DATE: April 23, 1999
THIS DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(D) OF REGULATION S-T
U.S. SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549
Form 10-KSB, AMENDMENT #1
ANNUAL REPORT
Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
Commission file number: 0-24767
BRIDGE TECHNOLOGY, INC.
(Name of Small Business Issuer in its Charter) December 31, 1998
NEVADA 59-3065437
(State or other Jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
12601 Monarch Street, Garden Grove, CALIFORNIA 92841
(Address of principal executive offices) (Zip code)
Issuer's telephone number: 714-891-6508
Issuer's facsimile number: 714-890-8590
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
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 [ ].
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[X]
State issuer's revenues for its most recent fiscal year. $20,737,017
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which
the common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.)
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate
market value of the common equity held by non-affiliates on the basis of
reasonable assumptions, if the assumptions are stated.
State number of shares outstanding: 6,182,936
Registrant's Form 10-SB and subsequent amendments 1 and 2 which
were initially filed in August 1998 with the Securities and Exchange
Commission in connection with the Registrant's Registration Statement
is incorporated by reference into Part I, II and III of this report as well as
certain exhibits filed with the Registrant's Registration Statement.
<PAGE>
TABLE OF CONTENTS PAGE
PART I
Item 1. Description of Business.
Item 2. Description of Property.
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Item 7. Financial Statements.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
PART III
Item 9. Directors, Executive officers, Promoters and Control
Persons.
Item 10. Executive Compensation.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
Item 12. Certain Relationships and Related Transactions.
Item 13. Exhibits and Reports on Form 8-K .
<PAGE>
Item 1. Description of Business.
The Company is in the business of developing, buying, assembling, testing,
packaging, lightly 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.
Through in-house development, joint ventures, licensing, and acquisition of
leading edge technologies and companies, the Company is deploying new and
leading edge technologies to create innovative products desired by personal
computer Original Equipment Manufacturers (OEMs), value added resellers and
system integrators, and ultimately by the end users. The Company sells
these products directly to OEMs and systems integrators as well as through
selected distributors and manufacturer's representatives. The Company
currently employs 36 full time employees, including senior management and
manufacturing personnel and 5 administrative personnel. The Company employs
3 professionals and 1 administrative person overseas. The Company also
employs one part-time person and contracts for services with several
consultants.
Currently the Company has four wholly owned subsidiaries: PTI Enclosures,
Inc., Newcorp Technology Ltd. (Japan), Newcorp Technology, Inc. (USA), and
Bridge R&D, Inc.
PTI Enclosures, Inc.
Through a stock swap transaction effective December 14, 1998, the Company
acquired 100% of the equity interest in PTI Enclosures, Inc. which has one
operating subsidiary: Classic Trading, Inc. (CTI), and one inactive
subsidiary, Dyna-5 International, Inc..
PTI Enclosures, Inc. (PTI)
PTI Enclosures, Inc. (PTI) main business focuses on designing,
developing, manufacturing, testing, and selling customer-designed enclosures
and power supplies for computer peripherals and other electronics devices.
Its customers include major computer and computer peripheral manufacturers
who use PTI's capabilities to produce OEM products manufactured to their exact
specifications. All OEM based and custom designed products provide high
quality at competitive prices. PTI also sells products to sub-system
integrators who add the peripherals and software to PTI's enclosures and
then sell these complete products to the end users. The enclosures PTI
provides encompass hard drive enclosures, tape enclosures, CD tower
enclosures, DVD tower enclosures, RAID enclosures, and server types of other
enclosures. PTI also supplies enclosures and power supplies for several
special-purpose systems.
Classic Trading, Inc.
CTI is an authorized distributor for Hewlett-Packard peripherals. CTI buys
and sells computer peripherals including InkJet printers, Laser printers,
printer supplies, hard disk drives, CD-ROM and CD-R drives, CD-R media,
DVD-ROM and DVD-RAM drives, floptical drives, expansion memory, peripheral
controllers, other computer peripheral, and enhancement products. CTI has
customers in several international markets.
Newcorp Technology Ltd. (Japan).
Through a stock swap transaction in November 1997, the Company acquired
100% of equity interest in Newcorp Technology Ltd., an R&D and high
technology sales company based in Tokyo, Japan. The mission of Newcorp
Japan is to develop and/or license latest technologies that could be used in
products made for major OEM customers. Newcorp Japan is actively pursuing
the acquisition and licensing of several new hardware and software
technologies from high technology R&D companies worldwide. Newcorp Japan
plans to capitalize on its connections and relationships in Japan to procure
unique new technologies and designs principally related to computer
enhancements and communications related businesses, through which the Company
expects to generate additional sales and profits. The Company established
many business relationships and commenced delivery of components that are made
of certain products for Microsoft Corporation and other OEMs.
Newcorp Technology, Inc. (USA)
Newcorp Technology, Inc. (USA) was established under the laws of the State
of Nevada in March 1999 and has two divisions: InkJet America and EEMB
Batteries.
At present, InkJet America division is buying, packaging, and selling
replacement inkjet printer cartridges to selected customers and distributors.
At the initial stage, InkJet America division has a limited sales volume.
The division plans to increase sales volume to several thousand pieces per
month. Once reaching sufficient sales volume of cartridges, it plans to
procure a specialized filling machine and manufacture its own brand name
inkjet printer cartridges.
EEMB, Co., Ltd., a People's Republic of China corporation, (EEMB) is a
major manufacturer of standard size batteries, high energy battery cells, and
special battery packs utilizing most popular battery cell chemistries. The
Company signed a three year exclusive sales agreement with EEMB China, and
immediately established the EEMB Batteries (USA) division with an objective
to procure, market and sell a family of batteries and battery packs,
principally to US based OEMs. EEMB Batteries also plans to sell packaged
batteries to retail and discount store chains.
EEMB USA further plans to sell batteries and battery packs to private label
customers as well as major notebook enhancement resellers. The Company
believes that with the continued proliferation of portable devices,
wireless devices, wireless remote controllers, and other wireless appliances,
the market demand for quality batteries will grow at an increasingly rapid
pace. Strategically, Newcorp Japan expects to acquire licenses for certain
proposed battery and intelligent charging IC circuit technologies, which EEMB
USA plans to use in new products to increase sales of its batteries and
battery packs.
In addition the Company expects to develop and possibly patent new battery
techniques to utilize Newcorp Japan's developing technologies. However,
there can be no assurance that EEMB USA will be successful in such efforts.
The primary mission of Newcorp Technology, Inc. (USA) is to innovate by
identifying, evaluating and procuring technologies that provide new products
with substantial added value. Newcorp USA plans to introduce several new
products in the near future. These products integrate new-generation PC and
energy related technologies to create an innovative solution for mobile
computer users. Newcorp USA is actively pursuing the acquisition and
licensing of additional new technologies from several major high technology
companies, principally in Japan and USA. Newcorp USA plans to develop, license
or acquire products that it is able to sell through its existing sales
channels. Newcorp USA is also in discussions with several companies, which
offer products that would complement or supplement the Company's core
products. These products could ultimately increase Newcorp USA sales revenues.
Newcorp USA plans to invest in several such products and/or technologies
related to both hardware and software. Newcorp USA commenced discussions
with several potential licensing or acquisition candidates in hopes to
negotiate firm contracts.
Since the Company executed non-disclosure agreements with several major
high technology companies, the Company is not permitted to disclose the
nature of these new technologies and products for potential licensing until
respective license agreements are in fact signed. However, there can be no
assurance that the Company will complete any additional licensing agreements
or technology acquisitions.
Bridge R&D, Inc.
Bridge R&D has three operating divisions: ADTX USA, DataStor and DVD
Technology.
ADTX USA
ADTX USA is a division of Bridge R&D Inc. Its main product is a family of
Redundant Array of Independent Drives (RAID) subsystems. These systems are
purchased from Advanced Technology and Systems Co., Ltd. an IBM Joint
Venture in Fujisawa Japan (hereinafter referred to as "ADTX Japan").
The Company established a close relationship with ADTX Japan, which
allows ADTX USA to organize and manage US operations on a contractual
basis, initially in North America and Europe. ADTX USA also sells on a
non-exclusive basis in other geographical areas including South America
and China.
ADTX USA General Manager, Mr. Naresh Chadha, manages the RAID business
including procurement, marketing, sales, and support for a family of high
performance RAID systems, specifically designed for fast non-compressed
video recording and playback applications.
ADTX USA sells both ready-to integrate RAID enclosures without hard disk
drives and completely configured and tested RAID sub-systems with hard
drives to OEMs, computer systems value added resellers, and complete solution
providers. ADTX also sells its systems through several major international
distributors. ADTX also provides Network Attached Storage (NAS) version of
the desktop RAID models. NAS RAID can be attached directly to an Ethernet
network without a need to be connected to a server. Thus the data can be
located away from the server, and the requests for data are handled without
taxing the server. ADTX also sells hard disk mirror products that provide
mirror copy of the data on a second disk that is packaged with the primary
disk. ADTX SCSI to IDE converter is a PCB module for converting 2.5 IDE
hard disk into SCSI hard disk. ADTX introduced a family of 1394 hubs and
repeaters operating at 200Mbits/sec, and plans to introduce 400Mbit/sec
models in Q3 1999. ADTX USA started shipping evaluation orders of these
systems in July 1998. ADTX USA and ADTX Japan jointly exhibited at
CEBIT 1999 in Hannover, Germany. ADTX USA started selling RAID
systems to international customers, targeting certain major European
distributors, system integrators and VARs first.
The latest forecast of RAID market by a market research firm, Datatrend,
projects the worldwide RAID market to reach $13 billion in 1998 and grow
20% annually.
Compared to current data backup methods which use a separate magnetic tape
drive, the RAID subsystem replaces a single hard disk drive inside the
computer with a redundant array of hard disk drives. The data are stored
on such RAID system in a manner that distributes and duplicates such data
across several disk drives in a pre-determined pattern. Depending on the
application, appropriate pattern can be selected by the user to provide
faster data access and also simultaneously allow uninterrupted operation
and continued data access in case of a defective or faulty disk drive.
Hard disk technology allows random access, while magnetic tape technology
provides only a sequential access, and it does not provide data redundancy,
only data backup and recovery. In case of a single hard disk drive failure,
the computer is not usable until the user either replaces the failed disk
drive and reloads the operating system and the data from the last tape
backup, or until the crashed disk is repaired, reformatted and the
operating system application programs and the data are reloaded. This
usually means that certain amount of data is lost and has to be re-entered
again, which costs both time and money, and the delay in computer
availability usually creates further losses. Additionally, while the old data
is being reconstructed, the newly incoming data cannot be entered and
processed, which causes an increase in data entry backlog and usually
brings additional errors and problems. Tape data transfer is also
comparatively slow, and the tape drive is an additional peripheral to
maintain that requires additional Interrupt Level and Device Address
inside the computer, additional controller card and software, all of which
are to add extra overhead and costs.
ADTX USA believes that decreasing disk drive costs per gigabyte of capacity
and disk controller costs are ushering in better and more cost effective
solutions using RAID which in turn will increase RAID acceptance and market
share. Accelerating this acceptance is the higher cost of downtime and
recovery from hard disk crash. These factors make a customer's decision to
buy RAID ever easier to justify.
The RAID systems ADTX USA provides use SCSI and SCSI-2 ultra-wide and fast
interface, while utilizing EIDE hard drives internally. The price/performance
is comparable to the leading edge of current SCSI technology. ADTX USA plans
to introduce LVD-2 and Fibre-Channel models in the future. Due to superior
data transfer rate for large sequential data blocks offered by ADTX "G"
series and "R" series RAID systems, ADTX USA marketing and sales efforts are
focused on Digital Video applications and the applications requiring transfers
of large blocks of data. ADTX currently provides the leading
price/performance RAID products in this market segment. However, there can be
no assurance that the Company will continue to maintain its quality and price
edge in the future.
