<PAGE> 1
================================================================================
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-Q
------------------------
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-25296
------------------------
PLAYNET TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 11-2706304
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
152 WEST 57TH STREET, NEW YORK, NEW YORK 10019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(212) 586-2400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
ARISTO INTERNATIONAL CORPORATION
(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT MARCH 14, 1997
- ---------------------------------------- ----------------------------------
<S> <C>
Common Stock, $.001 par value 14,966,755
</TABLE>
================================================================================
<PAGE> 2
PLAYNET TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ARISTO INTERNATIONAL CORPORATION)
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1 Consolidated Balance Sheets as of January 31, 1997 and October 31, 1996......
Consolidated Statements of Operations for the Three Months Ended January 31,
1997 and 1996; and For the Cumulative Period June 4, 1990 (inception) to
January 31, 1997.............................................................
Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended
October 31, 1991, 1992, 1993, 1994, 1995, 1996 and for the Cumulative Period
June 4, 1990 (inception) to January 31, 1997.................................
Consolidated Statements of Cash Flows for the Three Months Ended January 31,
1997 and 1996 and For the Cumulative Period June 4, 1990 (inception) to
January 31, 1997.............................................................
Notes to Consolidated Financial Statements...................................
Management's Discussion and Analysis of Financial Conditions and
Results of Operations........................................................
PART II -- OTHER INFORMATION
Item 1 Legal Proceedings............................................................
Item 6 Exhibits and Reports on Form 8-K.............................................
Signatures..................................................................................
</TABLE>
2
<PAGE> 3
PLAYNET TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ARISTO INTERNATIONAL CORPORATION)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, 1997 OCTOBER 31, 1996
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 650,592 $ 2,331,761
Restricted cash............................................. 250,000 250,000
Inventory................................................... 1,489,585
Deferred financing charge................................... 1,012,193
Prepaid expenses and other current assets................... 59,424 15,200
------------ ------------
Total current assets................................ 3,461,794 2,596,961
Equipment, net................................................ 1,003,418 695,784
Capitalized software, net..................................... 4,266,632 4,940,528
Goodwill, net................................................. 948,581 991,697
Restricted cash -- noncurrent................................. 89,039 89,039
Other assets.................................................. 358,809 355,672
------------ ------------
Total assets........................................ $ 10,128,273 $ 9,669,681
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses....................... $ 3,738,039 $ 2,439,666
Notes payable -- bank....................................... 406,000 406,000
Notes payable -- bridge financing........................... 2,250,000 --
Convertible term loans -- stockholders...................... 776,500 776,500
Payable to stockholder...................................... -- 270,000
Capital leases.............................................. 112,892 121,166
------------ ------------
Total current liabilities........................... 7,283,431 4,013,332
Convertible term loans -- stockholders........................ 1,330,000 1,330,000
Capital leases -- long term................................... 280,768 151,693
Deferred rent................................................. 141,622 145,076
------------ ------------
Total liabilities................................... 9,035,821 5,640,101
Commitments and contingencies................................. -- --
Stockholders' equity:
Preferred stock, $.001 par value; authorized 1,000,000
shares; issued and outstanding none at 1997 and 1996..... -- --
Common stock, $.001 par value; authorized 39,000,000 shares;
issued and outstanding 14,966,755 and 14,966,755,
respectively............................................. 14,967 14,967
Additional paid in-capital.................................. 32,840,706 31,736,496
Deficit accumulated during the development stage............ (31,763,221) (27,721,883)
------------ ------------
Total stockholders' equity.......................... 1,092,452 4,029,580
------------ ------------
Total liabilities and stockholders' equity.......... $ 10,128,273 $ 9,669,681
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
PLAYNET TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ARISTO INTERNATIONAL CORPORATION)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three month period ended January 31, 1997 and 1996
and for the cumulative period from June 4, 1990 (inception)
to January 31, 1997
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS ENDED SINCE
JANUARY 31, JUNE 4, 1990
------------------------- (INCEPTION) TO
1997 1996 JANUARY 31, 1997 *
----------- ----------- -------------------
<S> <C> <C> <C>
Royalty revenue..................................... $ 2,883 $ 1,547 $ 128,310
Production revenue.................................. -- 90,000 340,647
------------ ------------ -------------
Total revenue............................. 2,883 91,547 468,957
Selling, general and administrative expenses........ (1,637,037) (1,076,614) (18,946,487)
Research and development expenses................... (1,571,144) (372,030) (7,944,521)
Amortization of capitalized software costs
(including
1996 write down).................................. (673,896) (288,813) (4,043,378)
Interest and other income (expense)................. (162,144) (32,337) (482,583)
------------ ------------ -------------
Net loss.................................. (4,041,338) (1,678,247) (30,948,012)
Dividends on preferred stock........................ -- (3,851) (19,804)
------------ ------------ -------------
Net loss applicable to common stockholders.......... $(4,041,338) $(1,682,098) $ (30,967,816)
============ ============ =============
Weighted average number of common shares
outstanding....................................... 14,966,755 13,345,279
============ ============
Net loss per share.................................. $ (0.27) $ (0.13)
============ ============
</TABLE>
* Excludes cumulative losses of The Astro-Stream Corporation of $795,405 at the
time of the merger
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
PLAYNET TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ARISTO INTERNATIONAL CORPORATION)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
For the Fiscal Years ended October 31, 1992, 1993, 1994, 1995, 1996
and for the three month period ended January 31, 1997 and for the cumulative
period from June 4, 1990 (inception) to Janaury 31, 1997
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK(1) ADDITIONAL DURING THE
---------------- -------------------- PAID IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
------- ------ ---------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock for initial capitalization
($0.18 per share)......................................... 3,334,780 $3,335 $ 596,665
Sale of common stock during November for cash ($0.12 per
share).................................................... 1,764,099 1,764 218,526
Sale of common stock during October for cash ($1.29 per
share).................................................... 155,067 155 199,845
Exchange of common stock during October for services at
estimated value ($1.28 per share)......................... 78,367 78 99,922
Net loss for the year ended October 31, 1991............... $ (1,478,158)
------ --- ---------- ------ ---------- -----------
Balance, October 31, 1991.................................. 5,332,313 5,332 1,114,958 (1,478,158)
------ --- ---------- ------ ---------- -----------
Sale of common stock during the year for cash ($0.85 per
share).................................................... 1,589,023 1,589 1,348,411
Sale of common stock during the year for cash ($1.17 per
share).................................................... 235,102 235 274,765
Exchange of common stock during August for services at
estimated value ($1.28 per share)......................... 78,367 78 99,921
Net loss for the year ended October 31, 1992............... (1,480,812)
------ --- ---------- ------ ---------- -----------
Balance, October 31, 1992.................................. 7,234,805 7,235 2,838,055 (2,958,970)
------ --- ---------- ------ ---------- -----------
Sale of common stock during the year for cash ($1.63 per
share).................................................... 611,932 612 999,388
Sale of common stock during the year for cash ($1.28 per
share).................................................... 195,085 195 249,805
Exchange of common stock during May for services at
estimated value ($1.29 per share)......................... 116,717 117 149,883
Exchange of common stock during October for services at
estimated value ($1.33 per share)......................... 15,006 15 19,985
Exchange of common stock during October for patent rights
at estimated value ($1.28 per share)...................... 39,184 39 49,961
Purchase of treasury stock for cash ($0.04 per share)......
