DATE: April 15, 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
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 60days. (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 which was 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.
Exhibit B-index Appears at Page 40
<PAGE>
TABLE OF CONTENTS PAGE
PART I
Item 1. Description of Business.
Item 2. Description of Property.
Item 3. Patents and Proprietary Rights
Item 4. Legal Proceedings
Item 5. Submission of Matters to a Vote of Security Holders.
PART II
Item 6. Market for Common Equity and Related Stockholder Matters.
Item 7. Management's Discussion and Analysis or Plan of Operation.
Item 8. Financial Statements.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
PART II
Item 10. Directors, Executive officers, Promoters and Control
Persons.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Item 13. Certain Relationships and Related Transactions.
Item 14. 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 two
operating subsidiaries: Dyna-5 International, Inc. (Dyna-5) and Classic
Trading, Inc. (CTI).
Dyna-5 International, Inc.
Dyna-5's main business is focusing 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 DYNA-5's
capabilities to produce OEM products manufactured to their exact
specifications. All OEM based and custom designed products provide high
quality at competitive prices. Dyna-5 also sells products to sub-system
integrators who add the peripherals and software and then sell their products
to the end users.
The enclosures Dyna-5 provides encompass hard drive enclosures, tape
enclosures, CD tower enclosures, DVD tower enclosures, RAID enclosures, and
server types of other enclosures. Dyna-5 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 December 1998 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 and
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 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. 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. in Japan
(hereinafter referred to as "ADTX"). 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,
and 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 peripherals
into 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
effecton 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
theInvestment 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
OF1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISION, OR OTHERWISE, THE COMPANY HAS
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 3. 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.
Item 4. Patents and Proprietary Rights
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 patent
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 5. Legal Proceedings
There is no litigation pending or threatened by or against the Company.
Item 6. Submission of Matters to a Vote of Security Holders
None.
Item 7. 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 "BRDG". The Company has been advised that
trading will commence after the filing of this subject Form 10T SB.
As of April 13, 1999, there were approximately 1,800 shareholders of record
ofthe 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 7. 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 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
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 70 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. In1987 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.
Mike'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.
Mike'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
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.
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 1,200,000 25.53 Common
(/TABLE)
Directors as a Group (2)
(1) Officer and/or Director of the Company.
(2) The balance of the Company's outstanding Common Shares are held by
more than 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 other 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
ARTICLE 1
EXCHANGE OF STOCK
1.1 Agreement to Exchange Stock. On and subject to the terms and
conditions of this Agreement, the NEWCORP SHAREHOLDERS agree to transfer and
deliver to BRIDGE at the Closing (as defined in Section 1.3, below)
certificates representing all shares of the common stock of NewCorp owned by
the NEWCORP SHAREHOLDERS, which represent al of the issued and outstanding
capital stock of NewCorp (the "NewCorp Stock"), and BRIDGE agrees to acquire
from the NEWCORP SHAREHOLDERS all of their right, title and interest in and
to the NewCorp Stock. At the Closing, the NEWCORP SHAREHOLDERS shall deliver
to BRIDGE certificates representing the NewCorp Stock duly endorsed for
transfer or accompanied by appropriate stock powers duly executed in blank.
In consideration for the transfer of the NewCorp Stock, BRIDGE shall deliver
to the NEWCORP SHAREHOLDERS the consideration as set forth in Section 1.2,
below.
1.2 Consideration for NewCorp Stock. In consideration for the
transfer of the NewCorp Stock, BRIDGE agrees in transfer and deliver to the
NEWCORP SHAREHOLDERS at the Closing duly and validly issued stock
certificates representing that number of shares in BRIDGE's common stock equal
to the book value of shareholder equity set forth on NewCorp Japan's audited
financial statement as of September 30, 1997 divided by the per share book
value of shareholder equity set forth on Bridge's audited financial statement
as of June 30, 1997 (the "Bridge Stock"). The final number of shares mutually
agreed to under this clause is 200,000 shares.