RAID systems business has become very competitive. ADTX USA positions its
products as high performance products and prices most models to compete,
not on price, but rather on price/performance basis. ADTX USA does not
depend on any single major customer, and no customer comprises more than
5% of ADTX USA sales. ADTX USA is in a process of developing several
patentable and copyrightable products. However, there can be no assurance
that any of these products will generate any significant sales or profits for
ADTX USA. ADTX USA intends to file several patents and copyrights to
protect the results of its intellectual property developments. There can be
no assurance that ADTX will be successful in obtaining such patents and
copyrights.
Other than normal regulatory agency approvals such as UL, CSA, FCC, CE,
CB, etc., ADTX USA products do not require any specific government
approvals, nor are these products regulated by any governmental regulations.
Furthermore, ADTX Japan secures all the required products safety and
radiation compliance approvals prior to selling any such products in the
U.S. ADTX products are not subject to any environmental laws, and ADTX
products are not creating any pollution, nor do they have any other negative
impact on the environment.
DataStor
DataStor is a division of Bridge R&D, Inc. It identifies, designs,
develops, lightly manufactures, assembles, tests, and distributes metal and
plastic enclosures, brackets and enhancement kits for a variety of computer
platforms. Certain products are produced under specific contracts with
several manufacturers. DataStor also sells external peripheral kits
consisting of enclosures and power supplies, mounting brackets for various
peripheral devices, and complete kits for integration of various
peripheralsinto PC systems. DataStor supplies over 60 different mass storage
products, including enclosures for 1 to 7 drives, drive mounting brackets,
and fixed and removable mounting bracket kits. DataStor also procures,
markets, sells, and supports a family of medium size RAID-ready enclosures
and subsystems through selected distribution channels.
DataStor's customers include INGRAM Micro, NECX, Tech Data and other
National and international distributors who further sell to the second tier
distributors and systems integrators. Other customers are master resellers
who sell to second and third-tier OEMs, value added resellers and system
integrators. DataStor is dedicated to maintaining its market position as
an industry leader in making cutting edge technology available to customers.
DataStor dedicates its staff's efforts toward constantly researching and
developing new product lines and solutions. Part of the profits generated by
the DataStor and Newcorp divisions will be used to expand DataStor product
line. Additionally, part of the DataStor profits will fund R&D projects in
Newcorp Japan.
DataStor will continue to expand the number of OEM customers and systems
integrators to increase sales volume. DataStor will also introduce
additional new products to increase its sales revenues through the existing
distribution channels.
DVD Technology.
DVD Technology division is completing the design of advanced CD/DVD tower
and it is planning to source the design of a mixed peripherals enclosures for
sale to OEMs, value added resellers and systems integrators. CD/DVD towers
provide users access to data on several optical media disks (CD and
DVD).Principal advantage of this media is that it is read-only. This can be
valuable for companies requiring source of data that can not be changed by
any of the users accessing such data. Read-only media can also provide
immunity against potential viruses or changes to data by unauthorized users
of Internet and Web sites. DVD drive technology is still undergoing fast
changes, including the diverse standards provided by different manufacturers.
Even though DVD is believed to become the technology if choice for Video
content storage, there can be no assurance that the Company will be successful
in managing the rapid technology changes that are taking place.
Notebook Enhancements
Management of the Company has obtained an approval from the Board of
Directors to invest $40,000 in Integrated Technology Systems, Inc. (ITS),
a California company that specializes in the design, development, marketing
and sales on notebook hard disk enclosures (hard disk caddies). The Company
sells these notebook hard disk enclosures to ITS, who markets and resells
them to OEMs and VARs. The Company plans to place a representative on
the ITS Board of Directors concurrent with this investment. Should ITS
require additional financing, the Company has the first right of refusal to
participate in such financing.
Competition.
The manufacture and distribution of computer peripherals and computer
enhancement products are intensely competitive. The Company competes with
numerous other companies, including several major manufacturers and
distributors. Certain competitors have greater financial and other
resources than the Company. Consequently, such entities may begin to
develop, manufacture, market and distribute systems, which are substantially
similar or superior to the Company's products. There is no assurance that
the Company will be able to continue to develop and sell products that have
competitive advantage in the market.
Importance of New Product Development to Growth.
The Company's ability to develop and successfully introduce new products
will be a significant factor to its growth and remaining competitive.
Development of new product lines is costly and risk intensive. New product
development often requires long term forecasting of market trends, the
development and implementation of new designs, compliance with extensive
governmental regulatory requirements and substantial capital commitments.
There are a number of manufacturing and design risks inherent in
engineering high cost custom built prototypes upon which development and
contracting decisions are often made, into commercial products that are able
to be manufactured in large quantities at acceptable cost. Also, the
computer peripheral industry is characterized by rapid technological change.
As technological changes occur in the marketplace, the Company may have
to modify its products in order to keep pace with these changes and
developments.
The introduction of products embodying new technologies, or the emergence
of new industry standards, may cause the existing products, or even the
products under development, obsolete or unmarketable. Any failure by the
Company to anticipate or respond in a cost-effective and timely manner, to
government requirements, market trends, and customer requirements, or any
significant delays in product development or introduction, could have a
material adverse effect on the Company's business, results of operations, and
financial condition.
Expansion through Acquisitions and Joint Ventures.
From inception of new management in 1997, the Company has experienced rapid
growth in revenues and geographic scope of operations. Any future growth
may place a significant strain on management and on the Company's financial
resources and information processing systems. The failure to recruit
additional staff and key personnel, to have sufficient financial resources,
to maintain or upgrade these financial reporting systems, or to respond
effectively to difficulties encountered pursuing expansion could have a
material adverse effect on the Company's business, operating results and
financial condition.
The Company intends to expand its product lines and domestic and
international markets, in part, through acquisitions. The Company's
ability to expand successfully through acquisitions will depend upon the
availability of suitable acquisition candidates at the prices acceptable to
the Company, upon the Company's ability to consummate such transactions
and the availability of financing on terms acceptable to the Company.
There can be no assurance that the Company will be successful in
completing acquisitions.
Such expansions involve numerous risks, including possible adverse short-
term effects on the Company's operating results or the market price of the
common stock. These acquisitions and joint ventures may not be subject to
approval or review by the Company's stockholders. The Company does not
expect that it will obtain an appraisal by any independent appraisers with
respect to any such acquisition.
Certain of the Company's future acquisitions may also give rise to an
obligation by the Company to make contingent payments or to satisfy certain
repurchase obligations, which could have an adverse financial effect on the
Company. In addition, integrating acquired businesses may result in a loss
of customers or product lines of the acquired businesses and also requires
significant management attention and may place significant demands on the
Company's operations, information systems and financial resources. The
failure effectively to integrate acquired businesses with the Company's
operations could adversely affect the Company.
In addition, the Company competes for acquisition opportunities with
companies which have significantly greater financial and management
resources than those of the Company. There can be no assurance that suitable
acquisition opportunities will be identified and that any such transactions
can be consummated, or that, if acquired, such new businesses can be
integrated successfully and profitably into the Company's operations.
Moreover, there can be no assurance that the Company's historic rate of
growth will continue and that the Company will continue to successfully
expand, or that growth or expansion will result in profitability.
Several of the matters discussed in this document contain forward-looking
statements that involve risks and uncertainties. Factors associated with
the forward-looking statements, which could cause actual results to differ
materially from those projected or forecast in the statements, appear
below. In addition to other information contained in this document, readers
should carefully consider the following cautionary statements and risks
factors.
Cautionary Statements and Risk Factors
Limited Operating History; History of Losses and Accumulated Deficits.
While the Company has been in existence since 1969, its operations between
1975 and 1997 were limited to the exploration of acquisition opportunities.
Bridge Technology Inc. and its subsidiaries have only been in operation
since June 1, 1997. At December 31, 1998, the Company's accumulated deficit
was $1,140,935. The ability of the Company to obtain and sustain
profitability will depend, in part, upon the successful marketing of existing
products and the successful and timely introduction of new products. There
can be no assurance that the Company will be able to generate and sustain net
sales or profitability in the future.
Need for Additional Financing.
Based on its current operating plan, the Company anticipates further
capital will be required during the next twelve months to satisfy the
Company's expected increased working capital requirements and research and
development requirements for its new products already in the planning or
development stage. The Company is currently exploring alternative to fulfill
these requirements. No assurance can be given that additional financing will
be available when needed or that, if available, it will be on terms favorable
to the Company or its stockholders. If needed funds are not available, the
Company may be required to curtail its operations, which could have a
material adverse effect on the Company's business, operating results and
financial condition. If additional funds are raised through the issuance of
equity securities, additional dilution to stockholders may occur.
Dependence on Key Personnel.
The Company's future performance will depend significantly upon its
management. Management of the Company, except for John J. Harwer, Chief
Executive Officer, consists of employees "at will". Therefore, if the
Company is not successful, management may be replaced by the shareholders.
Removal of one or more present officers and directors of the Company and a
corresponding reduction in, or elimination of, their participation in the
future affairs of the Company, would have a negative effect on the business
prospects of the Company.
The loss of service of one or more of key employees could have a material
adverse effect on the Company's business and operations. The Company has
initially entered into an Employment Agreement with John J. Harwer and
pursuant to which Mr. Harwer has agreed to render services to the Company
for a period of five years at an annual salary of $200,000. Mr. Harwer has
been paid $160,000 for 1998 with the balance of his salary waived. For 1999
to date Mr. Harwer has been paid at the rate of $10,000 per month. Board of
Directors, after an annual meeting in May 1999, shall review all officers
salaries, including Mr. Harwer, in light of current operating results. The
Company does not maintain any insurance on the lives of its senior
management.
In addition, the Company's success will be dependent upon its ability to
recruit and retain additional qualified personnel. Any failure by the
Company to retain and attract key personnel could have a material adverse
effect on the Company's business, operating results, and financial
condition.
Limited Proprietary Protection.
The Company's success and ability to compete is dependent in part upon its
proprietary technology. The Company's proprietary technology is not yet
protected by any patents. However, the Company's CEO Mr. Harwer is actively
developing patent applications for at least three of the Company's
technological products. The Company has protected certain products by
registering their brand names with the US Copyright office. Therefore, to
date the Company has relied primarily on trademark, trade secret and
copyright laws to protect its technology. Also, the Company has
implemented a policy that most senior and technical employees and
third-party developers sign non-disclosure agreements. However, there
can be no assurance that such precautions will provide meaningful
protection from competition or that competitors will not be able to develop
similar or superior technology independently. Also, the Company has no
license agreements with the end users of its products, so it may be possible
for unauthorized third parties to copy the Company's products or to reverse
engineer or otherwise obtain and use information that the Company regards
as proprietary. If litigation is necessary in the future, to enforce the
Company's intellectual property rights, to protect the Company's trade
secrets, or to determine the validity and scope of the proprietary rights of
others, such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's
business, operating results and financial condition.
Ultimately, the Company may be unable, for financial or other reasons, to
enforce its rights under intellectual property laws. In addition, the laws
of certain countries in which the Company's products are or may be
distributed may not protect the company's products and intellectual property
rights to the same extent as the laws of the United States.
The Company believes that its products do not infringe upon any valid
existing proprietary rights of third parties. Although the Company has
received no communication from third parties alleging the infringement of
proprietary rights of such parties, there can be no assurance that third
parties will not assert infringement claims in the future. Any such third
party claims, whether or not meritorious, could result in costly litigation
or require the Company to enter into royalty or licensing agreements.