Net loss for the year ended October 31, 1993............... (1,636,310)
------ --- ---------- ------ ---------- -----------
Balance, October 31, 1993.................................. 8,212,729 8,213 4,307,077 (4,595,280)
------ --- ---------- ------ ---------- -----------
Sale of common stock during the year for cash ($1.46 per
share).................................................... 1,030,447 1,030 1,498,970
Exchange of common stock during January for services at
estimated value ($1.33 per share)......................... 15,007 15 19,985
Exchange of common stock during January for services at
estimated value ($1.46 per share)......................... 34,181 34 49,966
Conversion of note payable and accrued interest into common
stock ($1.53 per share)................................... 171,741 172 261,892
Conversion of note payable into common stock ($1.26 per
share).................................................... 159,236 159 199,841
Repayment of stock subscription receivable.................
Retirement of treasury stock during October................ (1,667,390) (1,667) (58,333)
Net loss for the year ended October 31, 1994............... (2,228,644)
------ --- ---------- ------ ---------- -----------
Balance, October 31, 1994.................................. 7,955,951 7,956 6,279,398 (6,823,924)
------ --- ---------- ------ ---------- -----------
<CAPTION>
COMMON STOCK HELD
DEFERRED IN TREASURY STOCK
COMPENSATION --------------------- SUBSCRIPTION
EXPENSE SHARES AMOUNT RECEIVABLE TOTAL
------------ ---------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock for initial capitalization
($0.18 per share)......................................... $ 600,000
Sale of common stock during November for cash ($0.12 per
share).................................................... 220,290
Sale of common stock during October for cash ($1.29 per
share).................................................... 200,000
Exchange of common stock during October for services at
estimated value ($1.28 per share)......................... 100,000
Net loss for the year ended October 31, 1991............... (1,478,158)
----------- ---------- -------- -------- -----------
Balance, October 31, 1991.................................. (357,868)
----------- ---------- -------- -------- -----------
Sale of common stock during the year for cash ($0.85 per
share).................................................... 1,350,000
Sale of common stock during the year for cash ($1.17 per
share).................................................... 275,000
Exchange of common stock during August for services at
estimated value ($1.28 per share)......................... 99,999
Net loss for the year ended October 31, 1992............... (1,480,812)
----------- ---------- -------- -------- -----------
Balance, October 31, 1992.................................. (113,680)
----------- ---------- -------- -------- -----------
Sale of common stock during the year for cash ($1.63 per
share).................................................... $(80,000) 920,000
Sale of common stock during the year for cash ($1.28 per
share).................................................... 250,000
Exchange of common stock during May for services at
estimated value ($1.29 per share)......................... 150,000
Exchange of common stock during October for services at
estimated value ($1.33 per share)......................... 20,000
Exchange of common stock during October for patent rights
at estimated value ($1.28 per share)...................... 50,000
Purchase of treasury stock for cash ($0.04 per share)...... (1,667,390) (60,000) (60,000)
Net loss for the year ended October 31, 1993............... (1,636,310)
----------- ---------- -------- -------- -----------
Balance, October 31, 1993.................................. (1,667,390) (60,000) (80,000) (419,990)
----------- ---------- -------- -------- -----------
Sale of common stock during the year for cash ($1.46 per
share).................................................... 1,500,000
Exchange of common stock during January for services at
estimated value ($1.33 per share)......................... 20,000
Exchange of common stock during January for services at
estimated value ($1.46 per share)......................... 50,000
Conversion of note payable and accrued interest into common
stock ($1.53 per share)................................... 262,064
Conversion of note payable into common stock ($1.26 per
share).................................................... 200,000
Repayment of stock subscription receivable................. 80,000 80,000
Retirement of treasury stock during October................ 1,667,390 60,000 --
Net loss for the year ended October 31, 1994............... (2,228,644)
----------- ---------- -------- -------- -----------
Balance, October 31, 1994.................................. 0 0 0 (536,570)
----------- ---------- -------- -------- -----------
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
PREFERRED STOCK COMMON STOCK(1) PAID IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
------ --- ---------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
DEFERRED COMMON STOCK HELD STOCK
COMPENSATION IN TREASURY SUBSCRIPTION
EXPENSE SHARES AMOUNT RECEIVABLE TOTAL
----------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Conversion of notes payable into common stock ($1.23 per
share).................................................... 834,529 835 1,024,165
Sale of common stock during November for cash ($1.53 per
share).................................................... 235,936 236 359,764
Sale of common stock during March for cash ($2.22 per
share).................................................... 450,195 450 999,550
Exchange of common stock in March for graphic illustrations
($2.22 per share)......................................... 115,050 115 255,440
Issuance of common stock per anti-dilution provision....... 38,350 38 (38)
Sale of preferred stock in May for cash ($3.00 per
share).................................................... 33,350 $ 33 -- -- 100,017
Equity acquired from the reverse acquisition with
Astro-Stream.............................................. 1,098,997 1,099 806,205 (795,405)
Issuance of common stock as a result of the acquisition of
Borta, Inc. ($4.67 per share)............................. 1,818,182 1,818 8,498,182
Grant of common stock ($5.50 per share).................... 357,143 357 1,963,929
Sale of common stock during August for cash ($4.50 per
