DATE: MARCH 27, 2000
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, 1999
NEVADA 59-3065437
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(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. $34,272,187
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which
the common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.) December 31, 1999 $75,600,00
-------------------------------
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: 10,442,186
-----------
Registrant's Form 10-SB and subsequent amendments 1 and 2 which
were initially filed in August 1998 with the Securities and Exchange
Commission in connection with the Registrant's Registration Statement
is incorporated by reference into Part I, II and III of this report as well
as certain exhibits filed with the Registrant's Registration Statement.
In addition Form 10KSB for the year ended 12/31/98 filed 3/31/99 with the
Securities and Exchange Commission is also incorporated by reference into Part
I, II, and III of this report as well as certain exhibits filed with the Form
10KSB.
<PAGE>
TABLE OF CONTENTS PAGE
PART I
Item 1. Description of Business. 4
Item 2. Description of Property. 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders. 14
PART II
Item 5. Market for Common Equity and Related Stockholder Matters. 15
Item 6. Management's Discussion and Analysis or Plan of Operation. 15
Item 7. Financial Statements. 19
Item 8. Changes in and Disagreements with Accountants on 45
Accounting and Financial Disclosure.
PART III
Item 9. Directors, Executive officers, Promoters and Control 45
Persons.
Item 10. Executive Compensation. 49
Item 11. Security Ownership of Certain Beneficial Owners and 49
Management.
Item 12. Certain Relationships and Related Transactions. 51
Item 13. Exhibits and Reports on Form 8-K. 51
<PAGE>
Item 1. Description of Business.
The Company's vision is to develop state-of-the-art components and products in
digital recording, storage, retrieval and communication. The Company designs
leading edge products for data, voice, multimedia, Internet and wireless
communications industries. To capitalize on these opportunities, the Company
designs, develops, buys, assembles, manufactures, tests, packages, markets and
sells broad family of 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
existing leading edge technologies. The Company is creating innovative
products desired by personal computer and communications equipment 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 66 full time
employees, including senior management and manufacturing personnel and 12
administrative personnel. The Company employs 5 professionals and 5
administrative personnel overseas. The Company also employs two part-time
persons and contracts for services with several consultants.
Currently the Company has five wholly owned subsidiaries: PTI Enclosures,
Inc. (USA), Newcorp Technology Ltd. (Japan), Newcorp Technology, Inc. (USA),
Bridge R&D, Inc. (USA), and Autec Power Systems, Inc. (USA). In addition the
Company owns 80% of Pacific Bridge Net and 60% interest in CMS
Technology (Hong Kong).
The Company is organized along three primary groups:
I) CORE COMPETENCY GROUP: AUTEC (USA), PTI (USA), EEMB (USA)
II) TECHNOLOGY GROUP: Newcorp Technology Ltd. (Japan), Pacific Bridge Net
(USA)
III) CHANNEL GROUP (under Bridge R&D): ADTX Division, DataStor Division,
Classic Trading Inc. and Newcorp Technology, Inc. (USA)
Each group company is focused on providing its specific contribution to Bridge
Technology, Inc.
I. CORE COMPETENCY GROUP:
Autec Power Systems Inc.
Through an exchange of shares of common stock effective December 1, 1999, the
Company acquired 100% of the equity interest in Autec Power Systems Inc.
("Autec"). The exchange was on the basis of one share of the Company's common
stock for two shares of Autec common stock outstanding.
Autec designs, develops, engineers and produces high quality power supplies
for a diversified list of clientele. Autec supplies over 90% of the power
supply needs of the largest manufacturer of gaming devices. Mr. Winston Gu,
Chairman and principal shareholder of Autec has joined the Company's
management team as Chief Executive Officer and a member of the Executive
Steering Committee.
<PAGE>
EEMB USA
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 Technology Limited (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 Technology Limited (Japan) developing
technologies. However,
there can be no assurance that EEMB USA will be successful in such efforts.
PTI Enclosures, Inc. (PTI)
PTI Enclosures, Inc. (PTI) main business focuses on designing, developing,
manufacturing, testing, and selling custom-designed enclosures and power
supplies for computer peripherals, telecommunications equipment, medical
equipment and other electronics devices. Its customers include major computer
and computer peripheral manufacturers, telecommunications manufacturers and
medical instrumentation manufacturers who use PTI's capabilities to produce
OEM products manufactured to their exact specifications. All OEM based and
custom designed products provide high quality at competitive prices. PTI also
sells products to sub-system integrators who add the peripherals and software
to PTI's enclosures and then sell these complete products to the end users.
The enclosures PTI provides encompass hard drive enclosures, tape enclosures,
CD tower enclosures, DVD tower enclosures, RAID enclosures, communications
system enclosures, medical system enclosures, various server enclosures and
other enclosures. PTI also supplies enclosures and power supplies for several
special-purpose systems.
II. TECHNOLOGY GROUP:
Newcorp Technology Ltd. (Japan)
Newcorp Technology Ltd., a high technology R&D and sales company is based in
Tokyo, Japan. The mission of Newcorp Japan is to develop and/or license
leading edge technologies that can 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 alliances and
relationships in Japan to procure unique new technologies and designs
principally related to computer enhancements and communications 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 specifically for certain products manufactured for
Microsoft Corporation and other OEMs by third party assemblers.
<PAGE>
Pacific Bridge Net (USA)
Pacific Bridge Net mission is to design, develop (patent and copyright)
certain devices required to provide high speed broadband wireless access to
the Internet backbone infrastructure. Such wireless broadband devices are
foreseen to provide the high speed Internet access to the buildings that have
no direct link to the light or dark fiber networks. It is estimated that about
90% of the buildings do not have (and in foreseeable future will not have)
high speed lines such as T-1, T-3 etc.. This will create an opportunity for
companies that make wireless broadband communication devices to provide
Internet access to these buildings. PBN has finished an engineering prototype
of the wireless broadband platform and it has been testing it for a period of
10 weeks for reliability and stability in real wireless network deployment. To
be successful PBN has to find and attract new talent in this highly innovative
and competitive area.
III. CHANNEL GROUP:
Bridge R&D, Inc.
Bridge R&D has three operating divisions: ADTX Distributor, DataStor and
Newcorp Technology, Inc. (USA).
ADTX Distributor division
ADTX Japan has granted Bridge R&D a distribution license to market RAID
subsystems. Its main product is a family of Redundant Array of Independent
Drives (RAID) subsystems. These systems are purchased from Advanced
Technology and Systems Co., Ltd. an IBM Joint Venture in Fujisawa, Japan.
Bridge R&D 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.
Bridge R&D 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. Bridge R&D also sells its systems through several major
international distributors. Bridge R&D 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. Bridge R&D 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 Japan introduced a
family of 1394 hubs and repeaters operating at 200Mbits/sec, and the new and
faster 400Mbit/sec models were introduced in late 1999.
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.
<PAGE>
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.
Bridge R&D 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.
These RAID systems use SCSI-2 ultra-wide and fast interface, and LVD2
interface, while utilizing EIDE hard drives internally. The price/performance
is comparable to the leading edge of current SCSI technology. ADTX Japan
plans to introduce the fastest Fibre-Channel based models in 2000. Due to
superior data transfer rate for large sequential data blocks offered by ADTX
"G" series and "R" series RAID systems, Bridge R&D marketing and sales efforts
are focused on Digital Video applications and the applications requiring
transfers of large blocks of data. However, there can be no assurance that the
Company will continue to represent ADTX Japan and that their quality and price
advantages can be maintained.
RAID systems business has become very competitive. Bridge R&D positions the
ADTX Japan products as high performance products and prices most models to
compete on price/performance basis, rather than on price. Bridge R&D does not
depend on any single major customer, and no customer comprises more than
5% of Bridge R&D sales.
Other than normal regulatory agency approvals such as UL, CSA, FCC, CE, CB,
etc., Bridge R&D 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 Bridge R&D 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
<PAGE>
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 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.
DataStor plans to 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.
Newcorp Technology, Inc. (USA)
Newcorp Technology, Inc. (USA) was established under the laws of the State of
Nevada in March 1999 and it has two operating divisions: InkJet America and
StarTrack. InkJet America sells refill ink cartridges and supplies for various
Inkjet printers. Newcorp Technology, Inc. provides innovative products and
proprietary memory modules to customers worldwide.
InkJet America
InkJet America division is buying, packaging, and selling
replacement inkjet printer cartridges to selected customers and distributors.
At the initial stage, InkJet America division has a limited sales volume.
The division plans to increase sales volume to several thousand pieces per
month. Once reaching sufficient sales volume of cartridges, it plans to
procure a specialized filling machine and manufacture its own brand name
inkjet printer cartridges.
StarTrack
StarTrack provides special patented wireless human input devices, including
handheld wireless trackball with presentation beam pointer. StarTrack patents
are expected to provide the basis for a family of products based on newly
developed mouse and trackball technologies. One of such technologies is an LED
diode and Optical Sensor based Optical Tracking Unit, developed in Japan and
utilizing Mitsubishi AR chip. The AR (Artificial Retina) chip is a CMOS device
which can be programmed to recognize various objects. The first product using
the Optical Trackball is expected to ship to OEM customers in late year 2000.
Newcorp Technology
The primary mission of Newcorp Technology, Inc. (USA) is to innovate by
identifying, evaluating and procuring technologies that provide new products
with substantial added value. This subsidiary 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
<PAGE>
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.
Competition.
The manufacture and distribution of computer peripherals, computer
enhancement, communications and other commercial electronics 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, to become 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
<PAGE>
resources and information processing systems. In conjunction with the Autec
acquisition, Mr. Winston Gu has joined the executive staff as Chief Executive
Officer of the Company, and Mr. John Harwer has assumed the Presidency of
Pacific Bridge Net. Pacific Bridge Net is an 80% owned subsidiary of the
Company whose mission is to design, develop (patent and copyright) certain
devices required to provide high speed broadband wireless access to the
Internet backbone infrastructure. Such wireless broadband devices are foreseen
to provide the high speed Internet access to the buildings that have no direct
link to the light or dark fiber networks. It is estimated that about 90% of
the buildings do not have (and in foreseeable future will not have) high speed
lines such as T-1, T-3 etc.. This will create an opportunity for companies
that make wireless broadband communication devices to provide Internet access
to these buildings. To be successful PBN has to find and attract new talent in
this highly competitive area. The failure to recruit additional staff and key
personnel, to have sufficient financial resources, to maintain or upgrade the
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 will be subject to
approval or ratification by the Company's stockholders. The Company has hired
American Appraisal Associates to obtain a valuation opinion on its CMS Hong
Kong acquisition. It is expected that the Directors will require its Officers
to obtain valuation opinions or contact letters on all future acquisitions.