There can be no assurance that the Company would prevail in any such
litigation or that any such licenses would be available on acceptable terms,
if at all. If the Company were found to have infringed upon the proprietary
rights of third parties, it could be required to pay damages, cease sales of
the infringing products and redesign or discontinue such products, any of
which alternatives, individually or collectively could have a material adverse
effect on the Company's business, operating results and financial condition.
Speculative Nature of Company's Proposed Plan.
The success of the Company's proposed plan of operation will depend to a
great extent on it management with limited financial resources. Present
funding is expected to be sufficient to sustain the Company's present
operation through December 31, 1999. If profitable business is not
developed quickly, the Company will need additional outside financing to
continue its operations. There is no assurance that outside financing will be
available to the Company, and if such financing were available that the terms
of such proposed financing would be acceptable to the Company.
Lack of Market Research or Marketing Organization.
The Company has determined on its own that a market demand exists for the
Company's contemplated business. The Company does not have a separate
marketing organization. Present management will market the Company's
products and services on a division basis as they are developed. Even if
demand identified for computer peripheral concepts to be developed by the
Company, there is no assurance the Company will be successful in business.
Lack of Diversification.
The Company's proposed operations, even if successful, will in all
likelihood be limited in nature until the Company obtains additional
financing expected to be required in calendar year 2000. The Company's
inability to diversify its activities into a number of areas may subject the
Company to economic fluctuations within a particular specific field, and
therefore increase the risks associated with the Company's operations.
Regulation.
Although the Company will be subject to regulation under the Securities
Exchange Act of 1934, management believes the Company will not be subject
to regulation under the Investment Company Act of 1940, insofar as the
Company will not be engaged in the business of investing or trading in
securities. In the event the Company engages in business combinations
which result in the Company holding passive investment interests in a
number of entities, the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be
required to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained
no formal determination from the Securities and Exchange Commission as
to the status of the Company under the Investment Company Act of 1940
and, consequently, any violation of such Act would subject the Company
to material adverse consequences.
Product Liability.
Although the Company has not experienced any product liability claims to
date, the sale and support of products by the Company may entail the risk of
such claims, and there can be no assurance that the Company will not be
subject to such claims in the future. A successful product liability claim
or claim arising as a result of use of the Company's products brought
against the Company, or negative publicity attendant to any such claim, could
have a material adverse effect upon the Company's business, operating results
and financial condition. The Company intends to procure product liability
insurance with coverage limits of $1,000,000 per occurrence and $1,000,000
per year. While the Company believes that these amounts are sufficient, there
can be no assurance that amounts are adequate insurance coverage, there can
be no assurance that the amount of insurance will be adequate to satisfy
claims made against the Company in the future, or that the Company will be
able to obtain insurance in the future at satisfactory rates or in adequate
amounts.
Limitation of Liability and Indemnification.
The Company's Amended and Restated Certificate of Incorporation limits, to
the maximum extent permitted by the Nevada General Corporation Law ("Nevada
Law), the personal liability of directors for monetary damages for breach of
their fiduciary duties as a director, and provides that the Company shall
indemnify its officers and directors and may indemnify its employees and
other agents to the fullest extent permitted by law.
The Company has entered into indemnification agreements with its directors
and executive officers which may require the Company, among other things,
to indemnify such directors or executive officers against liabilities that
arise by reason of their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified.
The Company has not purchased director's and officer's liability insurance.
Nevada Law provides that a corporation may indemnify a director, officer,
employee or agent made, or threatened to be, a party to an action by reason
of the fact that he was a director, officer, employee or agent of the
corporation or was serving at the request of the corporation against
expenses actually and reasonably incurred in connection with such action if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect of any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful.
Nevada Law does not permit a corporation to eliminate a director's duty of
care, and the provisions of the Company's Amended and Restated Certificate
of Incorporation have no effect on the availability of equitable remedies,
such as injunction or rescission, for a director's breach of the duty of
care. INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISION, OR OTHERWISE, THE COMPANY AS BEEN
INFORMED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION
SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS
THEREFORE UNENFORCEABLE.
Item 2. Description of Property.
The Company has minimal properties and at this time has no agreements to
acquire any properties. The Company's corporate offices, and the offices of
its subsidiary Bridge R&D, Inc., are located in sublet facilities at 12601
Monarch Street, Garden Grove, CA. 92841. This facility has approximately
50,000 square feet and it houses corporate offices, manufacturing and
warehouse operations. The lease is for 5 years at an average annual rent of
$145,000 per year. In addition the Company has entered into a three year
lease for additional 2,000 square feet of office and warehouse space in Las
Vegas, Nevada at $12,000 per annum.
The Company is in the process of finalizing several patent applications. The
proposed patents involve certain designs that the Company believes will give
it a competitive edge. There can be no assurance that the Company's pantent
applications will result in the issuance of patents. The Company's policy is
to file patent applications on a worldwide basis to protect technology,
inventions and improvements that are considered important to the development
of its business. The Company will, as a matter of policy, seek patent
protection in each of the three major geographic markets: United States,
Europe and the Pacific Rim. The Company also relies on trade secrets, know-
how, continuing technological innovations and licensing opportunities to
develop and maintain its competitive position. The Company has also acquired
over 20 brand names that were registered with the U.S. Patent and Trademark
office. The Company plans to use these names in the continuous marketing of
its products.
Manufacturing
The Company received and maintains the ISO 9002 certification to qualify as
an approved vendor for major computer and computer peripheral manufacturers.
The Company also uses off-shore vendors to procure certain sub-assemblies,
from which the Company then assembles the final products. Before shipment the
products are inspected and tested to maintain the high quality and low return
levels demanded by the Company's customers.
Item 3. Legal Proceedings
There is no litigation pending or threatened by or against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Market Price for Common Equity and Related Stockholder Matters.
The Company's Common Stock is expected to be traded on the NASDAQ OTC
BULLETIN BOARD under the symbol "BTGY". The Company has been
advised that trading will commence after the filing of this subject amendment
to Form 10KSB.
As of April 13, 1999, there were approximately 1,800 shareholders of record
of the Company's Common Stock. Such number was determined from records
maintained by the Company's Transfer Agent and does not include beneficial
owners of the Company's securities whose securities are held in the names
of various dealers and/or clearing agencies.
The Company has never paid any dividends on its Common Stock. It is
management's present intention not to declare or pay cash dividends on the
Company's Common Stock, but to retain earnings, if any, for the operation
and expansion of the Company's business.
Item 6. Management's Discussion and Analysis or Plan of Operation
Safe Harbor Statement.
Statements which are not historical facts, including statements about the
Company's confidence and strategies and its expectations about new and
existing products, technologies and opportunities, market and industry
segment growth, demand and acceptance of new and existing products are
forward looking statements that involve risks and uncertainties. These
include, but are not limited to, product demand and market acceptance risks,
the impact of competitive products and pricing, the results of financing
efforts, the loss of any significant customers of any business, the effect of
the Company's accounting policies, the effects of economic conditions and
trade, legal, social, and economic risks, such as import, licensing, and,
trade restrictions; the results of the Company's business plan and the impact
on the Company of its relationship with its lenders.
Results of Operations for Fiscal Years ended 12/31/1997 and 1998
Net Sales increased 43% from $14,488,828 in fiscal 1997 to $20,737,017 in
fiscal 1998. Products and services mix for the fiscal year 1998 has
changed substantially in comparison to prior year billings principally due to
the development of new core business by the Company in United States and
Japan. The Company has added and is expected to continue to add additional
products to its product mix.
Gross Profit increased 44% from $2,015,547 in fiscal 1997 to $2,903,698 in
fiscal 1998 principally as a result of augmented sales volume. Gross
profit as a percentage of net sales was 14% in 1998, the same as in 1997.
Selling and administrative expenses increased 60% from $2,031,309 in fiscal
1997 to $3,250,477 in fiscal 1998 and increased as percentage of sales from
14% to 16%. The increase in SG&A expenses is principally attributed to the
substantial increase in business from 1997 to 1998, and the related
indirect expenses required to support the sales volume increase, principally
indirect salaries and marketing expenses.
Net loss increase 284% from $98,847 in fiscal 1997 to $379,335 in fiscal
1998. Net losses from 1996, 1997 and 1998 are essentially attributed to
various subsidiary and division startup costs associated with the substantial
increase in business sales such as the setup of the organization and sundry
related expenses to enable the Company to pursue its planned growth.
Effects of Inflation.
The Company believes that inflation has not had a material effect on its'
net sales and results of operations.
Liquidity and Capital Resources
Since current management acquired control of the Company in early 1997, the
Company has financed its operations with internal generated cash and with
the private placement of its securities totaling in excess of $1,600,000 to a
limited number of accredited investors with knowledge of the Company's
operations and plans to expand. The private placement commenced in June
1997 and was completed on or about June 30, 1998.
The Company's capital requirements have been, and will continue to be,
significant and its cash requirements have been sufficient to cover its
cash flow from operations. At December 31, 1998, the Company had a working
capital surplus of $2,157,692 and cash and cash equivalents of $752,015
compared to a working capital surplus of $2,428,318 and cash and cash
equivalents of $202,130 at December 31, 1997. Since inception, the Company
has satisfied its working capital requirements through revenues generated
from operations, the issuance of equity and debt securities, and loans.
Net cash used in operating activities in the twelve months ended December
31, 1998 was $1,008,291, as compared to net cash provided of $123,032 in the
twelve months ended December 31, 1997 the difference is mainly due to net
loss and increase in inventory and trade receivables, decrease in accounts
payable and accrued liabilities, and changes in other operating activities.
Net cash used in investing activities in the twelve months ended December
30, 1998 was $267,818 essentially for the purchase of fixed assets, as
compared to $92,521 for the purchase of fixed assets in twelve months ended
December 31, 1997.
Net cash provided by financing activities in the twelve months ended
December 31, 1998 was $1,859,288 as compared to $52,441 used in financing
Company's activities in the twelve months ended December 31, 1997. This
reflects the cash provided from the issuance of the Company's stock in a
private placement.
The Company has obtained approval from the Board of Directors to invest
$40,000 in Integrated Technology Systems, Inc., a California Company that
specializes in the design, development, marketing and sales of notebook
hard disk enclosures.
The Company believes that it can fund the growth of its core business with
internally generated cash flow, in addition to its substantial cash
reserves and from the sale of its common stock.
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), had been subject to
such currency fluctuations and subsequently suffered significant losses due
mainly to the decline of Japanese yen from 106 Yen/dollar to 138.29
Yen/dollar in 1997 and early 1998. 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.
Fluctuation in Quarterly Results
Quarterly results may be adversely affected in the future by a variety of
factors, including the possible costs of obtaining capital, as well as the
initial costs associated with the release of new products and promotions
taking place within the quarter. The Company plans to fund research and
development and its expanded patent work with cash generated from internal
operations. To the extent that such expenses proceed, or are not
subsequently followed by, increased revenues, the Company's business,
operating results and financial condition will be adversely affected.
Year 2000 Issue
Like other companies, the Company could be adversely affected if the
computer systems it and its suppliers or customers use do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as
the Year 2000 issue. Additionally, this issue could also impact non-
accounting systems.
The Company has implemented a plan to modify its business technologies to
be compliant for the year 2000 and is in the process of converting critical
data processing systems and process control systems associated with its
accounting and instructional equipment. These projects are expected to be
substantially complete by mid-1999 and the cost is estimated to be minimal.
The Company does not expect this effort to have a significant effect on
operations.
