel to
the Company. Mr. Sass is also a director of Pallet Management Systems, Inc., a
company engaged in the manufacture and repair of wooden pallets and other
packaging services and a director of BarPoint.com, Inc., a company that will
operate a patent pending search engine and software technology that allows
consumers to search for product specific information on the internet and a
member and Vice Chairman of the Board of Trustees of Ithaca College. Mr. Sass
earned a B.A. from Ithaca College, a J.D. from Temple University School of Law
and an L.L.M. (in taxation) from New York University School of Law.
S. Charles Tabak has been a Director since April, 1997. Since 1991 he
has been the Chief Executive Officer of Arc Medical & Professional, Inc., an
employment agency specializing in placement of scientific, medical and office
personnel. From 1969 to 1990, he was the Executive Vice President and General
Counsel for Channel Home Centers Inc. From 1967 to 1969, he was the Director of
Finance of J.J. Newbury Co. Mr. Tabak is a past member of the Board of Directors
of Channel Home Centers, Inc. and Charge A Plate Group of Greater New York. He
is a graduate of both NYU School of Business and School of Law, and is admitted
to practice law in New York state and before the U.S. Supreme Court.
Warren D. Bagatelle has been a Director and Chairman of the Board of the Company
since August, 1995. He served as Chief Executive Officer of the Company from
December 1996 through June, 1997. Since 1988, he has been a Managing Director at
Loeb Partners Corporation, a New York City investment banking firm. Mr.
Bagatelle is also a director of Energy Research Corporation, a company engaged
in the development and commercialization of electrical storage and power
generation equipment, principally fuel cells and rechargeable storage batteries
and a director of Evercell, Inc., a company engaged in the development and
commercialization of batteries. Mr. Bagatelle has a B.A. in economics from Union
College and an M.B.A. from Rutgers University.
Brian Shuster has been President of NetCruise Interactive, Inc. and a
Director of the Company since July, 1998. He has served as Chief Executive
Officer, President and a director of United Film Distributors, Inc. since its
inception in May, 1995. Since he has been with United Film Distributors, Inc. he
has served as the producer of seven films. Prior to joining United Film
Distributors, Inc., he served as President of Beverly Hills Producers Group, a
private production company, where he produced one motion picture, served as
executive producer of another motion picture, and oversaw production of three
other films. From 1990 until 1993 Mr. Shuster served as Vice President of
Worldwide Entertainment Group, where he also produced three motion pictures. He
is also currently a director of United Lesiure Corporation and President of UIT.
Mr. Brian Shuster is currently a director of UIT. The Company recently acquired
a technology license and certain related assets from UIT, which is a wholly
owned subsidiary of ULC, as more fully described in Proposal No. 2. Mr. Brian
Shuster was elected as a director of the Company following
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<PAGE>
this transaction pursuant to the acquisition agreement and will so serve for
three (3) years, if so elected. In connection with this transaction, Mr. Brian
Shuster received two warrants, each entitling him to purchase 200,000 shares of
the Common Stock of the Company. One warrant is exercisable for 200,000 shares
at $2.50 per share and may be exercised between April 1, 2002 and June 30, 2002,
but only if NetCruise achieves profits equal to or exceeding $5,000,000 for the
years 1999, 2000 and 2001. The other Warrant is exercisable for 200,000 shares
at $6.00 per share and may be exercised between April 1, 2002 and June 30, 2002,
but only if NetCruise achieves profits equal to or exceeding $10,000,000 for the
years 1999, 2000 and 2001. Mr. Harry Shuster was also elected as a director of
the Company and the Chairman of NetCruise pursuant to the Asset Purchase
Agreement, but has since resigned from both positions due to personal reasons.
Executive Compensation
The following tabulation shows the total compensation paid by the
Company for services in all capacities in fiscal years 1996, 1997 and 1998 to
the officers of the Company.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name and Principal Position Year Salary Bonus Other Annual Compensation
Lawrence E. Burk 1998 $147,500 $0 $0
President & Chief Executive Officer 1997 $75,000 (1) $0 $0
1996 $0 $0 $0
Joseph Cutrona (2) 1998 $0 $0 $0
1997 $41,639 $0 $6,667
1996 $73,500 $0 $5,000
Mark A. Kenny(3) 1998 $88,462 $0 $0
1997 $64,231 $0 $28,967
1996 $42,000 $0 $16,250
John H. Wasko 1998 $80,000 $0 $0
Chief Financial Officer, Secretary & 1997 $81,247 $0 $20,000
Treasurer 1996 $10,000 $0 $49,500
</TABLE>
(1) Salary paid to Mr. Burk for the period June 23, 1997 thru December 31, 1997.
Mr. Burk's Annual salary is $150,000.
(2) As of May 12, 1997, Mr. Cutrona was no longer an employee, Officer or
Director of the Company.
(3) Mr. Kenny formerly was the Company's Executive Vice President. He resigned
as an employee and a Director of the Company as of November 6 , 1998.
The Company and Mr. Lawrence E. Burk entered into an Employment Agreement on
June 23, 1997 whereby the Company agreed to pay Mr. Burk a salary of $150,000
per year. The Employment Agreement is of continuous duration and may be
terminated by either party. Mr. Burk is also entitled to an incentive bonus to
be determined in the sole discretion by the Board of Directors of the Company.
The Company and Mr. John H. Wasko entered into an Employment Agreement on
October 16, 1996 whereby the Company agreed to pay Mr. Wasko a salary of $80,000
per year. The
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<PAGE>
Employment Agreement is of continuous duration and may be terminated by either
party. Mr. Wasko is also entitled to an incentive bonus to be determined in the
sole discretion by the Board of Directors of the Company. The Company and Loeb
Partners Corporation entered into a three year consulting and investment banking
agreement dated September 5, 1995 whereby the Company agreed to pay Loeb
Partners Corporation a consulting fee of $3,000 per month, which contract has
been extended for an additional three (3) years. Loeb Partners Corporation also
receives a fee for arranging private financing and acquisitions. Mr. Warren D.
Bagatelle, a Director and Chairman of the Company, is a Managing Director of
Loeb Partners Corporation. The Company and Mr. Mark A. Kenny entered into an
Employment Agreement on May 1, 1997 whereby the Company agreed to pay Mr. Kenny
a salary of $100,000 per year. This contract was terminated in November, 1998 by
the resignation of Mr.
Kenny. See Proposal No. 3.
Pursuant to the Asset Purchase Agreement the Company agreed that Mr.
Brian Shuster would serve as a director of the Company for three years and as
President of NetCruise. In addition, the Company agreed to pay Mr. Brian Shuster
$5,000 per month for his services as a consultant to the Company. Mr. Brian
Shuster also received two warrants, each entitling him to purchase 200,000
shares of the Common Stock of the Company. One warrant is exercisable for
200,000 shares at $2.50 per share and may be exercised between April 1, 2002 and
June 30, 2002, but only if NetCruise achieves profits equal to or exceeding
$5,000,000 for the years 1999, 2000 and 2001. The other Warrant is exercisable
for 200,000 shares at $6.00 per share and may be exercised between April 1, 2002
and June 30, 2002, but only if NetCruise achieves profits equal to or exceeding
$10,000,000 for the years 1999, 2000 and 2001. Mr. Harry Shuster was also
elected as a director of the Company and the Chairman of NetCruise pursuant to
the Asset Purchase Agreement, but has since resigned from both positions due to
personal reasons.
On May 12, 1997 the Company adopted the Genisys Reservation Systems,
Inc. 1997 Omnibus Stock Incentive Plan (the "Plan"). The Plan provides for the
granting of stock options to directors, officers and employees of the Company or
any subsidiary of the Company to purchase, or to exercise certain rights with
respect to shares of Common Stock of the Company. The following table sets forth
the options granted by the Company to the officers and directors of the Company:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name No. of Securities Percent of total Exercise or base Expiration Date
Underlying Options options granted price
to employees in per share
the fiscal year
John H. Wasko 35,000 $2.00 November 2001
25,000 $4.75 March 2004
Lawrence E. Burk 200,000 $4.75 March 2004
S. Charles Tabak 15,000 $4.75 March 2004
David W. Sass 15,000 $4.75 March 2004
</TABLE>
During 1998 the Board of Directors held four meetings and acted one
time by unanimous written consent.
