SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(For the Quarter ended September 30, 1999)
Commission File Number 1-29188
netcruise.com, inc. and subsidiaries
(Formerly Genisys Reservation Systems, Inc.)
_______________________
(Exact Name of registrant as specified in its charter)
New Jersey 22-2719541
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification no.)
2401 Morris Avenue, Union, New Jersey 07083
(Address of principal executive offices) (Zip Code)
(908) 810-8767
Issuer's Telephone Number including Area Code
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter periods that the registrant was required to
file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13
or 15(d) of the Exchange Act after the
distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of September 30, 1999: 7,822,076
shares of Common Stock
Transitional Small Business Disclosure Format (check one)
Yes X No
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September December
30, 1999 31, 1998
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(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $144,969 $145,921
Accounts receivable, less allowance for doubtful
accounts of $49,000 (1999) and $15,000 (1998) 11,721 67,174
Prepaid expenses 16,461 835
------------- -------------------
Total Current Assets 173,151 213,930
INVESTMENT IN, AND ADVANCES TO, GEN 02, INC. 272,587 664,204
PROPERTY AND EQUIPMENT 116,931 91,400
COMPUTER SOFTWARE, TECHNOLOGY LICENSE AND
RELATED ASSETS, LESS ACCUMULATED AMORTIZATION 2,283,912 2,376,265
OTHER ASSETS 144,457 94,638
------------- -------------------
$2,991,038 $3,440,437
============= ===================
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $365,550 $21,875
Accounts payable and accrued expenses 541,509 208,509
Accrued interest payable - related party 201,081 179,758
Accrued Dividend payable 275,000 0
------------- -------------------
Total current liabilities 1,383,140 410,142
------------- -------------------
LONG-TERM DEBT, LESS CURRENT MATURITIES 62,500 90,625
------------- -------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY:
Preferred Stock, $.0001 par value: 24,294,000 shares
authorized: none oustanding
Series A preferred stock, $.0001 par vlaue, 706,000 shares - -
authorized; Issued and outstanding 381,177 shares 38 38
Common Stock, $.0001 par value; 75,000,000 shares
authorized; issued and outstanding 7,822,076 shares (1999)
and 6,913,965 shares (1998) 782 691
Additional paid in capital 9,865,898 8,518,558
Deficit Accumulated During the Development Stage (8,321,320) (5,579,617)
------------- -------------------
Total Stockholders Equity 1,545,398 2,939,670
------------- -------------------
$2,991,038 $3,440,437
============= ===================
See Accompanying Notes to Consolidated Financial Statements
2
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Period from
March 7, 1994
(Commencement of
Nine Months Nine Months Three Months Three Months Development
Ended Ended Ended Ended Stage Activites) to
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999
$238,468 $ 52,002 $ 58,819 $ 22,128 $ 380,008
84,246 111,490 27,071 64,276 263,516
Payroll 631,746 602,272 232,504 217,353 2,593,132
Professional Fees 219,544 158,599 68,353 1,471,824
Travel & Entertainment 49,731 366 25,150 246,183
Advertising & Promotion 58,239 22,856 13,553 255,618
Other 388,103 275,387 143,582 96,921 1,383,528
460,859 397,091 159,488 201,014 1,348,867
14,645 (18,462) 6,207 (15,461) 220,344
2,181,773 1,695,292 750,673 671,159 7,783,012
(1,943,305) (1,643,290) (691,854) (649,031) (7,403,004)
523,398 0 162,079 0 643,316
($2,466,703) ($1,643,290) ($853,933) ($649,031) ($8,046,320)
7,524,434 4,961,089 7,822,076 5,655,594 3,875,094
($0.33) ($0.33) ($0.11) ($0.11) ($2.08)
See Accompanying Notes to Consolidated Financial Statements
3
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Deficit
Accumulated
Additional During the
Common Stock Series A Preferred Stock Paid-in Development
Shares Par Value Shares Par Value Capital Stage Total
BALANCE - DECEMBER 31, 1998 6,913,965 $691 381,177 $38 $8,518,558 ($5,579,617) $2,939,670
PROCEEDS FROM PRIVATE PLACEMENT
OF COMMON STOCK, NET OF EXPENSES 866,667 87 - - 1,277,913 - 1,278,000
ISSUANCE OF STOCK UPON
SAMMYS TRAVEL WORLD
ACQUISITION 36,600 4 - - 54,896 - 54,900
COMMON STOCK ISSUED TO FORMER OFFICERS 4,844 - - - 14,531 - 14,531
PREFERRED STOCK DIVIDEND ACCRUED - - - - - (275,000) (275,000)
