UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30, 1999
------------------
Bridge Technology, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 59-3065437
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(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
12601 Monarch Street, Garden Grove, CA 92841
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(Address of principal executive offices)
(714) 891-6508
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 []
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 [X] 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
7,602,936
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Transitional Small Business Disclosure Format (Check one): Yes [] No [X]
<PAGE>
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Bridge Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, Sept. 30,
1998 1999
(Audited) (Unaudited)
------------ -----------
<S> <C> <C>
Assets
Current assets:
Cash $ 752,015 $ 743,132
Accounts receivable 4,710,197 3,591,844
Subscription receivable 25,000 -
Other receivables 98,004 131,269
Inventory 1,320,588 2,214,837
Advances to employees 27,500 8,109
Other current assets 195,789 75,359
----------- -----------
Total current assets 7,129,093 6,764,550
Property and equipment, net 366,433 593,392
Trademark, net of amortization - 46,515
Deferred income tax 63,905 67,644
Other assets 229,676 416,314
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Total assets $7,789,107 $7,888,415
========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $3,710,781 $3,047,514
Payable to employee 41,161 -
Accrued liabilities 563,071 136,553
Loans payable 632,419 388,224
Other liabilities 23,969 42,014
----------- -----------
Total current liabilities 4,971,401 3,614,305
Notes payable, less current portion 210,213 160,852
Notes payable, less current portion to shareholders 100,000 100,000
----------- -----------
Total liabilities 5,281,614 3,875,157
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Minority interest - 48,607
Commitments and Contingencies
Shareholders' equity
Common stock; par value $0.01 per share, authorized
10,000,000 shares, 6,132,936 shares outstanding at
December 31, 1998, 7,602,936 shares outstanding at
Sept. 30, 1999 61,329 76,028
Additional paid-in capital 3,600,111 5,000,412
Stock subscribed 25,000 -
Accumulated deficit (1,140,935)(1,058,373)
Translation adjustment (38,012) (53,416)
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Total shareholders' equity 2,507,493 3,964,651
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Total liabilities and shareholders' equity $7,789,107 $7,888,415
========== ===========
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-1
</TABLE>
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
---------------------- ------------------------
1998 1999 1998 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $5,029,690 $6,389,233 $14,467,695 $19,603,791
Cost of sales 4,230,559 5,734,508 12,320,143 17,532,888
- -----------------------------------------------------------------------
Gross profit 799,131 654,725 2,147,552 2,070,903
Selling, general and 837,411 670,184 2,276,233 2,048,224
administrative expense
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Income (loss) from (38,280) (15,459) (128,681) 22,679
operations
Other income(expense):
Interest expense, net (3,989) (2,570) (17,908) (15,361)
Other income (expense) 561 35,115 12,871 87,949
Exchange gain (loss) 14,948 (3,698) 2,065 (4,116)
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Income (loss) before (26,760) 13,388 (131,653) 91,151
income taxes
Income Taxes provision: 2,120 4,879 2,120 9,982
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Net income (loss) (28,880) 8,509 (133,773) 81,169
Net loss allocated to - (1,393) (2,250) (1,393)
minority interest
Net income (loss) (28,880) 9,902 (136,023) 82,562
applicable to common
shares
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Weighted average number 5,840,001 7,519,023 5,178,724 6,871,104
of common shares
outstanding
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Earnings (loss) per share $(0.005) $ 0.001 $(0.03) $ 0.01
- -----------------------------------------------------------------------
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-2
</TABLE>
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
Sept. 30, Sept. 30,
1998 1999
(Unaudited) (Unaudited)
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<S> <C> <C>
Cashflows from operating activities
Net income (loss) $ (136,023) $ 82,562
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 86,828 91,345
Provision for doubtful accounts (2,390) (4,148)
Provision for slow moving inventory 83,831 -
Minority interest - 48,607
Increase (decrease) from changes in operating
assets and liabilities:
Trade receivables 448,270 1,122,501
Inventory (1,265,390) (894,249)