Outside directors receive $1,000 for each board meeting attended in
person and $250 for each committee meeting attended in person, as compensation
for serving in such capacities during the fiscal year ending December 31, 1998.
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<PAGE>
CERTAIN TRANSACTIONS
In February 1995, Loeb Holding Corporation, as escrow agent
("Loeb"), for Warren D. Bagatelle, HSB Capital, trusts for the benefit of
families of two principals of Loeb Holding Corporation and three unaffiliated
individuals, agreed to loan the Company $500,000 evidenced by a series of
Convertible Promissory Notes ("Convertible Promissory Notes"). In September,
1995, Loeb converted the Convertible Promissory Notes into 841,455 common shares
of the Company and two Term Promissory Notes, one in the principal amount of
$475,000 and the other in the principal amount of $25,000.
On August 11, 1995, Robotic Lasers, Inc. acquired Travel Link by
issuing 1,682,924 shares of restricted new Common Stock of the Company in
exchange for the shares of the common stock of Travel Link owned by Joseph
Cutrona, Mark A. Kenny and Steven E. Pollan, which represented all the issued
and outstanding shares of common stock of Travel Link.
In August 1995 the Company granted Mr. Wasko a five (5) year option to
purchase 25,000 shares of Common Stock at a price of $0.60 per share, which
option has been exercised. In November, 1996 the Company granted Mr. Wasko a
five (5) year option to purchase 35,000 shares of Common Stock at a price of
$2.00 per share, and in March 1999 the Company granted Mr. Wasko a five (5) year
option to purchase an aggregate of 25,000 shares of Common Stock at a price of
$4.75 per share.
On September 5, 1995 the Company entered into a three year consulting
and investment banking agreement with Loeb Partners Corporation. Under the terms
of the agreement the Company pays Loeb Partners Corporation $3,000 per month.
Loeb Partners Corporation will also receive a fee for arranging private
financing and acquisitions. This banking agreement has been extended by the
Company for three (3) years on the same terms. Mr. Warren D. Bagatelle, a
Director and Chairman of the Company, is a Managing Director of Loeb Partners
Corporation.
During December 1995, Loeb agreed to loan the Company $250,000
evidenced by a series of Convertible Promissory Notes. In November 1996, Loeb
converted the Convertible Promissory Notes into (i) two Term Promissory Notes,
one in the principal amount of $237,500 and the other in the principal amount of
$12,500 issued in December 1995 and discussed below and (ii) 420,728 shares of
Common Stock of the Company, of which 420,000 shares of Common Stock are owned
by four unaffiliated parties. Loeb Holding Corporation did not receive any
shares of Common Stock in this transaction.
In March 1998 the holder of two Term Convertible Promissory Notes in
the principal amounts of $475,000 and $237,500, converted $400,000 of the
principal amount of the former note and $200,000 of the principal amount of the
latter note into 188,235 shares and 94,118 shares respectively of the Series A
Preferred Stock of the Company at a price of $2.125 per share.
The holder of the term promissory notes is Loeb Holding Corporation, as
escrow agent for Warren D. Bagatelle, Managing Director of Loeb Partners Corp.,
HSB Capital (of which Mr. Bagatelle is a partner), trusts for the benefit of
families of two principals of Loeb Holding Corporation and three
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unaffiliated persons. Loeb Holding Corporation disclaims any beneficial interest
in these shares. Warren D. Bagatelle is Chairman of the Company.
The Term Promissory Note in the amount of $25,000 and the Term
Promissory Note in the amount of $12,500 issued in December 1995 were converted
in March 1998 into 400,000 shares of the Common Stock of the Company at a price
of $0.09375 per share.
In August 1996, the Company gave notice to Mr. Pollan that it was
canceling the 333,216 shares of Common Stock which had been issued to him in
August of 1995. It is the Company's position that the Common Stock should be
canceled because, among other reasons, Mr. Pollan failed to provide the services
to the Company which were to be the consideration for the issuance of the
shares. Mr. Pollan has commenced an action against the Company and others in the
New Jersey Federal Court which contests the Company's effort to cancel the
shares issued to him, and which seeks monetary damages and other relief. The
action is in its preliminary stages, and no assurance can be given as to its
ultimate outcome.
During November and December 1996, the Company and Loeb Holding
Corporation signed four eighteen (18) month Convertible Promissory Notes whereby
Loeb Holding Corporation loaned the Company the sums of $75,000, $30,000,
$10,000 and $95,000 (totaling $210,000). The Promissory Notes which bear
interest at 10%, matured on May 11, 1998, May 25, 1998, June 2, 1998 and June 9,
1998. In March 1998, Loeb, converted the total principal amount of the four
Convertible Promissory Notes ($210,000) into 98,824 shares of the Series A
Preferred Stock of the Company at a price of $2.125 per share.
In connection with the acquisition of the technology license and the
assets from UIT by NetCruise, Mr. Brian Shuster received two warrants, each
entitling him to purchase 200,000 shares of the Common Stock of the Company. One
warrant is exercisable for 200,000 shares at $2.50 per share and may be
exercised between April 1, 2002 and June 30, 2002, but only if NetCruise
achieves profits equal to or exceeding $5,000,000 for the years 1999, 2000 and
2001. The other Warrant is exercisable for 200,000 shares at $6.00 per share and
may be exercised between April 1, 2002 and June 30, 2002, but only if NetCruise
achieves profits equal to or exceeding $10,000,000 for the years 1999, 2000 and
2001.
In November 1998 the Company entered into an Acquisition Agreement with a
company newly formed by a management group led by Mark A. Kenny, a Company
founder and former director. This new company was organized for the purpose of
this acquisition. Mr. Kenny is still a shareholder of the Company. The terms of
this sale are more fully discussed in Proposal No. 3.
For the year ended December 31, 1997 the Company paid to the firm of McLaughlin
& Stern, LLP the sum of $145,762 for legal services. Mr. Sass, a director of the
Company, is a member of said firm.
The Company believes that each of these transactions was entered into
on terms at least as favorable to the Company as could have been obtained from
unaffiliated third parties.
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The transactions described above involve actual or potential conflicts
of interest between the Company and its officers or directors. In order to
reduce the potential for conflicts of interest between the Company and its
officers and directors, prior to entering into any transaction in which a
potential material conflict of interest might exist, the Company's policy has
been and will continue to be, that the Company does not enter into transactions
with officers, directors or other affiliates unless the terms of the transaction
are at least as favorable to the Company as those which would have been
obtainable from an unaffiliated source. As of the date hereof, the Company has
no plans to enter into any additional transactions which involve actual or
potential conflicts of interest between the Company and its officers or
directors. Should the Company enter into any such transaction in the future, it
will not do so without first obtaining at least one fairness opinion from,
depending on the nature of the transaction, either its own independent directors
or from an independent investment banking firm.
PROPOSAL NO. 2
RATIFICATION OF THE ACQUISITION OF A TECHNOLOGY LICENSE AND CERTAIN RELATED
ASSETS FROM UNITED INTERNET TECHNOLOGIES, INC. AND APPROVAL OF THE ISSUANCE OF
1,100,000 SHARES OF COMMON STOCK AND TWO STOCK PURCHASE WARRANTS TO UNITED
INTERNET TECHNOLOGIES, INC.
Pursuant to the Asset Purchase Agreement, NetCruise (a wholly owned
subsidiary of the Company formed on July 21, 1998 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 the Company's Common
Stock and two warrants ("Warrants"), each entitling the holder to purchase
800,000 shares of the Common Stock of the Company (the "UIT Transaction"). One
warrant is exercisable for 800,000 shares at $2.50 per share and may be
exercised between April 1, 2002 and June 30, 2002, but only if NetCruise
achieves profits equal to or exceeding $5,000,000 for the years 1999, 2000 and
2001. The other Warrant is exercisable for 800,000 shares at $6.00 per share and
may be exercised between April 1, 2002 and June 30, 2002, but only if NetCruise
achieves profits equal to or exceeding $10,000,000 for the years 1999, 2000 and
2001. No value has been placed on the warrants since the warrants are each
contingent upon future earnings. For a more detailed description of the
Company's Common Stock please see Proposal No. 5.
The Company has since been advised that the issuance of such securities
has caused the Company to inadvertently be in violation of a Nasdaq MarketPlace
Rule because the issuance of the 2,000,000 shares and Warrants amounted to more
than 20% of the issued and outstanding shares of the Company and were not
approved by Shareholders as required by such Rule. Nasdaq advised the Company
that the Company's Common Stock would be delisted as a result of such violation.