The failure to correct a material Year 2000 problem could result in an
interruption in normal business activity. The Company's plan is expected
to significantly reduce the risk associated with this issue. However, due to
the inherent uncertainty of this issue and dependence on third-party
compliance, no assurance can be given that potential failures will not
adversely affect the Company's operations, liquidity and financial position.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 130 (SFAS No. 130),
"Reporting Comprehensive Income", issued by the Financial Accounting
Standards Board (FASB) is effective for financial statements issued for the
periods ending after December 15, 1997. Earlier application is permitted.
SFAS No. 130 establishes certain standards for reporting of comprehensive
income and its components in a full set of general-purpose financial
statements. The Company has adopted this statement which had no material
effect on its financial position or results of operations.
Statement of Financial Accounting Standards No. 131 (SFAS No. 131),
"Disclosure about Segments of an Enterprise and Related Information",
issued by the Financial Accounting Standards Board (FASB) is effective for
financial statements with fiscal years beginning after December 15, 1997. The
new standard requires that public business enterprises report certain
financial information about operating segments of interim periods issued to
shareholders. It also requires that public business enterprise report
certain information about their products and services, the geographic areas
in which they operate and their major customers. The Company has
adopted this statement which had no material effect on its financial
position or results of operations.
Statement of Financial Accounting Standards No. 132, Employer's Disclosures
about Pensions and Other Postretirement Benefits (SFAS No. 132) amended the
disclosure requirements for pensions and other postretirement benefits.
The Company would not expect the adoption to have significant change on the
Company's financial statement disclosures.
Statement of Financial Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS No. 133). SFAS No. 133 requires
companies to recognize all derivatives contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as
a hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (ii) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Historically, the Company has not entered into
derivatives contracts either to hedge existing risks or for speculative
purposes. Accordingly, the Company does not expect adoption of the new
standard on January 1, 2000 to affect its financial statements.
Statement of Financial Accounting No. 134, Accounting for Mortgage-Backed
Securities Retained After the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise (SFAS No. 134) is effective for the
first fiscal quarter beginning after December 31, 1998. As the Company does
not engage in these types of transactions, the Company does not expect
adoption of the new standard on January 1, 1999 to have a material effect on
its financial position or results of operations.
Item 7. Financial Statements
<PAGE>
Bridge Technology, Inc. and Subsidiaries
_______________________
Consolidated Financial Statements
For the Years Ended December 31, 1997 and 1998
_______________________
<PAGE>
<TABLE>
<S> <C>
Bridge Technology, Inc. and Subsidiaries
Index to Consolidated Financial Statements
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements
Balance Sheets F-3
Statements of Operations and Comprehensive Loss F-4
Statements of Shareholders' Equity F-5
Statements of Cash Flows F-6
Summary of Accounting Policies F-8
Notes to Financial Statements F-13
</TABLE>
F-1
<PAGE>
Report of Independent Certified Public Accountants
The Shareholders of
Bridge Technology, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Bridge
Technology, Inc. (a Nevada corporation) and subsidiaries as of December 31,
1997 and 1998, and the related consolidated statements of operations and
comprehensive loss, shareholders' equity, and cash flows for the years ended
December 31, 1997 and 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bridge
Technology, Inc. and subsidiaries as of December 31, 1997 and 1998 and the
results of their operations and their cash flows for the years ended December
31, 1997 and 1998 in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Los Angeles, California
March 15, 1999
F-2
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION> December 31,
1997 1998
--------------------
<S> <C> <C>
Assets (Note 4)
Current assets:
Cash $ 202,130 $ 752,015
Accounts receivable less allowance 3,183,300 4,710,197
for doubtful accounts of $47,482
and $45,571 (Note 7 and 11)
Subscription receivable (Note 8) 1,213,630 25,000
Advances to employees - 27,500
Other receivables (Note 7) 96,941 98,004
Inventory, less provision of $241,266 961,277 1,320,588
and $0 (Note 1)
Other current assets 79,275 195,789
----------------------
Total current assets 5,736,553 7,129,093
Property and equipment, net (Note 2 and 7) 270,818 366,433
Intangible assets, net of amortization of 30,402 -
$66,623 in 1997
Insurance receivable 21,903 -
Deferred income tax (Note 3) 54,580 63,905
Other assets 24,900 229,676
---------------------
Total assets $ 6,139,156 $ 7,789,107
=======================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable (Note 7) $ 2,758,397 $3,710,781
Payable to employee 13,792 41,161
Related party payable (Note 7) 50,000 -
Accrued liabilities 164,870 563,071
Bank Loans payable (Notes 4 and 7) 306,522 632,419
Other current liabilities 14,654 23,969
----------------------
Total current liabilities 3,308,235 4,971,401
Notes payable, less current portion (Note 5) 13,202 210,213
Notes payable, less current portion to 100,000 100,000
shareholders (Note 7)
----------------------
Total liabilities 3,421,437 5,281,614
----------------------
Commitments and Contingencies (Notes 6 and 10)
Shareholders' equity (Notes 7,8,9 and 10):
Convertible, cumulative and redeemable
preferred stock, $1 stated value per
share, 500 shares authorized and
outstanding, redeemable at $50,000 50,000 -
Common stock; par value $0.01 per share,
authorized 10,000,000 shares, 3,482,936
shares and 6,132,936 shares outstanding
at December 31, 1997 and 1998 34,829 61,329
Additional paid-in capital 2,182,053 3,600,111
Stock subscribed 1,213,630 25,000
Accumulated deficit (759,350)(1,140,935)
Accumulated other comprehensive income (3,443) (38,012)
-----------------------
Total shareholders' equity 2,717,719 2,507,493
Total liabilities and shareholders' equity $ 6,139,156 $7,789,107
=======================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-3
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Operation
and Comprehensive Loss
<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1998
----------------------
<S> <C> <C>
Net sales (Notes 7 and 11) $ 14,488,828 $ 20,737,017
Cost of sales 12,473,281 17,833,319
------------------------
Gross profit 2,015,547 2,903,698
Selling, general and administrative expense 2,031,309 3,250,477
------------------------
Loss from operations (15,762) (346,779)
Other (income) expense:
Interest expense, net 10,943 29,931
Other expense 97,520 (2,034)
------------------------
Loss before income taxes (124,225) (374,676)
Income taxes provision (benefit) (Note 3) (25,378) 4,659
------------------------
Net loss (98,847) (379,335)
Preferred stock dividends (1,500) (2,250)
------------------------
Net loss applicable to common shares $(100,347) $(381,585)
Weighted average number of common stock outstanding 3,015,813 5,419,239
------------------------
Basic and diluted loss per share $ (.03) $ (.07)
------------------------
Comprehensive loss and its components consist of the following:
Net loss $ (98,847) (379,335)
Foreign currency translation adjustment, net of tax 3,491 (34,569)
-----------------------
Comprehensive loss $ (95,356) $(413,904)
-----------------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Consolidated Statement of Shareholders' Equity
For the Years Ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in
Shares Amount Shares Amount Capital
<S> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1997 - $ - 2,732,936 $27,329 $1,600.833
Issuance of preferred stock
on April 1, 1997 (Note 8)500 50,000 - - -
Issuance of common stock
(Note 8) - - 750,000 7,500 367,500
Stock Subscribed - - - - -
Additional paid-in
capital - - - - 213,720
Net loss - - - - -
Dividends paid - - - - -
Translation adjustment - - - - -
--------------------------------------------------
Balance, December 31, 1997
500 50,000 3,482.938 34,829 2,182.053
Subscription collection - - 2,300,000 23,000 1,127,000
Subscription collection - - - - 63,630
Issuance of common stock
(Note 8) - - 250,000 2,500 122,500
Conversion of preferred
stock(Note 8) (500) (50,000) 100,000 1,000 49,000
Stock subscribed - - - - -
Additional paid-in-capital - - - - 55,928
Net loss - - - - -
Dividends paid - - - - -
Translation adjustment - - - - -
--------------------------------------------------
Balance, December 31, 1998
- $ - 6,132,936 $61,329 $3,600,111
--------------------------------------------------
</TABLE>
Continuation of Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Other Accumulated
Accumulated Stock Comprehensive
Deficit Subscription Loss Total
Balance,January 1, 1997 $ (659,003) $ - $ (6,934) $ 962,225
Issuance of preferred stock
on April 1, 1997 (Note 8) ) - - - 50,000
Issuance of common stock
(Note 8 - - - 375,000
Stock Subscribed - 1,150,000 - 1,150,000
Additional paid-in
capital - 63,630 - 277,350
Net loss (98,847) - - (98,847)
Dividends paid (1,500) - - (1,500)
Translation adjustment - - 3,491 3,491
---------------------------------------------------
Balance, December 31, 1997 (759,350) 1,213,630 (3,443) 2,717,719
Subscription collection - - (1,150,000) - -
Subscription collection - - (63,630) - -
Issuance of common stock
(Note 8) - - - 125,000
Conversion of preferred
stock(Note 8) - - - -
Stock subscribed - 25,000 - 25,000
Additional paid-in-capital - - - 55,928
Net loss (379,335) - - (379,335)
Dividends paid (2,250) - - (2,250)
Translation adjustment - - - (34,569) (34,569)
----------------------------------------------------
Balance, December 31, 1998 (1,140,935) $ 25,000 $ (38,012) $2,507,493
-----------------------------------------------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1998
------------------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (98,847) $(379,335)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 102,579 119,802
Provision for doubtful accounts 78,052 6,120
Provision for slow moving inventory 241,266 -
Loss on disposal of fixed assets 21,885 75,409
Stock related compensation in PTI 30,720 -
Stock in exchange for services 33,000 5,928
Increase (decrease) from changes in operating
assets and liabilities:
Trade receivables (1,508,698) (1,526,897)
Inventory 165,408 (359,311)
Other receivables (54,936) 56,418
Advances to employees - (27,500)
Prepaid and other assets (34,830) (116,514)
Other assets (101,383) (249,679)
Accounts payable 1,178,708 952,384
Accrued liabilities 52,546 398,201
Other liabilities 17,562 36,683
Net cash provided by ( used in) operating
activities 123,032 (1,008,291)
-------------------------
Cash flows from investing activities
Purchase of property, plant and equipment (115,753) (275,118)
Intangible assets (7,800) -
Proceeds from disposal of fixed assets 31,032 7,300
------------------------
Net cash used in investing activities (92,521) (267,818)
------------------------
Cash flows from financing activities
Proceeds from loans payable 529,476 557,499
Repayments on loans payable (931,772) (34,591)
Repayments on notes payable and related interest (52,227) -
Proceeds from issuance of preferred stock
in Bridge Technology 50,000 -
Proceeds from issuance of common stock
in Bridge Technology 375,000 1,275,000
Repayment on related party payable (71,418) (50,000)
Proceeds from issuance of common stock in PTI 50,000 113,630
Dividends paid (1,500) (2,250)
-----------------------
Net cash provided by (used in) financing
activities (52,441) 1,859,288
-----------------------
Effect of exchange rate changes on cash (35,516) (58,294)
-----------------------
Net increase (decrease) in cash and cash
equivalents (57,446) 524,885
Cash and cash equivalents, beginning of year 259,576 202,130
-----------------------
Cash and cash equivalents, end of year $202,130 $727,015
Cash paid during the year for:
Interest $ 33,051 $ 10,943
Income taxes 2,970 8,659
-----------------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Supplemental disclosure of non-cash activities:
PTI issued 66,000 shares of common stock in October 1997 in exchange for
consulting services provided by one of the Company's minority shareholders
and his company at $0.50 per share.
PTI issued 200,000 shares of common stock to convert a subordinate
shareholder loan of $100,000 into equity on November 1, 1997.