NET LOSS - - - - - (2,466,703) (2,466,703)
BALANCE AT SEPTEMBER 30, 1999 7,822,076 $ 782 381,177 $ 38 $9,865,898 ($8,321,320) $1,545,398
See Accompanying Notes to Consolidated Financial Statements
4
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Period From
March 7, 1994
(Commencement of
Development Stage
Nine Months Ended Nine Months Ended Activities to
September 30,1999 September 30,1998 September 30,1999
------------------ ------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,466,703) $ (1,643,290) $ (8,046,320)
Adjustments to reconcile net loss to net
cash flows from operating activities
Equity in loss of GEN02, Inc. 523,398 - 643,316
Depreciation and amoritization 460,859 397,091 1,348,867
Contribution to capital of services rendered - - 49,600
Changes in operating assets and liabilities
Accounts receivable 55,453 (23,831) (12,627)
Prepaid expenses (15,626) (7,321) (28,470)
Deposits and other (23,122) 4,934 (81,349)
Accounts payable and accrued expenses 345,498 47,521 697,187
------------------ ------------------- ------------------
Net cash flows from operating acctivities (1,120,243) (1,224,896) 5,429,796
------------------ ------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and software (351,459) (293,281) (1,901,441)
Acquisition of Prosoft, Inc. - - (34,601)
Acquisition of Sammy's Travel World (54,900) - (54,900)
Advances to GEN 02, Inc. (131,781) - (171,781)
------------------ ------------------- ------------------
Net cash flows from investing activities (538,140) (293,281) (2,162,723)
------------------ ------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt - 9,652 (171,326)
Proceeds from public offering of common stock
and warrants net of deferred offering costs - - 4,507,915
Issuance of common stock for business acquisitions 54,900 - 92,400
Contribution to capital - stockholder/officer - - 205,400
Proceeds from issuance of notes payable 310,000 (93,195) 1,265,000
Payments under computer equipment leases - - (63,076)
Proceeds from sale and lease-back - - 294,644
Proceeds from sale of common stock 1,292,531 - 1,602,531
Proceeds from issuance of 10% promissory notes
and related warrants, less related costs - - 517,500
Payments on 10% promissory notes - - (563,500)
Other - - 50,000
------------------ ------------------- ------------------
Net cash flows from financing activities 1,657,431 (83,543) 7,737,488
------------------ ------------------- ------------------
NET CHANGE IN CASH AND EQUIVALENTS (952) (1,601,720) 144,969
CASH AND EQUIVALENTS, BEGINNING OF YEAR 145,921 2,207,841 -
------------------ ------------------- ------------------
CASH AND EQUIVALENTS, END OF PERIOD $ 144,969 $ 606,121 $ 141,969
------------------ ------------------- ------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ - $ 29,000 $ 168,322
------------------ ------------------- ------------------
Issuance of common stock for UIT assets $ - $ 2,500,000 $ 2,500,000
------------------ ------------------- ------------------
Conversion of related party debt to common stock $ $ - $ 57,609
------------------ ------------------- ------------------
Conversion of long-term debt to Series A Preferred
Stock $ - $ 37,500 $ 30,000
------------------ ------------------- ------------------
Conversion of related party debt into Series A
preferred stock $ - $ 810,000 $ 810,000
------------------ ------------------- ------------------
Net assets exchanged for investment in GEN 02, Inc $ - $ - $ 744,122
------------------ ------------------- ------------------
Preferred Stock Dividend $ 275,000 $ - $ 275,000
------------------ ------------------- ------------------
See Accompanying Notes to Financial Statements
5
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netcruise.com, inc. and subsidiaries
DEVELOPMENT STAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 Basis of Presentation
The consolidated balance sheet at the end of the preceding
fiscal year has been derived from the audited consolidated balance sheet
contained in the Company's Form 10-KSB and is presented for comparative
purposes. All other financial statements are unaudited. In the opinion of
management, all adjustments which include only normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows of all periods presented have been made. The results of operations
for interim periods are not necessarily indicative of the operating results for
the full year.