The Company requested a hearing on the delisting which was held on November 20,
1998. Nasdaq issued its written determination on January 12, 1999 to continue
listing the Company's securities on The Nasdaq SmallCap Market pursuant to the
following conditions: (i) the UIT Transaction must be unwound in the event
shareholders do not ratify the acquisition of the technology license and certain
related assets from UIT and approve the issuance of 1,100,000 shares of Common
Stock and two Stock Purchase Warrants to UIT; (ii) the Company must file a
Definitive Proxy Statement with the Securities and Exchange Commission and
Nasdaq on or before February 15, 1999; and (iii) the Company must
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<PAGE>
submit documentation to Nasdaq on or before March 15, 1999 evidencing either the
receipt of shareholder approval of the issuance of additional shares to UIT or
the unwinding of the issuance of additional shares to UIT and purchase of a
technology license and certain related assets from UIT. The Company has
requested an extension from Nasdaq with respect to the deadlines to August 15,
1999.
The Company and UIT have restructured the transaction so that UIT will
return to the Company 1,100,000 shares of the Company's Common Stock (retaining
900,000 shares that are not in violation of the Nasdaq MarketPlace Rule) and the
Warrants. The Company will issue to UIT 1,100,000 shares of Convertible Series B
Preferred Stock (the "Series B Preferred Stock"), which Series B Preferred Stock
is automatically converted into 1,100,000 shares of the Company's Common Stock
upon Shareholder approval of the issuance of the 1,100,000 shares of Common
Stock and the Warrants. The Series B Preferred Stock is non-voting stock and
carries a mandatory dividend of $275,000, payable on September 30, 1999 and a
mandatory quarterly dividend at the rate of $68,750 commencing with the quarter
ended December 31, 1999. The Series B Preferred Stock has an additional
mandatory dividend at the rate of 10% if any dividends are not paid when due,
has a mandatory liquidation preference equal to $2.75 million plus accrued and
unpaid dividends payable upon liquidation or dissolution of the Company and is
senior over other classes of stock in respect of dividends or other
distributions including amounts payable upon dissolution or liquidation of the
Company. No dividend will be payable if the Shareholders approve the issuance of
the 1,100,000 shares Common Stock and Warrants prior to June 30, 1999. The
Company was not able to obtain such Shareholder approval, and will therefore be
required to pay the dividend if it has funds legally available for such
purposes. State law prohibits the payment of a dividend if, as a result thereof,
the Company would be unable to pay its debts as they become due in the usual
course of its business or the Company's total assets would be less than its
total liabilities.. The total purchase price in the UIT Transaction is 900,000
shares of the Company's Common Stock and 1,100,000 shares of the Company's
Series B Convertible Preferred Stock. If shareholders ratify the acquisition,
the Series B Preferred Stock will automatically be converted into 1,100,000
shares of the Company's Common Stock and the Company will issue two warrants,
each to purchase 800,000 shares of Common Stock, as outlined above.
In the event shareholders do not ratify the acquisition of the assets
and approve the issuance of 1,100,000 shares of Common Stock and two stock
purchase warrants, the UIT Transaction will be unwound. In such event the
Company estimates that the cost to undo the transaction will not exceed $50,000.
This estimate includes accounting fees, legal fees, recording fees and employee
termination fees. In the event that the UIT Transaction must be unwound, the
following shall occur: (i) the Company shall reassign the technology license and
return the related assets to UIT; (ii) UIT will return to the Company all stock
certificates received pursuant to the UIT Transaction and (iii) Mr. Brian
Shuster will return the warrants issued to him by the Company; and (iv) Mr.
Brian Shuster will resign from any officer or director position held by him. In
addition, Mr. Brian Shuster's consulting fee shall be pro-rated to the date of
his resignation and shall cease as of such date. Reference should be made to Pro
Forma Condensed Consolidated Financial Statements as of December 31, 1998 for
the effect of undoing the UIT Transaction.
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The Company determined to expand into the internet travel business for
several reasons. Although the Company had begun to generate revenues, the
Company found that many limousine providers were resisting the payment of
commissions or fees in connection with bookings on the Company's system
resulting in a much slower development of revenues for the Company than was
originally anticipated. Management evaluated the cost of operations for a more
extended period of time and determined that the Company's available funds would
be better spent in other areas of the travel business. It therefore determined
to expand into the internet travel business. As a result, if the shareholders
approve the acquisition of the technology license and certain related assets and
the sale of the limousine reservation business, the effect to shareholders is a
fundamental change in the nature of the business of the Company from the
limousine reservation business to an internet travel business.
Disadvantages to Proposal No. 2 include a lack of operating history
with respect to the software relating to the internet travel business. Although
management expects web-site development to continue through mid-1999, the
internet web-site is currently operational and independent travel consultants
can view videos and book car, air and hotel reservations directly through the
web-site, as well as research vacation packages and cruise itineraries. The
Company's independent travel consultants are currently unable to book vacation
and cruise packages in an automated fashion through the web-site. In order to
make these types of reservations, the independent travel consultants are
instructed to contact the Company's service center, (operated through Sammy's
Travel World, a wholly owned subsidiary of the Company) via toll-free telephone,
fax or e-mail, whereby a live NetCruise travel agent will then make the vacation
or cruise reservation. The Company intends to continually enhance its technology
to automate the booking process for cruise and vacation reservations through its
web-site. There can be no assurance, though, that the Company will be able to
achieve the technological advancements necessary to automate the booking of
cruise and vacation reservations.
In addition, at the present time the Company only has a limited number
of individuals who have subscribed to be independent travel consultants. It is
important to note that the Company's customers consist of the independent travel
consultants as well as the clients of the independent travel consultants for
whom travel is booked. The Company initially acquired 280 independent travel
consultants as a result of the Company's acquisition of the assets of Sterling.
The Company is honoring the agreements the independent travel consultants made
with Sterling which were in place at the time the Company purchased Sterling's
assets. The subscription fees charged by the Company are significantly less than
those which had been charged by Sterling, although the renewal fees are the
same. This is true even though NetCruise will be providing additional services
not offered by Sterling, such as automated web- site booking capability and
video technology. As the independent travel consultants subscription agreements
come up for renewal, there is no guarantee that the independent travel
consultants will renew their agreements with the Company. Additionally, although
the Company believes that its national marketing campaign will be successful in
the recruitment of new independent travel consultants, there can be no assurance
of the effectiveness of the campaign.
The budgeted cost of launching the Company's marketing campaign, which
includes the development of a data base and networking capability, is expected
to be approximately $1,342,000. Of such amount, approximately $198,000 was
allocated to complete development of the web-site, which is currently
operational. The Company intends to use $75,000 of the $198,000 to continue to
enhance
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and upgrade the web-site. Such improvements will include providing additional
features to the site, such as personal web pages for the independent travel
consultants, chat capability, on-line accounting information for the independent
travel consultants as well as client profiling. The Company expects to continue
upgrading the web-site as appropriate. The remainder of the $1,342,000 will be
used to produce a television video infomercial and purchase media time. The
Company recently completed a private placement in the amount of $1,500,000. The
funds of the private placement were received by the Company as follows: $200,000
in 1998, $510,000 between January 1999 and February 1999 and $790,000 in June,
1999. With these proceeds and anticipated cash to be received from revenues, the
Company believed it would have sufficient resources to provide for its planned
operations for the next twelve months. However, there was a four month delay
from mid-February to mid-June in receiving the balance of the private placement
proceeds in the amount of $790,000 and a corresponding delay in launching the
Company's marketing campaign, which resulted in a much lower than anticipated
growth in the Company's revenues. As a result, during the delay the Company was
forced to divert approximately $600,000 of the private placement proceeds to
cover general and administrative expenses. The $600,000 was taken out of the
$710,000 the Company had received from the private placement as of February
1999, which the Company had originally planned on using for marketing purposes.
The remaining $110,000 of the private placement proceeds received as of February
1999 were used for web-site development, as originally planned.
As a result of these delays, the Company needs to raise an additional
$725,000 to continue the launch of the Company's marketing campaign.