PTI granted 181,800 options to key employees, all officers and directors for
their performances and contributions in 1994 and 1995. Accordingly, a stock
compensation cost of $27,270 and a non-employee director compensation cost of
$3,450 have been recognized and included in general and administrative
expense for 1997.
In 1997 PTI sold 181,800 shares of common stock at $0.50 per share and
recorded a stock subscription receivable of $63,630.
In November 1997, the Company issued 100,000 shares of common stock to
acquire 100% ownership of Newcorp Technology Limited located in Japan.
PTI issued 11,856 shares of common stock in December 1998 in exchange for
consulting services provided by one of the Company's minority shareholders at
$0.50 per share.
PTI issued 50,000 shares of common stock in December 1998 in exchange for
100% of the outstanding shares of Classic Trading, Inc. at $0.50 per share.
In 1998 PTI sold 50,000 shares of common stock at $0.50 per share and
recordeda stock subscription receivable of $25,000.
In December 1998, the Company issued 1,926,696 shares of common stock in
exchange for 100% of the outstanding shares of PTI Enclosures, Inc. See
Basis of presentation for details.
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-7
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Summary of Accounting Policies
Basis of Presentation
Bridge Technology, Inc. (formerly Land Acquisition and Nevada Development
Corporation, thereafter, the Company) was organized under the laws of the
State of Nevada on April 15, 1969 to conduct real estate business. The
Company was unsuccessful in its real estate business accumulating losses in
excess of $280,000 and operations ceased in 1972 and prior management kept
the Company inactive.
During April 1997, Cayman Computer Alliance Corporation purchased control of
the Company from prior management in a private transaction. After this
transaction, the name of Land Acquisition and Nevada Development Corporation
was changed into Bridge Technology, Inc. At present, the Company is located
in California and is primarily engaged in development and distribution of
various hardware, software, and peripheral products used in computer systems
and sales to value added resellers and system integrators.
The Company formed a wholly-owned subsidiary in April 1997 and commenced
operation on June 1, 1997 with the name of Bridge R&D, Inc.
On November 1, 1997, the Company exchanged 100,000 shares of its common stock
for 100% of issued and outstanding common shares of Newcorp Technology
Limited, a research and development corporation organized under the laws of
Japan. This transaction was accounted for as a pooling of interest
transaction.
On December 14, 1998, the Company issued 1,926,696 shares of its common stock
in exchange for 100% equity interest of PTI Enclosures, Inc. (PTI), a
computer enclosures entity incorporated in the State of California, via a
stock swap transaction. The terms of this transaction were: (1) one share of
common stock of the Company was exchanged for one share of common stock of
PTI including the shares subscribed before December 14, 1998; and (2) one
common stock warrant of the Company was exchanged for one common stock
warrant of PTI a total of 210,000 common stock warrants without changing the
exercise price. Among the 1,926,696 shares, the actual issued and
outstanding shares were 1,876,696 at December 31, 1998. The remaining 50,000
shares of common stock were issued subsequent to December 31, 1998.
This stock swap transaction was accounted for as a pooling of interest.
Consequently, the consolidated financial statements report the consolidated
financial position, results of operations, changes in shareholders' equity,
and cash flows of the Company as if the two entities had been combined for
all years presented.
Basis of Accounting
The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America
which include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements are presented in U.S.
dollars.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
F-8
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Summary of Accounting Policies
Accounts Receivable and Concentration of Credit Risk
During the normal course of business, the Company extends unsecured credit to
its customers who are located in various geographical areas. Typically
credit terms require payment made by the thirtieth day following the sale.
The Company evaluates and monitors the creditworthiness of each customer on a
case-by-case basis. The Company provides an allowance for doubtful accounts
based on its continuing evaluation of its customers' credit risk. The
Company does not require collateral from its customers. The Company
maintains its cash accounts at credit worthy financial institutions.
Inventories
Inventories consist principally of microcomputer component parts and are
stated at the lower of cost (first-in, first-out) or market.
Foreign Currency Translation and Transactions
The financial position and results of operations of the Company's foreign
subsidiary are determined using local currency as the functional currency.
Assets and liabilities of the subsidiary are translated at the prevailing
exchange rate in effect at each year end. Contributed capital accounts are
translated using the historical rate of exchange when capital is injected.
Income statement accounts are translated at the average rate of exchange
during the year. Translation adjustments arising from the use of different
exchange rates from period to period are included in the cumulative
translation adjustment account in shareholders' equity. Gains and losses
resulting from foreign currency transactions are included in operations.
The exchange rates as of December 31, 1997 and 1998 were $1 to 132.40 yen and
113.08 yen and the average rate of exchange during 1997 and 1998 were $1 to
121.60 yen and 130.99 yen.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are computed primarily utilizing the straight-line method over
the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
Estimated Useful
Life (in Years)
----------------
<S> <C>
Computer equipment 7
Furniture, fixtures and equipment 5-7
Vehicles 5-6
Leasehold improvements 7
</TABLE>
Maintenance, repairs and minor renewals are charged directly to expense as
incurred. Additions and betterments to property and equipment are
capitalized. When assets are disposed of, the related cost and accumulated
depreciation thereon are removed from the accounts and any resulting gain or
loss is included in statement of operations.
F-9
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Summary of Accounting Policies
Revenue Recognition
The Company recognizes revenue when the risk of loss for the product sold
passes to the customer and any right of return can be quantified, which is
generally when goods are shipped.
Fair Value of Financial Instruments
The carrying amount of cash, trade accounts receivable, notes receivable,
trade accounts payable and accrued liabilities are reasonable estimates of
their fair value because of the short maturity of these items. The carrying
amounts of the Company's lines of credit and notes payable approximate fair
value because the interest rates on these instruments are subject to change
with market interest rate.
Use of Estimates
The preparation of financial statements in conformity with US generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Among the more significant estimates included in these
financial statements are the estimated accounts receivable allowance for
doubtful accounts and the deferred income tax asset allowance. Actual
results could differ from those estimates.
Income Taxes
The Company accounts for income taxes using the liability method, which
requires an entity to recognize deferred tax liabilities and assets.
Deferred income taxes are recognized based on the differences between the tax
bases of assets and liabilities and their reported amounts in the financial
statements which will result in taxable or deductible amounts in future
years. Further, the effects of enacted tax laws or rate changes are included
as part of deferred tax expenses or benefits in the period that covers the
enactmentdate. A valuation allowance is recognized if it is more likely than
not that some portion, or all of, a deferred tax asset will not be realized.
Earnings (Loss) Per Share
In 1997, Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128). SFAS No.
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any diluted effects of options,
warrants, and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented and, where
applicable, restated to confirm to the requirements of SFAS No. 128.
Reclassifications
Certain reclassifications have been made to the prior year consolidated
financial statements to conform with the 1998 presentation.
F-10
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Summary of Accounting Policies
Accounting for the Impairment of Long Lived Assets and of the long-lived
Assets to Be Disposed of:Statement of the Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for the Long-
Lived Assets to be Disposed Of" (SFAS 121) establishes new guidelines
regarding when impairment losses on long-lived assets, which include plant
and equipment, and certain identifiable intangible assets, should be
recognized and how impairment losses should be measured. The Company has
adopted this accounting standard and its effects on the financial position
and the results of operations were immaterial.
Stock-based Compensation:
Statements of Financial Accounting Standards No. 123 "Accounting for Stock-
Based Compensation" (SFAS 123) establishes a fair value method of accounting
for stock-based compensation plans and for transactions in which an entity
acquires goods or services from nonemployees in exchange for equity
instruments. The Company adopted this accounting standard on January 1,
1997. SFAS 123 also encourages, but does not require companies to record
compensations utilizing the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, compensation cost for stock options is measured as the excess,
if any, of the fair market price of the Company's stock at the date of the
grant over the amount an employee must pay to acquire the stock.
Disclosures about Segments of an Enterprise and Related Information:
Statements of Financial Accounting Standards No. 131, "Disclosures about
Segment of an Enterprise and Related information," ("SFAS 131") requires that
public companies report certain information about operating segments,
products, services and geographical areas in which they operate and their
major customers. The Company adopted this accounting standard on December 15,
1997. There was no material effect on the financial position or the results
of operations.
Comprehensive Income (Loss)
During the year ended January 1, 1999 the Company adopted Statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income,"
("SFAS 130") issued by the FASB is effective for financial statements with
fiscal years beginning after December 15, 1997. SFAS 130 establishes
standards for reporting and presentation of comprehensive income (loss) and
its components in a full set of general-purpose financial statements. The
Company has chosen to report comprehensive income (loss) in the statements of
operations. Comprehensive income (loss) is comprised of net income and all
changes to stockholders' equity except those due to investments by owners and
distributions to owners. Adoption of SFAS 130 did not have a material impact
on the Company's financial position or results of operations.
New Accounting Pronouncements Not Adopted Yet
In February 1998, Statement of Financial Accounting Standards No. 132,
"Employer's Disclosures about Pensions and Other Postretirement Benefits"
(SFAS No. 132) amended the disclosure requirements for pensions and other
postretirement benefits. The Company would not expect the adoption to have
significant change on the Company's financial statement disclosures.
F-11
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Summary of Accounting Policies
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS No. 133). SFAS No. 133 requires companies to
recognize all derivatives contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are
met, a derivative may be specifically designated as a hedge, the objective of
which is to match the timing of gain or loss recognition on the hedging
derivative with the recognition of (i) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative
not designated as a hedging instrument, the gain or loss is recognized in
income in the period of change. SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999.
Historically, the Company has not entered into derivatives contracts either
To hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard on January 1, 2000 to
affect its financial statements.
F-12
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Inventory
Inventory consists of:
<TABLE>
<CAPTION>
December 31,
1997 1998
--------------------------
<S> <C> <C>
Service parts $1,121,848 $1,253,905
Work in progress 80,695 66,683
Provision for slow moving items (241,266) -
--------------------------
$ 961,277 $1,320,588
Note 2. Property, Plant and Equipment
Property, plant and equipment consists of:
December 31,
1997 1998
-------------------------
Furniture, fixtures and equipment $411,134 $140,124
Vehicles 81,909 90,016
Computer equipment 53,909 91,983
Leasehold improvements 7,472 184,582
Subtotal 554,424 506,705
Accumulated depreciation and amortization (283,606) (140,272)
Property, plant and equipment, net $270,818 $366,433
Note 3. Income Taxes
The income tax provision (benefit) is as follows:
Year Ended December 31,
1997 1998
----------------------
Current
Federal $ - $ -
State 4,000 4,000
Japan 576 654
Total current 4,576 4,659
Deferred
Federal -
- - -
State -
- - -
Japan (29,954)
- - -
Total deferred (29,954)
- - -
Total $(25,378) $ 4,659
-----------------------
</TABLE>
F-13
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 3. Income Taxes (Continued)
The difference between the effective income tax rate and the expected federal
statutory rate is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1998
-----------------------
<S> <C> <C> <C>
Federal statutory rate 34% $ 34%
Federal utilization of net operating loss (34)% (34)%
State taxes, net of federal benefit 4% 1%
Foreign income tax (benefit) (29)% -%
-----------------------
Effective income tax rate (25)% $ 1%
Net deferred tax assets consist of the following:
December 31,
1997 1998
--------------------
Domestic (U.S.)
Deferred tax assets: $9,405 $ 210,757
Valuation allowance (9,405) (210,757)
--------------------
Net deferred tax assets - -
Foreign (Japan)
Deferred tax assets:
Net operating loss carryforward 49,480 201,233
Accrued liabilities 5,100 -
Valuation allowance - (137,328)
--------------------
Net deferred tax assets $54,580 $ 63,905
</TABLE>
A 100% valuation allowance was provided at December 31, 1997 and 1998 for the
U.S. company, since the Company cannot determine at this time, with
reasonable certainty, that the net deferred tax assets will be realized. No
valuation allowance was provided at December 31, 1997 for the foreign (Japan)
deferred tax assets, however, there was a valuation allowance provided at
December 31,1998 for the foreign (Japan) deferred tax assets.
