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
Tuesday, May 25, 1999, at 11:00 a.m. local time, at the offices of the
Corporation at 2401 Morris Avenue, 3rd Floor, Union, New Jersey, 07083, to
consider and act upon the following matters. A proxy card for your use in voting
on these matters is also enclosed.
1. Electing seven (7) directors as recommended by the Board of
Directors.
2. Ratification of the acquisition of a technology license and
certain related assets from United Internet Technologies,
Inc.(formerly known as United Leisure Interactive, Inc.,) and
the approval of the issuance of 1,100,000 shares of Common
Stock and two Warrants, each in the amount of 800,000 shares,
to United Internet Technologies, Inc., as recommended by the
Board of Directors.
3. Ratification of the sale of the Limousine Reservation System
business to Gen O2, Inc., a newly organized corporation formed
by Mark A. Kenny, a former Director and founder of the
Company, as recommended by the Board of Directors.
4. Approval of an amendment to the Corporation's Certificate of
Incorporation to change the name of the Corporation to
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.
<PAGE>
All stockholders of record at the close of business on April 26, 1999,
are entitled to notice of and to vote at the meeting.
Dated: April 26, 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>
PRELIMINARY COPY
ANNUAL MEETING OF STOCKHOLDERS
OF
GENISYS RESERVATION SYSTEMS, INC.
MAY 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 May 25, 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 April 26, 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 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 April
26, 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 April 26, 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 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.
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
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. The internet web-site is
still being developed and is currently not fully operational, although
management expects the web-site to be fully operational by mid 1999. In
addition, the Company only has a limited number of individuals (280) who have
subscribed to be independent travel consultants and does not yet have any
internet travel customers. All of the 280 independent travel consultants who
subscribed to be independent travel consultants have not paid a subscription fee
to the Company, as they subscribed with Sterling Travel prior to the date the
assets of Sterling Travel were acquired by the Company. The budgeted cost of the
internet travel business becoming operational is expected to be approximately
$1,342,000. Of such amount, approximately $198,000 is needed to complete the
development of the web site. The remainder will be used to produce a television
video infomercial and purchase media time. The Company believes it will be able
to finance such development substantially from proceeds of a recent private
placement, but there can be no assurance that such funds will be sufficient. In
the event the Company decides to purchase significant amounts of media time for
the television infomercial, it will need to raise additional funds. No assurance
can be made that the Company will be able to raise such funds.
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 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
Management of the Company set revenue objectives for the limousine
reservation business and made the decision to review the operation at the end of
the third quarter to determine the best approach to maximize utilization of the
Company's resources. The limousine reservation business did not meet its revenue
objectives and in early September 1998, the Company decided to seek a buyer or
joint venture partner for its limousine reservation business.
In addition, although the Company had begun to generate revenues, the
Company found that many limousine providers were resisting the payment of
commissions or fees in connection with bookings on the Company's system until
such time as the potential benefits of the Company's system could be better
quantified. This resulted in a much slower development of revenues for the
Company than was originally anticipated. Management estimated the cost of
operations for a more extended period of time and determined that the Company's
available funds would be better spent in other areas of the travel business.
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. 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.
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
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
The advantages of amending the Company's Certificate of Incorporation
to restate the provisions of the Company's authorized Common and Preferred Stock
as described in Proposal No. 5 is that the Certificate of Incorporation will
become clearer because certain inconsistencies existing in the previous revision
will be corrected.
If shareholders do not approve the change in the amended Certificate of
Incorporation, it may be difficult for the Company to utilize the authorized
preferred shares for acquisitions, financing, and other proper corporate
purposes.
If shareholders do not approve the name change or the amendment to the
Company's Certificate of Incorporations restating the provisions of the common
and preferred stock, managements present intention is to leave the name of the
Company and the Certificate of Incorporation as they now are.
1
<PAGE>
GENISYS RESERVATION SYSTEMS, INC. AND SUBSIDIARIES
(Development Stage Companies)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998
(Unaudited)
The following statements are based upon the historical balance sheet of the
Company appearing in Form 10- KSB for the year ended December 31, 1998 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 Form 10-KSB for the year ended December 31, 1998 for additional
information.