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. This is especially true of
international acquisitions.
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
<PAGE>
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, 1999, the Company's accumulated deficit
was $ 744,415. 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 that 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 financial
plans 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 would occur.
Dependence on Key Personnel.
The Company's future performance will depend significantly upon its
management. The Company is in the process of entering into 3 year employment
contracts with the following Officers and Management who are members of the
Company's Executive Steering Committee.
Tetsuji Aoyagi, Chairman of Bridge Technology, Inc.
James Djen, President of Bridge Technology, Inc.
Winston Gu, CEO of Bridge Technology, Inc.
John T. Gauthier, CFO of Bridge Technology, Inc.
John Harwer, President & CEO of Pacific Bridge Net
Hideki Watanabe, President of Newcorp Technology Ltd. Japan
In addition the following operating executives of the Company will also be
entering into 3 year employment contracts. The loss of one or more of these
executives could have a negative effect on the business prospects of the
Company.
Dennis Bradshaw, Vice-President of Bridge Technology, Inc.
Dick Fox, General Manager of PTI Enclosures, Inc.
Naresh Chadha, General Manager of Bridge R&D, Inc.
Wagar Haider, President of Classic Trading, Inc.
In addition, the Company's success will be dependent upon its ability to
recruit and retain additional qualified personnel. Any failure by the
<PAGE>
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 of the Pacific
Bridge Net subsidiary, Mr. Harwer, is actively developing patent and/or
Copyright 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 secrets 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 in the future litigation is necessary 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 the intellectual property laws. In addition, the
laws of certain countries in which the Company's products are or may be
distributed may not protect the company's products and intellectual property
rights to the same extent as the laws of the United States.
The Company believes that its products do not infringe upon any valid
existing proprietary rights of third parties. Although the Company has
received no communication from third parties alleging the infringement of
proprietary rights of such parties, there can be no assurance that third
parties will not assert infringement claims in the future. Any such third
party claims, whether or not meritorious, could result in costly litigation
or require the Company to enter into royalty or licensing agreements.
There can be no assurance that the Company would prevail in any such
litigation or that any such licenses would be available on acceptable terms,
if at all. If the Company were found to have infringed upon the proprietary
rights of third parties, it could be required to pay damages, cease sales of
the infringing products and redesign or discontinue such products, any of
which alternatives, individually or collectively could have a material adverse
effect on the Company's business, operating results and financial condition.
Speculative Nature of Company's Proposed Plan.
The success of the Company's proposed plan of operation will depend to a
great extent on it's management, present and future, operating within the
confines of limited financial resources. Current working capital is expected
to be sufficient to sustain the Company's present operation through December
31, 2000. However, the Company's business model calls for significant growth
in the year 2000 which is directly dependent on the Company seeking a private
placement or secondary offering of its securities for $20,000,000.
<PAGE>
Negotiations have commenced with underwriters with a commitment expected
once the Company has been approved for NASDAQ listing. Without outside
financing the Company may have to revise its growth plans. 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 valued added computer peripheral products in the
development stage 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 planned for the 1st half of the year 2000. The Company's
inability to diversify its activities into a number of areas may subject the
Company to economic fluctuations within a particular specific field, and
therefore increase the risks associated with the Company's operations.
Regulation.
Although the Company will be subject to regulation under the Securities
Exchange Act of 1934, management believes the Company will not be subject
to regulation under the Investment Company Act of 1940, insofar as the
Company will not be engaged in the business of investing or trading in
securities. In the event the Company engages in business combinations
which result in the Company holding passive investment interests in a
number of entities, the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be
required to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained
no formal determination from the Securities and Exchange Commission as
to the status of the Company under the Investment Company Act of 1940
and, consequently, any violation of such Act would subject the Company
to material adverse consequences.
Product Liability.
Although the Company has not experienced any product liability claims to
date, the sale and support of products by the Company may entail the risk of
such claims, and there can be no assurance that the Company will not be
subject to such claims in the future. A successful product liability claim
or claim arising as a result of use of the Company's products brought
against the Company, or negative publicity attendant to any such claim, could
have a material adverse effect upon the Company's business, operating results
and financial condition. The Company intends to procure product liability
insurance with coverage limits of $1,000,000 per occurrence and $1,000,000
per year. While the Company believes that these amounts are sufficient, there
can be no assurance that amounts are adequate insurance coverage, there can
be no assurance that the amount of insurance will be adequate to satisfy
claims made against the Company in the future, or that the Company will be
able to obtain insurance in the future at satisfactory rates or in adequate
amounts.
<PAGE>
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 is entering 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
at this time. Nevada Law provides that a corporation may indemnify a
director, officer, employee or agent made, or threatened to be, a party to an
action by reason of the fact that he was a director, officer, employee or
agent of the corporation or was serving at the request of the corporation
against expenses actually and reasonably incurred in connection with such
action if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interest of the corporation, and, with respect
of any criminal action or proceeding, if he had no reasonable cause to believe
his conduct was unlawful.
Nevada Law does not permit a corporation to eliminate a director's duty of
care, and the provisions of the Company's Amended and Restated Certificate
of Incorporation have no effect on the availability of equitable remedies,
such as injunction or rescission, for a director's breach of the duty of
care. INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISION, OR OTHERWISE, THE COMPANY HAS
BEEN INFORMED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION
SUCH INDEMNIFICATION IS AGAINST THE PUBLIC POLICY AS EXPRESSED IN THE ACT AND
IS THEREFORE UNENFORCEABLE.
Item 2. Description of Property.
The Company has minimal properties and at this time has no agreements to
acquire any properties. The Company's corporate offices, and the offices of
its subsidiary Bridge R&D, Inc., are located in sublet facilities at 12601
Monarch Street, Garden Grove, CA. 92841. This facility has approximately
50,000 square feet and it houses corporate offices, manufacturing and
warehouse operations. The lease is for 5 years at an average annual rent of
$145,000 per year. In addition the Company has entered into a three year
lease for additional 2,000 square feet of office and warehouse space in Las
Vegas, Nevada at $12,000 per annum.
The Company's subsidiary Autec leases a 30,000 square feet facility in Simi
Valley, California. The lease is for 8 years at an average annual rent
$ 198,000 per year.
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
<PAGE>
to file patent applications on a worldwide basis to protect technology,
inventions and improvements that are considered important to the development
of its business. The Company will, as a matter of policy, seek patent
protection in each of the three major geographic markets: United States,
Europe and the Pacific Rim. The Company also relies on trade secrets, know-
how, continuing technological innovations and licensing opportunities to
develop and maintain its competitive position. The Company has also acquired
over 20 brand names that were registered with the U.S. Patent and Trademark
office. The Company plans to use these names in the continuous marketing of
its products.
Manufacturing
The Company received and maintains the ISO 9002 certification to qualify as
an approved vendor for major computer and computer peripheral manufacturers.
The Company also uses off-shore vendors to procure certain sub-assemblies,
from which the Company then assembles the final products. Before shipment the
products are inspected and tested to maintain the high quality and low return
levels demanded by the Company's customers.
Item 3. Legal Proceedings
There is no litigation pending or threatened by or against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
In November 1999 the shareholder voted to increase the authorized shares of
the Company from 10,000,000 to 100,000,000 shares.
Item 5. Market Price for Common Equity and Related Stockholder Matters.
As of May 15, 2000, there were approximately 2,200 shareholders of record
of the Company's Common Stock. Such number was determined from records
maintained by the Company's Transfer Agent and does include beneficial
owners of the Company's securities whose securities are held in the names
of various dealers and/or clearing agencies.
The Company has never paid any dividends on its Common Stock. It is
management's present intention not to declare or pay cash dividends on the
Company's Common Stock, but to retain earnings, if any, for the operation
and expansion of the Company's business.
Item 6. Management's Discussion and Analysis or Plan of Operation
Safe Harbor Statement.
Statements which are not historical facts, including statements about the
Company's confidence and strategies and its expectations about new and
existing products, technologies and opportunities, market and industry
segment growth, demand and acceptance of new and existing products are
forward looking statements that involve risks and uncertainties. These
include, but are not limited to, product demand and market acceptance risks,
the impact of competitive products and pricing, the results of financing
efforts, the loss of any significant customers of any business, the effect of
the Company's accounting policies, the effects of economic conditions and
<PAGE>
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 12/31/1998 and 1999
Net Sales increased 19.3% from $ 28,738,213 in fiscal 1998 to $ 34,272,187 in
fiscal 1999. Products and services mix for the fiscal year 1999 has
changed substantially in comparison to prior year billings principally due to
the acquisition of Autec Power Systems Inc.
Gross Profit increased 14.6% from $ 5,505,045 in fiscal 1998 to
$ 6,310,683 in fiscal 1999 principally as a result of augmented sales
volume. Gross profit as a percentage of net sales was 18.4% in 1999.
Research and development expenses increased by approximately 5.4% from
$322,016
in fiscal 1998 compared to $339,380 in fiscal 1999. The increase can be
attributed to on going product development and enhancement of existing
technologies.
Selling and administrative expenses decreased approximately 7.4% from
$5,414,702 in fiscal 1998 to $5,015,522 in fiscal 1999. The decrease
in S G&A expenses is principally attributed to the operational synergies
created by the 1998 merger with PTI.
Net profit increase 316% from loss of $ 305,646 in fiscal 1998 to a net
profit of $ 660,721 in fiscal 1999. 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 $2,990,000
to a limited number of accredited investors with knowledge of the Company's
operations and business model.
The Company's capital requirements have been, and will continue to be,
significant. At December 31, 1999, the Company had a working
capital surplus of $5,353,306 and cash and cash equivalents of
$ 2,900,029 compared to a working capital surplus of $3,710,978 and cash
and cash equivalents of $ 2,115,727 at December 31, 1998. Since
inception, the Company has satisfied its working capital requirements through
revenues generated from operations, the issuance of equity and debt
securities, and loans from banking institutions.