1.3 The Closing. The closing of the transaction contemplated by the
Agreement (the "Closing") shall take place at the offices of NewCorp in Japan
commencing at 10:00 a.m. local time on November 11, 1997, or such other date
as the Parties may mutually determine (the "Closing Date").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
2.1 Representations and Warranties of the NEWCORP SHAREHOLDERS. The
NEWCORP SHAREHOLDERS represent and warrant to BRIDGE that the statements
contained in this Section 2.1 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date was substituted for the date of this
Agreement throughout this Section 2.1).
2.1.1 Organization of NewCorp. NewCorp is a corporation duly organized,
validly existing, and in good standing under the laws of Japan and is
qualified to transact business in all jurisdictions in which such
qualification is required;
2.1.2 Outstanding Shares. The authorized capital stock of NewCorp
consists of one hundred (100) shares of common stock, and as of the date
hereof, there are outstanding one hundred (100) shares, all of which have
been validly issued and are fully paid and nonaccessable; and all of such
outstanding capital stock of NewCorp is owned by the NEWCORP SHAREHOLDERS and
is being transferred to BRIDGE hereunder.
2.1.3 Authorization of Transaction. The NEWCORP SHAREHOLDERS have full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the NEWCORP SHAREHOLDERS, enforceable in accordance
with its terms and conditions. The NEWCORP SHAREHOLDERS need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any other person or entity or of any government agency in order
to execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement.
2.1.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will: (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the NEWCORP SHAREHOLDERS
are subject or any provision of NewCorp's charter or bylaws; or (b) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material agreement,
contract, lease, license, instrument, or other arrangement to which the
NEWCORP SHAREHOLDERS or NewCorp are parties or by which they are bound or to
which any of their assets are subject.
2.1.5 Capitalization. There are no stock restriction agreements or
voting trust agreements or proxies affecting any of the NEWCORP SHAREHOLDER's
issued and outstanding capital stock. Except as provided for in this
Agreement, there are no outstanding subscriptions, warrants, calls, options,
rights, commitments or agreements by which NewCorp or the NEWCORP
SHAREHOLDERS are bound providing for the issuance, purchase, transfer,
repurchase or redemption of any shares of NewCorp's capital stock or
securities convertible or exchangeable into any class of shares of NewCorp's
capital stock.
2.1.6 Financial Statement. The financial statements of NewCorp
("Financial Statements") as, at and for the period ending September 30, 1997
and December 31, 1996 (copies of which statements are collectively attached
hereto as Exhibit "A") as well as all of the books and records previously
reviewed by BRIDGE, are true and correct, having been prepared
in accordance with generally accepted accounting principles, are consistent
with practices followed for prior periods, and present fairly the financial
condition of NewCorp at such respective dates and the results of its
operations for each of the respective periods. The balance sheet included
therein as of September 30, 1997 is hereinafter referred to as the "Reference
Balance Sheet."
2.1.7 Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved in the Reference Balance Sheet, NewCorp as of such date
has no liabilities of any nature, whether accrued, absolute, contingent or
otherwise, including without limitation, tax liabilities due or to become due
or arising out of any transaction entered into or any state of facts existing
prior to the date thereof. The NEWCORP SHAREHOLDERS do not know or have
reasonable grounds to know of any basis for the assertion against NewCorp, as
of the date hereof, of any liabilities of any nature or in any amount no
fully reflected or reserved against in the Reference Balance Sheet. Since
the date of the Reference Balance Sheet, NewCorp has not, and between the
date hereof and Closing, NewCorp will not have, incurred any liabilities,
debts or obligations of any nature whatsoever other than those incurred in
the ordinary course of business during such respective periods.
2.1.8 Taxes. NewCorp has paid or adequately provided for any and all
federal, state, county, local and foreign taxes, including, without
limitation, withholding taxes and social security taxes on all employees,
license fees, and any charges levied, assessed or imposed upon any of the
property of NewCorp, whether disputed or not, which are now known to be, or
are hereafter found to be or to have been due with respect to the conduct of
the business of NewCorp and the ownership of its property, up to and through
the Closing. NewCorp has filed all federal, state, county, local and foreign
tax returns required to be filed by it and has paid all taxes as shown on
said returns and all assessments received by it to the extent that such taxes
have become due.