share).................................................... 66,666 67 299,933
Sale of common stock during August for cash ($5.50 per
share).................................................... 93,500 94 514,156
Exchange of common stock in August for consulting services
($6.50 per share)......................................... 25,000 25 162,475
Exchange of common stock in August for consulting services
($5.75 per share)......................................... 3,687 4 21,196
Exchange of common stock in August for consulting services
($5.50 per share)......................................... 395 -- 2,172
Sale of common stock during September for cash ($5.50 per
share).................................................... 96,364 96 529,904
Sale of common stock during October for cash ($5.50 per
share).................................................... 10,000 10 54,990
Amortization of deferred compensation expense..............
Dividend on preferred stock................................ (4,585)
Net loss for the year ended October 31, 1995............... (4,116,457)
------ --- ---------- ------ ---------- -----------
Balance, October 31, 1995.................................. 33,350 33 13,199,945 13,200 21,871,438 (11,740,371)
------ --- ---------- ------ ---------- -----------
Sale of common stock during November for cash ($5.50 per
share).................................................... 60,000 60 329,940
Sale of common stock during December for cash ($5.50 per
share).................................................... 164,000 164 901,836
Conversion of notes payable into common stock in December
($3.00 per share)......................................... 66,667 67 199,933
Sale of preferred stock during January for cash ($5.50 per
share).................................................... 40,000 40 219,960
Exchange of common stock in January for consulting services
($5.50 per share)......................................... 500 1 2,749
Sale of common stock during February for cash ($5.50 per
share).................................................... 10,000 10 54,990
Sale of common stock during March for cash ($5.50 per
share).................................................... 60,000 60 329,940
Sale of common stock during April for cash ($5.50 per
share).................................................... 56,363 56 309,944
Reversal of prior year deferred compensation expense.......
Write-off of deferred compensation expense................. (357,143) (357) (1,963,929)
Sale of common stock during May for cash ($5.50 per
share).................................................... 59,362 59 326,432
Exchange of common stock in May for consulting services
($5.76 per share)......................................... 421 -- 2,423
Exchange of common stock in May for consulting services
($4.82 per share)......................................... 1,100 1 5,302
Conversion of preferred stock into common stock in May..... (73,350) (73) 58,191 58 15
Sale of common stock during June for cash ($5.50 per
share).................................................... 57,638 58 316,951
Exchange of common stock in June for consulting services
($5.50 per share)......................................... 1,000 1 5,499
Sale of common stock during July for cash ($5.50 per
share).................................................... 152,000 152 835,848
Exchange of common stock in July for consulting services
($5.50 per share)......................................... 12,000 12 65,988
Exchange of common stock in August for product rights
($5.00 per share)......................................... 30,000 30 149,970
Sale of common stock in August for cash ($5.00 per
share).................................................... 700,000 700 3,254,300
Sale of common stock in August for cash ($5.50 per
share).................................................... 23,636 24 129,976
Sale of common stock in September for cash ($5.00 per
share).................................................... 80,000 80 371,920
Sale of common stock in September for cash ($5.50 per
share).................................................... 46,000 46 252,954
<CAPTION>
Conversion of notes payable into common stock ($1.23 per
share).................................................... 1,025,000
Sale of common stock during November for cash ($1.53 per
share).................................................... 360,000
Sale of common stock during March for cash ($2.22 per
share).................................................... 1,000,000
Exchange of common stock in March for graphic illustrations
($2.22 per share)......................................... 255,555
Issuance of common stock per anti-dilution provision....... --
Sale of preferred stock in May for cash ($3.00 per
share).................................................... 100,050
Equity acquired from the reverse acquisition with
Astro-Stream.............................................. 11,899
Issuance of common stock as a result of the acquisition of
Borta, Inc. ($4.67 per share)............................. 8,500,000
Grant of common stock ($5.50 per share).................... $(1,964,286) --
Sale of common stock during August for cash ($4.50 per
share).................................................... 300,000
Sale of common stock during August for cash ($5.50 per
share).................................................... 514,250
Exchange of common stock in August for consulting services
($6.50 per share)......................................... 162,500
Exchange of common stock in August for consulting services
($5.75 per share)......................................... 21,200
Exchange of common stock in August for consulting services
($5.50 per share)......................................... 2,172
Sale of common stock during September for cash ($5.50 per
share).................................................... 530,000
Sale of common stock during October for cash ($5.50 per
share).................................................... 55,000
Amortization of deferred compensation expense.............. 117,857 117,857
Dividend on preferred stock................................ (4,585)
Net loss for the year ended October 31, 1995............... (4,116,457)
----------- ---------- -------- -------- -----------
Balance, October 31, 1995.................................. (1,846,429) -- -- -- 8,297,871
----------- ---------- -------- -------- -----------
Sale of common stock during November for cash ($5.50 per