Net cash provided by operating activities in the twelve months ended December
31, 1999 was $ 391,263, as compared to net cash provided of $ 850,593
in the twelve months ended December 31, 1998 the difference is mainly due to
net income, and changes in other operating activities.
Net cash used in investing activities in the twelve months ended December
<PAGE>
30, 1999 was $ 621,860 essentially for the purchase of fixed assets,
and purchase of intangibles as compared to $ 314,162 for the purchase of fixed
assets in twelve months ended December 31, 1998.
Net cash provided by financing activities in the twelve months ended
December 31, 1999 was $ 1,041,104 as compared to $ 1,813,992 provided by
financing Company's activities in the twelve months ended December 31, 1998.
This reflects the cash provided from the issuance of the Company's stock in
several private placements to accredited investors.
The Company has obtained approval from the Board of Directors to invest
$250,000 in Pacific Bridge Net Inc., a Nevada subsidiary of the Company whose
mission is to design, develope, manufacture, deploy infrastructure systems in
Asia through Joint Ventures and to sell of wireless infrastructure operating
equipment to third parties. $200,000 was actually invested by the Company and
$50,000 was invested by a strategic alliance partner, Worldwide Wireless
Internet. Additional funding of at least $1,000,000 will be required in 2000.
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 any potential 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.
Recent Accounting Pronouncements
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, 2000. 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.
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's project to assess and correct Y2K related issues regarding
the Year 2000 has been completed and the Company has not experienced any
significant Y2K related events. However, interactions with other companies'
systems make it difficult to conclude there will not be future effect.
Consequently, at this time, management cannot provide assurances that the
Year 2000 issues will not have an impact on the Company's operations.
Item 7. Financial Statements
Bridge Technology, Inc. and Subsidiaries
_______________________
Consolidated Financial Statements
For the Years Ended December 31, 1998 and 1999
_______________________
<PAGE>
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
<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,
1998
and 1999, and the related consolidated statements of operations and
comprehensive loss, shareholders' equity, and cash flows for the years ended
December 31, 1998 and 1999. 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, 1998 and 1999 and the results of
their
operations and their cash flows for the years ended December 31, 1998 and 1999
in conformity with generally accepted accounting principles.
BDO Seidman, LLP
Los Angeles, California
March 10, 2000
- F2 -
<PAGE>
<TABLE>
<CAPTION>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
------------------------------
1998 1999
------------- ---------------
<S> <C> <C>
Assets (Note 4)
Current assets:
Cash $ 2,115,727 $ 2,900,029
Accounts receivable less allowance for 5,892,089 5,793,882
doubtful accounts of $106,498 and $112,911
(Note 10)
Subscription receivable (Note 8) 25,000 75,000
Advances to employees 27,500 1,200
Other receivables - 39,082
Inventory, less provision of $208,865 and 2,937,298 3,157,433
$168,101 (Note 1)
Due from related party (Note 7) 22,803 28,107
Other current assets 332,288 110,284
-------------- -------------
Total current assets 11,352,705 12,105,017
Property and equipment, net (Note 2 and 7) 542,840 801,881
Licensing agreement and Know-How - 200,000
Related party receivable (Note 7) - 250,000
Investments in a third party (at cost) - 39,996
Deferred income tax (Note 3) 63,905 70,750
Other assets 237,587 65,912
---------------- -------------
Total assets $ 12,197,037 $ 13,533,556
============== =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 5,419,201 $ 5,289,936
Payable to employee 41,161 -
Accrued taxes payable 71,100 307,804
Accrued liabilities 1,412,214 862,506
Bank Loans payable (Note 4) 674,081 248,060
Other current liabilities 23,970 43,405
---------------- -------------
Total current liabilities 7,641,727 6,751,711
Notes payable, less current portion (Note 5) 673,518 727,643
Notes payable, less current portion to 100,000 -
shareholders (Note 7) ---------------- -------------
Total liabilities 8,415,245 7,479,354
---------------- -------------
- -
Minority interest - 38,552
Commitments and Contingencies (Note 6)
Shareholders' equity (Notes 8 and 9):
Convertible, cumulative and redeemable - -
preferred stock, $1 stated value per share,
500 shares authorized and outstanding,
redeemable at $50,000
Common stock; par value $0.01 per share, 88,972 104,422
authorized 100,000,000 shares, 8,897,186
shares and 10,442,186 shares outstanding at
December 31, 1998 and 1999
Additional paid-in capital 5,110,968 6,721,852
Treasury stock - (2,000)
Stock subscribed 25,000 -
Accumulated deficit (1,405,136) (744,415)
Accumulated other comprehensive income (38,012) (64,209)
---------------- -------------
Total shareholders' equity 3,781,792 6,015,650
---------------- -------------
Total liabilities and shareholders' equity $ 12,197,037 $ 13,533,556
================ =============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
- F3 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
Year ended December 31,
----------------------------------
1998 1999
---------------- ---------------
<S> <C> <C>
Net sales (Note 10) $ 28,738,213 $ 34,272,187
Cost of sales 23,233,168 27,961,504
---------------- ---------------
Gross profit 5,505,045 6,310,683
Research and development 322,016 339,380
Selling, general and administrative expense 5,414,702 5,015,522
----------------- --------------
(Loss) income from operations (231,673) 955,781
Other (income) expense:
Interest income, net (10,552) (68,724)
Other (2,034) 11,949
---------------- --------------
(Loss) income before income taxes (219,087) 1,012,556
Income taxes provision (benefit) (Note 3) 86,559 363,283
---------------- --------------
Net (loss) income before minority interest (305,646) 649,273
Less: losses in subsidiaries, attributed - 11,448
to minority interest
---------------- --------------
Net income (305,646) 660,721
Preferred stock dividends 2,250 -
---------------- --------------
Net (loss) income applicable to common $ (307,896) $ 660,721
shares ================ ==============
Basic weighted average number of common 8,183,487 9,800,665
stock outstanding ================ ==============
Basic (loss) incomeper share $ (0.04) $ 0.07
================ ==============
Comprehensive loss and its components
consist of the following:
Net loss (income) $ (305,646) 660,721
Foreign currency translation adjustment, (34,569) (26,197)
net of tax ----------------- --------------
Comprehensive income $ (340,215) $ 634,524
See accompanying summary of accounting policies and notes to consolidated
financial statements.
- F4 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998 AND 1999
(SEE NOTES 8 AND 9)
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL
STOCK OTHER
--------------- ------------------ PAID-IN
ACCUMULATED SUBSCRI- TREASURY COMPREHEN-
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
PTION STOCK SIVE LOSS TOTAL
------ -------- --------- --------- ----------- --------
- ---- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
BALANCE, December 31, 500 $ 50,000 3,428,936 $ 34,829 $ 2,182,053 $
(759,350) $ 1,213,630 $ - $ (3,443) $ 2,717,719
1997 as previously
reported
Adjustment for - - 2,764,250 27,643 1,510,857
(337,890) - - - 1,200,610
pooling of ------ -------- ---------- --------- ---------- --------
- ----- ----------- -------- ----------- ------------
interest
BALANCE, December 31,
1997, as restated 500 50,000 6,247,186 62,472 3,692,910
(1,097,240) 1,213,630 - (3,443) 3,918,329
Subscription - - 2,300,000 23,000 1,127,000
- - (1,150,000) - - -
collection
Subscription - - - - 63,630
- - (63,630) - - -
collection
Issuance of common - - 250,000 2,500 122,500
- - - - - 125,000
stock
Conversion of (500) (50,000) 100,000 1,000 49,000
- - - - - -
preferred stock
Stock subscribed - - - - -
- - 25,000 - - 25,000
Additional paid-in - - - - 55,928
- - - - - 55,928
capital
Net loss - - - - -
(305,646) - - - (305,646)
Dividends paid - - - - -
(2,250) - - - (2,250)
Translation - - - - -
- - - - (34,569) (34,569)
adjustment
------ ------- --------- --------- ----------- ------
- ----- ---------- ------- ---------- -----------
BALANCE, December 31, - - 8,897,286 88,972 5,110,968
(1,405,136) 25,000 - (38,012) 3,781,792
1998
Stock issued for - - 50,000 500 24,500
- - (25,000) - - -
stock subscribed
in prior year
Forgiveness of loan - - - - 100,000
- - - - - 100,000
payable to share-
holders in PTI
Warrants exercised - - 75,000 750 74,250
- - - - - 75,000
Stock repurchase - - - - -
- - - (2,000) - (2,000)
Autec
Issuance of common - - 600,000 6,000 444,000
- - - - - 450,000
stock
Issuance of common - - 700,000 7,000 693,000
- - - - - 700,000
stock
Issuance of common - - 120,000 1,200 238,800
- - - - - 240,000
stock
Non-employee compen- - - - - 34,500
- - - - - 34,500
sation due to war-
rants issued
Warrants issued for - - - - 1,834
- - - - - 1,834
public relationship
service
Net profit - - - - -
660,721 - - - 660,721
Translation - - - - -
- - - - (26,197) (26,197)
adjustment
------ --------- ---------- -------- ------------ ------
- ------ ------------ ------- ----------- ------------
BALANCE, DECEMBER 31, - $ - 10,442,186 $104,422 $ 6,721,852
$(744,415) $ - (2,000) $(64,209) $6,015,650
1999 ====== ========= ========== ======== ============
============ ============ ======= =========== ============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
- F5 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year ended December 31,
-----------------------------
1998 1999
-----------------------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (305,646) $ 660,721
Adjustments to reconcile net (loss)
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 188,256 162,825
Provision for doubtful accounts 74,184 6,413
Provision for slow moving inventory (17,074) (40,764)
Loss on disposal of fixed assets 61,394 -
Stock in exchange for services 5,928 36,334
Increase (decrease) in cash from changes
in operating assets and liabilities:
Trade receivables (2,210,117) 91,794
Inventory 588,274 (179,371)
Other receivables 53,998 25,940
Advances to employees (27,500) 26,300
Prepaid and other assets (123,716) 156,9782
Related party receivable - (250,000)
Other assets (249,679) 171,677
Accounts payable (23,752) (129,265)
Accrued liabilities 1,037,345 (549,708)
Income taxes payable 60,829 229,859
Due from related party - (5,304)
Other liabilities 36,683 (21,726)
Minority interest - 38,522
------------ ---------------
Net cash provided by ( used in) operating (850,593) 431,259
activities ------------ ---------------
Cash flows from investing activities
Purchase of property, plant and equipment (321,462) (421,866)
Licensing agreement and know-how - (200,000)
Investment in third party - (39,996)
Proceeds from disposal of fixed assets 7,300 -
------------- --------------
Net cash used in investing activities (314,162) (661,862)
------------- --------------
Cash flows from financing activities
Proceeds from loans payable 557,499 102,768
Repayments on loans payable (74,578) (474,664)
Proceeds from issuance of common stock 1,275,000 1,390,000
in Bridge Technology
Repayment on related party payable (55,309) -
Proceeds from issuance of common stock in PTI 113,630 -
Stock subscription collected - 25,000
Stock repurchase - (2,000)
Dividends paid
Dividends paid (2,250) -
-------------- --------------
Net cash provided by financing activities 1,813,992 1,041,104
-------------- --------------
Effect of exchange rate changes on cash (33,294) (26,199)
-------------- --------------
Net increase in cash and cash equivalents 615,943 784,302
Cash and cash equivalents, beginning of year 1,499,784 2,115,727
-------------- --------------
Cash and cash equivalents, end of year $ 2,115,727 $ 2,900,029
============== ==============
Cash paid during the year for:
Interest $ 32,808 $ 44,216
Income taxes 19,459 51,376
-------------- --------------
52,267 95,592
=========== =============
See accompanying summary of accounting policies and notes to consolidated
financial
statements.