2.1.9 Litigation and Regulation. There are no litigation proceedings,
suits or governmental proceedings, administrative or judicial, pending, nor
to the knowledge of the NEWCORP SHAREHOLDERS threatened, against NewCorp
which might materially affect the financial condition, business or property
of NewCorp. NewCorp is not subject to, or in violation or default in any
material respect of any order, writ, injunction, permit or decree of any
court, administrative agency or governmental body and it is in substantial
compliance in all material respects with all laws, rules, regulations and
orders applicable to its business and is in possession of all governmental
licenses and permits necessary to the conduct of its business, and such
licenses and permits are valid and in full force and effect. There are no
unresolved complaints pending against NewCorp before any governmental agency.
2.1.10 Title to Properties; Liens and Encumbrances. NewCorp has
good and marketable title to all of its properties and assets, subject to no
mortgage, pledge, lien, conditional sales agreement, encumbrance or charge,
unless set forth in the Financial Statements.
2.1.11 Due Performance. Newcorp has performed all obligations
required to be performed by it to date and is not in default or alleged to be
in default in any respect under, or in violation in any material respect of,
any agreement under which NewCorp or any of its properties or assets may be
affected, and no other party is in default thereunder, and there exists no
condition or event which after notice or lapse of time or both would
constitute a default by any party thereto.
2.1.12 Business Conditions. The NEWCORP SHAREHOLDERS have no
knowledge of any conditions which would have a material adverse effect upon
the business of NewCorp or prevent such business from being carried on in the
future.
2.1.13 Disclosure. No representation or warranty by the NEWCORP
SHAREHOLDERS in this Agreement or any statement, document or certificate
furnished or to be furnished to BRIDGE pursuant thereto, or in connection
with the transactions contemplated hereby, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading.
2.1.14 Continuation of the Business. The business of NewCorp will
be carried on prior to the Closing diligently and in the same manner as such
business was conducted by it prior to the date of this Agreement in the
ordinary course of business.
2.1.15 No Reliance on Other Representations. Except for the
representations, warranties and promises of BRIDGE expressly set forth
herein, the NEWCORP SHAREHOLDERS are not relying upon any representation,
warranty, promise or other information of or regarding BRIDGE (including,
without limitation, BRIDGE's financial condition or prospects) in agreeing
to exchange their Newcorp Stock for Bridge Stock as provided herein. The
NEWCORP SHAREHOLDERS acknowledge that they have had full opportunity to
obtain and review any and all information of or regarding BRIDGE that they
deemed relevant to their decision to exchange their NewCorp Stock.
2.2 Representations and Warranties of BRIDGE. BRIDGE represents and
warrants to the NEWCORP SHAREHOLDERS that the statements contained in this
Section 2.2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date was substituted for the date of this Agreement
throughout the Section 2.2).
2.2.1 Organization of BRIDGE. BRIDGE is a corporation duly organized,
validly existing, and in good standing under the laws of Nevada and is
qualified to transact business in all jurisdictions in which such
qualification is required.
2.2.2 Outstanding Shares. The authorized capital stock of BRIDGE
consists of Ten Million (10,000,000) shares of common stock and Five Hundred
(500) Shares of preferred stock, and as of the date hereof, there are
outstanding One Million Five Hundred Twelve Thousand Three Hundred sixty-
eight (1.512,368) shares of common stock and Five Hundred (500) shares of
Preferred Stock, all of which have been validly issued and are fully paid and
nonassessable.
2.2.3 Authorization of Transaction. BRIDGE has full power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of BRIDGE, enforceable in accordance with its terms and
conditions.
2.2.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will:
(a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which BRIDGE is subject or
any provision of BRIDGE's charter or bylaws; or (b) conflict with, result in
a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any material agreement, contract, lease, license,
instrument, or other arrangement to which BRIDGE is a party or by which it is
bound or to which any of its assets are subject.
2.2.5 Taxes. BRIDGE has paid or adequately provided for any and all
federal, state, county, local and foreign taxes, including, without
limitation, withholding taxes and social security taxes on all employees,
license fees, and any charges levied, assessed or imposed upon any of the
property of BRIDGE, whether disputed or not, which are now known to be, or
are hereafter found to be or to have been due with respect to the conduct of
the business of BRIDGE and the ownership of its property, up to and through
the Closing. BRIDGE has filed all federal, state, county, local and foreign
tax returns required to be filed by it and has paid all taxes as shown on
said returns and all assessments received by it to the extent that such taxes
have become due.