Additionally, the Company is obligated by contract to pay a mandatory dividend
in the amount of $275,000 to United Internet Technologies, Inc. on September 30,
1999, bringing the total amount of additional funds required to $1,000,000. The
$1,000,000 in additional funds, if and when received, will be allocated as
follows: $90,000 to continue upgrading and enhancing the web-site, $510,000 to
complete development of a television infomercial and purchase media time;
$125,000 for general working capital and $275,000 to pay the mandatory dividend.
The Company is obligated to pay this dividend if funds are legally available for
such purpose. State law prohibits the payment of a dividend if, as a result
thereof, the Company would be unable to pay its debts as they become due in the
usual course of its business or the Company's total assets would be less than
its total liabilities. The Company is seeking to raise the additional funds, but
if such funds are not available the Company will be forced to curtail its
marketing campaign. In addition to the funding requirement stated above, should
the Company decide to purchase significant additional media time for the
television informercial, additional funds will be required. No assurance can be
made that the Company will be able to raise any additional funds.
Initially revenues from the web-site will be derived from subscriptions
fees of the independent travel consultants along with commissions received from
bookings shared with the independent travel consultants. As the Company develops
management believes that the majority of the Company's revenue will be derived
from commissions earned from the sale of travel through the independent travel
consultants. The Company's business model is built around the sharing of
commissions with the independent travel consultants generated from travel
industry vendors such as airlines, hotels, car rental companies, resort
properties, tour operators and cruise lines. The Company believes that
commission sharing with the independent travel consultant, which ranges from 50%
to 60% of the commissions received by NetCruise is a key enticement for
individuals to subscribe to become independent travel consultants. The
subscription and annual renewal fee for all independent travel consultants,
including the former Sterling Travel Consultants, is currently $95.00. While the
Company believes it will benefit from its portion of the commission revenues
generated, it also believes that significant revenues will be derived from other
key areas such as annual subscription fees from its independent travel
consultants, advertising through its web-site and incentive arrangements with
travel vendors and
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travel related product vendors (in addition to its share of the standard travel
commissions). However, a significant change in the prevailing commission
structure in the travel industry could have a detrimental effect on the
Company's ability to attract and retain independent travel consultants and to
benefit from the other revenue sources listed above, which are substantially
created through this core distribution system.
As a result of the transaction, the Company acquired the internet
travel web site called "NetCruise" and a perpetual, world-wide technology
license for "Parallel Addressing Video Technology" for all travel related
applications, along with all of the custom software, computer systems and
intellectual properties. No royalty payments are required under the licensing
agreement for the "Parallel Addressing Video Technology" and the license is
exclusive as it relates to the technology as applied to the travel industry. UIT
has retained the right to the technology for all other uses outside of the
travel industry. The intellectual property acquired consists of a license for
the "Parallel Addressing Video Technology" which includes the NetCruise name,
logo, trade-marks and service- marks. The company did not acquire the patent to
the "Parallel Addressing Video Technology." Also included as part of the
intellectual property was an agreement between UIT and Internet Travel Network
of Palo Alto, CA which UIT transferred to the Company. This agreement provides
for a "private label" site on the Internet Travel Network "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 Company has renewed this
agreement under the terms and conditions of the original agreement. There is no
cost associated with renewing the agreement. 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, the Company is able to offer its travel
consultants access to a leading travel system, while not having to expend the
Company's capital resources which would be required to create its own access.
The custom software acquired by the Company consists of a video player program
(called a ULI player) that permits the end user to view video files, a cruise
database, a CD-ROM video disc database containing video images of travel-related
information and miscellaneous commercially purchased software. The technological
feasibility of the custom software was established at the time of the
acquisition, as a working model of the custom software had been completed at
that time. The Company formed NetCruise as a wholly owned subsidiary for the
purpose of operating an internet travel business featuring the technology
obtained through this acquisition.
Although the Company only has a limited number of individuals who have
subscribed to be independent travel consultants, and therefore a limited number
of customers, the Company intends to launch, through television advertising, an
aggressive marketing campaign inviting the general public, along with existing
travel agents, to become NetCruise travel consultants. The goal of the Company's
marketing campaign is to encourage individuals to enroll as independent travel
consultants by paying an annual fee to the Company. The independent travel
consultants will then be able to make reservations either through the password
protected section of the NetCruise web site or via telephone, fax or e-mail
bookings with travel agents who work directly for NetCruise. Non-members who
visit the non-password protected section of the NetCruise web-site (the
"Visitor's Section") shall have access to
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a portion of the site which contains general information about the Company,
describes the independent travel consultant program and allows the public to
request information or enroll as an independent travel consultant. To date, the
Visitor's Section of the web-site is being used for demonstration to potential
travel consultants. The password protected section allows independent travel
consultants to see vacation and cruise destinations in full motion video and
stereo audio and to make hotel, air, car reservations, as well as research
vacation packages and cruise itineraries. The Company's independent travel
consultants are currently unable to book vacation and cruise packages in an
automated fashion through the web-site. In order to make these types of
reservations, the independent travel consultant must contact the Company's
service center, (operated through Sammy's Travel World, a wholly owned
subsidiary of the Company) via toll-free telephone, fax or e-mail, whereby a
live NetCruise travel agent will then make the cruise reservation. The password
protected section is only accessible by company personnel and independent travel
consultants using a password.
The Company believes it 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 the
Company commissions for all sales generated by the Company. Such commissions
will be shared with the independent travel consultants. The Company hopes to
enroll both the general public and existing travel agents. The Company believes
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. The Company believes 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
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
the Company's marketing strategy directed to existing travel agents will be
successful. The Company, through a combination of direct response TV, print,
radio, and web-based advertising, plans to offer individuals an opportunity to
join NetCruise as independent travel consultants. Each new independent travel
consultant will receive a start-up kit consisting of 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 the Company's live travel agents.
"Parallel Addressing Video Technology" allows the independent travel
consultants to see a destination in full motion video and stereo audio never
before available on the internet, without waiting for a lengthy file download.
Utilizing this proprietary technology the NetCruise web site will interact with
the individual's PC, find the requested video clip on its CD ROM, and play it
locally in a clear, full screen mode. Included in the assets acquired by
NetCruise is an extensive library of video clips complete with music and
narratives in stereo, which will bring views of cruise ships, hotels, and
destinations from around the world to the user in seconds. When the travel
consultant is ready, he or she will be able to make airline, hotel and car
rental reservations quickly and easily via NetCruise's reservation web site, as
well as research vacation packages and cruise itineraries. The Company's
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independent travel consultants are currently unable to book vacation and cruise
packages in an automated fashion through the web-site. In order to make these
types of reservations, the independent travel consultant is instructed to
contact the Company's service center, (operated through Sammy's Travel World, a
wholly owned subsidiary of the Company) via toll-free telephone, fax or e-mail,
whereby a live NetCruise travel agent will then make the cruise reservation.
"Parallel Addressing Video Technology" provides zero-wait time, full
motion video and stereo audio to the independent travel consultants interacting
with the Company's internet web-site. Unlike various forms of streaming video,
live media and internet video broadcasts, this technology does not rely on
bandwidth as the medium for delivery of video. UIT and its parent, ULC,
developed this technology and filed for patents in July 1997. 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 February 1, 1999 the Company acquired Sammy's Travel World,
Inc., a full-service travel agency specializing in leisure and corporate travel
and serving the New York City and northern New Jersey area ("Sammy's"), with
annual gross bookings of approximately $1,800,000. "Bookings" consists of the
total dollar amount of airline tickets sold, cruises sold, and hotel and car
reservations made. Sammy's will provide, when necessary, full service support
via telephone to the Company's independent travel consultants. Sammy's is now a
wholly owned subsidiary of the Company and has five (5) employees. 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 acquired the following assets from Sammy's: telephones,
desks, chairs, fax and copy machines, filing cabinets, safe, shelves,
typewriters and computers.
Mr. Brian Shuster has been appointed the President of NetCruise.
Pursuant to the Asset Purchase Agreement, Mr. Brian Shuster will receive $5,000
per month for his services as a consultant to the Company. In addition, Mr.Brian
Shuster has been serving as a director of the Company since the transaction
closed and has been nominated for election as a director of the Company. Mr.
Harry Shuster was also elected as a director of the Company and the Chairman of
NetCruise pursuant to the Asset Purchase Agreement, but has since resigned from
both positions due to personal reasons.