Other receivables 61,941 9,254
Prepaid and other assets (41,897) 139,821
Note receivable (409,561) (100,000)
Other assets (347,785) (129,157)
Accounts payable and accrued liabilities 935,483 (1,089,783)
Other liabilities 51,180 (23,116)
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Net cash used in operating activities (535,513) (746,363)
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Cash flows from investing activities
Purchase of property, plant and equipment (155,710) (319,821)
Addition to intangible assets (46,515)
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Net cash used in investing activities (155,710) (366,336)
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Cash flows from financing activities
Borrowings on loans payable 113,424 -
Payments on loans payable - (244,195)
Borrowings on notes payable 1,141 (49,361)
Payments on notes payable and related interest (50,000) -
Net proceeds from issuance of common stock 1,329,880 1,415,000
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Net cash provided by financing activities 1,394,445 1,121,444
---------- ----------
Effect of exchange rate changes on cash 3,018 (17,628)
---------- ----------
Net increase (decrease) in cash and 706,240 (8,883)
cash equivalents
Cash and cash equivalents, beginning of year 202,130 752,015
---------- ----------
Cash and cash equivalents, end of year $ 908,370 $ 743,132
========== ==========
Supplemental information:
Cash paid during the year for:
Interest $ 25,000 $ 18,126
Income taxes 3,200 7,482
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-3
</TABLE>
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Organization and Business
Bridge Technology, Inc. (The Company) was organized under the law of the
State of Nevada on April 15, 1969. The Company is currently located in
California and is in the business of developing, buying, assembling,
testing, packaging, manufacturing, marketing, and selling computer
peripherals and computer system enhancement products. The Company
established operating divisions and subsidiaries under several separate
business names. Each of these operating entities is focused on certain
specific products and sales channels. Currently the Company has four
wholly owned subsidiaries: PTI Enclosures, Inc., Newcorp Technology Ltd.
(Japan), Newcorp Technology, Inc. (USA), and Bridge R&D, Inc. and an 80%
owned subsidiary Pacific Bridge Net.
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB
and Article 10 of Regulation S-X. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for fair presentation have been included.
Operating results for the nine months periods ended Sept. 30,
1999 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-KSB for the year ended
December 31, 1998.
Note 2. Income Taxes
As of December 31, 1998, for federal income tax purposes, the Company
had approximately $582,000 in net operating loss carryforwards expiring
through 2018. The annual utilization of the operating loss carryforward
may be significantly limited due to the adverse resolution, if any, with
respect to the loss carryover provisions of Internal Revenue Code
Section 382 in connection with certain stock issuances by the Company.
Note 3. Shareholders' Equity
In 3rd quarter, 1999 the Company sold, in a private placement to two
sophisticated investors, 120,000 shares of its common stock for
$240,000.
F-4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Except for historical information contained herein, the matters set
forth in this report are forward-looking statements within the meaning
of the "Safe Harbor" provisions of the Private Securities Litigation Act
of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially. The
Company disclaims any obligations to update these forward-looking
statements.
Results of Operations for the Three Months Ended Sept. 30, 1999 as
compared to the Three Months Ended Sept. 30, 1998.
Net sales of $6,389,233 for the three months ended Sept. 30, 1999
increased by $1,359,543 (27.0%) over net sales of $5,029,690 for the
same period of 1998. This increase was due primarily to the Company's
entry into the distribution business and increased sales by PTI
Enclosures, Inc.
Gross profit for the three months ended Sept. 30, 1999 was
$654,725, a 18.0% decrease, when compared to $799,131 for the three
months ended Sept. 30, 1998. Gross profit as a percentage of net sales
decreased from 15.9% to 10.2% for the three months ended Sept. 30, 1999.
Selling, general and administrative expenses decreased by $167,227
to $670,184 in the three months ended Sept. 30, 1999 compared to
$837,411 for the three months ended Sept. 30, 1998 due primary to the
restructure of the ADTX division. As a percentage of net sales, these
expenses decreased from 16.6% in the three months ended Sept. 30, 1998
to 10.5% in the three months ended Sept. 30, 1999.
