UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended June 30, 1999
-------------
Bridge Technology, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 59-3065437
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(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
12601 Monarch Street, Garden Grove, CA 92841
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(Address of principal executive offices)
(714) 891-6508
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No []
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a court.
Yes [X] No []
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date
7,182,936
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Transitional Small Business Disclosure Format (Check one): Yes [] No [X]
<PAGE>
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Bridge Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
(Audited) (Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 752,015 $ 777,565
Accounts receivable 4,710,197 1,615,677
Subscription receivable 25,000 300,000
Other receivables 98,004 144,206
Inventory 1,320,588 2,476,335
Advances to employees 27,500 21,177
Other current assets 195,789 52,761
----------- -----------
Total current assets 7,129,093 5,387,721
Property and equipment, net 366,433 603,961
Trademark, net of amortization - 602
Deferred income tax 63,905 59,747
Other assets 229,676 508,203
----------- -----------
Total assets $ 7,789,107 $6,560,234
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,710,781 $2,003,881
Payable to employee 41,161 -
Accrued liabilities 563,071 215,138
Loans payable 632,419 192,618
Other liabilities 23,969 113,067
----------- -----------
Total current liabilities 4,971,401 2,524,704
Notes payable, less current portion 210,213 188,756
Notes payable, less current portion to shareholders 100,000 100,000
----------- -----------
Total liabilities 5,281,614 2,813,460
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Commitments and Contingencies
Shareholders' equity
Common stock; par value $0.01 per share, authorized
10,000,000 shares, 6,132,936 shares outstanding at
December 31, 1998, 7,182,936 shares outstanding at
Jun 30, 1999 61,329 71,828
Additional paid-in capital 3,600,111 4,464,612
Stock subscribed 25,000 300,000
Accumulated deficit (1,140,935)(1,068,275)
Translation adjustment (38,012) (21,391)
----------- -----------
Total shareholders' equity 2,507,493 3,746,774
----------- -----------
Total liabilities and shareholders' equity $ 7,789,107 $6,560,234
=========== ===========
See accompanying summary of accounting policies and notes to
consolidated financial statements
</TABLE>
F-1
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ------------------------
1998 1999 1998 1999
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
<S> <C> <C> <C> <C>
Net sales $4,699,246 $5,497,001 $9,438,005 $13,214,558
Cost of sales 3,973,778 4,857,175 8,089,585 11,791,880
- -----------------------------------------------------------------------
Gross profit 725,468 639,826 1,348,420 1,422,678
Selling, general and 717,625 726,140 1,438,820 1,384,540
administrative expense
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Income (loss) from 7,843 (86,314) (90,400) 38,138
operations
Other income(expense):
Interest expense, net (9,844) (4,106) (13,920) (12,790)
Other income (expense) (21,617) 49,605 (2,822) 52,414
- -----------------------------------------------------------------------
Income (loss) before (23,618) (40,815) (107,142) 77,762
income taxes
Income Taxes provision: - 4,302 - 5,102
- -----------------------------------------------------------------------
Net income (loss) (23,618) (45,117) (107,142) 72,660
Net income (loss) (23,618) (45,117) (107,142) 72,660
applicable to common
shares
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Weighted average number 5,782,936 6,840,628 4,842,605 6,541,776
of common shares
outstanding
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Earnings (loss) per share $(0.01) $(0.01) $(0.02) $0.01
- -----------------------------------------------------------------------
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>
F-2
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1998 1999
(UnAudited) (Unaudited)
<S> <C> <C>
Cashflows from operating activities
Net income (loss) $ (107,142) $ 72,660
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 45,085 60,965
Provision for doubtful accounts (2,459) (4,520)
Provision for slow moving inventory (36,170) -
Increase (decrease) from changes in operating
assets and liabilities:
Trade receivables (159,492) 3,099,040
Inventory (319,576) (1,155,747)
Other receivables (109,939) (46,202)
Prepaid and other assets (94,381) 149,351
Other assets (38,207) (278,527)
Accounts payable and accrued liabilities 663,375 (2,054,833)
Other liabilities 97,435 47,937