Management of the Company had been exploring a number of ways to more
fully and quickly develop its internet travel business, while still maintaining
an interest in the limousine reservation business, through its ownership
interest in GEN O2, Inc., but with a significant reduction in the resources the
Company had to commit to the reservation operation. Management of the Company
believes that the NetCruise internet travel business, which is not compatible
with the limousine reservation business, provides the Company's shareholders
with a potential for a greater return.
On November 5 , 1998, in order to augment the Company's entry into the
internet travel business, the Company entered into an Asset Purchase Agreement
with Sterling AKG Corp. d/b/a
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Sterling Travel ("Sterling"), in which the Company purchased all the assets
relating to Sterling's network of independent travel consultants ("Sterling
Travel Consultants") for a total purchase price of 25,000 shares of the
Company's 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 ("Escrow
Shares") will be held in escrow by counsel to the Company. If the Company does
not achieve $3,000,000 of gross sales from the sale of travel services,
including renewal fees from the Sterling Travel Consultants, over the initial
twelve month period beginning on November 1, 1998 and ending on October 31,
1999, the Escrow Shares shall immediately be returned to the Company. If the
Company achieves $3,000,000 of gross sales from Sterling Travel Consultants over
the initial twelve month period as described herein, the Escrow Shares will be
released by the Company.
Included in the assets purchased by the Company was a list of Sterling
Travel Consultants (both active and inactive) that had done or were doing
business with Sterling. Also included in the assets purchased were contacts,
files, correspondence, earning records, a data base of former and current
customers of Sterling estimated at approximately 20,000 entries, property and
equipment, including desks, chairs, fax and copy machines, filing cabinets,
computers and miscellaneous office supplies. The data base of former and current
customers also included the Sterling Travel Consultants, as they were considered
customers, not employees of Sterling and the names of travel agents who had done
business with Sterling as Sterling Travel Consultants. In addition, included
were agreements with such Sterling Travel Consultants setting forth the
commissions they could earn and operational matters relating to their position
as an independent travel consultant.
The Company's current independent travel consultants are all former
Sterling Travel Consultants whose contracts were assigned to the Company from
Sterling as part of the acquisition and who paid their subscription fee to
Sterling. In the event the independent travel consultants (formerly the Sterling
Travel Consultants) desire to renew their contracts, a renewal subscription fee
will be paid to the Company.
Since on-line transactions can be faster, less expensive and more
convenient than transactions conducted via traditional means, a growing number
of consumers are transacting business over the World Wide Web. Examples of such
transactions include buying consumer goods, trading securities, purchasing
airline tickets and paying bills. Based upon its research and discussions with
individuals knowledgeable in electronic commerce on the World Wide Web,
management believes that 27% of adult World Wide Web users made on-line
purchases in 1997 and that 50% of adult World Wide Web users will make on-line
purchases in 2000. Management believes that as electronic commerce expands,
advertisers and direct marketers will increasingly seek to use the World Wide
Web to locate customers, advertise their products and services and facilitate
transactions.
The Company also believes that lodging and airline travel will be a
major leader in this market with total on-line travel revenues possibly reaching
over $50 billion by 2001. With travel taking such a large portion of on-line
sales, management of the Company expects that the enhanced travel services
offered by NetCruise will attract a wide range of internet using consumers
enabling NetCruise to become a significant participant in internet travel. In
the event shareholders do not approve this Proposal No. 2 the Company intends to
continue its entry into the internet travel business either by
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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 Proposal No. 2 is not approved by the Shareholders and Proposal No. 3
is approved, the Company will not own the limousine reservation business but
will continue to expand into the internet travel business.
Management of the Company is confident that there were no conflicts of
interest in negotiating the acquisition of the internet travel business and that
all negotiations with UIT were at "arms length".
Based upon the presently outstanding number of shares of Common Stock
of the Company (6,749,068), UIT would hold 3,600,000 shares (9,934,694 shares
outstanding) or approximately 36.2% of the stock of the Company, assuming
issuance of the full 2,000,000 shares of Common Stock (consisting of 900,000
shares of Common Stock currently held by UIT and an additional 1,100,000 shares
of Common Stock to be issued to UIT upon conversion of the Series B Preferred
stock in the event the Shareholders approve Proposal No. 2) and exercise of the
Warrants. One warrant is exercisable for 800,000 shares at $2.50 per share and
may be exercised between April 1, 2002 and June 30, 2002, but only if NetCruise
achieves profits equal to or exceeding $5,000,000 for the years 1999, 2000 and
2001. The other Warrant is exercisable for 800,000 shares at $6.00 per share and
may be exercised between April 1, 2002 and June 30, 2002, but only if NetCruise
achieves profits equal to or exceeding $10,000,000 for the years 1999, 2000 and
2001.
The acquisition of the technology license and certain related assets as
described in this Proposal No. 2 will have no immediate tax effect on the
Company.
Ratification of the acquisition of the technology license and certain
related assets from UIT and the approval of the issuance of 1,100,000 shares of
Common Stock of the Company and two Warrants to UIT requires the affirmative
vote of a majority of the votes cast at the meeting by holders of the Company's
Common and Series A Preferred Stock entitled to vote thereon. Pursuant to an
Amendment Agreement made in connection with the Asset Purchase Agreement,
directors, officers and certain principal shareholders of the Company, who in
the aggregate hold approximately 23.2% of the Company's outstanding Common Stock
and all of the Company's Preferred Stock, have agreed to vote "FOR" Proposal No.
2. UIT will not vote on Proposal No. 2.
The Board of Directors recommends that the stockholders vote "FOR" the
ratification of the acquisition of a technology license and certain related
assets from UIT and for the approval of the issuance of Common Stock and
Warrants to UIT and. (Item No. 2 on the proxy card).
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PROPOSAL NO. 3
RATIFICATION OF THE SALE OF THE LIMOUSINE RESERVATION SYSTEM BUSINESS TO GEN O2,
INC., A NEWLY ORGANIZED CORPORATION FORMED BY MARK A. KENNY, A FORMER DIRECTOR
AND FOUNDER OF THE COMPANY.
On November 6, 1998 the Company sold the limousine reservation system
business by entering into an Acquisition Agreement (the "Sales Agreement") by
and between the Company and Corporate Travel Link, Inc. ("Travel Link"), a
wholly owned subsidiary of the Company (the sellers in the transaction) and
TranspoNet (a non-affiliated company), Mark A. Kenny, Paul Murray and GEN 02,
Inc. (the purchaser in the transaction), a newly organized corporation formed by
Mark A. Kenny, a former director and founder of the Company. This sale will
allow the Company to concentrate its resources and efforts on the continued
build-up of its internet travel business.
Prior to the current sale, the principal business of the Company had
been the development of a computerized reservation and payment system known as
"Genisys Reservation System". This System accepts and processes reservations and
payments for ground transportation services made by its customers through
computerized reservations systems owned and operated by others, using the trade
name "Genisys Reservation System".
Management of the Company set revenue objectives for the limousine
reservation business and made the decision to review the operation at the end of
the third quarter to determine the best approach to maximize utilization of the
Company's resources. The limousine reservation business did not meet its revenue
objectives and in early September 1998, the Company decided to seek a buyer or
joint venture partner for its limousine reservation business.
In addition, although the Company has begun to generate revenues, the
Company found that many limousine providers were resisting the payment of
commissions or fees in connection with bookings on the Company's system until
such time as the potential benefits of the Company's system could be better
qualified. This resulted in a much slower development of revenues for the
Company than was originally anticipated. Management estimated the cost of
operations for a more extended period of time and determined that the Company's
available funds would be better spent in other areas of the travel business. It
therefore determined to expand into the internet travel business. As a result of
the shareholders approval, the acquisition of the technology license and certain
related assets and the sale of the limousine reservation business the effect to
shareholders is a fundamental change in the nature of the business of the
Company from the limousine reservation business to an internet travel business.