F-14
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 3. Income Taxes (Continued)
At December 31, 1997, the Company had available net operating loss
carryforwards of approximately $62,700 for U.S. income tax purposes which
expire in varying amounts through 2012. Section 382 of the 1986 Internal
Revenue code imposes limitations on the use of net operating losses following
certain changes in ownership. Such a change occurred during 1997 and 1998.
At December 31, 1998, the Company has available net operating loss
carryforwards of approximately $400,000 for U.S. income tax purposes which
expires in varying amounts through 2018.
Additionally, one of the subsidiaries of the Company has net operating loss
carryforwards, not included above, which are separate return year losses in
the amount of approximately $182,000, and will begin to expire in 2008. On
December 14, 1998, the subsidiary had a change in ownership as defined under
Internal Revenue Code Section 382. The net operating loss carryfoward is
subject to an annual limitation which does not appear to be significant.
Note 4. Bank Loans
Bank loans consist of short-term borrowings in the U.S. and Japan. As of
December 31, 1997 and 1998, the average interest rates on the short-term
borrowings in Japan were 1.86% and 2.15%. Short-term borrowings in
Japan of approximately $172,000 were guaranteed by the Chief Executive
Officer of Newcorp Technology Limited, ("Newcorp") a Japanese wholly-owned
subsidiary of the Company. Short-term borrowings in Japan of approximately
$327,000 were guaranteed by the governmental guarantee association, and
newcorp pays a fee to the association for providing the guarantee. The
Directors of Newcorp are joint and several guarantors for the association.
A subsidiary of the Company has a revolving line of credit from a commercial
bank for working capital purposes. The revolving line of credit enabled the
subsidiary to borrow an aggregate amount of principal not to exceed $500,000
at a variable interest rate (0.75% over the bank's prime rate). The
revolving line of credit was subject to certain restrictive covenants and was
collateralized by substantially all of the assets of the subsidiary. The
outstanding balances at December 31, 1997 and 1998 was $0 and $300,000, and
the balance of $300,000 was paid off in January 1999.
F-15
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 5. Notes and Loans Payable
<TABLE>
<CAPTION>
December 31,
1997 1998
-----------------
<S> <C> <C>
Note payable with a foreign (Japan) bank, monthly
payment of $1,468 including interest of 2.5%,
due November 2003 $ - $ 86,965
Note payable with a foreign (Japan) bank, monthly
payment of $3,166 including interest of 2.2%,
due May 2003 - 170,534
Loan payable for the purchase of a vehicle, monthly
payment of $501 including interest at 10.25%,
collateralized by the related asset, due June
18, 2001 17,609 13,202
---------------------
17,609 270,701
Less current portion (4,407) (60,488)
---------------------
$13,202 $210,213
</TABLE>
The minimum cash payments of $6,009, $6,009 and $3,005 for the auto loan need
to be made in 1999, 2000, and 2001.
Note 6. Commitments and Contingencies
Commitments
The Company signed an operating lease for a building from a related party.
The lease term is five years and expires in October 2003. Future minimum
rental payments are as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amount
- - ------------------------- -----------
<S> <C>
1999 $ 272,554
2000 286,909
2001 291,705
2002 297,300
2003 309,192
----------
$1,457,660
</TABLE>
Total rental expense for the year ended December 31, 1997 and 1998, was
$193,715 and $325,495, respectively.
F-16
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 6. Commitments and Contingencies (Continued)
Commitments (Continued)
The Company entered into a five-year employment contract with an officer of
the Company and its U.S. based subsidiary. The annual base salary was at
$200,000 per year. The officer has the right to receive up to fifty
percent of this base salary as an equivalent amount in the form of common
stock of the Company at fair market value. The employment contract is
automatically renewable after the five-year period end for unlimited
additional terms of three years each. In 1997 the officer decided to waive
50% of his compensation. In 1998 the officer decided to waive the 20% of his
compensation.
In 1997 PTI provided a guarantee for a related party loan of $700,000 which
bears interest at a rate of 6.21% per annum, maturing at February 2018, with
monthly payments of $5,975 and had been used to purchase a building.
Note 7. Related-Party Transactions
In the ordinary course of business, the Company engaged in transactions with
Allied Web, Inc. The President of the Company and major shareholder is also
the owner and President of Allied Web, Inc. Sales to and purchases from
Allied Web, Inc. for the year ended December 31, 1997 amounted to $1,068,628
and $1,061,373. There was no sales and purchase activity in 1998. The
Company also has a receivable in the amount of $35,000 due from Allied Web,
Inc. for advances to its President as of December 31, 1997.
The Company purchased certain operating assets (principally computer
equipment, furniture and fixture, vehicles, and inventory) from a related
party in June, 1997. The purchase was recorded by using net book
value of $191,640.
Included in the accompanying consolidated cash flow statements is a repayment
of $52,227 to related parties for notes payable and corresponding accumulated
interest during year ended December 31, 1997. On November 13, 1996, the
Company's foreign subsidiary borrowed $165,500 from one of its directors at
an interest rate of 4% per annum. The loan was completely repaid on June 20,
1997.
F-17
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statement
Note 7. Related-Party Transactions (Continued)
In the ordinary course of business, the Company's wholly-owned foreign
subsidiary engaged in transactions with Digital Stream Corporation ("DSC").
The Company's foreign subsidiary has a director and major shareholder in DSC.
DSC leases office space to the Company's foreign subsidiary and is entrusted
with the Company's foreign subsidiary.
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1998
-----------------------
<S> <C> <C>
Digital Stream Corporation ("DSC"):
Purchases $ 6,168 $ 6,667
Rent 9,377 9,161
--------------------------
</TABLE>
In the ordinary course of business, the Company has purchase arrangements
with a related company whose CEO is one of the Company's shareholders. Total
purchases from this related company was $1,451,755 and $2,013,767 in 1997 and
1998.
In November, 1997, one of the Company's shareholders loaned $50,000 to PTI
bearing no interest and no definite payment terms. The balance was paid in
full in January 1998.
On January 15, 1995, PTI signed a promissory note to pay $100,000 to a
company wholly-owned by one of the Company's minority shareholders. The note
bears no interest and the entire principal balance is due December 1, 2000
unless a public offering is completed, at which time the note shall be
cancelled.
In August 1995, one of the Company's shareholders made a subordinated loan of
$100,000 to PTI with an interest rate of 10% per annum. The interest was
payable on a monthly basis. In November 1997, the total principal balance
due was converted to 200,000 shares of common stock at $0.50 per share.
During 1997, the total interest paid to the shareholder was approximately
$9,200.
Note 8. Shareholders' Equity
In April 1997 the Company affected a two for one reverse stock split, and
1,512,368 shares of outstanding common stock were exchanged for 756,420
shares of common stock. The financial statements give effect to this reverse
stock split for all periods presented.
F-18
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 8. Shareholders' Equity (Continued)
In April 1997 the Company issued 500 shares of preferred stock having a
Stated value of $1 per share, for net proceeds of $50,000. Of which 150
shares were issued to an officer. The preferred stock is convertible at the
rate of one share of preferred stock to 200 shares of common stock, with
quarterly dividend accumulated at 6% per annum, and redeemable at the
Company's option for $100 per share at any time after December 31, 1997. In
September 1998, the preferred stock holders converted the stock into 100,000
shares of common stock.
In June 1997, the Company issued 750,000 shares of common stock for $.50 per
share. Of which, 400,000 shares were issued to an officer.
In November, 1997, the Company issued 100,000 shares of common stock to
acquire 100% of Newcorp Technology Limited, a research and development
corporation organized under the laws of Japan. The transaction was accounted
for as a pooling of interest transaction, therefore, the statement of
operation for the years ended December 31, 1997 has been retroactively
restated to include all activities of Newcorp Technology Limited.
On December 31, 1997, the Company received fifteen subscriptions for
2,500,000 shares of common stock for $.50 per share and 300,000 shares were
subscribed for by an officer. Subsequent to December 31, 1997, the Company
received $1,150,000 of the subscription receivable and issued 2,300,000
shares of common stock subscribed.
During September and October 1998, the Company issued 50,000 and 200,000
shares of common stock, respectively, at $0.50 per share and received
aggregate proceeds of $125,000.
In December, 1998, the Company issued 1,926,696 shares of common stock to
acquire a 100% equity interest of PTI Enclosures, Inc. The transaction was
accounted for as a pooling of interest transaction, therefore, the
statement of operations for the years ended December 31, 1997 and 1998 have
been retroactively restated to include all activities of PTI Enclosures, Inc.
The results of the operations of the Companies before the
acquisition took place were as follows:
<TABLE>
<CAPTION>
Net
Income
Revenue (Loss)
----------------------
<S> <C> <C>
Bridge Technology, Inc.
December 31, 1997 $4,414,001 $(158,022)
January 1 to December 14, 1998 5,786,128 (555,967)
-----------------------
PTI Enclosures, Inc. (Stand Alone)
December 31, 1997 10,137,927 57,675
January 1 to December 14, 1998 12,000,153 117,679
-----------------------
</TABLE>
F-19
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 9. Shareholders' Equity in PTI Enclosues, Inc.
During October 1997, two individuals (one is an existing shareholder and
Board member of PTI together purchased 100,000 shares of common stock at
US$0.50 per share for cash.
During December 1998, PTI sold 100,000 shares of common stock at $0.50 per
share to a third party company and received proceeds of $50,000.
During 1998, the Company sold 50,000 shares of common stock at $0.50 per
share to two individuals and recorded a common stock subscription receivable
of $25,000.
During December 1998, PTI issued 11,856 shares of common stock in exchange
for consulting services provided by a shareholder.
During December 1998, PTI acquired a 100% equity interest in Classic Trading
Inc. (CTI) through issuing 50,000 shares of common stock at $0.50 per share.
The sole owner of CTI was a shareholder of the Company.
Note 10. Stock Options and Warrants
Historically, PTI had stock based compensation granted as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1997
Options Options Warrants
Warrants
-------------------------------------
- - -
<S> <C> <C> <C> <C>
Exercise price $ 0.35 $ 0.35 $ 2.00 $ 3.50
Directors 15,000 45,000 45,000 45,000
Officers 33,800 60,000 60,000 60,000
Key employees 17,500 25,500 - -
-------------------------------------
Total $ 66,300 $130,500 $105,000 $105,000
</TABLE>
During December 1997, the Board of Directors meeting of PTI ratified the
decisions made by management. All grantees but one exercised their options
immediately. During January 1998, one director cancelled 15,000 stock
options granted to him.