Footnote disclosures normally included in financial statements
prepared in accordance with the generally accepted accounting principles have
been omitted in accordance with the published rules and regulations of the
Securities and Exchange Commission. These consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Form 10-KSB for the most recent fiscal year.
Note 2 Activities of the Company
The accompanying financial statements of the Company have been
presented on the basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has reported net losses since inception and expects to
incur additional operating losses over the next several quarters. The Company
has also experienced liquidity difficulties since inception, and in order to
continue the marketing and sales efforts of the Company's Internet travel
business may need additional financing. The Company has financed its operations
since inception with the proceeds from the issuance of long-term debt, with the
proceeds from its public and private offerings and loans from a related party.
As of November 5, 1998, the Company began generating revenues
from shared commissions earned by the network of Sterling Travel Consultants
recently acquired, although these revenues were not significant through the
fiscal quarter ended September 30, 1999. Management of the Company expects the
Internet travel business to be fully operational in by the end of 1999 and is
planning to begin television marketing of the Company's products in January
2000. These efforts are expected to significantly increase revenues in 2000. The
Company plans to continue an aggressive marketing campaign as well as expand its
network of travel consultants throughout 2000. The Company expects its
operations to achieve break-even by the end of the second quarter of fiscal
2000. The Company has also begun to receive contingent payments from GEN 02
although these payments were not significant through the fiscal quarter ended
September 30, 1999. The Company completed a private placement of common stock in
January 1999 and received gross proceeds of $1,500,000. Of this figure $200,000
was received by the Company in 1998, $510,000 between January 1999 and February
1999 and the remaining $790,000 were received by the Company in June 1999. With
these proceeds and anticipated cash to be received from revenues, the Company
believed that it would have sufficient resources to provide for its planned
operations for the next twelve months. However, there was a four month delay
from mid February to mid June in receiving the balance of the private placement
proceeds in the amount of $790,000 and a corresponding delay in launching the
Company's marketing campaign, which resulted in a much lower than anticipated
growth in the Company's revenues. As a result during the delay the Company was
forced to divert approximately $600,000 of the private proceeds to cover general
and administrative expenses. The $600,000 was taken out of the $710,000 the
Company had received from the private placement as of February 1999, which the
Company had originally planned on using for marketing purposes. The remaining
$110,000 of the private placement proceeds received as of February 1999 were
used for web-site development as originally planned.
Primarily as a result of these delays, the Company needs to
raise an additional $975,000 to continue the launch of the Company's marketing
campaign. Additionally, the Company was obligated by contract to pay a mandatory
dividend in the amount of $275,000 to United Internet Technologies, Inc. on
September 30, 1999 bringing the total amount of additional funds required to
$1,250,000. The $1,250,000 in additional funds, if and when received, will be
allocated as follows: $90,000 to continue upgrading and enhancing the web-site,
$400,000 to complete development of a database and networking capability,
$360,000 to complete development of a television infomercial and purchase test
media time; $125,000 for general working capital and $275,000 to pay the
mandatory dividend. The Company is obligated to pay this dividend if funds are
legally available for such purpose. State law prohibits the payment of a
dividend if, as a result thereof, the Company would be unable to pay its debts
as they become due in the usual course of its business or the Company's total
assets would be less than its total liabilities. The Company is seeking to raise
the additional funds, but if such funds are not available the Company will be
forced to curtail its marketing campaign. In addition to the funding requirement
stated above should the Company decide to purchase significant amounts of
additional media time for the television infomercial, additional funds will be
required. No assurance can be made that the Company will be able to raise any
additional funds.