The Company does not believe that it will, through GEN O2, Inc., be
exposed to losses from continued resistance of payment of fees or commissions to
GEN O2, Inc. The Company believes that GEN O2, Inc. has a reasonable chance of
success in the future. This is because GEN O2, Inc., in response to market
forces, has recently altered its marketing approach by offering a tiered pricing
model. This pricing strategy provides a lower net cost for high volume limousine
companies. This approach has been met with a favorable response from the market
to date. GEN O2, Inc. has also reduced costs by reducing payroll, lowering
operating and development costs and lowering rent
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expenses. Additionally, GEN O2, Inc.'s partnership with the computer reservation
systems of the major airlines ("CRSs," consisting of SABRE, APOLLO and
WORLDSPAN) made recent price concessions to GEN O2, Inc. in an effort to capture
market share through lowered transaction pricing. This reduction in fees from
the CRSs should support GEN O2 Inc.'s efforts to increase the number of
transactions flowing through the system by reducing limousine transaction costs
to the car and limousine service providers. The Company cannot predict with
certainty however, if the new marketing approach will be effective or if the
CRSs will continue to support the GEN O2, Inc. pricing model.
Disadvantages to ratification of Proposal No. 3 include the fact that
as part of the sale, the Company will be retaining a 32.66% interest in GEN 02,
Inc. and will be loaning to GEN 02, Inc. a $135,000 installment loan and a
$40,000 bridge loan. The TranspoNet Companies, Inc. ("TranspoNet") another
32.66% shareholder of GEN 02, Inc., is providing, commencing December 10, 1998,
$20,000 per month to GEN 02, Inc., for an aggregate of $240,000. TranspoNet is
not affiliated with the Company or any of its shareholders. The primary
capitalization of GEN 02, Inc., is being provided by the loans from the Company
and TranspoNet. In addition, the sole asset of GEN 02, Inc. is the limousine
reservation business. As a result, the Company will absorb all losses to the
extent of the assets transferred ($744,122). Although there are no minimum
contingent payments, the Company has begun to receive minimal contingent
payments from GEN 02, Inc., consisting of two payments totaling $3,656.20.
However, it is possible that the Company will not receive significant contingent
payments from GEN 02, Inc. over the 5 year period. Shareholders should note that
they are being asked to ratify the sale of the limousine business to GEN 02,
Inc., a company organized by Mark A. Kenny, who is a former director of the
Company. The sale of the limousine reservation business was negotiated with GEN
02, Inc. while Mr. Kenny was still a director of the Company, although he did
not participate in the directors analysis and decision to sell the business to
GEN 02, Inc.
In the event that Shareholders do not approve Proposal No. 3, the
Company will be required to raise additional capital to bring the limousine
reservation business to full operation. No assurance can be given that the
Company will be able to raise such funds. In the event shareholders do not
ratify the acquisition of a technology license and certain related assets from
UIT and approve the issuance of 1,100,000 shares of the Company's Common Stock
to UIT, as described in Proposal No. 2, the Company intends to continue to
expand 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 Proposal No.
2 is not approved by the Shareholders and this Proposal No. 3 is approved, the
Company will not own the limousine reservation business or the internet travel
business but will continue to expand into the internet travel business.
Management is of the opinion 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, it is management's opinion that the internet travel
business can be brought to market sooner and will provide, on a long term basis,
a greater return to shareholders.
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Under the terms of the Sale Agreement, the sellers will sell and
transfer certain contractual rights and obligations of the Company, all of the
assets of Travel Link which are utilized in connection with the ownership,
operation and marketing of the Genisys Reservation System and its entire
ownership interest in ProSoft to the purchaser in the transaction, constituting
approximately 20% of the total assets of the Company. ProSoft is an 80% owned
subsidiary of the Company which was acquired by the Company in June, 1997.
ProSoft is a software development company which developed the software for the
Company's computerized limousine reservation and payment system. Paul Murray, a
former employee of the Company and President and Shareholder of ProSoft, is also
a shareholder of GEN O2, Inc.
The Company sold these assets, which had a book value of $744,122 at
November 6, 1998, net of $83,000 of indebtedness assumed by GEN O2, Inc. for (i)
2,450 shares of Series A Convertible Preferred Stock of GEN O2, Inc.,
constituting a 32.66% interest in GEN O2, Inc., which the Company carries on its
balance sheet as of December 31, 1998 at an asset value of $624,204 and (ii)
certain contingent payments over a period of 5 years, totaling $1,080,000 if all
payments to the Company are realized, however, since there are no minimum
contingent payments, it is possible that the Company will receive no significant
contingent payments from GEN 02, Inc. The terms are as follows:
a. For each completed limousine transaction through the current
system from corporate users, a payment of $0.20 per
transaction with a $100,000 maximum payment per year for five
years.
b. For each completed limousine transaction through the Almost
Real Time System which was (the "ART System") under
development by the sellers prior to the execution of the sales
agreement and is to be completed by GEN 02, Inc., that will be
directed toward leisure customers, a payment of $0.20 per
transaction with a $100,000 maximum payment in the first year
and a $0.30 payment per transaction with a $120,000 maximum
payment per year thereafter.
c. If the system and the ART System are merged at any time in the
future, the sellers shall receive a payment of $0.25 per
completed transaction with a $200,000 maximum payment in the
first year and a $220,000 maximum payment per year thereafter.
d. If the payments are not reached in a particular year, the
payments defined in letters a-c above will have a carry-over
to the following year.
e. In no event shall any payments defined in letters a-c above be
due to the sellers for transactions completed after December
10, 2003.
f. For the transfer of the assets by the sellers and the assumption of certain
liabilities of the sellers by the purchaser as described above along with the
agreement by the sellers to provide the purchaser with a series of loans, the
purchaser granted an equity interest to the sellers in GEN O2, Inc. equal to
32.66% of the equity of GEN O2, Inc. The loans provided by the sellers will
include a ninety day secured bridge loan in the amount of $40,000 secured by
22,857 shares of Common Stock of the Company owned by Mr. Kenny, a secured loan
of $135,000 payable commencing in the second year and secured by 77,143 shares
of Common Stock of the Company owned by Mr. Kenny. Mr. Kenny has also pledged
23,428 shares of the Company's Common Stock owned by him to secure the return of
a security deposit to the Company and 68,000 shares of the
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<PAGE>
Company's Common Stock to secure minimum payments which are
required to be made by the Company under certain contracts
which were transferred to the purchaser in connection with the
sale.
g. A second 32.66% shareholder of GEN O2, Inc., TranspoNet, has
committed to provide funding for the purchaser of up to
$240,000 in the form of a series of loans. TranspoNet has a
right to convert the unpaid principal of the loans at any time
into a maximum number of shares of common stock of the
purchaser not to exceed an additional 6% equity interest in
the purchaser.
The Series A Preferred Stock issued to the Company and TranspoNet in
accordance with the transaction are part of a class of preferred stock of GEN
O2, Inc. designated as "Series A Preferred Convertible Stock" and the number of
shares of preferred stock constituting such class is 4,900. The shares of Series
A Preferred Stock issued to the Company together with the shares of Series A
Preferred Stock issued to TranspoNet constitute all of the authorized shares of
the Series A Preferred Stock of GEN O2, Inc. So long as any share of Series A
Preferred Stock remains outstanding, GEN O2, Inc. shall not authorize the
issuance or issue any additional shares of Series A Preferred Stock or any
shares of any series or class of stock ranking senior to, or on a parity with,
the Series A Preferred Stock as to rights upon liquidation, dissolution or
winding up of GEN O2, Inc. without the prior written consent of at least a
majority of the holders of the Series A Preferred Stock.
The par value of the Series A Preferred Stock is $0.0001 per share and
no dividends shall be declared or paid on the Series A Preferred Stock. In the
event of a voluntary or involuntary liquidation, dissolution or winding up of
GEN O2, Inc., the holders of the Series A Preferred Stock shall be entitled to
receive out of the assets of GEN O2, Inc. available for distribution to
stockholders, before any distribution of assets is made to the holders of any
other series or class of stock of GEN O2, Inc., a liquidating preferential
distribution in an amount equal to $400.00 per share of Series A Preferred
Stock. The holders of the Series A Preferred Stock shall be entitled to vote on
all matters submitted to a vote of the shareholders of GEN O2, Inc. and shall be
entitled to one vote for each share of Series A Preferred Stock. The holders of
the Series A Preferred Stock shall not have cumulative voting rights. At any
time and from time to time, upon notice to GEN O2, Inc., the holders of the
Series A Preferred Stock shall be entitled to convert each share of Series A
Preferred Stock into one fully paid and non-assessable share of common stock of
GEN O2, Inc. subject to adjustments for any stock splits, stock dividends,
reverse stock splits or recapitalization.