- F6 -
</TABLE>
<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 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 recorded
a stock subscription receivable of $25,000.
During the year ended December 31, 1998, Autec sold certain fixed assets with
a cost of $34,500 and accumulated depreciation of $20,700 to a vendor in
exchange for a credit of $27,815. Autec recognized a gain of $14,015 for this
transaction.
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.
In early 1999, the Company cancelled a note of $100,000 payable to a
shareholder in accordance with the terms contained in the promissory note.
The term states that if the Company became a public reporting company before
December 1, 2000, the shareholder would forgive this note of $100,000 payable
to him.
Accordingly, the Company recognized the forgiveness of note of $100,000
payable to the shareholder as a part of additional paid in capital.
In October 1999, the Company granted 310,000 stock warrants to key employees,
all officers and directors. Accordingly, a non-employee director compensation
cost of $34,500 was recognized and included in general and administrative
expenses for 1999.
In October 1999, the Company issued 50,000 warrants to a public relations firm
in exchange for public relations services starting from November 1, 1999 to
April 30, 2000. Accordingly, an expense of $1,834 on a pro rata basis was
recognized and included as a general and administrative expense.
In December 1999, the Company issued 2,763,250 shares of common stock in
exchange for 100% of the outstanding shares of Autec Power Systems, Inc. See
basis of presentation for details.
See accompanying summary of accounting policies and notes to consolidated
financial
statements.
- F7 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
Bridge Technology, Inc. (the Company) was incorporated under the laws of the
State of Nevada on April 15, 1969. Starting from April 1997, the Company
registered to do business in the State of 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 started to enter into wireless internet business in
1999.
The Company has the following subsidiaries:
Bridge R&D, Inc. Established on June 1, 1997
Newcorp Technology Limited (in Japan) Merged on November 1, 1997
PTI Enclosures, Inc. Merged on December 14, 1998
Newcorp Technologies, Inc. (USA) Established on March 10, 1999
Pacific Bridge Net, Inc. Established on August 16, 1999
Autec Power System, Inc. Merged on December 1, 1999
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 285,000 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 interests.
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.
On August 16, 1999, the Company formed a subsidiary, Pacific Bridge Net, Inc.
("PBN") incorporated in the State of California with a strategic alliance
partner. The Company has an 80% of equity interest in this entity and the
partner has 20%. PBN has obtained a license to design, build, operate and
maintain a wireless infrastructure for Los Angeles county, California. The
entity commenced start-up activities in August 1999.
On December 1, 1999 the Company committed to issue 2,764,250 shares of its
common stock in exchange for 100% equity interest in Autec Power System, Inc.
("Autec"), via a stock swap transaction. Autec is an entity incorporated in
the State of California and engaged in the design, sale and servicing of
switching power supplies. The terms of the transaction were: one share of
common stock in the Company was exchanged for two shares of common stock in
Autec. The actual shares issued by the Company were 2,763,250 as Autec
reserved the rights to issue 2,000 shares of treasury stock in exchange for
1,000 shares of common stock in the Company.
- F8 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
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.
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 regularly 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, 1998 and 1999 were $1 to 113.08 yen and
102.14 yen and the average rate of exchange during 1998 and 1999 were $1 to
130.99 yen and 113.70 yen.
- F9 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
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:
Estimated Useful
Life (in Years)
------------------
Computer equipment 7
Furniture, fixtures and equipment 5-7
Vehicles 5-6
Leasehold improvements 7-10
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.
Intangible Assets
In 1999, the Company entered into an agreement with a Japanese company to
distribute DVD related products in Southeast Asia countries including China,
Hong Kong, and Singapore, etc. for 10 years. The Company paid $150,000 for
the distribution right in 1999 and will amortized it over a period of five
years when the distribution business starts later in 2000 as estimated.
In 1999, the Company entered into agreement with a strategic partner to
develop wireless internet business in Los Angeles county and purchased
technical know how from this strategic partner for $50,000. The Company plans
to amortize this know how over a period of five years when the wireless
business starts later in 2000 as estimated.
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.
- F10 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
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 enactment
date. 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.
Accounting for the Impairment of Long-lived Assets and for the Long-lived
Assets to be Disposed Of
Statement of the Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for the Long-Lived Assets to be Disposed
Of" (SFAS 121) establishes new guidelines regarding when impairment losses on
long-lived assets, which include plant and equipment, and certain identifiable
intangible assets, should be recognized and how impairment losses should be
measured. The Company has adopted this accounting standard and its effects on
the financial position and the results of operations were immaterial.
Stock-based Compensation
Statements of Financial Accounting Standards No. 123 "Accounting for Stock-
Based Compensation" (SFAS 123) establishes a fair value method of accounting
for stock-based compensation plans and for transactions in which an entity
acquires goods or services from nonemployees in exchange for equity
instruments. The Company adopted this accounting standard on January 1, 1997.
SFAS 123 also encourages, but does not require companies to record
compensations utilizing the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the fair market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.
Disclosures about Segments of an Enterprise and Related Information
Statements of Financial Accounting Standards No. 131, "Disclosures about
Segment of an Enterprise and Related information," ("SFAS 131") requires that
public companies report certain information about operating segments,
products, services and geographical areas in which they operate and their
major customers. The Company adopted this accounting standard on December 15,
1997. There was no material effect on the financial position or the results
of operations.
- F11 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
Comprehensive Income (Loss)
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 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, 2000.
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.
Reclassifications
Certain reclassifications have been made to the prior year consolidated
financial statements to conform with the 1999 presentation.
- F12 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Inventory
<TABLE>
<CAPTION>
Inventory consists of:
December 31,
----------------------------
1998 1999
------------ -------------
<S> <C> <C>
Service parts $ 1,814,006 $ 1,575,435
Work in progress 274,681 624,820
Finish goods 1,057,476 1,125,279
Provision for slow moving items (208,865) (168,101)
------------- -------------
$ 2,937,298 $ 3,157,433
============= =============
</TABLE>
Note 2. Property, Plant and Equipment
<TABLE>
<CAPTION>
Property, plant and equipment consists of:
December 31,
-------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
Furniture, fixtures and equipment $ 291,554 $ 324,337
Vehicles 119,023 158,697
Computer equipment 302,902 358,971
Leasehold improvements 243,819 537,159
-------------- --------------
957,298 1,379,164
Accumulated depreciation and amortization (414,458) (577,283)
-------------- --------------
Property, plant and equipment, net $ 542,840 $ 801,881
============== ==============
</TABLE>
Note 3. Income Taxes
<TABLE>
<CAPTION>
The income tax provision is as follows:
Year ended December 31,
--------------------------------
1998 1999
---------------- -------------
<S> <C> <C>
Current
Federal $ 64,400 $ 362,671
State 21,500 -
Japan 659 612
---------------- -------------
Total current 86,559 363,283
---------------- -------------
Deferred
Federal - -
State - -
Japan - -
---------------- -------------
Total deferred - -
---------------- -------------
Total $ 86,559 $ 363,283
================ =============
</TABLE>
- F13 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Income Taxes (Continued)
<TABLE>
<CAPTION>
The difference between the effective income tax rate and the expected
federal statutory rate is as follows:
Year ended December 31,
--------------------------------------
1998 1999
---------------- -------------------
<S> <C> <C>
Federal statutory rate (34) % 34 %
Federal utilization of net - (6)
operating loss
State taxes, net of federal benefit (6) 6
Subsidiary income not offset by NOL 37.4 -
Changes in valuation allowance 40 4
Impact from permanent differences 2.6 (2)
----------------- -------------------
Effective income tax rate 40 % 36 %
</TABLE>
<TABLE>
<CAPTION>
Net deferred tax assets consist of the following:
December 31,
---------------------------------------
1998 1999
----------------- -------------------
<S> <C> <C>
Domestic (U.S.)
Deferred tax assets: $ 347,927 $ 362,896
Valuation allowance (347,927) (362,896)
----------------- -------------------
- -
Net deferred tax assets - -
Foreign (Japan)
Deferred tax assets:
Net operating loss carryforward 201,233 222,787
Valuation allowance (137,328) (152,037)
----------------- -------------------
Net deferred tax assets $ 63,905 $ 70,750
================= ===================
</TABLE>
A 100% valuation allowance was provided at December 31, 1998 and 1999 for the
U.S. entities, since the Company cannot determine at this time, with
reasonable certainty, that the net deferred tax assets will be realized. For
the foreign (Japan) deferred tax assets, there was a valuation allowance
provided at December 31, 1998 and December 31, 1999.
- F14 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Income Taxes (Continued)
At December 31, 1999, the Company has available net operating loss
carryforwards of approximately $180,000 for U.S. income tax purposes which
expires in varying amounts through 2019.