These
statements should be read in conjunction with these financial statements and
notes thereto .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Assuming
Assuming Shareholders
Shareholders Approve Assuming
Approve UIT Shareholders
Assuming Transaction Transaction Do Not
Shareholders But Not the But Not the Approve
Approve Both Gen 02 UIT Either
ASSETS Transactions Transaction Transaction Transaction
(Note A) (Note B) (Note C) (Note D)
Current assets $ 78,930 $ 248,159 $ 78,930 $ 248,159
Investment in, and advances to, Gen 02, Inc. 799,204 - 799,204 -
Property and equipment 91,400 289,498 91,400 289,498
Computer software 2,376,2652,897,251 and 101,265622,251related assets
Other 94,638 102,058 94,638 102,058
----- ------- ------ ------
$3,440,437 $3,536,966 $1,165,437 $1,261,966
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 410,142 $ 484,671 $ 460,142 $ 534,671
===== ======= ===== =======
Long-term debt 90,625 112,625 90,625 112,625
Stockholders' equity 2,939,670 2,939,670 614,670 614,670
--------- --------- ------- ------
$3,440,437 $3,536,966 $1,165,437 $1,261,966
========== ========== ========== ==========
</TABLE>
Note A - Represents the historical balance sheet at December 31, 1998, as both
transactions were recorded as completed transactions, adjusted to reflect the
remaining loan commitment to GEN02, Inc. Of $135,000 as if it were advanced as
of December 31, 1998.
Note B - Reflects the consolidation of Gen 02, Inc.'s balance sheet (as reported
in Note 3 to the Company's financial statements appearing elsewhere herein) and
the elimination of intercompany balances.
Note C - Reflects the elimination of the $2,275,000 book value of the
assets acquired from UIT at December 31, 1998, the related $2,500,000
value ascribed to the common stock issued and accumulated depreciation
and amortization of $225,000. In addition, the estimated costs of
$50,000 to unwind the UIT transaction have been accrued and the
statement has been adjusted to reflect the remaining loan commitment
to GEN02, Inc. of $135,000 as if it were advanced as of December 31,
1998.
Note D - Reflects both the consolidation and elimination entries
described in Notes B and C.
2
<PAGE>
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 in Form 10-KSB for the year ended December
31, 1998 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 Form 10-KSB for the year ended
December 31, 1998 for additional information. These statements should be read in
conjunction with these financial statements and notes thereto .
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Assuming Shareholders
Shareholders Approve Assuming
Approve UIT Gen 02 Shareholders
Assuming Transaction Transaction Do Not
Shareholders But Not the But Not the Approve
Approve Both Gen 02 UIT Either
Transactions Transaction Transaction Transaction
(Note A) (Note B) (Note C) (Note D)
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 $(2,344,489) $(2,344,489) $ (2,119,489) $(2,119,489)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
5,561,000 5,561,000 4,561,000 4,561,000
BASIC AND DILUTED LOSS PER
COMMON SHARE $ (.42) $ (.42) $ (.46) $ (.46)
</TABLE>
Note A - Represents the historical statement of operations for the year ended at
December 31, 1998, as both transactions were recorded as completed transactions.
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 elsewhere
herein). 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.
Interested Parties
As more fully described in Proposal No. 2, the Company recently
acquired a technology license and certain related assets from
UIT. In connection with this acquisition the Company is seeking
Shareholder approval for ratification of that acquisition and
payment therefor, in the form of the issuance of 1,100,000 shares
of Common Stock and two Warrants, each to purchase 800,000 shares
of the Company's Common Stock, to UIT. Messrs. Brian Shuster and
Harry Shuster are currently directors of UIT and were also
elected as Directors of the Company pursuant to an Asset Purchase
Agreement, dated as of June 30, 1998, between the Company and UIT
(the "Asset Purchase Agreement"). In connection with this
transaction, Mr. Brian Shuster received two warrants, each
entitling him to purchase 200,000 shares of Common Stock of the
Company if certain performance goals are met. UIT will not vote
the 900,000 shares of Common Stock of the Company currently held
by UIT, nor will these votes be counted for the purpose of
obtaining a quorum for Proposal No. 2. The 900,000 shares of
Common Stock of the Company currently held by UIT will be counted
for quorum purposes and will be eligible to vote on all other
matters at the 1999 Annual Meeting.