Upon conversion of the Series A Preferred Stock into common stock of
GEN O2, , Inc. the Company and TranspoNet will each own 2,450 shares or 32.66%,
respectively, of the issued and outstanding common stock of GEN O2, Inc. It is
anticipated that the Purchaser will issue an additional 2,500 shares of common
stock in the near future, thereby diluting the ownership interest of the Company
and TranspoNet in GEN O2, Inc. to 24.5%. The Company's influence in GEN O2, Inc.
is limited to the right to elect one member of a five (5) member Board of
Directors.
In the event shareholders do not approve the sale of the limousine
reservation business as described in this Proposal No. 3 the Company intends to
either find another purchaser of the limousine reservation business or raise
additional capital to bring the limousine reservation business to full
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<PAGE>
operation while continuing its entry into the internet travel business. No
assurance can be given that the Company will be able to raise such funds.
Shareholders are being asked to ratify the sale of the Limousine
Reservation System business since it represented the primary focus of the
Company. Since the Limousine Reservation business did not meet its revenue
objectives and would require additional capital infusion, management decided it
would be in the best interest of the shareholders if the Company were to
concentrate its efforts on the NetCruise internet travel business. Reference
should be made to the Pro Forma Balance Sheet as of September 30, 1998 and notes
thereto contained in the Company's Form 10-QSB, as amended, (which gives effect
to this transaction as of this date) and to the last paragraph of Note 6
thereto.
Management of the Company believes that the sale of the limousine reservation
business to GEN O2, Inc. as described in this Proposal No. 3 will have no
material tax effect on the Company.
Ratification of the sale of the Limousine Reservation System business
requires the affirmative vote of a majority of the votes cast at the meeting by
the holders of the Company's Common and Series A Preferred Stock entitled to
vote thereon.
The Board of Directors recommends that the Shareholders vote "FOR" the
ratification of the sale of the Limousine Reservation System business. (Item no.
3 on the Proxy Card).
PROPOSAL NO. 4
TO AMEND ARTICLE FIRST OF THE COMPANY'S CERTIFICATE OF INCORPORATION
The Board of Directors of the Company has unanimously adopted, subject
to stockholder approval, a resolution to amend Article FIRST of the Company's
Certificate of Incorporation to change the name of the Company from Genisys
Reservation Systems, Inc. to netcruise.com, inc.
Reasons for the Proposal
With the acquisition of certain assets and the technology license from
UIT, the Company expanded its travel business such that the current name is no
longer descriptive of the Company's business. Management is of the opinion that
the proposed new name is more descriptive. Through NetCruise the Company plans
to become a provider of Internet travel services and the Board of Directors has
determined that it is in the Company's best interest to change its name to be
more identified with that of the Company's business, and has adopted a
resolution amending Article FIRST of the Certificate of Incorporation to reflect
this change. Management does not believe that there are any significant
disadvantages to changing the name to netcruise.com, inc.
The resolution approved by the Board of Directors amending Article
FIRST is as follows:
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<PAGE>
"FIRST: The name of the Corporation is netcruise.com, inc."
Approval of the amendment to Article FIRST of the Company's Certificate
of Incorporation requires the affirmative vote of a majority of the votes cast
at the meeting by holders of the Company's Common and Series A Preferred Stock
entitled to vote thereon.
The Board of Directors recommends that the stockholders vote "FOR" approval of
this Proposal No. 4.
PROPOSAL NO. 5
TO AMEND ARTICLE FOURTH OF THE COMPANY'S CERTIFICATE OF INCORPORATION
The Board of Directors of the Company has unanimously adopted, subject
to stockholder approval, a resolution to amend Article FOURTH of the Company's
Certificate of Incorporation to amend and restate the provisions of the
Company's authorized Common and Preferred Stock to correct certain
inconsistencies.
Reasons for the Proposal
The Board of Directors of the Company has unanimously adopted, subject
to stockholder approval, a resolution amending and restating the first paragraph
and paragraphs (a) and (b) of Article FOURTH of the Company's Certificate of
Incorporation to amend and restate the provisions of the Company's authorized
Preferred Stock to correct certain inconsistencies in such provisions as they
now exist. The prior version of the Certificate of Incorporation does not
describe the rights of the holders of Common Stock. The restated version sets
forth clearly the voting, dividend, dissolution and liquidation of the Common
Stock consistent with the laws of the State of New Jersey. The description of
the Preferred Stock has also been amended to correct certain inconsistencies
found in the current version. These included conflicting descriptions of the
dividends. Currently 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 to determine the liquidation preference. These corrections are
needed for the Series B Preferred Stock to be issued to UIT as described in
Proposal No. 2. The amended version also differs from the current Article of
Incorporation in that it gives the Board of Directors the power to determine and
fix voting power, declare dividend rights without limitation and to determine
the rank of any series of Preferred Stock issued. A disadvantage to amending the
Certificate of Incorporation to restate the provisions of the Preferred and
Common Stock of the Company is that it may be difficult for the
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<PAGE>
Company to utilize the authorized preferred shares for acquisitions, financing
and other proper corporate purposes.
The resolution approved by the Board of Directors amending and
restating Article FOURTH is as follows:
"FOURTH: The total number of shares of stock which the Corporation
shall be authorized to issue shall be 100,000,000 shares consisting of
75,000,000 shares of Common Stock with a par value per share of $.000l
("Common Stock"), and 25,000,000 shares of Preferred Stock with a par
value per share of $.0001 ("Preferred Stock"). The following is a
statement of the designations and the powers, privileges, rights,
qualifications, limitations or restrictions in respect of each class of
capital stock of the Corporation:
(a) The voting, dividend, liquidation and other rights and privileges
of the holders of the Common Stock are subject to and qualified by any and all
rights and privileges of the holders of Preferred Stock of any series as may be
designated by the Board of Directors upon any issuance of the Preferred Stock of
any series. The holders of Common Stock are entitled to one vote for each share
of Common Stock held at all meetings of stockholders (and written actions in
lieu of meetings). There shall be no cumulative voting of shares of the Common
Stock. Dividends shall be declared and paid on the Common Stock from funds
legally available therefor when, as and if declared by the Board of Directors of
the Corporation. Upon the dissolution or liquidation of the Corporation, all
assets of the Company available for distribution to the holders of Common Stock
shall be distributed ratably among the holders of the Preferred Stock, if any,
and the holders of the Common Stock, subject to any preferential rights of any
then outstanding Preferred Stock.
(b) Preferred Stock may be issued at any time from time to time in one
or more series, each of such series to have such powers, designations,
preferences, rights, qualifications, limitations or restrictions as provided in
this Certificate of Incorporation or by law or in the resolution or resolutions
providing for the issuance of such series adopted by the Board of Directors of
the Corporation as hereinafter provided. Authority is hereby granted to the
Board of Directors from time to time to issue the Preferred Stock in one or more
series, and in connection with the creation of any such series, by resolution or
resolutions providing for the issuance of' the shares thereof, to determine and
fix such voting powers, full or limited, or no voting powers, and such
designations, preferences, powers and relative participating, optional or other
special rights and qualifications, limitations or restrictions thereof,
including, without limitation, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be stated and expressed in such
resolution or resolutions, all to the full extent now or hereafter permitted by
law. Without limiting the generality of the foregoing, the resolutions providing
for issuance of any series of Preferred Stock may provide that such series shall
be superior or rank equally or be junior to the Preferred Stock of any other
series to the extent permitted by law. The resolutions providing for issuance of
any series of Preferred Stock may provide that such resolutions may be amended
by subsequent resolutions adopted in the same manner as the preceding
resolutions. All shares of Preferred Stock of the same series shall be identical
with each other in all respects."
33
<PAGE>
The Company is currently authorized to issue 75,000,000 shares of
Common Stock, having a par value of $.0001 per share of which 6,749,068 are
outstanding. Each share of Common Stock entitles the holder thereof to one vote
on each matter submitted to the stockholders of the Company for a vote thereon.
The holders of Common Stock: (i) have equal ratable rights to dividends from
funds legally available therefor when, as and if declared by the Board of
Directors; (ii) are entitled to share ratably in all of the assets of the
Company available for distribution to holders of Common Stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not have
preemptive, subscription or conversion rights, or redemption or sinking fund
provisions applicable thereto; and (iv) as noted above, are entitled to one
non-cumulative vote per share on all matters submitted to stockholders for a
vote at any meeting of stockholders. The Company has not paid any dividends on
its Common Stock to date. The Company anticipates that, for the foreseeable
future, it will retain earnings, if any, to finance the continuing operations of
its business. The payment of dividends will depend upon, among other things,
capital requirements and operating and financial conditions of the Company.