share).................................................... 330,000
Sale of common stock during December for cash ($5.50 per
share).................................................... 902,000
Conversion of notes payable into common stock in December
($3.00 per share)......................................... 200,000
Sale of preferred stock during January for cash ($5.50 per
share).................................................... 220,000
Exchange of common stock in January for consulting services
($5.50 per share)......................................... 2,750
Sale of common stock during February for cash ($5.50 per
share).................................................... 55,000
Sale of common stock during March for cash ($5.50 per
share).................................................... 330,000
Sale of common stock during April for cash ($5.50 per
share).................................................... 310,000
Reversal of prior year deferred compensation expense....... (117,857) (117,857)
Write-off of deferred compensation expense................. 1,964,286 --
Sale of common stock during May for cash ($5.50 per
share).................................................... 326,491
Exchange of common stock in May for consulting services
($5.76 per share)......................................... 2,423
Exchange of common stock in May for consulting services
($4.82 per share)......................................... 5,303
Conversion of preferred stock into common stock in May..... --
Sale of common stock during June for cash ($5.50 per
share).................................................... 317,009
Exchange of common stock in June for consulting services
($5.50 per share)......................................... 5,500
Sale of common stock during July for cash ($5.50 per
share).................................................... 836,000
Exchange of common stock in July for consulting services
($5.50 per share)......................................... 66,000
Exchange of common stock in August for product rights
($5.00 per share)......................................... 150,000
Sale of common stock in August for cash ($5.00 per
share).................................................... 3,255,000
Sale of common stock in August for cash ($5.50 per
share).................................................... 130,000
Sale of common stock in September for cash ($5.00 per
share).................................................... 372,000
Sale of common stock in September for cash ($5.50 per
share).................................................... 253,000
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK(1) ADDITIONAL DURING THE
---------------- -------------------- PAID IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
------- ------ ---------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
COMMON STOCK HELD
DEFERRED IN TREASURY STOCK
COMPENSATION --------------------- SUBSCRIPTION
EXPENSE SHARES AMOUNT RECEIVABLE TOTAL
------------ ---------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Exchange of common stock in September for consulting
services ($5.50 per share)................................ 15,625 16 85,921
Exchange of common stock in September for goods ($5.50 per
share).................................................... 11,800 12 99,988
Grant of common stock as signing bonuses ($5.50 per
share).................................................... 51,250 51 281,824
Sale of common stock in October for cash ($5.00 per
share).................................................... 400,000 400 1,853,600
Sale of common stock in October for cash ($5.50 per
share).................................................... 6,400 6 35,194
Issuance of warrants in exchange for consulting services
($8.25 per share)......................................... 1,183,942
Issuance of warrants in exchange for consulting services
($5.50 per share)......................................... 221,648
Dividend on preferred stock................................ (15,219)
Net loss for the fiscal year ended October 31, 1996........ (15,966,292)
------ --- ---------- ------ ---------- -----------
Balance, October 31, 1996 -- -- 14,966,755 14,967 31,736,496 (27,721,883)
------ --- ---------- ------ ---------- -----------
Issuance of warrants pursuant to bridge financing
agreements-- December and January 1997.................... 1,104,210
Net loss for the three month period ended January 31,
1997...................................................... (4,041,338)
------ --- ---------- ------ ---------- -----------
Balance, January 31, 1997 -- -- 14,966,755 $14,967 $32,840,706 $(31,763,221)
====== === ========== ====== ========== ===========
<CAPTION>
Exchange of common stock in September for consulting
services ($5.50 per share)................................ 85,937
Exchange of common stock in September for goods ($5.50 per
share).................................................... 100,000
Grant of common stock as signing bonuses ($5.50 per
share).................................................... 281,875
Sale of common stock in October for cash ($5.00 per
share).................................................... 1,854,000
Sale of common stock in October for cash ($5.50 per
share).................................................... 35,200
Issuance of warrants in exchange for consulting services
($8.25 per share)......................................... 1,183,942
Issuance of warrants in exchange for consulting services
($5.50 per share)......................................... 221,648
Dividend on preferred stock................................ (15,219)
Net loss for the fiscal year ended October 31, 1996........ (15,966,292)
----------- ---------- -------- -------- -----------
Balance, October 31, 1996 -- -- -- -- 4,029,580
----------- ---------- -------- -------- -----------
Issuance of warrants pursuant to bridge financing
agreements-- December and January 1997.................... 1,104,210
Net loss for the three month period ended January 31,
1997...................................................... (4,041,338)
----------- ---------- -------- -------- -----------
Balance, January 31, 1997 -- -- -- $ 1,092,452
=========== ========== ======== ======== ===========
</TABLE>
- ---------------
Note 1. All common shares information has been restated since inception to
reflect conversion of the outstanding shares of PlayNet's (formerly Aristo)
common stock into 90% of the common stock of Astro-Stream pursuant to the Merger
agreement.