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 $77,000, 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 and long-term borrowings in the U.S. and
Japan. As of December 31, 1998 and 1999, the average interest rates on the
short-term borrowings in Japan were 2.15% and 2.075%. Short-term borrowings
of approximately $90,000 and $97,000 at December 31, 1998 and 1999,
respectively, in Japan were guaranteed by a director of Newcorp Technology
Limited, ("Newcorp") a Japanese wholly-owned subsidiary of the Company. Long-
term borrowings of approximately $608,000 and $630,000 at December 31, 1998
and 1999, respectively, in Japan 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. As of December 31, 1998 and 1999, the average interest rates on
the long-term borrowings in Japan were 2.37% and 2.30%.
A subsidiary of the Company had 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, 1998 and 1999 was $300,000 which was paid
off in January 1999.
On June 16, 1999, the Company took over a revolving line of credit from the
above bank for working capital purposes. The revolving line of credit enabled
the Company to borrow an aggregate amount of principal not to exceed
$1,000,000 at a variable interest rate (1% 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 Company and its US
based subsidiaries. Repayment is in the form of a promissory note which
stipulates that all outstanding interest and principal is payable by no later
than June 30, 2000. The outstanding balance at December 31, 1999 was $0. In
February 2000, the revolving line of credit was increased to an aggregate
amount of principal not to exceed $2,000,000.
During the year ended December 31, 1999, Autec Power Systems, Inc. ("Autec") a
wholly owned subsidiary Company, had a $1,300,000 revolving line of credit
with a bank that was secured by substantially all of Autec's assets except
inventories and was guaranteed by certain shareholders of the Company. The
line beared an interest at the Bank's prime rate. At December 31, 1999, there
were no borrowings outstanding under the line. The credit line will expire on
September 25, 2000.
- F15 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Bank Loans (Continued)
During the year ended December 31, 1999, Autec had a $300,000 equipment
purchase line of credit with a bank that was secured by the equipment
purchased by Autec and was guaranteed by certain shareholders of the Company.
The line incurred an interest at the Bank's prime rate. At December 31, 1999,
there were no borrowings outstanding under the line. The credit line will
expire on August 25, 2003.
Note 5. Notes and Loans Payable
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
Note payable with a foreign (Japan) bank, $ 86,965 $ 76,777
monthly payment of $1,625 including
interest of 2.075%, due November 2003.
(Note 4)
Note payable with a foreign (Japan) bank, 170,534 329,274
monthly payment of $6,824 including
interest of 2.375%, due May 2004.
(Note 4)
Loan payable for the purchase of a vehicle, 13,202 8,322
monthly payment of $501 including
interest at 10.25%, collateralized by
the related asset, due June 18, 2001
Note payable to the Small Business 303,112 279,441
Administration, collateralized by
substantially all of the assets of Autec
and personally guaranteed by four of the
Company's shareholders, payable in monthly
installments of $2,950, which includes
interest at 4% per annum
Note payable to the Small Business 201,855 183,985
Administration, collateralized by
substantially all of the assets of Autec
and personally guaranteed by four of the
Company's shareholders, payable in monthly
installments of $2,138, which includes
interest at 4% per annum
--------------- --------------
775,668 877,799
Less current portion (102,150) (150,155)
--------------- --------------
$ 673,518 $ 727,643
=============== ==============
</TABLE>
The aggregate maturities of notes and loans payable are as follows:
Year ending December 31, Amount
- ------------------------------- -----------------
2000 $ 150,155
2001 149,433
2002 148,354
2003 127,535
2004 74,092
Thereafter 228,230
-----------------
$ 877,799
=================
The note payables by Autec to the Small Business Administration includes
various covenants. As of December 31, 1999 Autec was in compliance with loan
covenants.
- F16 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. The Company entered
into a sublease agreement with another related party, for a portion of the
building for a monthly payment of $1,380, through October 2003.
Autec leases facilities under an operating lease from a company owned by a
majority stockholder. The lease calls for monthly lease payments of $16,500,
subject to cost of living adjustment, through 2007. Autec entered into a
sublease agreement with a related party, for a portion of the facility for a
monthly payment of $4,125. The term of the sublease was for 10 years.
The following table represents the consolidated rental commitments at December
31, 1999.
Year ending December 31, Amount
- ------------------------- ------------
2000 $ 489,610
2001 498,307
2002 503,220
2003 517,171
Thereafter 811,654
------------
$ 2,819,962
============
Total rental expense for the year ended December 31, 1998 and 1999, was
$499,077 and $392,334, respectively.
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.
Note 7. Related-Party Transactions
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.
Year Ended December 31,
-------------------------------------
1998 1999
---------------- ------------------
Digital Stream Corporation ("DSC"):
Purchases $ 6,667 $ 52,851
Rent 9,161 11,749
---------------- ------------------
- F17 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Related-Party Transactions (Continued)
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 the
Company became a public reporting company, at which time the note will be
cancelled. In early 1999, the shareholder forgave this note of $100,000
payable to him. Accordingly, the Company recognized the increase of $100,000
in additional paid-in capital.
During the years ended December 31, 1998 and 1999, Autec was reimbursed for
certain operating and overhead expenses attributable to a related party, owned
by one of the Company's majority shareholders. The amount of $22,803 and
$28,107 represented the unreimbursed expense due from the related party as of
December 31, 1998 and 1999 respectively.
In January 1999, the Company purchased a motor vehicle form a director of the
Company for $37,000.
During the middle of 1999, the Company lent $250,000 to a related party entity
at which a shareholder of the Company is the Director of Marketing. This
related party entity has been engaging the business of converting digital
image to film based image. As of December 31, 1999, the Company believes that
the receivable is fully recoverable.
Note 8. Shareholders' Equity
1998
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 interests transaction, therefore, the statement
of operations for the years ended December 31, 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.
January 1 to December 14, 1998 $ 5,786,128 $ (555,967)
============ =============
PTI Enclosures, Inc. (Stand Alone)
January 1 to December 14, 1998 $ 12,000,153 $ 117,679
============= =============
</TABLE>
- F18 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Shareholders' Equity (Continued)
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. The subscription was received early in 1999.
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 became a shareholder of the Company.
1999
In early 1999, the Company cancelled a note of $100,000 payable to a
shareholder in accordance with the terms contained in the promissory note.
The term states that if the Company became a public reporting company before
December 1, 2000, the shareholder would forgive this note of $100,000 payable
to him. Accordingly, the Company recognized the forgiveness of $100,000
payable to the shareholder as a part of additional paid in capital.
During March 1999, the Company sold 600,000 shares of common stock at $0.75
per share to two individuals and received proceeds of $450,000.
During June and July 1999, the Company sold 700,000 shares of common stock at
$1.00 per share to four individuals and received proceeds of $700,000.
During July and August 1999, the Company sold 120,000 shares of common stock
at $2.00 per share, 100,000 to an individual investor and 20,000 to a third
party company and received proceeds of $240,000.
In October 1999, the Company granted 310,000 stock warrants to key employees,
all officers and directors. Accordingly, a non-employee director compensation
cost of $34,500 was recognized and included in general and administrative
expenses for 1999.
In October 1999, the Company issued 50,000 warrants to a public relations firm
in exchange for public relations services starting from November 1, 1999 to
April 30, 2000. Accordingly, an expense of $1,834 on a pro rata basis was
recognized and included as a general and administrative expense.
During later 1999, the Company issued 75,000 shares of its common stock as a
result of warrants exercised with an exercise price at $1.00 per shares. The
proceeds of $75,000 were received subsequent to December 31, 1999.
- F19 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Shareholders' Equity (Continued)
In December, 1999, the Company committed to issue 2,764, 250 shares of common
stock in exchange for 100% equity interest in Autec Power Systems Inc. The
transaction was accounted for as a pooling of interest transaction, therefor
the statement of operations for the years ended December 31, 1998 and 1999
have been retroactively restated to include all activities of Autec Power
Systems Inc.
On March 14, 1999, per one employee-shareholder's request, Autec repurchased
2,000 shares of common stock at $1.00 per share from this individual..
Accordingly the actual shares issued by the Company were 2,763,250 as Autec
reserved the rights to issue 2,000 shares of treasury stock in exchange for
1,000 shares of common stock in the Company.
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, 1998 $ 20,737,017 $ (381,585)
January 1 to November 30, 1999 23,016,451 (103,089)
============ ==============
Autec Power System, Inc. (Stand Alone)
December 31, 1998 10,014,963 73,689
January 1 to November 30, 1999 8,538,951 771,382
============ ==============
</TABLE>
Note 9. Stock Options and Warrants
There were no option/warrant activities in Autec in 1998 and 1999.
Warrants activities in the Company are summarized as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
-------------- ------------------
<S> <C> <C>
Outstanding at January 1, 1998 180,000 2.46
Warrants granted in PTI 105,000 3.50
Warrants granted in the Company 360,000 1.75
-------------- ------------------
Outstanding at December 31, 1999 645,000 2.23
Warrants granted in the Company 360,000 5.00
Warrants exercised (75,000) (1.00)
-------------- ------------------
Outstanding at December 31, 1999 930,000 3.40
============== ==================
</TABLE>
In June 1999, the Board of Directors of the Company decided to change the
effective contractual life of 20 years to five years for the warrants granted
in 1997 and 1998 with a total of 570,000 warrants.
- F20 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Stock Options and Warrants (Continued)
On November 29, 1999, the Board of Directors of the Company approved a
proposal made by management in October 1999 to grant 360,000 warrants to
officer, directors, and a public relationship consultant for their performance
and contribution to the Company in 1999. 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 $5.00 per share. The warrants granted to the
public relationship consultant have a two year contractual life while all
other warrants granted during 1999 have a five year contractual life. Each
warrant is immediately exercisable and will expire if it would not be
exercised within contractual life 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.
<TABLE>
<CAPTION>
The following table summarizes the total warrants granted in 1999:
Granting Warrants Exercise
Vested
Expiring
Date Granted Price
Period
Date
-------------------------------------------
- --
- --------------
<S> <C> <C> <C> <C><C>
Warrants granted to employees 10/11/99 235,000 $5.00 None
10/11/04
Warrants granted to non-employees 10/11/99 75,000 $5.00 None
10/11/04
Warrants granted to public 10/11/99 50,000 $5.00 None
10/11/01
relationship consultant
------------
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 $5.00 is higher than
the stock issuance price of $2.00 on October 11, 1999, 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 $0.46. Accordingly, pursuant to SFAS No.
123 the Company recognized a compensation cost of $34,500 for warrants granted
to non - employees.