2.2.6 Litigation and Regulation. There are no litigation proceedings,
suits or governmental proceedings, administrative or judicial, pending, nor
to the knowledge of the BRIDGE threatened, against BRIDGE which might
materially affect the financial condition, business or property of BRIDGE.
BRIDGE is not subject to, or in violation or default in any material respect
of any order, writ, injunction, permit or decree of any court, administrative
agency or governmental body and it is in substantial compliance in all
material respects with all laws, rules, regulations and orders applicable to
its business and is in possession of all governmental licenses and permits
necessary to the conduct of its business, and such licenses and permits are
valid and in full force and effect. There are no unresolved complaints
pending against BRIDGE before any governmental agency.
2.2.7 Title to Properties; Liens and Encumbrances. BRIDGE has good and
marketable title to all of its properties and assets, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, unless set
forth in its financial statements.
2.2.8 Due Performance. BRIDGE has performed all obligations required to
be performed by it to date and is not in default or alleged to be in default
in any respect under, or in violation in any material respect of, any
agreement under which BRIDGE or any of its properties or assets may be
affected, and no other party is in default thereunder, and there exists no
condition or event which after notice or lapse of time or both would
constitute a default by any party thereto.
2.2.9 Business Conditions. BRIDGE has no knowledge of any conditions
which would have a material adverse effect upon the business of BRIDGE or
prevent such business from being carried on in the future.
2.2.10 Disclosure. No representation or warranty by BRIDGE in this
Agreement or any statement, document or certificate furnished or to be
furnished to the NEWCORP SHAREHOLDERS pursuant thereto, or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
2.2.11 Continuation of the Business. The business of BRIDGE will
be carried on prior to the Closing diligently and in the same manner as such
business was conducted by it prior to this date of this Agreement in the
ordinary course of business.
2.2.12 No Reliance on Other Representations. Except for the
representations, warranties and promises of the NEWCORP SHAREHOLDERS
expressly set forth herein, BRIDGE is not relying upon any representation,
warranty, promise or other information of or regarding NewCorp (including,
without limitation, NewCorp's financial condition or prospects) in agreeing
to exchange Bridge Stock for NewCorp Stock as provided herein. BRIDGE
acknowledges that it has had full opportunity to obtain and review any and
all information of or regarding NewCorp that it deemed relevant to its
decision to exchange Bridge Stock for NewCorp Stock.
ARTICLE 3
CONDITIONS TO OBLIGATION TO CLOSE
3.1 Conditions to Obligation of BRIDGE. The obligation of BRIDGE to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) The NEWCORP SHAREHOLDERS shall have delivered the NewCorp Stock as
set forth in Section 1.1, above;
(b) The representations and warranties of the NEWCORP SHAREHOLDERS set
forth in Section 2.1, above, shall be true and correct in all material
respects at and as of the Closing Date;
(c) The NEWCORP SHAREHOLDERS shall have performed and complied with all
of its convenants hereunder in all material respects through the Closing;
(d) No action, suit, proceeding, hearing, investigation, charge
complaint, claim or demand shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would:
(i)
prevent consummation of any of the transactions contemplated by this
Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(e) All actions by the NEWCORP SHAREHOLDERS in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form
and substance to BRIDGE;
BRIDGE may waive any condition specified in this Section 3.1, above, if it
executes a writing so stating at or prior to the Closing.
3.2 Conditions to Obligation of the NEWCORP SHAREHOLDERS. The
obligation of the NEWCORP SHAREHOLDERS to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction
of the following conditions:
(a) BRIDGE shall have delivered the Bridge Stock as set forth in Section
1,2, above;
(b) The representations and warranties of BRIDGE set forth in Section
2.2, above, shall be true and correct in all material respects at and as of
the Closing Date;
(c) BRIDGE shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(d) No action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would: (i) prevent
consummation of any of the transactions contemplated by this Agreement; or
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(e) All actions to be taken by BRIDGE in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to the NEWCORP
SHAREHOLDERS;
The NEWCORP SHAREHOLDERS may waive any condition specified in this
Section 3.2, above, if they execute a writing so stating at or prior to the
Closing.