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Net cash used in operating activities (61,471) (109,876)
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Cash flows from investing activities
Purchase of property, plant and equipment (165,487) (299,385)
Addition to intangible assets - (602)
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Net cash used in investing activities (165,487) (299,987)
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Cash flows from financing activities
Borrowings on loans payable 123,941 -
Payments on loans payable - (443,663)
Borrowings on notes payable 2,259 -
Payments on notes payable and related interest (50,000) (17,595)
Net proceeds from issuance of common stock 750,000 875,000
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Net cash provided by financing activities 826,200 413,742
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Effect of exchange rate changes on cash 25,958 21,671
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Net increase in cash and cash equivalents 625,200 25,550
Cash and cash equivalents, beginning of year 202,130 752,015
---------- -----------
Cash and cash equivalents, end of year $ 827,330 $ 777,565
========== ===========
Supplemental information:
Cash paid during the year for:
Interest $ 13,920 $ 14,549
Income taxes 3,200 5,102
Supplemental disclosure of non-cash activities:
The company recorded subscription receivable of $300,000 and stock
subscribed of $300,000 as of June 30, 1999.
See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>
F-3
<PAGE>
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Organization and Business
Bridge Technology, Inc. (The Company) was organized under the law of the
State of Nevada on April 15, 1969. The Company is currently located in
California and is in the business of developing, buying, assembling,
testing, packaging, manufacturing, marketing, and selling computer
peripherals and computer system enhancement products. The Company
established operating divisions and subsidiaries under several separate
business names. Each of these operating entities is focused on certain
specific products and sales channels. Currently the Company has four
wholly owned subsidiaries: PTI Enclosures, Inc., Newcorp Technology Ltd.
(Japan), Newcorp Technology, Inc. (USA), and Bridge R&D, Inc. and an 80%
owned subsidiary Pacific Bridge Net.
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB
and Article 10 of Regulation S-X. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for fair presentation have been included.
Operating results for the three and six months periods ended June 30,
1999 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-KSB for the year ended
December 31, 1998.
Note 2. Income Taxes
As of December 31, 1998, for federal income tax purposes, the Company
had approximately $582,000 in net operating loss carryforwards expiring
through 2018. The annual utilization of the operating loss carryforward
may be significantly limited due to the adverse resolution, if any, with
respect to the loss carryover provisions of Internal Revenue Code
Section 382 in connection with certain stock issuances by the Company.
Note 3. Shareholders' Equity
In June, 1999, the Company received proceeds of $400,000 to issue
400,000 shares of its common stock to sophisticated investors through
a private placement at a price of $1.00 per share.
F-4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Except for historical information contained herein, the matters set
forth in this report are forward-looking statements within the meaning
of the "Safe Harbor" provisions of the Private Securities Litigation Act
of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially. The
Company disclaims any obligations to update these forward-looking
statements.
Results of Operatings for the Three Months Ended June 30, 1999 as
compared to the Three Months Ended June 30, 1998.
Net sales of $5,497,001 for the three months ended June 30, 1999
increased by $797,755 (17.0%) over net sales of $4,699,246 for the
same period of 1998. This increase was due primarily to the Company's
entry into the RAID business and increased sales by PTI Enclosures, Inc.
Gross profit for the three months ended June 30, 1999 was $639,826,
a 11.8% decrease, when compared to $725,468 for the three months ended
June 30, 1998. Gross profit as a percentage of net sales decreased
from 15.4% to 11.6% for the three months ended June 30, 1999.
Selling, general and administrative expenses increased by $8,515 to
$726,140 in the three months ended June 30, 1999 compared to $717,625
for the three months ended June 30, 1998. As a percentage of net sales,
these expenses decreased from 15.3% in the three months ended June 30,
1998 to 13.2% in the three months ended June 30, 1999.