Operating results increased from a loss of $38,280 in the three
months ended Sept. 30, 1998 to a loss of $15,459 in the three months
ended Sept. 30, 1999. Operating results as a percentage of net sales
increased 0.6% from a 0.8% loss in the three months ended Sept. 30,
1998 to a 0.2% loss in the three months ended Sept. 30, 1999.
Other income increased by $17,327 from $11,520 other income in
the three months ended Sept. 30, 1998 when compared to other income of
$28,847 for the three months ended Sept. 30, 1999.
Net income increased to $9,902 or an income of $0.001 per share for
the three months ended Sept. 30, 1999 compared to a loss of $28,880
or a loss of $0.005 per share for the three months ended Sept. 30, 1998.
Results of Operations for the Nine Months ended Sept. 30, 1999 as
compared to the Nine Months Ended Sept. 30, 1998.
Net Sales of $19,603,791 for the nine months ended Sept. 30, 1999
increased by $5,136,096 (36%) over net sales of $14,467,695 for the
same period of 1998. The increase was due primarily to the Company's
expansion of its distribution business.
Gross Profit for nine months ended Sept. 30, 1999 was $2,070,903
a 3.6% decrease when compared to $2,147,552 for the nine months ended
Sept. 30, 1998, reflecting lower gross margins attributed to the
Company's Classic Trading, Inc. acquisition. Gross Profit as a
percentage of net sales decreased from 14.8% to 10.6% for the nine
months ended Sept. 30, 1999.
Selling, general and administrative expenses decreased by $228,009
to $2,048,224 in the nine months ended Sept. 30, 1999 compared to
$2,276,233 for the nine months ended Sept. 30, 1998 due primary to the
restructure of the ADTX division. As a percentage of net sales, these
expenses decreased from 15.7% in the nine months ended Sept. 30, 1998 to
10.4% in the nine months ended Sept. 30, 1999.
Operating results increased from a loss of $128,681 in the nine
months ended Sept. 30, 1998 to an income of $22,679 in the nine
months ended Sept. 30, 1999 principally reflecting a reduction in
selling and administrative expenses in the nine months ended Sept. 30,
1999. Operating results as a percentage of net sales increased 1.0%
from a 0.9% loss in the nine months ended Sept. 30, 1998 to a 0.1%
income in the nine months ended Sept. 30, 1999.
Other income increased by $71,444 from $2,972 other expenses in
the nine months ended Sept. 30, 1998 when compared to other income of
$68,472 for the nine months ended Sept. 30, 1999.
Net income increased $218,585 from a loss of $136,023 or $0.03 per
share for the nine months ended Sept. 30 ,1998 to a profit of $82,562 or
$0.01 per share for the nine months ended Sept. 30, 1999.
Liquidity and Capital Resources
Since current management acquired control of the Company in early 1997,
the Company has financed its operations with internally generated cash
and with the private placement of its securities principally to a
limited number of sophicated investors, principally directors and
strategic alliance partners.
The Company's investment in DVD (digital versatile disk), OPU
(optical pickup unit) has produced a working OPU. Based on these
results the Company is actively seeking OEM customers and
manufacturing facilities in China.
The Company has decided to focus the activities of its 80% owned
subsidiary, Pacific Bridge Net, on developing certain wireless internet
access apparatus and operational software principally to be used
worldwide in fixed base wireless internet access infrastructure systems.
The Company is in negotiations with one or more major corporations in
connection with this development work. Patent applications are
being processed along with copyright applications.
In connection with these recent accelerated activity in product
developments the Company's 80% subsidiary Pacific Bridge net has decided
not to accept the build out of a Los Angeles fixed wireless
infrastructure system. A strategic alliance group, Worldwide Wireless
Networks and Global Bridge E-Net are expected to build out this
infrastructure. Accordingly there is now no need to place the
previously announced $650,000 convertible debenture for its Pacific
Bridge Net subsidiary.
The Company is also actively seeking partners in the ASIA area to
promote these products and to possibly set up one or more joint
ventures with local companies for the building out of wireless
infrastructure systems.