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 8
PLAYNET TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ARISTO INTERNATIONAL CORPORATION)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the three month period ended January 31, 1997 and 1996
and for the cumulative period from June 4, 1990 (inception)
to January 31, 1997
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS ENDED SINCE
JANUARY 31, JUNE 4, 1990
------------------------- (INCEPTION) TO
1997 1996 JANUARY 31, 1997
----------- ----------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss during development stage............................................ $(4,041,338) $(1,678,247) $(30,948,012)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.............................................. 787,863 469,054 2,794,241
Expenses paid by issuance of common stock.................................. -- 2,750 1,925,663
Deferred rent.............................................................. (3,454) (3,454) 141,622
Deferred financing costs................................................... 92,018 -- 92,018
Loss on disposal of fixed asset............................................ -- -- 19,200
Net realized loss on sale of marketable securities......................... -- -- 51,845
Net unrealized gain on marketable securities............................... -- 38 (7,713)
Write down of capitalized software......................................... -- -- 1,925,417
Charges related to issuance of warrants.................................... -- -- 1,405,590
Impairment of patents...................................................... -- -- 71,306
Reserve for bad debt....................................................... -- -- 132,538
Changes in assets and liabilities:
Increase in prepaid expenses, other current assets and
other assets.......................................................... (47,806) (11,151) (181,905)
Increase in inventory.................................................... (1,489,585) -- (1,489,585)
Increase in accounts payable and accrued expenses........................ 1,298,817 27,631 3,601,698
----------- ----------- ------------
Net cash used in operating activities................................. (3,403,485) (1,193,379) (20,466,077)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Borta, Inc., net of cash acquired.............................. -- -- (238,615)
Expenditures for equipment, leasehold improvements, patents and organization
costs...................................................................... (257,684) (92,883) (1,012,240)
Purchase of marketable securities............................................ -- -- (1,517,601)
Sales of marketable securities............................................... -- 1,462 1,473,469
Purchase of computer software................................................ -- -- (110,000)
Increase (decrease) in other assets.......................................... -- 21,873 (170,639)
Increase in restricted cash.................................................. -- (3,738) (339,039)
----------- ----------- ------------
Net cash used in investing activities................................. (257,684) (73,286) (1,914,665)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayments) from notes payable -- bank......................... -- -- 359,857
Proceeds from notes payable -- stockholders.................................. -- -- 793,500
Repayments of notes payable -- stockholders.................................. -- (75,000) (573,500)
Repayments of notes payable -- other......................................... (270,000) -- (270,000)
Proceeds from notes payable -- bridge financing.............................. 2,250,000 -- 2,250,000
Proceeds acquired in connection with the Astro-Stream merger................. -- -- 59,494
Proceeds from issuance of preferred stock.................................... -- 220,000 320,050
Proceeds from issuance of common stock....................................... -- 1,232,000 16,860,237
Proceeds from convertible term loans......................................... -- 20,000 3,761,500
Repayments of convertible term loans......................................... -- -- (450,000)
Purchase of treasury stock................................................... -- -- (60,000)
Dividends on preferred stock................................................. -- (3,851) (19,804)
----------- ----------- ------------
Net cash provided by financing activities............................. 1,980,000 1,393,149 23,031,334
----------- ----------- ------------
Net (decrease) increase in cash and cash equivalents.................. (1,681,169) 126,484 650,592
Cash and cash equivalents, beginning of period................................. 2,331,761 540,297 --
----------- ----------- ------------
Cash and cash equivalents, end of period.............................. $ 650,592 $ 666,781 $ 650,592
=========== =========== ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.............................................................. $ 39,723 $ 36,091 $ 211,472
=========== =========== ============
Taxes................................................................. $ 14,390 $ 4,069 $ 34,016
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE> 9
PLAYNET TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ARISTO INTERNATIONAL CORPORATION)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(UNAUDITED)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
The Company, on June 4, 1990, issued 3,334,780 shares of common stock in
exchange for technical know-how and patents valued at $600,000.
During October 1993, the Company issued 39,184 shares of common stock in
exchange for the rights to a patent valued at $50,000.
During 1994, notes payable of $250,000 and $12,064 of accrued interest
thereon were converted into 171,741 shares of common stock.
During 1994, a note payable of $200,000 was converted into 159,236 shares
of common stock.
During 1994, the Company retired 1,667,390 shares of treasury stock valued
at $60,000.
During 1995, convertible term loans of $1,025,000 were converted into
834,529 shares of common stock.
During 1995, the Company issued 115,050 shares of common stock in exchange
for original graphic illustrations valued at $255,555.
In connection with the Merger with Astro-Stream, the Company assumed
liabilities of $47,595 and acquired cash of $59,494.
The Company purchased all of the capital stock of Borta, Inc. The details
of the business acquired are as follows:
<TABLE>
<S> <C>
Fair value of current assets acquired................................... $ 67,418
Fair value of fixed assets acquired..................................... 43,258
Intangible assets of business acquired:
Capitalized software.......................................... 8,086,750
Excess of cost over net assets acquired (goodwill)............ 5,008,049
Deferred tax liability.................................................. (3,800,772)
Liabilities assumed..................................................... (104,703)
Intercompany payable to the Company..................................... (50,000)
-----------
Total purchase price consideration............................ 9,250,000
Common stock issued..................................................... 8,500,000
-----------
Total cash to be paid to sellers.............................. 750,000
Liabilities to former stockholder....................................... 500,000
-----------
Cash paid to sellers at closing of the acquisition............ 250,000
Less, cash acquired..................................................... 11,385
-----------
Net cash payment at closing of the acquisition................ $ 238,615
===========
</TABLE>
In connection with the purchase of Borta, the Company issued 357,143 shares
of restricted common stock valued at $1,964,286 to the president of Borta as
deferred compensation. These shares are subject to forfeiture.
During 1995, the Company issued 25,000 shares of common stock in exchange
for consulting services valued at $162,500.
During 1995, the Company issued 4,082 shares of common stock in exchange
for consulting services valued at $23,372.
9
<PAGE> 10
PLAYNET TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY ARISTO INTERNATIONAL CORPORATION)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(UNAUDITED)
During December 1995, convertible term loans of $200,000 were converted
into 66,667 shares of common stock.
During 1996, the Company issued 42,446 shares of common stock in exchange
for consulting services valued at $267,915.
During 1996, the Company issued 58,191 shares of common stock in exchange
for the 73,350 outstanding shares of preferred stock.