Additionally, as a result of the sale of the limousine
reservation business to GEN 02, Inc., the Company has limited its post-December
31, 1998 cash outflow for the limousine reservation business to $175,000 (of
which $172,000 was loaned to GEN02 as of September 30, 1999 pursuant to the
Company's loan commitment to GEN 02, Inc.) As the Company moves from the
development stage to the operating stage of the internet travel business and
continues its aggressive marketing campaign to build its network of independent
travel consultants, revenues are expected to increase. The Company is completing
production of its TV infomercial and intends to begin its television media
campaign in January 2000. Based upon estimates received from marketing
consultants hired by the Company (which marketing consultants are not affiliated
with the persons making the infomercial), test marketing of the infomercial is
expected to produce in excess of 2,000 new independent travel consultants over a
two month period, as well as commissions derived from the increased volume of
travel booked by the independent travel consultants both of which will
contribute to increased revenues.
On August 17, 1999, the Company was informed that the Nasdaq
Listings Qualifications Panel has de-listed the Company's securities from The
Nasdaq Stock Market effective with the close of business on August 17, 1999. The
reason for the de-listing was that the Company failed to meet net-tangible
assets of $2,550,000 on a pro-forma basis as of May 31, 1999, which standard is
higher than the customary maintenance requirement established for continued
listing on The Nasdaq Stock Market. The Higher standard was established by The
Nasdaq Listing Qualification Panel in connection with a hearing previously held
concerning the Company's listing on The Nasdaq Stock Market.
The Company intends to appeal the decision of the Nasdaq
Listing Qualification Panel to The Nasdaq Listing and Hearing Review Counsel and
in connection with that appeal will demonstrate that the Company meets the
higher standard by reason of conversion of debt to equity and certain other
matters. The Company has been advised by representatives of The Nasdaq Listing
and Hearing Review Counsel that a hearing may not be held earlier than February
2000. The Company plans to take all necessary steps to have the Company's
securities re-instated on The Nasdaq Stock Market.
Reference should be made to "Management's Discussion and
Analysis of Financial Condition and Results of Operations" include elsewhere
herein for additional information.
Note 3 Acquisition
Net Cruise - As of June 30, 1998, the Company's newly formed
subsidiary, NetCruise Interactive, Inc. ("NetCruise") acquired computer
software, a technology license and related assets from UIT in exchange for
2,000,000 shares of the Company's stock and two warrants ("Warrants").
Subsequently, the Company was advised that because the issuance of 2,000,000
shares and warrants exceeded 20% of the Issued and outstanding shares,
shareholder approval was required by a NASDAQ rule. At the Annual Meeting of
Shareholder held on October 13, 1999, the shareholders ratified the acquisition
of the assets and approved the issuance of 1,100,000 shares of Common Stock and
two stock purchase warrants.
In February 1999, the Company acquired Sammy's Travel World. Inc. a travel
agency for 36,600 shares of common stock
valued at $1.50 per share ($54,900).
Pro forma results assuming the acquisitions had occurred as
of January 1, 1998 have not been presented, as the acquisition of Sammy's was
not deemed significant and the acquisition of assets from UIT was not of a
business.
Note 4 - Contingencies
-------------
Cancellation of Shares - In August 1996, the Company gave
notice to a former officer and director of the Company that it was canceling the
333,216 shares of its common stock which had been issued to the former officer
in connection with services to be provided at the inception of Travel Link. Such
cancellation relates to various claims made by the Company against the former
officer and failure to provide services to the Company.
On April 17, 1997, the officer of the Company filed an action
in the United States District Court, District of New Jersey, against the
Company, Travel Link, the officers of both companies, and various related and
unrelated parties seeking among other things a declaratory judgement that the
former officer is the owner of the 333,216 shares of Common Stock of the Company
which had been issued to him at the inception of Travel Link for services he was
to have provided and for unspecified compensatory and punitive damages. The
Company believes that the plaintiff's claims are without merit and intends to
vigorously defend the action and to assert numerous defenses and counterclaims
in its answer. Pending return of the shares, they are considered outstanding for
all periods presented herein.