PTI applies APB Opinion No. 25 and related interpretations in accounting for
its stock options granted to employees. The difference between the option
exercise price of $0.35 and stock issuance price of $0.50 was recognized as
employee stock compensation cost. In accordance with APB No. 25, no
compensation cost has been recognized for the fair value of options granted
to employees. Had the compensation cost for the fair value of option granted
to employees been recognized in line with SFAS No. 123, PTI's net income and
earnings per share would have been reduced to the pro forma amounts as
follows:
F-20
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 10. Stock Options and Warrants (Continued)
<TABLE>
<CAPTION>
December 1997
--------------
<S> <C>
Net income attributed to common shares:
As reported $ 56,915
Pro forma 18,551
Basic earnings per share
As reported $ 0.05
Pro forma 0.01
-------------
Diluted earnings per share
As reported $ 0.04
Pro forma 0.01
</TABLE>
Option activity in PTI during the year ended December 31, 1997 was as
follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
------------------------------
<S> <C> <C>
Outstanding at January 1, 1997 - -
Option granted 196,800 $0.35
Option canceled (15,000)
Options exercised (181,000) $0.35
Outstanding at December 31, 1997 - -
</TABLE>
Warrant activity in PTI Enclosures, Inc. during the year ended December 31,
1997 and 1998 is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
--------------------
<S> <C> <C>
Outstanding at January 1, 1997 - $ -
Warrants granted 210,000 2.75
Outstanding at December 31, 1997 210,000 $ 2.75
Outstanding at December 31, 1998 210,000 $ 2.75
</TABLE>
F-21
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 10. Stock Options and Warrants (Continued)
The following table summarizes information about stock warrants outstanding
as of December 31, 1998 as those warrants were subsequently exchanged into
the Company's warrants without changing the exercise price:
<TABLE>
<CAPTION>
Warrants Outstanding
--------------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Exercise Price Shares Life (Year) Price
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
$2.00 105,000 19 Years $ 2.00
$3.50 105,000 19 Years $ 3.50
-------
210,000
</TABLE>
On January 31,1999, the Board of Directors of the Company approved a proposal
made by management in December 1998 to grant 360,000 warrants to officer,
directors, and consultant for their performance and contribution to the
Company in 1997 and 1998. As a result of this approval, a total of 360,000
warrants were granted. Accordingly, a total of 360,000 shares of common
stock will be reserved by the Company for issuance upon the exercise of the
granted warrants.
Each warrant will entitle the holder to purchase one share of the Company's
common stock at a price of $1.75 per share within five years from the grant
date. Each warrant is immediately exercisable and will expire if it would
not exercised within five years from the grant date. Shares acquired through
exercising a warrant will be restricted and will not be registered for
trading purpose unless the Company, at its sole discretion, files a
registration statement and includes these designated shares. The following
table summarizes the total warrants granted:
<TABLE>
<CAPTION>
Granting Warrants Exercise Vested Expiring
Date Granted Price Period Date
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Warrants granted
to employees 12/31/98 250,000 $ 1.75 None 1/30/2004
Warrants granted
to non-employees 12/31/98 110,000 $ 1.75 None
1/30/2004
-------
Warrants granted 360,000
</TABLE> -------
The Company follows APB No. 25 and related interpretations for its stock
warrants granted to employees. As the exercise price of $1.75 is higher than
the stock issuance price of $0.50 in 1998, the Company did not recognize any
compensation cost for the warrants granted to employees. Using the Black
Scholes option pricing model, the Company determined that the fair value of
each warrant granted was $0.00.
F-22
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 10. Stock Options and Warrants (Continued)
Accordingly, the Company did not recognize any compensation cost for the
warrants granted to non-employees. The assumptions used were as follows:
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Discount rate 4.5%
Volatility 0.0%
Expired life 5 year
Expected dividend yield -
</TABLE>
After acquiring PTI Enclosures, Inc., the consolidated activities of granting
warrants of the Company in 1997 and 1998 are rolled forward as follows:
<TABLE>
<CAPTION>
Exercise
Shares Price
--------------------
<S> <C> <C>
Outstanding at January 1, 1997 - $ -
Warrants granted for 1996 performance 105,000 2.00
Warrants granted for 1997 performance 105,000 3.50
---------------------
Outstanding at December 31, 1997 210,000
Warrants granted for 1998 performance 360,000 $ 1.75
---------------------
Outstanding at December 31, 1998 $570,000
---------------------
</TABLE>
The following table summarizes information about Warrants outstanding as of
December 31, 1998:
<TABLE>
<CAPTION>
Warrants Outstanding Warrants Exercisable
-------------------------------- -----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
<S> <C> <C> <C><C> <C> <C> <C>
$1.51 - $2.50 465,000 8 Years $ 1.81 465,000 $ 1.81
$3.50 105,000 19 Years $ 3.50 105,000 $ 3.50
------- -------
570,000 570,000
------- -------
</TABLE>
F-23
<PAGE>
Bridge Technology, Inc. Subsidiaries
Notes to Consolidated Financial Statements
Note 11. Concentration of Customer and Suppliers
During the year ended December 31, 1997 and 1998, one customer accounted for
approximately 38% and 46% of the consolidated revenue and 31% and 43% of
consolidated accounts receivable at December 31, 1997 and 1998.
Two vendors accounted for 36% of the consolidated total purchases during the
year ended December 31, 1997. Three vendors accounted for 41% of the
consolidated total purchases during the year ended December 31, 1998.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
The directors and officers of the Company are as follows:
Name Age Position
John J. Harwer 52 CEO & Co-Chairman of the Board
Tetsuji Aoyagi 46 Co-Chairman of the Board
James Djen 45 President and Director
John T. Gauthier 71 CFO & Director
Robert Walling, Esq. 53 Director
Hideki Watanabe 49 Director
Michael Paull 46 Director
The above listed Directors will serve until the next annual meeting of the
shareholders or until their death, resignation, retirement, removal, or
disqualification, or until their successors have been duly elected and
qualified. Vacancies in the existing Board of Directors are filled by
majority vote of the remaining Directors. Officers of the Company serve at
the will of the Board of Directors. There is no family relationship
between executive Officers and Directors of the Company.
RESUMES:
James Djen is President and a Director of the Company since November 2,
1998. From January 1994 to date he is the President and Chairman of the
Board of PTI Enclosures, Inc. From June 1985 to 1994 he was a Director and
Executive Vice President of CMS Enhancement, a New York, Stock Exchange firm.
Mr. Djen was granted a Bachelor of Science Degree in Electrical Engineering
from National Taiwan University in 1977; a Master of Science Degree in
Electrical Engineering from Connecticut's Bridgeport University in 1978 and a
Master of Science Degree in Electrical Engineering in 1981 from California
State University. Mr. Djen will devote full time to the Company.
John J. Harwer is Chief Executive Officer of the Company since June 1997
and Co-Chairman of the Board of Directors since April 1998. From January 1996
to May 1997, Mr. Harwer owned and managed a computer distribution company,
Allied Web Inc. with $35 million in 1996 annual sales. From May 1994 to
April 1996, he was a majority owner of SimmSun, Inc. a supplier of computer
memory and components to the various domestic and international companies.
From January 1990 to May 1994, he was Vice President of Operations and New
Product Development for CMS Enhancements, a $200 million NYSE computer
peripheral company. From 1971 through 1989, he held senior engineering,
marketing and management positions with several companies in the computer
industry including Hewlett-Packard, Raytheon, Gerber Scientific, Picker
Nuclear, Genrad, and Calcomp. Mr. Harwer also served as technology
consultant to Burroughs (now UNISYS), SHARP USA, GRAPHTEC,
HOUSTON INSTRUMENTS, AMTEC and others. He received his Master
of Computer Science degree from Charles University, Prague, Czech
Republic in 1971. He took graduate studies in Telecomms at Northeastern
University, Boston, Massachusetts. Later on, while working full time, he
studied law at night, focusing on Contracts and Intellectual Property. He
also took advanced courses in Fault Tolerant Computing and Data Security
at UCLA. He also attended MBA courses at graduate night school of
Business at Cal State Fullerton. He has written, conducted, and participated
in, numerous management and technology seminars and conferences.
Mr. Harwer devotes full time to the operations of the Company.
Tetsuji Aoyagi is the Co-Chairman of the Board of Directors of the Company
since April 1998. He is also the President, Chief Executive Officer and
Director of Digital Stream Corporation, a Tokyo, Japan based R&D company.
Mr. Aoyagi has over 17 years experience in Research and Development of high
technology products, especially in the field of Optical Media Storage and
Human Interface field. From 1980 until 1984 he worked at Thompson Research
and Development Corporation where he was responsible for all the consumer
product developments as a special Scientific Adviser to the President.
In 1985 he founded MOST Corporation in Los Angeles, California, where he
was responsible for 3.5 inch Magneto-optical disc drive. Mr. Aoyagi became
the General Manager and was responsible for marketing of this
Magneto-Optical drive to OEM accounts until 1987. In 1987 he founded
Digital Stream Corporation in Yokohama, Japan where he is responsible
for corporate management. Mr. Aoyagi also served as the Chairman of the
Board of Data Stream cooperation, a Joint Venture organized by the
Singapore Government and Creative Technology. Mr. Aoyagi received his
M.S. Degree in Optics in 1974 from the State University of Pennsylvania at
Edinboro. Mr. Aoyagi devotes as much time as possible concurrent with his
other responsibilities.
John T. Gauthier is the Chief Financial Officer and Director of the
Company, and he was the Chairman of the Board of Directors from March 1997
until April 1998. He is also the Secretary-Treasurer, Chief Financial
Officer and Director of the Exell Corporation since June 1995. Since 1984 he
is the President of Cottesloe Capital Corporation, a due diligence consulting
firm to small businesses. He was Chairman of the Board and Executive Vice
President of Americare International Inc., a small capitalization public
company in the medical field, from January 1990 to December 1993.
Mr. Gauthier was President and Chairman of the Board of Bond Street Capital
Corporation, a small New York-based investment banking firm, from September
1986 to October 1988. For twelve years Mr. Gauthier was President and
Chairman of the Board of Datronic Engineers Inc., a small capitalization
public company engaged in the design, furnishing and installation of long
range telecommunications systems internationally. For six years he was
Director of Finance and Administration for Northrop Corporation's
subsidiary: Page communications Engineers, a leading international
telecommunications company. He was a former management consultant to the
Executive Director of the International Monetary Fund of the World Bank. He
was also a Founder and Director of the Free State Bank and Trust Company in
Potomac, Maryland. Mr. Gauthier received a Bachelor of Science Degree in
Finance from Fordham University in 1953 and completed the MBA program at the
Graduate School of Business, George Washington University in 1957. Mr.
Gauthier also completed two years of legal training at the Georgetown
University Law Center in 1959. Mr. Gauthier devotes as much time as is
necessary as the CFO of the Company.
Mike M. Paull is a Director since December, 1998. Mr. Paull is currently
Managing Director of the Intelligent Home Systems Group, a product
development unit of Microsoft's Hardware Division based in Redmond, WA.
Mike has been with Microsoft since 1991, where his teams have identified
and shipped new products that enhance the software experience, to include
the original trackball for portable computers, ergonomically-designed
keyboards, and a wide variety of advanced technology products in the Gaming
Devices area such as optically-based joysticks and force-feedback devices.
Mr. Paull's current mission it to enable new products and services in the
home automation and control markets, to include automation and control
services for the Windows (R) Operating System, and participation in
Microsoft's Universal Plug and Play (UPnP) vision. Prior to joining
Microsoft, Mike spent over 10 years in the design and manufacture of
products for the medical industry, to include laminar-flow clean benches,
pasteurization systems, and cardiac monitors and defibrillators with
Physio-Control Corporation, a world-wide leader in advanced cardiac care
equipment. Mike was also Principle Designer at Stratos Product Design
Group, where he was involved with product development in a wide variety
of consumer-focused areas. Mr. Paull's product development groups have
always been " virtual corporations", with globally-dispersed design,
manufacturing and test occurring in the United States, Japan, Taiwan,
Singapore, Malaysia, China, Ireland and other countries. Many enduring
partnerships with both domestic and foreign design and manufacturing
partners have fed his teams' successes.