ARTICLE 4
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All of the representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder (even if the damaged Party knew
or had reason to know of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
ARTICLE 5
MISCELLANEOUS
5.1 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any individual partnership, corporation, association,
joint stock company, trust, joint venture, unincorporated organization, or
governmental entity other than the Parties and their
respective successors and permitted assigns.
5.2 Entire Agreement. This Agreement, including the documents
referred to herein, constitutes the entire agreement among Parties and
supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
5.3 Succession and Assignment. No Party may assign either this
Agreement or any of his, her or its rights, interest, or obligations
hereunder without the prior written approval of the Parties.
5.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
5.5 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
5.6 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the NEWCORP SHAREHOLDERS: HIDEKI WATANABE
1894-1 Kamitsuruma
Sagamihara-Shi,
Kanagawa-Ken 228, Japan
If to the BRIDGE: John Harwer
12601 Monarch Street
Garden Grove, CA 92841
Copy to: Jackson, DeMarco & Peckenpaugh
4 Park Plaza, Suite 1600
Irvine CA 92623
Either Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the addresses set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by
the intended recipient. Either Party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to
be delivered by giving the Party notice in the manner herein set forth.
5.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California without
giving effect to any choice or conflict of law provision or rule (whether of
the State of California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
California.
5.8 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
both Parties. No waiver by either Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
5.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
5.10 Attorneys' Fees.
(a) In any action, arbitration proceeding or other litigation
("Litigation") between the parties to declare the rights ranted in this
Agreement or to enforce the provisions of this Agreement, the party
prevailing in the Litigation, whether at trial or on appeal, shall be
entitled to its costs and expenses of suit, including, without limitation, a
reasonable sum as and for attorneys' fees incurred in such Litigation. The
term "prevailing party" as used in this paragraph shall not be limited to a
prevailing plaintiff, but shall also include, without limitation, any party
who is made a defendant in Litigation in which damages or other relief or
both may be sought against such party and a final judgment or dismissal or
decree is entered in such Litigation in favor of such party defendant.
(b) Attorney's fees incurred in enforcing any judgment rendered in
connection with the interpretation or enforcement of this Agreement
("Judgment") are recoverable by the party in whose favor such Judgment is
rendered, as a separate item of damages. The provisions of this paragraph
are severable from the other provisions of this agreement and shall survive
any such Judgement, and the provisions of this paragraph shall not be deemed
merged into any such Judgment.
5.11 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
constructed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring either Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If either
Party has breached any representation, warranty, or covenant contained herein
in any respect, the fact that there exists another representation, warranty,
or covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
5.12 Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BRIDGE:
BRIDGE TECHNOLOGIES, INC.,
a Nevada corporation
By: Signed John J. Harwer
Name: John J. Harwer
Title: President
NEWCORP SHAREHOLDERS:
Signed Tetsuji Aoyagi
Tetsuji Aoyagi
Signed Hideki Watanabe
Hideki Watanabe
Item 14. Submission of matters to a Vote of Security Holders
None
<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 ofoperations 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
subsidiaryof 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.
F-24
<PAGE>
BRIDGE TECHNOLOGY, INC.
FORM 10-KSB
SEC FILE NO. 0-24767
ITEM 15. INDEX OF EXHIBITS
_____________________________________________________________
- - - Exhibit 3 (i) Articles of Incorporation of Bridge R & D, Inc., as
dated June 25, 1997, (incorporated herein by reference to
Exhibit 3 (i) of Bridge Technology, Inc. Form 10-SB,
Amendment # 1 , filed November 16, 1998 with the Commission).
Incorporation of Bridge Technology, Inc., as amended April 21,1997
(incorporated herein by reference to Exhibit 3 (i) of Bridge
Technology, Inc. Form 10-SB, Amendment # 1 , filed November 16,
1998 with the Commission).
Newcorp Technology, Inc. (Nevada)
- - - Exhibit 3 (ii) By-laws of Bridge Technology, Inc., as dated August 1,
1997,
(incorporated herein by reference to Exhibit 3 (ii) of Bridge
Technology, Inc. Form 10-SB, Amendment # 1 , filed November 16,
1998 with the Commission).