On December 23, 1997, an individual filed an action in the
Superior Court of New Jersey against the Company and the former President of the
Company, alleging that the former President of the Company induced such person
to leave her place of employment to assume employment with the Company. The
claim seeks monetary damages based upon an oral promise of employment allegedly
made by the same officer of the Company. The Company believes that the
plaintiff's claim is without merit and intends to vigorously defend the action
and to assert numerous defenses in its answer. A former officer and director has
agreed to hold the Company harmless and indemnify the Company from any and all
claims. Management believes that there will be no material effect on the Company
as a result of this action.
Note 5 Exchange of Assets
In November 1998, the Company decided to exchange the assets
of its computerized limousine reservation and payment system for a 32.7%
interest in Gen 02, Inc., a Company newly formed by a former director and
founder of the Company, and contingent payments for a period of five years (up
to a maximum total of $1,080,000). For financial reporting purposes, this
exchange resulted in a change in reporting from consolidated (for periods prior
to November 6, 1998) to the equity basis (for periods since November 6, 1998).
Summarized information on Gen 02, Inc. for the three and six months ended
September 30, 1999 is as follows:
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Nine Months Ended Three Months Ended
September 30, September 30,
1999 1999
Revenues from external domestic customers $ 204,957 $ 63,740
--------- ---------
Expenses:
Cost of services 73,969 32,140
General and administrative 345,830 95,975
Depreciation and amortization 308,556 97,704
------- ----------
728,355 225,819
--------- ---------
Net Loss $523,398 $162,079
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September 30, 1999
Current assets $ 44,280
Property and equipment 133,378
Computer software costs 282,291
Other assets 48,922
$508,871
Current liabilities $186,098
Due to Company and Transponet 183,021
Equity 139,752
$508,871
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The principal business activity of the Company is the Internet
Travel business which generates revenues from people who have paid a
subscription fee and signed up as Independent travel consultants. In addition,
airlines, hotels, car rental companies, cruise lines, tour operators and other
travel vendors will pay the Company commissions for all sales generated by the
Company's network of independent travel consultants. Such commissions are then
shared with the independent travel consultants.
In order to concentrate its resources and efforts on its
NetCruise Internet Travel business, in November 1998 the Company agreed to sell
the assets of the computerized limousine reservation and payment system to GEN
02, Inc. a company newly formed by a management group lead by Mark A. Kenny, a
former director and founder of the Company. The Company owns a minority interest
in the new company and will receive royalties on transactions processed by the
new company for a period of five years.
On November 5, 1998, in order to augment the Company's entry
into the internet travel business, the Company entered into an Asset Purchase
Agreement with Sterling AKG Corp., d/b/a Sterling Travel, in which the Company
purchased all the assets relating to Sterling's network of independent travel
consultants.
As of February, 1999, the Company acquired Sammy's Travel
World, Inc. a full service travel agency serving the northern New Jersey and New
York City areas. The purchase price for the acquisition was 36,600 shares of the
company's common stock which, for accounting purposes, is being valued at $1.50
per share or an aggregate of $54,900. The company believes that this agency with
its team of travel agents will provide the company with licensing and servicing
capabilities that will augment and extend the current capabilities of the
company, particularly the Sterling Travel consultants. The Company believes that
this combination of experience and expertise will accelerate its entry into the
Internet travel business.
As indicated above, revenues and related costs of fiscal 1999
differ from those of fiscal 1998, as revenues from its former computerized
limousine reservation and payment system represented all of the Company's
revenues until November 5, 1998 and thereafter, all revenues relate to its
internet travel business.
The Company has been in the development stage and has only
generated limited revenues. The Company has been unprofitable since inception
and expects to incur additional operating losses over the next several fiscal
quarters. Total revenues for the three and nine month periods ended September
30, 1999 were $58,819 and $238,468 compared to $22,128 and $52,002 for the 1998
periods.