Mr. Mark A. Kenny, a former director and officer of the Company,
and currently a shareholder, is a principal of Gen O2, Inc., the
purchaser of the assets sold by the Company, as more fully
described in Proposal No. 3. Mr. Kenny will not vote the shares
of Common Stock held by him in connection with Proposal No. 3.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide for a Board of
Directors of not less than three (3) members. The Board of Directors
currently consists of seven (7) members. The Board of Directors has
fixed the number of directors at seven (7) in accordance with the
provisions of the Company's By-laws. At the 1998 Annual Meeting, seven
(7) directors will be elected to serve until the next Annual Meeting of
Stockholders and until their successors have been elected and
qualified. Any vacancy or vacancies which occur during the year may be
filled by the Board of Directors, and any directors so appointed must
stand for election at the next annual meeting of stockholders.
All nominees have consented to be named and have indicated
their intent to serve if elected. The Company has no reason to believe
that any of these nominees are unavailable for election. However, if
any of the nominees become unavailable for any reason, the persons
named as proxies may vote for the election of such person or persons
for such office as the Board of Directors of the Company may recommend
in the place of such nominee or nominees. It is intended that proxies,
unless marked to the contrary, will be voted in favor of the election
of the nominees.
Election of the directors requires the affirmative vote of a
majority of the votes cast at the meeting by holders of the
Company's Common and Series A Preferred Stock. The Board of
Directors recommends that the stockholders vote "FOR" the
election of the following seven nominees (Item No. 1 on the proxy
card).
NOMINEES FOR ELECTION
Name Age Position
Lawrence E.Burk 57 President, Chief Executive Officer
and Director
John H. Wasko 60 Chief Financial Officer, Secretary,
Treasurer and Director
David W. Sass 63 Director
S. Charles Tabak 66 Director
Warren D. Bagatelle 40 Chairman
Harry Shuster 63 Director
Brian Shuster 40 Director
The Company's Audit and Compensation Committees consist of Messrs. Warren D.
Bagatelle, S. Charles Tabak and David W. Sass. All officers of the Company
devote their full time to the Company's business.
Lawrence E. Burk joined the Company on June 23, 1997, as President, Chief
Executive Officer, and Director following a 27 year career with Alexander &
Alexander Services. From 1993 to early 1996, Mr. Burk served as Chairman and CEO
of Alexander & Alexander, Inc., the U.S. Retail Subsidiary of A & A Services,
and from early 1996 until the company's acquisition by AON Corporation in late
1996, Mr. Burk served as President and Chief Operating Officer of A & A
International, the company's global retail operation. Mr. Burk served on the
company's Global Retail Board from 1985; on A & A Services Operations Board from
1989; and on A & A Inc.s' Executive Committee and Operations Board from 1989. A
& A was a NYSE listed Financial Services firm with revenues of over $1.3
billion. Mr. Burk has a B.A. degree in Economics from Southern Illinois
University and is a member of the schools' Advisory Board.
John H. Wasko has served the Company as a Director since April, 1986, as
Secretary since September 1995, and as Treasurer and Chief Financial Officer
since April 1996. Mr. Wasko has also served the Company as President and
Chairman of the Board since its inception to August 1995, and as Treasurer from
April 1986 to September 1987 and from May 1988 to August 1995. Mr. Wasko has
also served as Chairman of the Board, President and Director of JEC Lasers,
Inc., presently an inactive company, since it was organized in September 1977.