Operating results decreased from an income of $7,843 in the three
months ended June 30, 1998 to a loss of $86,314 in the three months
ended June 30, 1999. Operating results as a percentage of net sales
decreased 1.8% from a 0.2% income in the three months ended June 30,
1998 to a 1.6% loss in the three months ended June 30, 1999.
Other income increased by $76,960 from $31,461 other expenses in
the three months ended June 30, 1998 when compared to other income of
$45,499 for the three months ended June 30, 1999.
Net loss increased to $45,117 or a loss of $0.01 per share for
the three months ended June 30, 1999 compared to a loss of $23,618,
or a loss of $0.01 per share for the three months ended June 30, 1998.
Results of Operations for the Six Months ended June 30, 1999 as
compared to the Six Months Ended June 30, 1998.
Net Sales of $13,214,558 for the six months ended June 30, 1999
increased by $3,776,553 (40%) over net sales of $9,438,005 for the
same period of 1998. The increase was due primarily to the Company's
entry into the RAID business and increased sales by PTI Enclosures, Inc.
Gross Profit for six months ended June 30, 1999 was $1,422,678
a 5.5% increase when compared to $1,348,420 for the six months ended
June 30, 1998, reflecting higher gross margins attributed to the
Company's PTI Enclosures, Inc. acquisition. Gross Profit as a
percentage of net sales decreased from 14.3% to 10.8% for the six
months ended June 30, 1999.
Selling, general and administrative expenses decreased by $54,280
to $1,384,540 in the six months ended June 30, 1999 compared to
$1,438,820 for the six months ended June 30, 1998. As a percentage of
net sales, these expenses decreased from 15.2% in the six months ended
Juen 30, 1998 to 10.5% in the six months ended June 30, 1999.
Operating results increased from a loss of $90,400 in the six
months ended June 30, 1998 to an income of $38,138 in the six
months ended June 30, 1999 principally reflecting gross profits from the
PTI Enclosures acquisition and a reduction in selling and administrative
expenses in the six months ended June 30, 1999. Operating results as
a percentage of net sales increased 1.3% from a 1.0% loss in the six
months ended June 30, 1998 to a 0.3% income in the six months ended
June 30, 1999.
Other income increased by $56,366 from $16,742 other expenses in
the six months ended June 30, 1998 when compared to other income of
$39,624 for the six months ended June 30, 1999.
Net income increased to $72,660 or $0.01 per share for the six
months ended June 30, 1999 compared to a loss of $107,142 or a loss of
$0.02 per share for the six months ended June 30, 1998.
Liquidity and Capital Resources
Since current management acquired control of the Company in early 1997,
the Company has financed its operations with internally generated cash
and with the private placement of its securities principally to its
directors and strategic alliance partners totaling in excess of
$4,000,000 to a limited number of sophisticated investors with knowledge
of the Company's operations and plans to expand.
The Company's capital requirements have been and will continue to
be significant and its cash and cash equivalent have been sufficient
to cover its cash flow from operations. At June 30, 1999, the Company
had a working capital of $2,863,017 and cash of $777,565
compared to a working capital of $2,157,692 and cash of $752,015
at December 31, 1998. Since restarting operations, the Company has
satisfied its working capital requirements with cash generated through
operations and the issuance of equity securities, and obtaining working
capital bank loans. The Company has an open line of credit with a
commercial bank in Los Angeles for $1,000,000 at 6% interest. The
Company has drawn down $0 on this line of credit as of June 30, 1999.
Net cash used in operating activities in the six months ended
June 30, 1999 was $109,876 as compared to $61,471 used in the six
months ended June 30, 1998. The difference is mainly due to increase
the result of operation, an increase in inventory, decrease in accounts
receivable collections and accounts payable and accrued liabilities.
Net cash used in investing activities in the six months ended
June 30, 1999 was $299,987 for the purchase of fixed assets and
intangible assets in Japan, as compared to $165,487 for the purchase
of fixed assets in the six months ended June 30, 1998.