Using the Black Scholes option pricing model, the Company determined that the
fair value of each warrant granted to the public relationship firm was $0.11.
The total fair value of these warrants granted was $5,500. Accordingly,
pursuant to SFAS No. 123 the Company recognized a public relationship expense
of $1,834 for warrants granted to the public relationship consultant in 1999.
A pro rata expense was recognized during 1999 as the public relationship
consulting agreement commenced in October 1999 and runs through to April 2000.
- F21 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Stock Options and Warrants (Continued)
<TABLE>
<CAPTION>
The assumptions used in the Black Scholes option pricing model in 1999 were as
follows:
Warrants Warrants
Granted to Granted to
Employees a Public
and Non- Relationship
Employees Firm
--------------- -------------------
<S> <C> <C>
Discount rate 6.03% 5.86%
Volatility 47.0% 47.0%
Expected life 5 years 2 years
Expected dividend yield - -
--------------- -------------------
</TABLE>
In accordance with SFAS No. 123 the pro forma effect on net income
attributable to common shareholders is as follows:
December 1999
-------------------
Net income attributed to common shares:
As reported $ 660,721
Pro forma 552,621
Basic earnings per share
As reported $ 0.07
Pro forma 0.06
Diluted earnings per share
As reported $ 0.06
Pro forma 0.05
------------------
The following table summarizes information about Warrants outstanding as of
December 31, 1999:
<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>
$ 1.75 360,000 4.04 years $ 1.75 360,000 $ 1.75
$ 3.50 210,000 3.04 years $ 3.50 210,000 $ 3.50
$ 5.00 360,000 4.37 years $ 5.00 360,000 $ 5.00
--------- ---------
930,000 930,000
========= =========
</TABLE>
- F22 -
<PAGE>
BRIDGE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Concentration of Customer and Suppliers
During the year ended December 31, 1998 and 1999, one customer accounted for
approximately 38% and 46% of the consolidated revenue and 31% and 43% of
consolidated accounts receivable at December 31, 1998 and 1999.
Two vendors accounted for 36% of the consolidated total purchases during the
year ended December 31, 1998. Three vendors accounted for 41% of the
consolidated total purchases during the year ended December 31, 1999.
Note 11. Subsequent Events
The Company filed with NASDAQ to be listed on NASDAQ market system on
December 17, 1999. As of March 10, 2000, the approval from NASDAQ has not yet
been received.
In December, 1999 The Company entered into an acquisition agreement with CMS
Technology Limited (CMS), a related party company incorporated under the laws
of Hong Kong Special Administrative Region, to acquire 60% equity interest for
cash of $6 million subject to a valuation report that will be performed by a
third party appraisal firm. At the same time, a director and shareholder of
the Company would acquire 10% of equity interest in CMS. In accordance with
the acquisition agreement, the Company has an option to acquire the remaining
30% of equity interest in CMS in exchange for 300,000 shares of the Company's
common stock. As of March 10, 1999, the acquisition has not been complete.
In December, 1999, the Company signed a letter of intent to acquire 100%
equity interest in Centennial Electronics Limited (CEL), a third party company
incorporated under the laws of Hong Kong Special Administrative Region, for
the consideration of 500,000 shares of the Company's common stock. This
completion of acquiring CEL is contingent on whether the Company is, for CEL's
future expansion of business, able to provide a revolving line of credit of $8
million which is heavily depend on the success of the planned secondary
offering of the Company's common stock. As of March 10, 1999, the acquisition
has not been completet.
The Company issued 40,000 shares of common stock in February 2000 in exchange
for five patents including design and tooling, from an unrelated entity, at
the market price $11.25 per share.
In January 2000, a key employee of the Company exercised 10,000 warrants with
an exercise price of $3.50 per share in exchange for 10,000 shares of common
stock. The Company accordingly received proceeds of $35,000 from the
employee.
Note 12. Profit Sharing Plan
Autec has a 401(k) profit sharing plan covering substantially all Autec
employees, subject to certain participation and vesting requirements. The
plan provides that Autec will partially match employee contributions up to
specified percentages. The amount charged to selling general and
administrative expense for the 401(k) profit sharing plan amounted to $5,455
and $18,388 in 1998 and 1999 respectively.
- F23 -
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
The directors and officers of the Company are as follows:
Name Age Position
Tetsuji Aoyagi 47 Chairman of the Board
James Djen 46 President and Director
Winston Gu 46 CEO & Director
John J. Harwer 53 Director
John T. Gauthier 72 CFO & Director
Peter Liu 50 Director
Hideki Watanabe 50 Director
Michael Paull 47 Director
Alan Hui-Tse Sheen 43 Director
Bob Hong 55 Director
Fusahiko Hasegawa 56 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:
Tetsuji Aoyagi is the Chairman of the Board of Directors and a member of the
Executive Steering Committee 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 20 years experience in
Research and Development of high technology products, especially in the field
of Optical Media Storage and Human Interface field. From 1980 until 1984 he
worked at Thompson Research and Development Corporation where he was
responsible for all the consumer product developments as a special Scientific
Adviser to the President. In 1985 he founded MOST Corporation in Los Angeles,
California, where he was responsible for 3.5 inch Magneto-optical disc drive.
Mr. Aoyagi became the General Manager and was responsible for marketing of
this Magneto-Optical drive to OEM accounts until 1987. In 1987 he founded
Digital Stream Corporation in Yokohama, Japan where he is responsible
for corporate management. Mr. Aoyagi also served as the Chairman of the
Board of Data Stream cooperation, a Joint Venture organized by the
Singapore Government and Creative Technology. Mr. Aoyagi received his
M.S. Degree in Optics in 1974 from the State University of Pennsylvania at
Edinboro. Mr. Aoyagi devotes his major efforts to the Company.
James Djen is President, Director and a member of the Executive Steering
Committee of the Company since November 2, 1998. He also serves as the
President and Chairman of the Board of PTI Enclosures, Inc., a Company
subsidiary. 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 devotes full time to the Company.
Winston Gu is the CEO of the Company and a member of the Executive Steering
Committee. He is also the Chief Executive Officer of the Company's
subsidiary, Autec Power Systems, Inc. and the President of Frontier
Electronics Corporation. Mr. Gu devotes full time to the Company.
John J. Harwer is a Director and member of the Executive Steering Committee of
the Company since June 1997 and also serves as the President of Pacific Bridge
Net, a Company subsidiary. 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 market. From January 1990 to May 1994, he was Vice
President of Operations and New Product Development for CMS Enhancements, a
$200 million NYSE computer peripherals 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, AMTEC
and others. He received his Master of Computer Science degree from Charles
niversity, Prague, Czech Republic in 1971. 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.
John T. Gauthier is the Chief Financial Officer, Director and member of the
Excutive Steering Committee of the Company. He was the prior Chairman of the
Company's 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. 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 along with the former Controller of the U.S.
Treasury, James Saxton 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 full time to the Company.
<PAGE>
Peter Liu is a Director of the Company. He is the Founder, Chairman and Chief
Executive Officer of the W.I. Harper Group, a San Francisco based venture
capital and investment banking firm, with offices in San Francisco, Taipei,
Hong Kong and Beijing. W.I. Harper Group provides cross-border, financial and
management services to companies in the international market. He recently
organized a 2 billion dollar China fund.
Hideki Watanabe is a Director and member of the Executive Steering Committee
of the Company since April 1998. Mr. Watanabe also serves as President of
NEWCORP TECHNOLOGY LIMITED, a Tokyo, Japan based electronics technology R&D
subsidiary of the Company. 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 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 Newcorp Technology subsidiary
in Japan.
Mike M. Paull is a Director of the Company. He is the Managing Director of
Microsoft's Intelligent Home Systems Group, a product development unit of
Microsoft's Hardware Division based in Redmond, Washington. Mr. Paull has been
with Microsoft since 1991, where his teams have identified and shipped a wide
variety of advanced technology products. Mr. Paull's current mission is to
develop 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. Mr. Paull's product development group works as a "virtual
corporation", with globally-dispersed design, manufacturing and testing
occurring in the United States, Japan, Taiwan, Singapore, Malaysia, China,
Ireland and other countries.
Alan Hui-Tse Sheen is a Director of the Company. He is the Chairman and Chief
Executive Officer of American Computer and Digital Components, Inc., which is
believed to be the largest privately held computer memory module company in
the world. Last year's sales were in excess of $600 million dollars. Mr.
Sheen has been actively involved in the computer memory module business since
graduation from the University of Southern California in 1983 with a BS in
Business Administration.
Bob Hong is a Director of the Company. He is the Chairman of Multacom, a
multinational telecommunications company. Mr. Hong is also Chairman of Global
Bridge e-Net, a telecommunications company that is building a broadband
wireless network in Los Angeles County. Mr. Hong is also the Chairman of TCI
Group, LP, a firm with investment interest in Hi-Tec and Telecommunication in
Asia and the U.S. He is the Co-founder and Senior Director on the Board of
University Synergies Company, a university affiliate that specializes in
biotechnology development and commercialization. He is also the Major
Investor of Beijing Ao-Sheng Independent Development Company, Paging Network
firm in Beijing, China. Mr. Hong is the Chairman of Beijing Wells Medical and
Healthcare Consultant Co., a healthcare product importer and distributor with
offices in major Chinese cities. He is also the Founder of the Great Heart
Charity Foundation in Taiwan.
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, 1999 paid by the
Company to each of the Company's executive officers whose cash compensation
exceeded $100,000.
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
Other Restr- All Other
Annual icted Sec. Compen-
Compen- Stock Undrlng LTIP sation
sation Award(s)Options/Payouts Warrants
Name and
Position Yr Sal.($) Bonus($) ($) ($) SAR's($) ($)
Winston Gu 1999 75,000 200,000 25,000@$5.00
President 1998 60,000 200,000
Autec
Power Sys.
J. Djen 1999 120,000 0 0 0 0 0 25,000@$5.00
President 1998 159,900 0 0 0 0 0 45,000@$3.50
1997 82,000 0 0 0 0 0 45,000@$2.00
J. Harwer 1999 120,000 0 0 0 0 0 25,000@$5.00
CEO 1998 158,333 0 0 0 0 0 100,000@$1.75
1997 98,333 0 0 0 0 0 0
R. Fox 1999 125,000 0 0 0 0 0 15,000@$5.00
General 1998 123,637 0 0 0 0 0 30,000@$3.50
Manager 1997 73,839 0 0 0 0 0 30,000@$2.00
PTI
Enclosures
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.