He was awarded a bachelor of science degree in physics in 1963 and a master of
science degree in physics (summa cum laude) in 1965 from Fairleigh Dickinson
University.
David W. Sass has been a Director since April, 1997 and has been a practicing
attorney in New York City for the past 38 years and is currently a senior
partner in the law firm of McLaughlin & Stern, LLP, securities counsel to the
Company. Mr. Sass is also a director of Pallet Management Systems, Inc., a
company engaged in the manufacture and repair of wooden pallets and other
packaging services and a director of The Harmat Organization, Inc., a New York
based construction company and a member and Vice Chairman of the Board of
Trustees of Ithaca College. Mr. Sass earned a B.A. from Ithaca College, a J.D.
from Temple University School of Law and an L.L.M. (in taxation) from New York
University School of Law.
S. Charles Tabak has been a Director since April, 1997. Since 1991 he has been
the Chief Executive Officer of Arc Medical & Professional, Inc., an employment
agency specializing in placement of scientific, medical and office personnel.
From 1969 to 1990, he was the Executive Vice President and General Counsel for
Channel Home Centers Inc. From 1967 to 1969, he was the Director of Finance of
J.J. Newbury Co. Mr. Tabak is a past member of the Board of Directors of Channel
Home Centers, Inc. and Charge A Plate Group of Greater New York. He is a
graduate of both NYU School of Business and School of Law, and is admitted to
practice law in New York state and before the U.S. Supreme Court.
Warren D. Bagatelle has been a Director and Chairman of the Board of the Company
since August, 1995. He served as Chief Executive Officer of the Company from
December 1996 through June, 1997. Since 1988, he has been a Managing Director at
Loeb Partners Corporation, a New York City investment banking firm. Mr.
Bagatelle is also a director of Energy Research Corporation, a company engaged
in the development and commercialization of electrical storage and power
generation equipment, principally fuel cells and rechargeable storage batteries
and a director of Evercell, Inc., a company engaged in the development and
commercialization of batteries. Mr. Bagatelle has a B.A. in economics from Union
College and an M.B.A. from Rutgers University.
Harry Shuster has been Chairman of the Board of NetCruise Interactive, Inc., a
wholly owned subsidiary of the Company and a Director of the Company since July,
1998. Mr. Shuster has served as Chairman of the Board, President and Chief
Executive Officer of United Leisure Corporation ("ULC"), a public company
engaged in children's recreational activities and interactive technology
development, since April, 1975. Mr. Shuster is also the Chairman of the Board,
President and Chief Executive Officer of Grand Havana Enterprises, Inc., a
public company primarily engaged in the business of ownership and operation of
private membership restaurants and cigar clubs. Mr. Shuster is also the Chairman
of the Board of United Film Distributors, Inc., a privately held independent
motion picture production corporation and the General Partner of HEP II, Inc., a
limited partnership engaged in the motion picture production business. Mr.
Shuster is the father of Mr. Brian Shuster.
Brian Shuster has been President of NetCruise Interactive, Inc. and a Director
of the Company since July, 1998. He has served as Chief Executive Officer,
President and a director of United Film Distributors, Inc. since its inception
in May, 1995. Since he has been with United Film Distributors, Inc. he has
served as the producer of seven films. Prior to joining United Film
Distributors, Inc., he served as President of Beverly Hills Producers Group, a
private production company, where he produced one motion picture, served as
executive producer of another motion picture, and oversaw production of three
other films. From 1990 until 1993 Mr. Shuster served as Vice President of
Worldwide Entertainment Group, where he also produced three motion pictures. He
is also currently a director of ULC and President of UIT. Mr. Shuster is the son
of Mr. Harry Shuster.
Messrs. Harry Shuster and Brian Shuster are currently directors of UIT. The
Company recently acquired a technology license and certain related assets from
UIT, which is a wholly owned subsidiary of ULC, as more fully described in
Proposal No. 2. Messrs. Harry Shuster and Brian Shuster were elected as
directors of the Company following this transaction pursuant to the acquisition
agreement and will so serve for three (3) years, if so elected. In connection
with this transaction, Mr. Brian Shuster received two warrants, each entitling
him to purchase 200,000 shares of the Common Stock of the Company. One warrant
is exercisable for 200,000 shares at $2.50 per share and may be exercised
between April 1, 2002 and June 30, 2002, but only if NetCruise Interactive, Inc.