Approval of the amendment to Article FOURTH of the Company's
Certificate of Incorporation requires the affirmative vote of a majority of the
votes cast at the meeting by holders of the Company's Common and Series A
Preferred Stock entitled to vote thereon.
The Board of Directors recommends that the stockholders vote "FOR" approval of
this Proposal No. 5.
PROPOSAL NO. 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Wiss & Company, LLP as independent
auditors to examine and report on the consolidated financial statements of the
Company for the year ending December 31, 1998 and 1999, subject to stockholder
ratification.
During the year ending December 31, 1997 and 1998, Wiss & Company, LLP
provided the Company with audit services, including examinations of and
reporting on the Company's consolidated financial statements, as well as those
of its subsidiaries. Audit services also included a review of filings with the
Securities and Exchange Commission and the Company's annual report on Form
10-KSB.
Ratification of the appointment of Wiss & Company, LLP as independent
auditors requires the affirmative vote of a majority of the votes cast at the
meeting by holders of the Company's Common and Series A Preferred Stock entitled
to vote thereon.
A representative of Wiss & Company, LLP will be present at the Annual
Meeting, will have an opportunity to make a statement if he or she so desires
and is expected to be available to respond to appropriate questions.
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<PAGE>
The Board of Directors recommends that the stockholders vote "FOR"
ratification of this appointment (Item No. 6 on the proxy card).
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following tabulation shows the security ownership as of April 26,
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF PERCENT
NAME & ADDRESS SHARES OWNED OF CLASS
Loeb Holding Corporation
As Escrow Agent (1)
61 Broadway 1,088,973
New York, NY 10006 16.1%
Loeb Holding Corporation (2)
61 Broadway 98,824
New York, NY 10006 1.46%
United Internet Technologies, Inc.(3)(4)(8)
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 1,187,797
17.5%
Mark A. Kenny
GEN O2, Inc.
15 Clyde Road, Suite 201
Somerset, NJ 08873 324,175
4.8%
John H. Wasko (5)
Genisys Reservation Systems
2401 Morris Avenue 137,046 2.0%
Union, NJ 07083
Lawrence E. Burk (6)
Genisys Reservation Systems 205,000 3.03%
2401 Morris Avenue
Union, NJ 07083
S. Charles Tabak (7)
ARC Medical Professional Personnel
36 Route 10W, Suite D 22,000 *
East Hanover, NJ 07936
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<PAGE>
David W. Sass (7)
McLaughlin & Stern, LLP
260 Madison Ave. 18th Fl.
New York, NY 10016 20,000 *
Brian Shuster (4)(8)
United Internet Technologies, Inc.
18081 Magnolia Avenue
Fountain Valley, CA 92708 0 *
All Officers and Directors
as a group (6 persons) 2,471,843(8) 36.5%
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* less than 1%
</TABLE>
(1) Includes 753,679 shares of Common Stock purchased by Loeb Holding
Corporation, as escrow agent for Warren D. Bagatelle, Managing Director of Loeb
Partners Corp., HSB Capital (of which Mr. Bagatelle is a partner), trusts for
the benefit of families of two principals of Loeb Holding Corporation and three
unaffiliated persons, 282,353 shares of Common Stock issuable upon conversion of
282,353 shares of Series A Preferred Stock of the Company and 52,941 shares of
Common Stock issuable upon conversion of two Convertible Notes aggregating
$112,500. Loeb Holding Corporation disclaims any beneficial interest in these
shares.
(2) Includes 98,824 shares of Common Stock issuable upon conversion of
98,824 shares of Series A Preferred Stock of the Company.
(3) UIT is a wholly owned subsidiary of United Leisure Corporation,
Inc. Mr. Harry Shuster is a former director of the Company and is a significant
shareholder of United Leisure Corporation, Inc. and may therefore be deemed a
beneficial owner of these shares.
(4) UIT will also receive 1,100,000 shares of Series B Preferred Stock,
convertible into 1,100,000 shares of Common Stock if Shareholders approve the
issuance of 1,100,000 shares of Common Stock and two Warrants, each entitling
the holder to purchase 800,000 shares of Common Stock. One warrant is
exercisable for 800,000 shares at $2.50 per share and may be exercised between
April 1, 2002 and June 30, 2002, but only if NetCruise achieves profits equal to
or exceeding $5,000,000 for the years 1999, 2000 and 2001. The other Warrant is
exercisable for 800,000 shares at $6.00 per share and may be exercised between
April 1, 2002 and June 30, 2002, but only if NetCruise achieves profits equal to
or exceeding $10,000,000 for the years 1999, 2000 and 2001.
(5) Includes 14,362 shares of Common Stock owned of record by Joan E.
Wasko, John Wasko's wife, of which Mr. Wasko disclaims beneficial ownership, but
of which he may be deemed beneficial owner, a five (5) year option to purchase
35,000 shares of the Company's Common Stock at a price of $2.00 per share
granted to Mr. Wasko by the Company on November 1, 1996, a five (5) year option
to purchase an aggregate of 25,000 shares of Common Stock at a price of $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.
(6) Includes a five (5) 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.
(7) 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.
(8) Does not include two warrants issued in connection with the
acquisition of assets from UIT, each entitling Mr. Brian 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) through (7) above.
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<PAGE>
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of
no other business to be presented for action at the Annual Meeting of
Stockholders. As for any business that may properly come before the Annual
Meeting or any continuation or adjournment thereof, the Proxies confer
discretionary authority to the person named therein. These persons will vote or
act in accordance with their best judgment with respect thereto.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report on Form 10-KSB as amended for the year ended December
31, 1998 is being mailed to Stockholders with this Proxy Statement and are
incorporated herein by reference.
STOCKHOLDER PROPOSAL - 1999 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion
in the proxy material for the 1999 Annual Meeting of Stockholders must be
received by the Company at its principal executive offices by March 31, 2000.
The prompt return of your proxy is appreciated and will be helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
meeting, please sign the proxy and return it in the enclosed envelope.
BY ORDER OF
THE BOARD OF DIRECTORS
New York, New York JOHN H. WASKO, Secretary
August 25, 1999
<PAGE>
GENISYS RESERVATION SYSTEMS, INC.
P R O X Y
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Lawrence E. Burk and Warren D.
Bagatelle as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
the common and preferred stock of Genisys Reservations Systems, Inc. held of
record by the undersigned on August 25, 1999, at the Annual Meeting of
Stockholders to be held on September 29, 1999, or any adjournment thereof.
1. ELECTION OF DIRECTORS
Lawrence E. Burk, John H. Wasko, David W. Sass, S. Charles Tabak, Warren D.
Bagatelle and Brian Shuster.
To withhold authority to vote for any nominee, a line must be drawn
through the nominee's name.
2. RATIFICATION OF THE ACQUISITION OF A TECHNOLOGY LICENSE AND CERTAIN
RELATED ASSETS FROM UNITED INTERNET TECHNOLOGIES, INC. ANDAPPROVAL OF
THE ISSUANCE OF 1,100,00 SHARES OF COMMON STOCK AND TWO WARRANTS EACH
IN THE AMOUNT OF 800,000 SHARES TO UNITED INTERNET TECHNOLOGIES, INC.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF THE SALE OF THE LIMOUSINE RESERVATION BUSINESS SYSTEM
TO GEN O2, INC., A NEWLY ORGANIZED COMPANY FOUNDED BY MARK A. KENNY, A
FORMER DIRECTOR AND FOUNDER OF THE COMPANY.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE CORPORATION TO NETCRUSETRAVEL.COM, INC.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO RESTATE THE PROVISIONS RELATING TO THE CORPORATION'S AUTHORIZED
PREFERRED STOCK AS THEY RELATE TO DIVIDENDS AND LIQUIDATION
PREFERENCES.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE>
6. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3, 4, 5 AND 6.
Please sign name exactly as appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 1999
Signature
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY USING THE ENCLOSED
ENVELOPE
If you have had a change of address, please print or type your new address(s) on
the line below.
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