The corresponding cost of service for the three and nine month
periods ended September 30, 1999 were $27,071 and $84,246 compared to $64,276
and $111,490 for the1998 periods. The net loss for the three and nine month
period ended September 30, 1999 was $853,933 or $0.11 cents a share and
$2,466,703 or $0.33 cents a share compared to a loss of $649,031 or $.11 cents a
share and $1,643,290 or $0.33 cents a share for the 1998 periods. As reflected
in the accompanying financial statements, the Company has incurred losses
totaling $8,046,320 since inception and at September 30, 1999, had a working
capital deficit of $1,209,989.
General and administrative expenses were $557,908 and
$1,622,023 for the three and nine month periods ending September 30, 1999 as
compared to $421,332 and $1,205,173 for the 1998 periods. The primary reason for
the difference between the two periods is an increase in legal and accounting
expenses.
Costs increases for the three months ended September 30, 1999
consist of payroll and payroll related costs ($15,000), consulting fees
($10,000), insurance costs ($16,000), marketing costs ($9,000), other
administrative costs ($17,000), professional fees ($80,000) and investment
banking fees ($14,000) while travel and entertainment expenses decreased
($25,000) for the period.
Cost increases for the nine months ended September 30, 1999
consist of payroll and payroll related costs ($29,000), consulting fees
($107,000), professional fees ($196,000), insurance costs ($36,000), investment
banking fees ($23,000) and other administrative costs ($53,000) while marketing
costs decreased ($5,000) and travel and entertainment expenses decreased
($23,000).
Liquidity and Capital Resources
The Company's funds have principally been provided from Loeb
Holding Corp. as escrow agent, Loeb Holding Corp., LTI Ventures Leasing
Corporation, two private offerings and a public offering.
During April 1999, the Company and a principal of Loeb
Partners, Corp. signed two Promissory Notes each in the amount of $105,000,
whereby the Company borrowed a total of $210,000. The Promissory Notes, which
bear interest at 10% per annum, are payable on demand.
During April 1999, the Company and Warren D. Bagatelle,
Managing Director of Loeb Partners, Corp. signed two Promissory Notes, each in
the amount of $45,000, whereby the Company borrowed a total of $90,000. The
Promissory Notes, which bear interest at 10% per annum, are payable on demand.
The Company completed a private placement of common stock in
January 1999 whereby it sold 1,000,000 shares of Common stock for an aggregate
of $1,500,000 of which $200,000 was received in 1998, $510,000 between January
1999 and February 1999 and $790,000 in June 1999. With these proceeds and
anticipated cash to be received from revenues, the Company believed it would
have sufficient resources to provide for its planned operations for the next
twelve months. However, there was a four month delay from mid February to mid
June in receiving the balance of the private placement proceeds in the amount of
$790,000 and a corresponding delay in launching the Company's marketing
campaign, which resulted in a much lower than anticipated growth in the
Company's revenues. As a result, during the delay the Company was forced to
divert approximately $600,000 of the private placement proceeds to cover general
and administrative expenses. The $600,000 was taken out of the $710,000 the
Company had received from the private placement as of February 1999, which the
Company had originally planned on using for marketing purposes. The remaining
$110,000 of the private placement proceeds received as of February 1999 were
used for web-site development as originally planned.
Primarily as a result of these delays, the Company needs to
raise an additional $975,00 to continue the launch of the Company's marketing
campaign. Additionally, the Company was obligated by contract to pay a mandatory
dividend in the amount of $275,000 to United Internet Technologies, Inc. on
September 30, 1999, bringing the total amount of additional funds to $1,250,000.
The $1,250,000 in additional funds, if and when received, will be allocated as
follows: $90,000 to continue upgrading and enhancing the web-site, $400,00 to
complete development of a database and networking capability, $360,000 to
complete development of a television infomercial and purchase test media time;
$125,000 for general working capital and $275,000 to pay the mandatory dividend.
The Company is obligated to pay this dividend if funds are legally available for
such purpose. State law prohibits the payment of a dividend if, as a result
thereof, the Company would be unable to pay its debts as they become due in the
usual course of its business or the Company's total assets would be less than
its total liabilities. The Company is seeking to raise the additional funds, but
if such funds are not available the Company will be forced to curtail its
marketing campaign. In addition to the funding requirement stated above should
the Company decide to purchase significant amounts of additional media time for
the television infomercial, additional funds will be required. No assurance can
be made that the Company will be able to raise any additional funds.