("NetCruise") achieves profits equal to or exceeding $5,000,000 for the years
1999, 2000 and 2001. The other Warrant is exercisable for 200,000 shares at
$6.00 per share and may be exercised between April 1, 2002 and June 30, 2002,
but only if NetCruise achieves profits equal to or exceeding $10,000,000 for the
years 1999, 2000 and 2001.
3
<PAGE>
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 1997 $75,000 (1) $0 $0
Officer 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, 1997 $81,247 $0 $20,000
Secretary & Treasurer 1996 $10,000 $0 $49,500
</TABLE>
(1) Salary paid to Mr. Burk for the period June 23, 1997 thru December 31, 1997.
Mr. Burk's Annual salary is $150,000.
(2) As of May 12, 1997, Mr. Cutrona was no longer an employee, Officer or
Director of the Company.
(3) Mr. Kenny formerly was the Company's Executive Vice President. He resigned
as an employee and a Director of the Company as of November 6 , 1998.
The Company and Mr. Lawrence E. Burk entered into an Employment Agreement on
June 23, 1997 whereby the Company agreed to pay Mr. Burk a salary of $150,000
per year. The Employment Agreement is of continuous duration and may be
terminated by either party. Mr. Burk is also entitled to an incentive bonus to
be determined in the sole discretion by the Board of Directors of the Company.
The Company and Mr. John H. Wasko entered into an Employment Agreement on
October 16, 1996 whereby the Company agreed to pay Mr. Wasko a salary of $80,000
per year. The Employment Agreement is of continuous duration and may be
terminated by either party. Mr. Wasko is also entitled to an incentive bonus to
be determined in the sole discretion by the Board of Directors of the Company.
The Company and Loeb Partners Corporation entered into a three year consulting
and investment banking agreement dated September 5, 1995 whereby the Company
agreed to pay Loeb Partners Corporation a consulting fee of $3,000 per month,
which contract has been extended for an additional three (3) years. Loeb
Partners Corporation also receives a fee for arranging private financing and
acquisitions. Mr. Warren D. Bagatelle, a Director and Chairman of the Company,
is a Managing Director of Loeb Partners Corporation. The Company and Mr. Mark A.
Kenny entered into an Employment Agreement on May 1, 1997 whereby the Company
agreed to pay Mr. Kenny a salary of $100,000 per year. This contract was
terminated in November, 1998 by the resignation of Mr. Kenny. See Proposal No.
3.
Pursuant to the Asset Purchase Agreement the Company agreed that Messrs. Harry
Shuster and Brian Shuster would serve as directors of the Company for three
years and that Mr. Harry Shuster would serve as Chairman and Mr. Brian Shuster
would serve as President of NetCruise Interactive, Inc. In addition, the Company
agreed to pay Mr. Brian Shuster $5,000 per month for his services as 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
Interactive, Inc. achieves profits equal to or exceeding $5,000,000 for the
years 1999, 2000 and 2001. The other Warrant is exercisable for 200,000 shares
at $6.00 per share and may be exercised between April 1, 2002 and June 30, 2002,
but only if NetCruise achieves profits equal to or exceeding $10,000,000 for the
years 1999, 2000 and 2001.
On May 12, 1997 the Company adopted the Genisys Reservation Systems, Inc. 1997
Omnibus Stock Incentive Plan (the "Plan"). The Plan provides for the granting of
stock options to directors, officers and employees of the Company or any
subsidiary of the Company to purchase, or to exercise certain rights with
respect to shares of Common Stock of the Company. The following table sets forth
the options granted by the Company to the officers and directors of the Company:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name No. of Securities Percent of Exercise or Expiration Date
Underlying Options total options base price
granted to per share
employees in
the fiscal
year
John H. Wasko 35,000 $2.00 November 2001
25,000 $4.75 March 2004
Lawrence E. Burk 200,000 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.