During 1996, the Company issued 30,000 shares of common stock in exchange
for product rights valued at $150,000.
During 1996, the Company issued 51,250 shares of common stock as signing
bonuses pursuant to employment agreements to two key personnel valued at
$281,875.
During 1996, pursuant to a Settlement Agreement with the former president
of Borta, Inc. the Company canceled 357,143 shares of common stock originally
issued as deferred compensation.
In connection with warrants issued in 1996 in exchange for consulting
services, the Company recorded charges of $1,405,590.
In the first quarter of fiscal year 1997, the Company issued warrants in
connection with bridge financing and recorded deferred charges of $1,104,211.
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The interim consolidated financial statements reflect adjustments,
consisting only of normal recurring accruals, which are, in the opinion of
management, necessary for a fair presentation of the financial position and
results of operations for the periods presented. Sales and the net loss for any
interim period are not necessarily indicative of the results for a full year.
These consolidated financial statements should be read in conjunction with the
Company's annual report Form 10-KSB for the fiscal year ended October 31, 1996
and the related audited financial statements included therein. The financial
statements have been prepared on a going-concern basis, which contemplates
realization of assets and liquidation of liabilities in the normal course of
business. The Company, as of January 31, 1997, has a working capital deficit of
$3,821,637. The Company expects to incur substantial costs and expenses during
the ensuing twelve months as the Company continues to develop new products and
commence sales of its PlayNet Web networked entertainment terminals. Since
inception through January 31, 1997 the Company raised approximately $23,000,000
through the private placement of stock and convertible notes. The Company
intends to continue to fund operations until the commercial launch of its
products through equity and/or debt financing together with available funds and
cash flows expected to be generated by operations. Thereafter, if cash generated
by operations is insufficient to satisfy the Company's liquidity requirements,
the Company may need to raise additional funding through public or private debt
financing. If additional funds are raised through the issuance of equity
securities, the percentage of ownership of the then current stockholders of the
Company may be reduced and such equity securities may have rights, preferences
or privileges senior to those of the holders of the Company's common stock.
There can be no assurance that additional financing will be available on terms
favorable to the Company.
NOTE 2 -- INVENTORIES
Inventory is stated at the lower of cost or market. At January 31, 1997,
inventory consisted of $624,240 in finished goods and $865,345 in raw materials
and assembly costs for the Company's PlayNet Web networked entertainment
terminals (see Note 5).
NOTE 3 -- FINANCING
On December 30, 1996, the Company entered into a bridge financing agreement
with Allen & Company Incorporated ("Allen") pursuant to which Allen will act as
the Company's placement agent in the sale of senior secured notes in two stages
for aggregate gross proceeds of up to $18,000,000, subject to achievement of
certain prescribed operating targets. Through January 31, 1997 the Company had
received gross proceeds of $2,250,000 (see Note 5). The promissory notes related
thereto bear interest at a rate of 12% per annum payable on the maturity date of
the note. Additionally, the holders of these notes were granted warrants to
purchase shares of the Company's common stock.
In the three month period ended January 31, 1997 and to current date, the
Company recorded an aggregate deferred charge of $1,592,264 related to the
issuance of warrants to purchase an aggregate of 650,000 shares of its common
stock pursuant to the bridge financing arrangement between the Company and
senior secured note holders. Through January 31, 1997, the Company recorded
$92,018 of interest expense in connection with the amortization of these
deferred charges.
NOTE 4 -- LETTER OF INTENT
On January 24, 1997, the Company entered into a Letter of Intent with IBM
Global Services ("IBM") for delivery of server farm management services and
Internet dial up access services. The letter of intent allows 60 days to
finalize a formal agreement satisfactory in form and substance to both parties.
The Company agreed that in the event that the parties do not enter into an
agreement relating to the services contemplated, the Company will reimburse IBM
for reasonable, documented costs and expenses actually incurred by IBM in
11
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
an effort to implement the services in accordance with the Company's scheduled
timeline, in an amount not to exceed $300,000 (see Note 5).
NOTE 5 -- SUBSEQUENT EVENTS
On February 22, 1997, the Company launched its PlayNet Web networked
entertainment terminals. Through March 14, 1997, the Company has shipped 470
PlayNet Web terminals.
During February and March 1997, the Company has received an additional
$1,000,000 in bridge financing bringing the total gross proceeds received under
the Allen bridge financing to $3,250,000. In connection with this additional
funding, the Company issued warrants to purchase shares of the Company's common
stock (see Note 3).
On March 6, 1997, the Company entered into a short term revolving line of
credit for a total principal sum of $850,000 subject to a draw down and
repayment schedule bearing a repayment interest of 15%. As of March 14, 1997,
the Company had received $500,000 in draw down payments and made repayments in
the amount of $57,500, pursuant to the terms of the line of credit. As
consideration for this line of credit, the holder received a security interest
in certain purchase orders for the PlayNet Web product and warrants to purchase
66,000 shares of the Company's common stock at a price per share equal to the
closing price per share of the Company's common stock as quoted on the Nasdaq
Small Cap Market. In connection with these warrants the Company will record a
deferred charge in the second quarter of fiscal year 1997 in the amount of
$152,390.
In February 1997 the Company finalized a one year renewable agreement with
IBM for dial up access services. Negotiations with IBM for a long term
commitment for the delivery of server farm management services and increased
dial up access services are still in process. In connection therewith, the
Company's commitment to IBM has increased to $550,000 with payment terms and
amortization periods to be determined as part of the negotiation process.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying consolidated
financial statements.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
A number of statements contained in this report are forward-looking within
the meaning of the Private Securities Litigation Reform Act of 1995 that involve
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied herein. These risks and uncertainties include
but are not limited to the recent development and commencement of operations;
dependence on new products; risks related to technological factors; dependence
on certain third party vendors and on the Internet; and other risks described in
the Company's Registration Statement on Form S-1 filed on October 16, 1996.