Name and Address of Preferred Common %
Title of Class
Beneficial Owner Shares Shares Ownership
- --------------------------------------------------------------------------
Winston Gu (3) 2,773,334 27 Common
12601 Monarch Street
Garden Grove, CA 9841
James Djen (1) 565,000 5 Common
12601 Monarch Street
Garden Grove, CA 92841
John T. Gauthier (1) 0 0 Common
12601 Monarch Street
Garden Grove, CA 92841
John J. Harwer and 200,000 2 Common
Oliva Harwer Trust (1)
12601 Monarch Street
Garden Grove, CA 92841
Tetsuji Aoyagi (1) 400,000 4 Common
2-12-38, Aobadai, Aoba-Ku
Yokohama-Shi, Kanagawa-Ken, Japan
Hideki Watanabe (1) 300,000 3 Common
4-14-2 Nagatsuda, Midori-Ku
Yokohama-Shi, Kanagawa-Ken, Japan
Cayman Computer 373,206 4 Common
Alliance Corporation
12601 Monarch Street
Garden Grove CA 92841
COMMON
All Officers & Directors (2) 5,488,334 53 Common
(1) Officer and/or Director of the Company.
(2) Officers and Directors as a Group. The balance of the Company's
outstanding Common Shares is held by approximately 2200 persons.
(3) Include sharrs owned by wife Jeannie Gu.
Warrants activities in the Company are summarized as follows:
Weighted Average
Shares Exercise Price
----------------------------
Outstanding at January 1, 1998 180,000 $ 2.46
Warrants granted in PTI 105,000 3.50
Warrants granted in the Company 360,000 1.75
------------------------
Outstanding at December 31, 1999 645,000 2.23
Warrants granted in the Company 360,000 5.00
Warrants exercised (75,000) (1.00)
------------------------
Outstanding at December 31, 1999 930,000 3.40
------------------------
The following table summarizes information about Warrants outstanding as of
December 31, 1999:
Warrants Outstanding Warrants Exercisable
--------------------------------- ---------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
- --------------------------------------------------------------------------
$ 1.75 360,000 4.04 years $ 1.75 360,000 $ 1.75
$ 3.50 210,000 3.04 years $ 3.50 210,000 $ 3.50
$ 5.00 360,000 4.37 years $ 5.00 360,000 $ 5.00
------- -------
930,000 930,000
======= =======
Item 12. Certain Relationships and Related Transactions.
There have been no related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation
except as disclosed in the Notes to the financial statements.
ITEM 13. EXHIBITS AND REPORTS ON FORM 10-KSB
- - Exhibit 3 (i) Articles of Incorporation
a) Newcorp Technology, Inc. (Nevada), Incorporated March 15, 1999
(incorporated by reference to Bridge Technology, Inc. Form 10KSB
filed March 31, 1999)
b) - Bridge Technology, Inc. as amended April 21, 1997 (incorporated by
reference to Bridge Technology, Inc. Form 10-SB, Amendment #2,
Exhibit 3(i)filed December 23, 1998 with the Commission).
- Bridge R & D, Inc. Incorporated June 25, 1997 (incorporated by
reference to Bridge Technology, Inc. Form 10-SB, Amendment #2,
Exhibit 3 (i) filed December 23, 1998 with the Commission).
c) - Pacific Bridge Net incorporated June 9, 1999
=========================================================================
STATE OF NEVADA
Secretary of State
1. NAME OF CORPORATION: PACIFIC BRIDGE NET
----------------------------
2. RESIDENT AGENT: (designated resident agent and his STREET ADDRESS in
Nevada where process may be served)
Name of Resident Agent: LOUIS POPP
---------------------------------------------
Street Address: 2004 WESTLUND DRIVE LAS VEGAS 89102
------------------------------------------------------
Street No. Street Name City Zip
3. SHARES: (number of shares the corporation is authorized to issue)
Number of shares with par value: 1,000 Par value $0.01
--------- -------
Number of shares without par value: NONE
------
4. GOVERNING BOARD: shall be styled as (check one):
X Directors Trustees
-- ---
The FIRST BOARD OF DIRECTORS shall consist of 2 members and the
---
names and addresses as follows (attach additional pages if necessary)
JOHN T. GAUTHIER 12601 MONARCH ST., GARDEN GROVE, CA 92841
------------------------- -------------------------------------------
Name Address
JAMES DJEN 12601 MONARCH ST., GARDEN GROVE,C A 92841
-------------------------- ------------------------------------------
Name Address
5. PURPOSE (Optional - see reverse side) The purpose of the corporation shall
be:
DEVELOP AND MANUFACTURE WIRELESS INTERNET ACCESS EQUIPMENT
----------------------------------------------------------------------
6. OTHER MATTERS: This form includes the minimal statutory requirements
incorporate under NRS 78. You may attach additional information pursuant
to NRS 78.037 or any other information you deem appropriate. If any of the
additional information is contradictory to this form it cannot be filed and
will be returned to you for correction.
Number of pages attached 0
---
7. SIGNATURES OF INCORPORATORS: The names and addresses of each of the
incorporators signing the articles: (Signatures must be notarized.)
(Attach additional pages if there are more than two imcorporators.)
JOHN T. GAUTHIER JAMES DJEN
----------------------- ----------------------------------
Name (print) Name (print)
12601 MONARCH ST., 12601 MONARCH STREET
----------------------- ---------------------------------
Address Address
GARDEN GROVE, CA 92841 GARDEN GROVE, CA 92841
------------------------ ---------------------------------
Address Address
JOHN T. GAUTHIER JOHN T. GAUTHIER
------------------------ --------------------------------
Signature Signature
State of California State of California
--------------- ------------------------
County of Orange County of Orange
-------------- ------------------------
This instrument was acknowledged This instrument was acknowledged
before me on before me on
May 25, 19 99 , by May 24, 19 99 , by
--------------- ---- -------------------- ----
Stephanie N. Gandre Paul Chang
--------------------------- --------------------------------
Name of Person Name of Person
as incorporator as incorporator
of PACIFIC BRIDGE NET of PACIFIC BRIDGE NET
--------------------------- -----------------------------
(name of party on behalf of (name of party on behalf of
whom instrument was executed) whom instrument was executed)
STEPHANIE N. GANDRE PAUL CHANG
----------------------------- ------------------------------
Notary Public Signature Notary Public Signature
(affix notary stamp or seal) (affix notary stamp or seal)
STEPHANIE N. GANDRE PAUL CHANG
Commission # 1190358 Commission # 1072531
Notary Public - California Notary Public - California
Orange County Orange County
My Comm. Expires Jul 18, 2002 My Comm. Expires Sep 17, 1999
8. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
I LOUIS POPP hereby accept appointment as Resident Agent for the
--------------
above named corporation.
LOUIS POPP
-------------------------------------------------------------------------
Signature of Resident Agent Date
============================================================================
- - Exhibit 3.(ii) By-laws of Bridge Technology, Inc., as dated August 1,
1997, (incorporated herein by reference to Bridge
Technology, Inc. Form 10-SB, Amendment #2, Exhibit 3 (ii)
filed December 23, 1998 with the Commission).
- - Exhibit 4 Determination of Shareholder Preferences, (incorporated herein
by reference to Bridge Technology, Inc. Form 10-SB, Amendment #2,
Exhibit 4, filed December 23, 1998 with the Commission).
- - Exhibit 10 Material Contracts
A) Classic Trading, Inc. Agreement (incorporated by reference
to Bridge Technology, Inc. Form 10KSB filed March 31, 1999)
B) Allied Web, Inc. Purchase of Assets Agreement,(incorporated
herein by reference to Bridge Technology, Inc. Form 10-SB,
Amendment #2 Exhibit 10, A) filed December 23, 1998 with
the Commission).
C) John Harwer Employment Agreement, dated June 1, 1997, (incor-
porated herein by reference to Bridge Technology, Inc.
Form 10-SB, Amendment #2, Exhibit 10 B) filed December 23,
1998 with the Commission).
D) EEMB, Co. Ltd. China Agreement dated November 11, 1997,
(incorporated herein by reference to Bridge Technology
Inc. Form 10-SB, Amendment #2, Exhibit 10 C) filed December
23, 1998 with the Commission).
E) Newcorp Technology, Ltd. (Japan) Stock Exchange Agreement,
as entered into November 11, 1997, (incorporated herein by
reference to Bridge Technology, Inc. Form 10-SB, Amendment
#2, Exhibit 10 D) filed December 23, 1998, with the
Commission).
F) Autec Power Systems, Inc. Acquisition Agreement, dated December
8, 1999
MERGER AND ACQUISITION AGREEMENT
This MERGER & ACQUISITION AGREEMENT ("Agreement") is entered into this
8th day of December, 1999 by and between BRIDGE TECHNOLOGY, INC. ("BTGY") a
Nevada corporation in organization and AUTEC POWER SYSTEMS, INC. ("AUTEC") a
California corporation.
ARTICLE I
CAPITALIZATION
1.1 BTGY has 100,000,000 shares authorized, $0.01 par value, with
7,602,936 shares issued and outstanding.
1.2 AUTEC has 7,000,000 shares authorized, no par value, with
5,528,500 shares issued and outstanding.
ARTICLE II
EXCHANGE OF SHARES
2.1 BTGY and AUTEC agree to exchange on a two for one basis 5,528,500
shares of stock whereby AUTEC is to receive 2,764,250 shares of BTGY for
shares of AUTEC, representing 100% of all outstanding shares of AUTEC.
ARTICLE III
CLOSING
3.1 The effective date of the merger and acquisition is December 1,
1999.
3.2 The closing ("closing") shall take place on or before December
15,
1999 at 10:00 a.m. at such place as the parties agree.
3.3 At the closing AUTEC shall deliver shares of its common stock and
all the books and records to BTGY.
3.4 At the closing BTGY shall deliver 2,764,250 shares of its common
stock to AUTEC in accordance with a certified list of shareholders to be
furnished prior to closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
AUTEC
AUTEC hereby represents and warrants to BTGY as follows:
4.1 Organization and Related Matters. AUTEC is a California
corporation, duly organized, validly existing and in good standing under the
laws of the State of California. AUTEC has the corporate power and authority
to carry on the business as now being conducted, and the corporate power and
authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby and has taken all actions necessary to secure
all approvals required in connection therewith.