Robert Walling, Esq., is a Director since March 1997. From 1973 until 1975
he was with the legal department of Bank of America, San Francisco,
California. From 1988 until he was a partner at Friedman, Peterson, Walling &
Lau, a Law practice devoted to mortgage banking, real estate, corporate and
tax law. From 1995 Mr. Walling has been in private practice in Newport Beach,
California specializing in mortgage banking, real estate, corporate law and
tax law. Mr. Walling received LLM degree in taxation from New York
University of Law. He also received Juris Doctor degree from University of
California, Hastings College of Law, and Bachelor of Arts from University of
California. Mr. Walling is a Judge Pro Tem at Harbor Municipal court. Mr.
Walling will devote as much time to the company as may reasonably be
required.
Hideki Watanabe is a Director of the Company since April 1998. Mr.
Watanabe is also the current President of NEWCORP TECHNOLOGY
LIMITED, a Tokyo, Japan based electronics technology R&D and sales
company that was acquired by Bridge in September 1997. He graduated
from Nihon Physical Education College in 1972. From 1972 until 1982 he
worked for Wakou-Shoji. From 1983 until 1984 he was the President of
Seiei Corporation. In 1995 he co-founded and became the President of
Newcorp Technology Limited, where he is responsible for international
sales and marketing of high technology products for the company.
Mr. Watanabe devotes full time to the Company's operations in Japan.
Karen Chiu is the designated Controller of the Company, effective January
1, 1999. Ms. Chiu is the Controller of PTI Enclosures, Inc. since 1994. She
acquired her Bachelor of Business Administration Degree from Providence
College in Taiwan in 1975 and her Master of Business Administration from
the University of Missouri in 1978. Ms. Chiu is expected to devote full time
to the Company.
Richard Fox is General Manager of PTI Enclosures, Inc. since 1990. Mr. Fox
worked in various executive capacities over the past ten years, from
President of Sigma Sales 1980 to 1990 and General Manager and Vice
President of operations for Plessey Peripheral Systems 1980 to 1985. Mr. Fox
was awarded a Bachelor's Degree in Electrical Engineering from Utah State
University in 1969 and a Masters Degree in Business Administration from
Iowa University in 1972. Mr. Fox is expected to devote full time to PTI's
operations.
Conflicts of Interest.
Certain members of the Company's management are associated with other firms
involved in a range of business activities. Consequently, there are
potential inherent conflicts of interest in their acting as Officers and
Directors of the Company. Insofar as these officers and directors are
engaged in other business activities, management anticipates they will devote
less than full time to the Company's affairs. The officers and directors of
the Company are now and may in the future become shareholders, Officers
or Directors of other companies that may be formed for the purpose of
engaging in business activities similar to those conducted by the Company.
Accordingly, additional direct conflicts of interest may arise in the future
with respect to such individuals acting on behalf of the Company or other
entities. Moreover, additional conflicts of interest may arise with respect
to opportunities which come to the attention of such individuals in the
performance of their duties or otherwise. The Company does currently have
a right of first refusal pertaining to opportunities that come to
management's attention insofar as such opportunities may relate to the
Company' s proposed business operations.
The Officers and Directors are, so long as they are Officers or Directors
of the Company, subject to the restriction that all opportunities
contemplated by the Company's plan of operation which come to their attention,
either in the performance of their duties or in any other manner, will be
considered opportunities of, and be made available to the Company and the
companies that they are affiliated with on an equal basis. A breach of this
requirement will be a breach of the fiduciary duties of the Officer or
Director. If the Company or the companies in which the Officers and Directors
are affiliated with both desire to take advantage of an opportunity, then said
Officers and Directors would abstain from negotiating and voting upon the
opportunity. However, all directors may still individually take advantage of
opportunities if the Company should decline to do so. Except as set forth
above, the Company has not adopted any other conflict of interest policy with
respect to such transactions. Investment Company Act of 1940 Although the
Company will be subject to regulation under the Securities Act of 1934 and
the Securities Exchange Act of 1934, management believes the Company will
not be subject to regulation under the Investment Company Act of 1940
insofar as the Company will not be engaged in the business of investing or
trading in securities in the event the Company engages in business
combinations which result in the Company holding passive investment
interests in a number of entities, the Company could be subject to regulation
under the Investment Company Act of 1940. In such event, the Company
would be required to register as an investment company and could be
expected to incur significant registration and compliance costs. The
Company has obtained no formal determination from the Securities and
Exchange Commission as to the status of the Company under the
Investment Company Act of 1940 and, consequently, any violation of
such Act would subject the Company to material adverse consequences.
The Company's Board of Directors unanimously approved a
resolution stating that it is the Company's desire to be exempt from the
Investment Company Act of 1940 via Regulation 3a-2 thereto.
Item 10. Executive Compensation.
The following table shows all cash compensation for services rendered
during the last two fiscal years ended December 31, 1998 paid by the
Company to each of the Company's executive officers whose cash compensation
exceeded $100,000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C><C>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
Other Restr- All Other
Annual icted Sec. Compen-
Name and Compen- Stock Undrlng LTIP sation
Principal sation Award(s)Options/Payouts
Warrants
Position Yr Sal.($) Bonus($) ($) ($) SAR's($) ($) ($)
J.Harwer 1998 158,333 0 0 0 0 0 100,000@$1.75
CEO, and 1997 98,333 0 0 0 0 0 0
Co-Chairman
J.Djen 1998 159,900 0 0 0 0 0 45,000@$3.50
President 1997 82,000 0 0 0 0 0 45,000@$2.00
R.Fox 1998 123,637 0 0 0 0 0 30,000@$3.50
General 1997 73,839 0 0 0 0 0 30,000@$2.00
Manager
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to be the beneficial owner
of more than 5% of such securities, as well as the securities of the Company
beneficially owned by all directors and officers of the Company. Unless
otherwise indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
<TABLE>
<CAPTION>
Name and Address of Preferred Common %
Title of Class
Beneficial Owner Shares Shares Ownership
- - --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James Djen (1)
12601 Monarch Street 100,000 1.6 Common
Garden Grove, CA 92841
John T. Gauthier (1)
12601 Monarch Street 0 0 Common
Garden Grove, CA 92841
John J. Harwer (1)
12601 Monarch Street 700,000 11.4 Common
Garden Grove, CA 92841
Tetsuji Aoyagi (1)
2-12-38, Aobadai, Aoba-Ku 200,000 4.9 Common
Yokohama-Shi, Kanagawa-Ken, Japan
Robert Walling, Esq. (1)
1650 Town Center Dr, Suite 0 0 Common
Costa Mesa, CA 92626
Hideki Watanabe (1)
4-14-2 Nagatsuda, Midori-Ku 200,000 4.9 Common
Yokohama-Shi, Kanagawa-Ken, Japan
Cayman Computer
Alliance Corporation
12601 Monarch Street 413,206 10.1 Common
Garden Grove CA 92841
COMMON
All Officers & Directors (2) 1,200,000 25.53 Common
</TABLE>
(1) Officer and/or Director of the Company.
(2) Officers and Directors as a Group. The balance of the Company's
outstanding Common Shares is held by approximately 1700 persons.
After acquiring PTI Enclosures, Inc., the consolidated activities of
granting warrants of the Company in 1997 and 1998 are rolled forward as
follows:
<TABLE>
<CAPTION>
Exercise
Shares Price
----------------------------------
<S> <C> <C>
Outstanding at January 1, 1997 - $ -
Warrants granted for 1996 performance 105,000 2.00
Warrants granted for 1997 performance 105,000 3.50
---------------------
Outstanding at December 31, 1997 210,000
Warrants granted for 1998 performance 360,000 $ 1.75
---------------------
Outstanding at December 31, 1998 570,000
---------------------
</TABLE>
The following table summarizes information about Warrants outstanding as of
December 31, 1998:
<TABLE>
<CAPTION>
Warrants Outstanding Warrants
Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
- - --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.51 - $2.50 465,000 8 Years $1.81 465,000 $ 1.81
$3.50 105,000 19 Years $3.50 105,000 $ 3.50
------- -------
570,000 570,000
------- -------
</TABLE>
Item 12. Certain Relationships and Related Transactions.
There have been no related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation
except as disclosed in the Notes to the financial statements.
ITEM 13. EXHIBITS AND REPORTS ON FORM 10-KSB
- - - Exhibit 3 (i) Articles of Incorporation
a) Newcorp Technology, Inc. (Nevada), Incorporated March 15, 1999
b) - Bridge Technology, Inc. as amended April 21, 1997 (incorporated by
reference to Bridge Technology, Inc. Form 10SB, Amendment #2,
Exhibit 3(i)filed December 23, 1998 with the Commission).
- Bridge R & D, Inc. Incorporated June 25, 1997 (incorporated by
reference to Bridge Technology, Inc. Form 10-SB, Amendment #2,
Exhibit 3 (i) filed December 23, 1998 with the Commission).
- - - Exhibit 3.(ii) By-laws of Bridge Technology, Inc., as dated August 1,
1997, (incorporated herein by reference to Bridge
Technology, Inc. Form 10-SB, Amendment #2, Exhibit 3 (ii)
filed December 23, 1998 with the Commission).
- - - Exhibit 4 Determination of Shareholder Preferences, (incorporated herein
by reference to Bridge Technology, Inc. Form 10-SB, Amendment #2,
Exhibit 4, filed December 23, 1998 with the Commission).
- - - Exhibit 10 Material Contracts
A) Classic Trading, Inc. Agreement
B) Allied Web, Inc. Purchase of Assets Agreement,(incorporated
herein by reference to Bridge Technology, Inc. Form 10-SB,
Amendment #2 Exhibit 10, A) filed December 23, 1998 with
the Commission).
C) John Harwer Employment Agreement, dated June 1, 1997, (incor-
porated herein by reference to Bridge Technology, Inc.
Form 10-SB, Amendment #2, Exhibit 10 B) filed December 23,
1998 with the Commission).
D) EEMB, Co. Ltd. China Agreement dated November 11, 1997,
(incorporated herein by reference to Bridge Technology
Inc. Form 10-SB, Amendment #2, Exhibit 10 C) filed December
23, 1998 with the Commission).
E) Newcorp Technology, LTd. (Japan) Stock Exchange Agreement,
as entered into November 11, 1997, (incorporated herein by
reference to Bridge Technology, Inc. Form 10-SB, Amendment
#2, Exhibit D) filed December 23, 1998, with the Commission).
- - - Exhibit 21 Subsidiaries of the Registrant
A) Newcorp Technology, Inc. (Nevada) March 1999
B) PTI Enclosures, Inc.(California) July 1993
C) Newcorp Technology, Inc. (Japan)
D) Bridge R & D, Inc. (California)
- - - Exhibit 27 Financial Data Schedule
- - - Exhibit 99 Additional Contracts
A) Assignment of Trademarks
B) Property Lease
D) Incentive Stock Option Plan (incorporated herein by
reference to Bridge Technology, Inc. Form 10-SB, Amend-
ment #2, filed December 23, 1998, with the Commission).
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JAN-01-1998
<CASH> 752,015
<SECURITIES> 0
<RECEIVABLES> 4,808,268
<ALLOWANCES> (45,571)
<INVENTORY> 1,320,588
<CURRENT-ASSETS> 7,129,093
<PP&E> 800,286
<DEPRECIATION> (140,272)
<TOTAL-ASSETS> 7,789,107
<CURRENT-LIABILITIES> 4,971,401
<BONDS> 310,213
0
0
<COMMON> 61,329
<OTHER-SE> 2,446,164
<TOTAL-LIABILITY-AND-EQUITY> 7,789,107
<SALES> 20,737,017
<TOTAL-REVENUES> 20,737,017
<CGS> 17,833,319
<TOTAL-COSTS> 3,250,477
<OTHER-EXPENSES> (2,034)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,931
<INCOME-PRETAX> (374,676)
<INCOME-TAX> 0
<INCOME-CONTINUING> (374,676)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 6,909
<NET-INCOME> (381,585)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