OVERVIEW
The Company designs, develops and sells networked entertainment systems
with emphasis on intelligent, Internet-enabled digital terminals targeted for
worldwide commercial venues. The Company's three primary products, trademarked
as PlayNet Web, PlayNet Music Station and PlayNet Sports, are designed to accept
both cash and credit cards, have touch screens, user-friendly interfacing and
come pre-loaded with the Company's proprietary software, its advanced
technologies and other licensed content. The terminals are aimed at frequenters
of bars and sports bars, hotel chains, restaurant chains and eateries, coffee
cafes, theme parks, studio stores, lounges, gyms, airports and new "cyber"
establishments. All three products run on Microsoft Windows NT platform.
The Company's digital terminals are designed to utilize the Internet to
enhance the traditional entertainment and competitive game experience through
innovations such as linking multiple players in remote locations, offering
tournament prize play for sports, strategy and video game enthusiasts, and
offering, for both pay-per-play and purchase, catalogues of music titles from a
broad array of artists and eras. In addition, the terminals are designed to
provide convenient "out-of-home" access to select Internet services including
E-mail, World Wide Web browsing and Web casting, while simultaneously
functioning as points of purchase for entertainment tie-in merchandise.
During February 1997, the Company shipped 470 PlayNet Web networked
entertainment terminals. The 470 units aggregated revenues of approximately
$1,018,000. Additionally, the Company currently has outstanding purchase orders
for the shipment of another 3,030 terminals which is expected to generate
revenues of approximately $6,564,000. The Company has entered into a one year,
annually renewable agreement with an unaffiliated vendor to manufacture the
PlayNet Web terminals, production of which began in January 1997.
COMPARISON OF THE THREE MONTH PERIOD ENDED JANUARY 31, 1997 VS. JANUARY 31, 1996
Consolidated revenues for the three months ended January 31, 1997 were
$2,883, a decrease of approximately $89,000 as compared to the same period in
1995. Revenues from the development of software represented 0% and 98% of the
1997 and 1996 revenues, respectively. Royalties on the Company's consumer
products represented 100% of revenues in 1997 compared to 2% of revenues in
1996.
Selling, general and administrative expenses for the three months ended
January 31, 1997 increased to $1,637,037 as compared to $1,076,614 for the three
months ended January 31, 1996. Of the total selling, general and administrative
expenses 40% or $657,217 for 1997 related to salaries and benefits as compared
to approximately 26% or $285,293 for the prior period. This increase was
attributable to an increase in personnel to 15 as of January 31, 1997 from 5 as
of January 31, 1996, to support the Company's preparations for the commercial
launch of its PlayNet Web networked entertainment terminals.
13
<PAGE> 14
Occupancy expense for the current period amounted to $200,623 as compared
to $82,876 for the same period in 1996. This increase is related to increased
office space in the Company's New York office and an engineering and design
facility in California, which was occupied beginning in April 1996. Of the total
selling, general and administrative expenses, occupancy expense represents 12%
and 8% for the three months period in 1997 and 1996, respectively.
Amortization and depreciation expenses related to equipment totaled $23,021
and $7,469 respectively, for the three months ended January 31, 1997 and 1996.
The increase of approximately $15,500 resulted primarily from the capital
expenditures in fiscal years 1997 and 1996 related to the acquisition of
equipment and leasehold improvements in the development of an infrastructure
necessary to achieve the Company's business objectives.
Other selling, general and administrative expenses for the 1997 period of
approximately $756,000 include $392,000 for legal, auditing services and
consulting services related to developing business plans, market strategies and
funding of the Company. The balance of approximately $364,000 is primarily
attributable to increased travel expenditures, marketing and exhibit costs and
general corporate activity.
Research and development costs for the three months ended January 31, 1997
increased to $1,571,144 as compared to $372,030 for the comparable period in
1996. This increase was primarily attributable to (i) an increase in personnel
to 60 as of January 31, 1997 from 30 as of January 31, 1996 ($301,000), and (ii)
an increase of expenses related to building prototypes for market test, software
and architectural platform development, network design, and final test products
($557,000).
The increase of $385,083 in amortization of capitalized software costs
expense is related to the change (reduction) in the estimated life of the
Company's capitalized software asset, which occurred at October 31, 1996.
Interest expense net of interest and other income for the three months
ended January 31, 1997 was $162,144 an increase of approximately $130,000 as
compared to the same period in the prior year. This increase was primarily
attributable to interest paid in connection with convertible notes, the bridge
financing and amortization of deferred financing charges related to the issuance
of warrants.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a revolving credit facility with The Merchants Bank of New
York in an amount up to $500,000. The facility expires on May 15, 1997. As of
January 31, 1997, $406,000 had been drawn upon, of which $250,000 is
collateralized by a certificate of deposit.