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 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.
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 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
July 31, 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. No
dividend will be payable if the Shareholders approve the issuance of
the 1,100,000 shares Common Stock and Warrants prior to the time that
the dividend is payable. Therefore, the total purchase price in the UIT
Transaction is 900,000 shares of the Company's Common Stock and
1,100,000 shares of the Company's Series B Convertible Preferred Stock.
If shareholders ratify the acquisition, the Series B Preferred Stock
will automatically be converted into 1,100,000 shares of the Company's
Common Stock and the Company will issue two warrants, each to purchase
800,000 shares of Common Stock, as outlined above.
In the event shareholders do not ratify the acquisition of the assets and
approve the issuance
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) Messrs.
Brian and Harry Shuster will resign from any officer or director
position held by them. In addition, Mr. Brian Shuster's consulting fee
shall be pro-rated to the date of his resignation and shall cease as of
such date. Reference should be made to Pro Forma Condensed Consolidated
Financial Statements as of December 31, 1998 for the effect of undoing
the UIT Transaction.
The Company determined to expand into the internet travel
business for several reasons. Although the Company had begun to
generate revenues, the Company found that many limousine providers were
resisting the payment of commissions or fees in connection with
bookings on the Company's system resulting in a much slower development
of revenues for the Company than was originally anticipated. Management
evaluated the cost of operations for a more extended period of time and
determined that the Company's available funds would be better spent in
other areas of the travel business. It therefore determined to expand
into the internet travel business. As a result, if the shareholders
approve the acquisition of the technology license and certain related
assets and the sale of the limousine reservation business, the effect
to shareholders is a fundamental change in the nature of the business
of the Company from the limousine reservation business to an internet
travel business.
Disadvantages to Proposal No. 2 include a lack of operating history with respect
to the
software relating to the internet travel business. The internet web-site is
still being developed and is currently not fully operational, although
management expects it to be operational by mid 1999. In addition, the Company
only has a limited number of individuals (280) who have subscribed to be
independent travel consultants and does not yet have any internet travel
customers. All of the 280 independent travel consultants who subscribed to be
independent travel consultants have not paid a subscription fee to the Company,
as they subscribed with Sterling Travel prior to the date the assets of Sterling
Travel were acquired by the Company. The Company has budgeted approximately
$198,000 to complete the web-site. Additional costs of bringing the internet
travel business operational are expected to be approximately $1,144,000, which
includes producing a television video infomercial and purchasing media time. The
Company believes it will be able to finance such development substantially from
proceeds of a recent private placement, but there can be no assurance that such
funds will be sufficient. In the event the Company decides to purchase
significant amounts of media time for the television infomercial, it will need
to raise additional funds. No assurance can be made that the Company will be
able to raise such funds.
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, trademarks
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 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 internet web-site is still in the development stage and
the Company only has a limited number of individuals who have
subscribed to be independent travel consultants (280) and does not yet
have any internet travel 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 a 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 conversations 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 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 will allow
independent travel consultants to see destinations in full motion vide
and stereo audio and to make hotel, air, car and vacation package
reservations, as well as research cruise itineraries. However, since
it is presently the policy of cruise lines not to accept cruise
reservations over the internet from third parties, in order to make a
cruise reservation, the independent travel consultant must contact
Sammy's Travel World, Inc., a wholly owned subsidiary of the Company,
via telephone, fax or e- mail, whereby a live 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 expects that the web site will not be
fully integrated to support the independent travel consultants until
mid- 1999.
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 plans to offer, through a
combination of direct response TV, print, radio, and web-based
advertising, a CD ROM library of video destinations; a marketing kit
which includes a guide to marketing an at-home business, a training
manual describing the travel industry, a welcome letter containing a
password for the web site and an outline of Netcruise policies and
procedures; and full-service support from the Company's live travel
agents.