On September 30, 1999, the Company had cash of $144,969 and a
working capital deficit of $1,209,989. As of November 5, 1998, the Company has
begun to generate revenues from shared commissions earned by the network of
Sterling Travel Consultants recently acquired, although these revenues have not
been significant. Management of the Company expects the Internet travel business
to be fully operational in by the end of 1999 and is planning to begin
television marketing of the Company's products in January 2000. These efforts
are expected to significantly increase revenues. The Company plans to continue
the aggressive marketing campaign as well as expand its network of travel
consultants throughout 2000. Although the Company has also begun to receive
contingent payments from Gen 02, these revenues have not been significant. The
Company expects its operations to achieve break-even by the end of the second
quarter of fiscal 2000.
PART II OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Company held on
October 13, 1999 there were present in person or by proxy 5,358,238 shares of
Common and 381,177 shares of Series A preferred stock representing in excess of
the majority of the issued and outstanding stock entitled to vote. The following
items of business were conducted in the meeting.
1. Five directors were elected by the holders of an excess of
the majority of outstanding shares as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name Votes in Favor Votes Opposed
Lawrence E. Burk 5,250,667 109,071
John H. Wasko 5,253,944 110,794
David W. Sass 5,254,167 110,571
S. Charles Tabak 5,252,167 112,571
Warren D. Bagatelle 5,238,079 126,659
2. The proposal to approve the ratification of the acquisition
of assets from United Leisure Interactive, Inc. ("UIT") and approve the issuance
of 1,100,000 shares of Common Stock and two stock purchase warrants to UIT was
approved by the holders of an excess of the majority of the outstanding shares
voted as follows:
Votes in Favor Votes Opposed Unvoted
3,236,549 59,098 32,918
3. The proposal to ratify the sale of the limousine
reservations systems business to GEN02 was approved by the holders of an excess
of the majority of the outstanding shares voted as follows:
Votes in Favor Votes Opposed Unvoted
2,872,709 87,005 368,851
4. An Amendment to Article FIRST of the Company's Certificate
of Incorporation to change the name of the Company to netcruise.com, inc. was
approved by the holders of an excess of the majority of the outstanding shares
voted as follows:
Votes in Favor Votes Opposed Unvoted
5,325,516 12,776 21,442
5. An amendment to Article FOURTH of the Company's Certificate
of Incorporation to restate the provisions relating to the Company's authorized
Common and Preferred Stock as they relate to dividends and liquidation
preferences to correct certain inconsistencies was approved by the holders of an
excess of the majority of the outstanding shares voted as follows:
Votes in Favor Votes Opposed Unvoted
3,159,177 79,035 90,353
6. The proposal to approve the ratification of the appointment
of Wiss & Company, LLP as auditors of the Company was approved by the holders of
an excess of the majority of the outstanding shares voted as follows:
Votes in Favor Votes Opposed Unvoted
5,329,017 8,329 22,292
</TABLE>
ITEM 6. Exhibits and Reports on Form 8-K
Form 8-KA filed on July 6, 1999
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
netcruise.com, inc.
Date: November 10, 1999 By: /s/ Lawrence E. Burk
President and Chief Executive Officer
Date: November 10, 1999 By: /s/ John H. Wasko
Secretary, Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the nine months ended September 30, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 145
<SECURITIES> 0
<RECEIVABLES> 61
<ALLOWANCES> 49
<INVENTORY> 0
<CURRENT-ASSETS> 173
<PP&E> 151
<DEPRECIATION> 34
<TOTAL-ASSETS> 2,991
<CURRENT-LIABILITIES> 1,383
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,545
<TOTAL-LIABILITY-AND-EQUITY> 2,991
<SALES> 238
<TOTAL-REVENUES> 238
<CGS> 84
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,606
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> (2,467)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,467)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,467)
<EPS-BASIC> (.33)
<EPS-DILUTED> (.33)
</TABLE>