As of January 31, 1997, the Company had outstanding notes in the aggregate
principal amount of $2,106,500 which were due on February 28, 1997 and March 31,
1997. On February 24, 1997, the notes with maturity dates of February 28, 1997
were extended to March 31, 1997. One promissory note, in the principal amount of
$260,000, requires quarterly payments of interest each in the amount of $13,000
beginning on April 1, 1996; two promissory notes, each in the principal amount
of $500,000, bear interest at a rate of 10% per annum and 12% per annum,
respectively; and the remaining promissory note, in the principal amount of
$330,000, bears interest at the prime rate. The holder of one promissory note is
also entitled to receive a 12.5% participation in certain license royalties
(but, to date, no amount has been paid or accrued with respect thereto), subject
to the Company's right to terminate such participation and, in lieu thereof,
issue warrants to purchase shares of common stock. The Company has agreed, if a
holder of any of the forgoing notes so elects, to issue shares of common stock
in full payment (in lieu of cash) of the principal amount of each of these notes
(based on a price of $5.50 per share). Three of such holders, with notes
aggregating $1,330,000, have given notice to the Company of their intention to
receive shares of common stock in payment of the entire principal amount of the
promissory note held by it, although no such holder is legally obligated to do
so by reason of such notice. The holders of two of the promissory notes were
also granted options to purchase a total of 232,717 additional shares of common
stock at a price of $5.50. In addition, the Company has borrowed $516,500 from
certain lenders, each of whom has the right to receive shares of common stock in
payment of the principal amount of the loan (based on a price of $6.50 per share
or, as to $55,000 principal amount of one
14
<PAGE> 15
note, $5.50 per share). Accordingly, the Company expects to issue 370,091 shares
of common stock with respect to such promissory notes and loans, although no
such holders or lenders is legally obligated to receive such shares.
The Company intends to complete its proposed public offering of 2,000,000
shares of its common stock which was initiated with the filing of a registration
statement in October, 1996. On December 30, 1996 the Company entered into a
bridge financing arrangement with Allen & Company Incorporated (Allen) pursuant
to which Allen will act as the Company's placement agent in the sale of senior
secured notes and warrants for aggregate gross proceeds of up to $18,000,000,
subject to the achievement of certain prescribed operating targets. Through
March 6, 1997, the Company has received gross proceeds of $3,250,000,
representing an over subscribed initial stage of financing. In the event that
Allen is unsuccessful in completing the bridge financing or if the Company does
not achieve its targets, the Company has received a commitment from a principal
stockholder to fund a minimum of an additional $5,750,000 of capital and/or
convertible term loans during 1997.
On March 6, 1997, the Company entered into a short term revolving line of
credit for a total principal sum of $850,000 subject to a draw down and
repayment schedule bearing a repayment interest of 15%. As of March 14, 1997,
the Company had received $500,000 in draw down payments and made repayments in
the amount of $57,500, pursuant to the terms of the line of credit. As
consideration for this line of credit, the holder received a security interest
in certain purchase orders for the PlayNet Web product and warrants to purchase
66,000 shares of the Company's common stock at a price per share equal to the
closing price per share of the Company's common stock as quoted on the Nasdaq
Small Cap Market. In connection with these warrants the Company will record a
deferred charge in the second quarter of fiscal year 1997 in the amount of
$152,390.
The Company, as of January 31, 1997, has a working capital deficiency of
$3,821,637. Furthermore, in its continuing transition from the development stage
to the commercial operating stage, the Company's losses are expected to continue
as a result of expenditures required to continue network and software
development efforts and increase marketing and sales activities. The Company's
ability to meet its obligations in the ordinary course of business is dependent
upon its ability to continue to obtain adequate financing and/or to successfully
distribute its new entertainment software products.
The Company believes that the net proceeds from the bridge financing and
its public offering, together with available funds and cash flows expected to be
generated by operations, will be sufficient to meet its anticipated cash needs
for working capital and capital expenditures for at least the next twelve
months. In the event the Company's plans change, its assumptions change or prove
to be inaccurate or if the proceeds of the bridge financing and the public
offering or cash flows prove to be insufficient to fund operations, the Company
may find it necessary or desirable to reallocate a portion of the proceeds
within the above described categories, seek additional financing or curtail its
activities. There can be no assurance that additional financing will be
available on terms favorable to the Company, or at all. If adequate funds are
not available or are not available on acceptable terms, the Company may not be
able to take advantage of unanticipated opportunities, develop new products or
otherwise respond to unanticipated competitive pressures. Such inability could
have a material adverse effect on the Company's business, and financial
condition and results of operations.
15
<PAGE> 16
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
On or about December 24, 1996 Microleague Media, Inc. filed a demand for
arbitration with the American Arbitration Association asserting claims against
the Company's subsidiary, PlayNet Studios, Inc. (formerly Borta, Inc.) for an
unspecified amount of damages based on the alleged breach of a licensing/co-
development agreement between the parties. The Company intends to vigorously
defend its position in this arbitration.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Form 8-K
The Company filed a report on Form 8K dated as of November 13, 1996 with
respect to its certificate of an amendment to its restated and amended
certificate of incorporation to change its corporate name and to increase its
authorized capital stock.
16
<PAGE> 17
SIGNATURES
Pursuant to the 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 signed.
Dated: March 17, 1997
PlayNet Technologies, Inc.
(formerly known as Aristo
International Corporation)
By: /s/ SHMUEL COHEN
------------------------------------
Shmuel Cohen
President
By: /s/ GLENN P. SBLENDORIO
------------------------------------
Glenn P. Sblendorio
Executive Vice President,
Chief Financial Officer and
Treasurer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLAYNET
TECHNOLOGIES, INC. AND SUBSIDIARIES FOR THE QUARTERLY PERIOD ENDED JANUARY 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FILING ON FORM
10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 650,592
<SECURITIES> 0
<RECEIVABLES> 152,538
<ALLOWANCES> 152,538
<INVENTORY> 1,489,585
<CURRENT-ASSETS> 3,461,794
<PP&E> 1,270,064
<DEPRECIATION> 266,646
<TOTAL-ASSETS> 10,128,273
<CURRENT-LIABILITIES> 7,283,431
<BONDS> 0
0
0
<COMMON> 14,967
<OTHER-SE> 1,077,485
<TOTAL-LIABILITY-AND-EQUITY> 10,128,273
<SALES> 2,883
<TOTAL-REVENUES> 2,883
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,882,077
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162,144
<INCOME-PRETAX> (4,041,338)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,041,338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,041,338)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