"Parallel Addressing Video Technology" will allow 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, airline, hotel, car rental and vacation
package reservations, as well
as research cruise itineraries will all be made quickly and easily via
NetCruise's reservation web site. However, since it is presently the
policy of cruise lines not to accept cruise reservations over the
internet from third parties, in order to make a cruise reservation the
independent travel consultant must contact Sammy's Travel World, Inc.,
a wholly owned subsidiary of the Company, via telephone, fax or
e-mail, whereby a live travel agent will then make the cruise
reservation.
"Parallel Addressing Video Technology" will provide, when the web-site
is fully operational, to the independent travel consultants
interacting with the Company's internet web - site zero-wait time,
full motion video and stereo audio. 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 "Parallel Addressing Video Technology" is fully
operational, the internet web-site utilizing this technology is
currently still in development . Management expects the web-site to be
fully operational by mid-1999. Although the general public will be
able to access much of the site to obtain information and enroll as an
independent travel consultant, the Company intends that only
participating travel consultants who have paid a fee to the Company
and received a password will be able to access the reservation area of
the site.
If at any point the individual requires additional expertise,
a personal NetCruise travel agent will be available by phone to guide
them through the process. On 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. Harry Shuster has been appointed Chairman and Brian Shuster the
President of NetCruise Interactive, Inc. Pursuant to the Asset
Purchase Agreement, Mr. Brian Shuster will receive $5,000 per month
for his services as a consultant to the Company. In addition, Messrs.
Harry Shuster and Brian Shuster have been serving as directors of the
Company since the transaction closed and both have been nominated for
election as directors of the Company.
Effective as of November 6, 1998, the Company sold the assets
of its computerized limousine reservation system, through the sale of
all the assets of Corporate Travel Link, a wholly owned subsidiary of
the Company, to Gen O2, Inc. a company newly formed by a management
group led by Mark A. Kenny, a founder, shareholder and former Director
of the Company. This transaction allows the Company to concentrate its
resources and efforts on the continued build-up of its NetCruise
internet travel business. The Company owns a 32.66% minority interest
in Gen O2, Inc. and will receive certain contingent payments on
transactions processed by Gen O2, Inc. for a period of five years. A
32.66% minority interest in the new company is also owned by
TranspoNet, a leading developer and owner of software technology for
the ground transportation industry. The Company and TranspoNet will
provide limited working capital to Gen O2, Inc. See Proposal No. 3.
Management of the Company had been exploring a number of ways
to more fully and quickly develop its internet travel business, while
still maintaining an interest in the limousine reservation business,
through its ownership interest in Gen O2, Inc., but with a significant
reduction in the resources the Company had to commit to the reservation
operation. Management of the Company believes that the NetCruise
internet travel business, which is not compatible with the limousine
reservation business, provides the Company's shareholders with a
potential for a greater return.
On November 5 , 1998, in order to augment the Company's entry
into the internet travel business, the Company entered into an Asset
Purchase Agreement with Sterling AKG Corp. d/b/a Sterling Travel
("Sterling"), in which the Company purchased all the assets relating to
Sterling's network of independent travel consultants ("Sterling Travel
Consultants") for a total purchase price of 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 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).
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.
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. 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.
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 GEN02, 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 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 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:
"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.
4
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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
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."
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.
The Board of Directors recommends that the stockholders vote
"FOR" ratification of this appointment (Item No. 6 on the proxy card).
5
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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.
NUMBER OF PERCENT
SHARES OWNED OF CLASS
NAME & ADDRESS
Loeb Holding Corporation 1,088,973 16.1%
As Escrow Agent (1)
61 Broadway
New York, NY 10006
98,824 1.46%
Loeb Holding Corporation (2)
61 Broadway
New York, NY 10006
900,000 13.3%
United Internet Technologies, Inc. (3)(7)
18081 Magnolia Avenue
Fountain Valley, CA 92708
Warren D. Bagatelle (1)(2) 1,187,797 17.5%
Loeb Partners Corporation
61 Broadway
New York, NY 10006
Mark A. Kenny 324,175 4.8%
Gen O2, Inc.