- - - Exhibit 4 Determination of Shareholder Preferences, held April 21, 1997 in
Cypress, California, (incorporated herein by reference to Exhibit
4 of Bridge Technology, Inc. Form 10-SB, Amendment # 1 , filed
November 16, 1998 with the Commission).
- - - Exhibit 10 Material Contracts
A) Purchase of Assets of Allied Web Agreement, as reviewed
11/13/98,(incorporated herein by reference to Exhibit
10, A) of Bridge Technology, Inc. Form 10-SB, Amendment # 1,
filed November 16, 1998 with the Commission).
, B) John Harwer Employment Agreement, dated June 1,1997, (incorp-
orated herein by reference to Exhibit 10, B) of Bridge
Technology,Inc. Form 10-SB, Amendment # 1, filed November 16,
1998 with the Commission).
C) EEMB China Agreement, reviewed 11/13/98, as entered into
November 11, 1997 (incorporated herein by reference to
Exhibit
C) of Bridge Technology, Inc. Form 10-SB, Amendment # 1, filed
November 16, 1998 with the Commission).
D) Newcorp Japan Stock Exchange Agreement, as entered into
November 11, 1997 (incorporated herein by reference to Exhibit
10 D) of Bridge Technology, Inc. Form 10-SB, Amendment #2
filed filed December 23, 1998, with the Commission).
E) Classic Trading Agreement
- - - Exhibit 21 Subsidiaries of the Registrant
Newcorp Technology, Inc. (Nevada)
PTI Enclosures, Inc.,; Newcorp Technology Ltd. (Japan);
Newcorp Technology, Inc (USA); Bridge R & D, Inc,.
(incorporated herein by reference to Exhibit 21 of the
Bridge Technology, Inc. Form 10-SB, filed August 10, 1998,
with the Commission.)
- - - Exhibit 27 Financial Data Schedules
- Audited financial statements for one year ending December 31,
1997. (Incorporated here by reference to Exhibit 27 of the
Bridge Technology, Inc. Form 10-SB Amendment #2, filed
December 23, 1998 with the Commission).
- Unaudited financial statements for 6 months ending June 30, 1998
Incorporated here by reference to Exhibit 27 of the
Bridge Technology, Inc. Form 10-SB Amendment #2, filed
December 23, 1998 with the Commission).
- Audited financial statements December 31, 1997 and December 31,
1998
- - - Exhibit 99 Additional contracts
- Incentive Stock Option Plan
- Assignment of Trademarks
- Property Lease
ASSIGNMENT OF TRADEMARKS
TrademarkRegistration No. Date Class No.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIGIDISK 2,203,190 11/10/98 9
SANSEI 2,204,363 11/17/98 9
KYOJIN 2,203,209 11/10/98 9
HOKUTOSEI 2,204,367 11/17/98 9
MISAIRU 2,203,194 11/10/98 9
YOKOHAMA 2,203,207 11/10/98 9
YAMAI 2,203,192 11/10/98 9
OPTSTOR 2,203,191 11/10/98 9
SONAI 2,201,965 11/03/98 9
TAKAYA 2,203,193 11/10/98 9
TOYICHI 2,204,369 11/17/98 9
HANSHIN 2,203,206 11/10/98 9
HIDEKI 2,203,205 11/10/98 9
MISAKI 2,203,208 11/10/98 9
NANYO 2,204,370 11/17/98 9
MIRAI 2,204,362 11/17/98 9
HIMAX 2,207,528 12/01/98 9
HIKARI 2,207,529 12/01/98 9
YOMIKI serial 75/199987 11/17/98 registered 9
</TABLE>
ASSIGNOR:
WEB, INC.
A California Corporation
59 Sillero
Rancho Santa MArgarita, California 92688
ASSIGNEE:
BRIDGE R&D, INC.
A Nevada Corporation
12601 Monarch
Garden Grove, California 92601
Assignor is, and has been, the owner of the above trademarks since the
above dates of registration.
For valuable consideration received, Assignor hereby grants and assigns
to Assignee Assignor's entire interest in the trademark and its registration,
together with that part of the goodwill of Assignor's business connected with
the use of and symbolized by the marks.
ALLIED WEB, INC.,
a California Corporation
by:Signed
John J. Harwer, President
<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>