The Company's capital requirements have been and will continue to
be significant and its cash and cash equivalent have been sufficient
to cover its cash flow from operations. At Sept. 30, 1999, the Company
had a working capital of $3,150,245 and cash of $743,132
compared to a working capital of $2,157,692 and cash of $752,015
at December 31, 1998. Since restarting operations, the Company has
satisfied its working capital requirements with cash generated through
operations and the issuance of equity securities, and obtaining working
capital bank loans. The Company has an open line of credit with a
commercial bank in Los Angeles for $1,000,000 at prime + 3/4% interest.
The Company has drawn down $0 on this line of credit as of Sept. 30,
1999.
Net cash used in operating activities in the nine months ended
Sept. 30, 1999 was $746,363 as compared to $535,513 used in the nine
months ended Sept. 30, 1998. The difference is mainly due to increased
operating results, an increase in inventory, decrease in accounts
receivable collections and accounts payable and accrued liabilities.
Net cash used in investing activities in the nine months ended
Sept. 30, 1999 was $366,336 for the purchase of fixed assets and
intangible assets in Japan, as compared to $155,710 for the purchase
of fixed assets in the nine months ended Sept. 30, 1998.
Net cash provided by financing activities in the nine months
ended Sept. 30, 1999 was $1,121,444 as compared to $1,394,445 for
the nine months ended Sept. 30, 1998. The difference is mainly due to
the repayment of the loans payable.
The Company believes that it can fund the growth of its core
business with internally generated cash flow in addition to bank loans
under the Company's line of credit with a commercial bank in Los
Angeles.
Effects of Inflation
The Company believes that inflation has not had a material effect on its
net sales and results of operations.
Effects of Fluctuation in Foreign Exchange Rates
The Company continues to buy products and services from foreign
suppliers. The Company contracts for such products and services in U.S.
dollars, thus eliminating the possible effect of currency fluctuations.
The Company's wholly-owned subsidiary, Newcorp Technology (Japan) in
1997 and early 1998, was subject to such currency fluctuations and
suffered losses due mainly to the decline of Japanese Yen. In May,
1998, Newcorp Japan changed its sales contracts with its OEM customers
from Japanese Yen to U.S. dollars in order to eliminate future material
effect of currency fluctuations on its net sales and results of
operations. There have been no significant currency losses in 1999.
Year 2000 Effect
The Company's accounting software currently does not utilize a four
digit year field, however, the Company has been assured by the software
manufacturer that all necessary modifications for the year 2000 have
been or will be made and tested timely.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceeding
There are no legal proceedings either against the Company or
against third parties.
Item 2. Changes in Securities and Use of Proceeds
Recent Sales.
The Company sold 120,000 shares of common stock in August 1999 at
$2.00 per share to "accreditated investors" primarily Directors and
Strategic Alliance Partners.
The Company's subsidiary canceled its previously announced $650,000
convertible debenture financing.
The Company uses the above proceeds for its operating activities.
Item 3. Defaults upon Senior Securities
There are no defaults upon senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
There are no matters submitted to a vote of security holders.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
There are no exhibits and reports on Form 8-K.
SIGNATURES
Bridge Technology, Inc.
Registrant
Date 11/2/99 JOHN J. HARWER
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Signature
John J. Harwer, CEO
Date 11/2/99 JOHN T. GAUTHIER
-------------- --------------------------
Signature
John T. Gauthier, CFO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 743,132
<SECURITIES> 0
<RECEIVABLES> 3,806,581
<ALLOWANCES> 0
<INVENTORY> 2,214,837
<CURRENT-ASSETS> 6,764,550
<PP&E> 1,123,865
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,888,415
<CURRENT-LIABILITIES> 3,614,305
<BONDS> 260,852
0
0
<COMMON> 3,964,651
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,888,415
<SALES> 19,603,791
<TOTAL-REVENUES> 19,603,791
<CGS> 17,532,888
<TOTAL-COSTS> 19,581,112
<OTHER-EXPENSES> (83,833)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,361
<INCOME-PRETAX> 91,151
<INCOME-TAX> 9,982
<INCOME-CONTINUING> 81,169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,169
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