15 Clyde Road, Suite 201
Somerset, NJ 08873
John H. Wasko (4) 137,046 2.0%
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083
Lawrence E. Burk (5) 205,000 3.03%
Genisys Reservation Systems
2401 Morris Avenue
Union, NJ 07083
S. Charles Tabak (6) 22,000 *
ARC Medical Professional Personnel
36 Route 10W, Suite D
East Hanover, NJ 07936
David W. Sass (6)
McLaughlin & Stern, LLP
260 Madison Ave. 18th Fl.
New York, NY 10016 20,000 *
Harry Shuster(3)(7)(8)
United Internet Technologies, Inc. 900,000 13.3%
18081 Magnolia Avenue
Fountain Valley, CA 92708
Brian Shuster (7)
United Internet Technologies, Inc. 0 *
18081 Magnolia Avenue
Fountain Valley, CA 92708
Yeshiva Beth Hillel of Krasner, Inc. 400,000 5.9%
1371 42nd Street
Brooklyn, New York 11219
All Officers and Directors
as a group (7 persons) 2,471,843(9) 36.5%
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* less than 1%
(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 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.
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(4) Includes 14,362 shares of Common Stock owned of record by
Joan E. Wasko, John Wasko's wife, of which Mr. Wasko disclaims
beneficial ownership, but of which he may be deemed beneficial owner, a
five (5) year option to purchase 35,000 shares of the Company's Common
Stock at a price of $2.00 per share granted to Mr. Wasko by the Company
on November 1, 1996, a five (5) year option to purchase an aggregate of
25,000 shares of Common Stock at a price of $4.75 per share granted on
March 12, 1999 and 5,333 shares of Common Stock issuable upon
conversion of Mr. Wasko's prorata share of a Convertible Note in the
principal amount of $12,500.
(5) Includes a five (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.
(6) Includes a five (5) year option to purchase 15,000 shares
of Common Stock at a price of $4.75 per share granted on March 12, 1999.
(7) Includes the 900,000 shares of the Company's Common Stock
owned by UIT. Mr. Harry Shuster is a significant shareholder, a
director and the Chairman of the Board of UIT and may be deemed the
beneficial owner of these shares.
(8) Does not include two warrants issued in connection with
the acquisition of assets from UIT, each entitling Mr. Shuster to
purchase 200,000 shares of the Company's Common Stock. One warrant is
exercisable for 200,000 shares at $2.50 per share and may be exercised
between April 1, 2002 and June 30, 2002, but only if NetCruise achieves
profits equal to or exceeding $5,000,000 for the years 1999, 2000 and
2001. The other warrant is exercisable for 200,000 shares at $6.00 per
share an may be exercised between April 1, 2002 and June 30, 2002, but
only if NetCruise achieves profits equal to or exceeding $10,000,000
for the years 1999, 2000 and 2001.
(9) Includes all of the options granted to certain officers
and directors pursuant to the footnotes numbered (1) through (6) above.
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.
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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 June 30, 1999.
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
April 26, 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 April 26, 1999, at the Annual Meeting of
Stockholders to be held on May 25, 1999, or any adjournment thereof.
1. ELECTION OF DIRECTORS
Lawrence E. Burk, John H. Wasko, David W. Sass, S. Charles Tabak,
Warren D. Bagatelle, Harry Shuster and Brian Shuster.
To withhold authority to vote for any nominee, a line must be drawn
through the nominee's name.
2. RATIFICATION OF THE ACQUISITION OF A TECHNOLOGY LICENSE AND CERTAIN
RELATED ASSETS FROM UNITED INTERNET TECHNOLOGIES, INC. ANDAPPROVAL OF
THE ISSUANCE OF 1,100,00 SHARES OF COMMON STOCK AND TWO WARRANTS EACH
IN THE AMOUNT OF 800,000 SHARES TO UNITED INTERNET TECHNOLOGIES, INC.
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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