Net cash provided by financing activities in the six months
ended June 30, 1999 was $413,742 as compared to $826,200 in the six
months ended June 30, 1998. The difference is mainly due to the
repayment of the loans payable.
The Company believes that it can fund the growth of its core
business with internally generated cash flow in addition to bank loans
under the Company's line of credit with a commercial bank in Los
Angeles.
Effects of Inflation
The Company believes that inflation has not had a material effect on its
net sales and results of operations.
Effects of Fluctuation in Foreign Exchange Rates
The Company continues to buy products and services from foreign
suppliers. The Company contracts for such products and services in U.S.
dollars, thus eliminating the possible effect of currency fluctuations.
The Company's wholly-owned subsidiary, Newcorp Technology (Japan) in
1997 and early 1998, was subject to such currency fluctuations and
suffered losses due mainly to the decline of Japanese Yen. In May,
1998, Newcorp Japan changed its sales contracts with its OEM customers
from Japanese Yen to U.S. dollars in order to eliminate future material
effect of currency fluctuations on its net sales and results of
operations. There have been no significant currency losses in 1999.
Year 2000 Effect
The Company's accounting software currently does not utilize a four
digit year field, however, the Company has been assured by the software
manufacturer that all necessary modifications for the year 2000 have
been or will be made and tested timely.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceeding
There are no legal proceedings either against the Company or
against third parties.
Item 2. Changes in Securities and Use of Proceeds
Recent Sales.
The Company sold 400,000 shares of common stock in June 1999 at
$1.00 per share to "accreditated investors" primarily Directors and
Strategic Alliance Partners.
The Company sold 50,000 shares of the common stock of Pacific
Bridge Net, a subsidiary in August 1999 at $1.00 per share, representing
20% of the subsidiary's total shares outstanding, to Worldwide Wireless
Networks, Inc. a strategic alliance partner of the Company. The
Company acquired its 80% or 200,000 shares in August for a cash
investment of $200,000.
The Company's subsidiary Pacific Bridge Net sold $650,000 of 6%
convertible debentures in August 1999 to "accreditated investors",
primarily Directors of the Company. The debentures are convertible into
the common stock of Pacific Bridge Net at $3.00 per share. The Company
has subscribed and paid for $250,000 of these Debentures. On a fully
diluted basis the Company would own 283,333 shares of Pacific Bridge Net
representing 60.7% of the Company if Worldwide Wireless Networks, Inc.
does not exercise it right to maintain its 20% interest. The Company's
interest would be 56% if Worldwide Wireless Networks, Inc. maintained
its 20% interest by purchasing 43,333 shares of Pacific Bridge Net's
common stock at $3.00 per share.
The Company uses the above proceeds for its operating activities.
Item 3. Defaults upon Senior Securities
There are no defaults upon senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
There are no matters submitted to a vote of security holders.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
There are no exhibits and reports on Form 8-K.
SIGNATURES
Bridge Technology, Inc.
Registrant
Date ____________________ __________________________
Signature
John J. Harwer, CEO
Date ___________________ __________________________
Signature
John T. Gauthier, CFO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 777,565
<SECURITIES> 0
<RECEIVABLES> 2,133,821
<ALLOWANCES> 0
<INVENTORY> 2,476,335
<CURRENT-ASSETS> 5,387,721
<PP&E> 1,172,513
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,560,234
<CURRENT-LIABILITIES> 2,524,704
<BONDS> 288,756
0
0
<COMMON> 3,746,774
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,560,234
<SALES> 13,214,558
<TOTAL-REVENUES> 13,214,558
<CGS> 11,791,880
<TOTAL-COSTS> 11,791,880
<OTHER-EXPENSES> 52,414
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,790)
<INCOME-PRETAX> 77,762
<INCOME-TAX> 5,102
<INCOME-CONTINUING> 72,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,660
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