4.2 Authority. AUTEC has full power and the capacity and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, AUTEC, enforceable in
accordance with its terms; and no further action, approvals or consents are
necessary on the part of the AUTEC; nor is it necessary for AUTEC to obtain
any actions, approvals or consents from any third persons, governmental or
other, to make this Agreement valid and binding upon and enforceable against
AUTEC in accordance with its terms, or to enable AUTEC to perform this
Agreement and the transactions contemplated hereby.
4.3 Title and Quiet Enjoyment. AUTEC has good and marketable title
to all of the Assets. All the Assets are free and clear of restrictions on or
conditions to transfer or assignment, and are free and clear of all defects of
title, mortgages, liens, pledges, leases, charges, encumbrances, equities,
claims, conditional sale contracts, easements, rights of way, security
interests, covenants, conditions, or restrictions.
4.4 Disclosure. There is no fact known to AUTEC which has not been
disclosed to BTGY in writing with respect to the business, assets,
liabilities, financial condition or performance of AUTEC, which could
reasonably be anticipated to have a material adverse affect upon the existing
or expected financial condition, operations, sales, gross margins, operating
results, assets, customer relations, employee relations or business prospects
of AUTEC.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
BTGY
BTGY represents and warrants to the AUTEC as follows:
5.1 Organization and Related Matters. BTGY is a Nevada corporation,
duly organized, validly existing and in good standing under the laws of the
State of Nevada. BTGY has the corporate power and authority to carry on the
business as now being conducted, and the corporate power and authority to
execute and deliver this Agreement and consummate the transactions
contemplated hereby and has taken all actions necessary to secure all
approvals required in connection therewith.
5.2 Due Authorization. The execution and delivery of this
Agreement and the consummation of the transactions required of BTGY under this
Agreement have been duly authorized by BTGY and is subject to formal
radification and approval by BTGY's Board of Directors, and this Agreement
represents a valid agreement of BTGY which is binding on and enforceable
against BTGY in accordance with its terms.
ARTICLE VI
OBLIGATIONS PENDING AND FOLLOWING THE CLOSING
6.1 Consents/Litigation. Each party shall use its best efforts: (a)
to obtain or cause to be obtained at the earliest practicable date and prior
to the Closing Date all consents, approvals, permits and licenses necessary to
permit such party to consummate the transactions contemplated hereby which can
reasonably be obtained by the Closing Date; and (b) to resist and obtain the
dismissal of any litigation, investigation or other proceeding which questions
the validity or legality or seeks to hinder or prevent the consummation of the
transactions contemplated hereby.
6.2 Notice of Breach. Each party to this Agreement will immediately
give written notice to the other parties of the occurrence of any event, or
the failure of any event to occur, that results in a breach by it of any
representation or warranty or a failure by it to comply with or fulfill any
covenant, condition or agreement contained herein.
6.3 Other Offers. AUTEC shall not solicit, consider, entertain,
accept or take any other affirmative or favorable action with respect to any
offer or proposal involving: (a) a sale of any of the Assets; (b) any merger,
consolidation or other reorganization of AUTEC with or into any other entity;
or (c) any other transaction which would prevent or hinder the consummation of
the transactions contemplated herein.
6.4 Further Assurances. Each party hereto shall execute and
deliver such instruments and take such other actions as the other party or
parties, as the case may be, may reasonably require in order to carry out the
intent of this Agreement.
6.5 Best Efforts. BTGY and AUTEC will use their best efforts to
perform or cause to be satisfied each covenant or condition contained herein
to be performed or satisfied by it.
WHEREAS:
BUYER and SELLER agree to exchange all the shares outstanding in AUTEC
for 2,764,250 shares in BTGY.
Now therefore be it resolved that BUYER has acquired SELLER for
2,764,250 shares of BUYER.
BUYER SELLER
BRIDGE TECHNOLOGY, INC.(BTGY) AUTEC POWER SYSTEMS, INC. (AUTEC)
John T. Gauthier Winston Gu
----------------------- -------------------------------------
John T. Gauthier, CFO Winston Gu, Chairman & CEO
Dec. 8, 1999 Dec. 8, 1999
----------------------- -------------------------------------
Date Date
=============================================================================
G) CMS Technology Limited (HK) Acquisition Agreement as amended
March 15, 2000
ACQUISITION AGREEMENT
AS AMENDED MARCH 15, 2000
The Agreement is between Bridge Technology, Inc. ("BTGY") and it's unnamed
partner/partners and certain controlling shareholders of CMS Technology
Limited HK ("CMS").
CMS has accepted BTGY 60% of the shares outstanding.
a) USD$6,000,000 cash, 50% payable by January 5, 2000 and 50% by
February 9, 2000.
b) 300,000 shares payable in the common stock of BTGY at $10.00 per shares to
management team. (300,000 shares of restricted stock)
BTGY, after polling a majority of its Board of Directors, has agreed to accept
the acquisition of 60% of CMS offer with the understanding that BTGY will
engage BDO Seidman to audit the books of CMS and engage American Appraisal
Associates for a valuation report before final closing.
CMS is required to deliver at closing a written 3 year offer of first refusal
to buy an additional 30% of CMS in exchange for common stock of BTGY after
BTGY has been accepted for listing on the NASDAQ market system.
CMS Technology Limited, Hong Kong Bridge Technology, Inc.
Edwin Cheng Tetsuji Aoyagi
------------------- --------------------------
Edwin Cheng Tetsuji Aoyagi
Mathew Cheng Dated: January 4, 2000
-------------------- ------------------
Mathew Cheng
=============================================================================
- - Exhibit 21 Subsidiaries of the Registrant
A) Newcorp Technology, Inc. (Nevada) March 1999
B) PTI Enclosures, Inc. (California) July 1993
C) Newcorp Technology, Inc. (Japan)
D) Bridge R & D, Inc. (California)
E) Pacific Bridge Net
F) Autec Power Systems, Inc.
G) Classic Trading Inc.
- - Exhibit 27 Financial Data Schedule
- - Exhibit 99 Additional Contracts
A) Assignment of Trademarks (incorporated by reference to
Bridge Technology, Inc. Form 10KSB filed March 31, 1999)
B) Property Lease (incorporated by reference to Bridge
Technology, Inc. Form 10KSB filed March 31, 1999)
C) Incentive Stock Option Plan (incorporated herein by
reference to Bridge Technology, Inc. Form 10-SB, Amend-
ment #2, filed December 23, 1998, with the Commission).
D) Distribution Product Rights Development Agreement
dated July 1, 1999
DISTRIBUTION PRODUCT RIGHTS DEVELOPMENT AGREEMENT
This product and technology distribution rights Agreement ("Agreement")
is entered into as of July 1, 1999, by and between Bridge Technology, Inc., a
Nevada company with principal offices located at 12601 Monarch, Garden Grove,
CA 92841 (the "Client"), and TAD Inc., a Japan company with principal offices
at 2-12-38, Aobadai, Aoba-Ku, Yokohama, Kanagawa, Japan, (the "Company"), with
respect to the following facts:
A. Client is engaged in the business of marketing, sales, distribution
and support of CD-ROM, CD-R, DVD-ROM and DVD-RAM drives, DVD players,
and other optical storage products (collectively, the "Products");
and
B. Company is engaged in the business of research, design and
development and licensing of rights to optical products, including
the key parts for CD-ROM, CD-R, DVD-ROM and DVD-RAM drives, DVD
players and other optical and opto-mechanical technologies.
C. Client and Company desire to enter into a relationship whereby the
Client will modify and/or develop certain key elements of the DVD
player/recorder, and a DVD player/recorder, and sell the rights for
the production, sales and distribution of these products by Client,
principally in the People's Republic of China market. (DVD products
and technology distribution rights)
NOW, THEREOF, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Grant of License. Company hereby grants the Client the rights to
manufacture and sell DVD-player/recorder and its key components.
2. Award of Development Consulting contract. Client hereby awards the
Company the Development Consulting contract to design and develop a
commercially viable DVD-player and its key components.
3. Project cost, License cost and payment schedule. The estimated cost
of the rights to product and technology distribution license is
$300,ooo US. The payment for this contract will be 50% upon
execution of this Agreement, and 50% upon acceptance of the result of
the completed porduct development. While the contemplated DVD
player/recorder shall principally be capable of reading and writing
standard DVD disks, the exact product and technology specifications
will be provided as first milestone for approval by both parties
prior to delivery of the working prototypes.
4. Term. The term of this Agreement shall commence as of the date of
the execution of this Agreement and shall continue in full force and
effect until terminated in accordance with Section 8 hereof. Working
prototypes shall be delivered by Company to Cient for final
acceptance on or before December 31, 2000. The Client has 60 days
from delivery date to accept or to provide Company with a list of
corrections required for final acceptance.
5. Distribution rights. Unless otherwise agreed to in writing by Client
and Company, Client is hereby awarded the exclusive the rights to
manufacture, market, sell and distribute any and all products
produced by Client or its assignee based on the technology developed
by Company under this Agreement.
(a) Distribution rights and Royalty payments. Unless otherwise
agreed to in writing, the distribution rights are hereby
prepaid in full. The product and technology Royalty payments,
if agreed upon by both parties prior to December 31, 2000,
shall be determined by both parties prior to the shipment of
the DVD-player/recorder and related products.
6. Sales, marketing and distribution rights.
(a) Sales. Client shall have the exclusive rights to sell, market
and distribute any and all products manufactured by client or
his assignee based on the DVD technology developed under this
Agreement for a period of ten (10) years from the date of
acceptance of the final product design.
(b) Covenants. During the term of this Agreement, the Company
heregy covenants and agrees:
(i) not to use Client's trademarks, logos or trade names as the
name, or any part thereof, of Company's business or other
trade name;
(ii) to immediately notify Client of any improper, wrongful or
unauthorized use of Client's technology, designs,
trademarks, logos or trade names or other similar rights
which Company becomes aware of;
(iii) not to make any representations, warranties or guaranties
relating to the Products or Client except as set forth in
written materials provided by Client or as expressly
authorized in writing by Client in advance.
(c) Expense. Unless otherwise agreed to in writing by Client, the
Company shall be solely responsible and shall pay all costs
associated with the activities contracted for herein, including
but not limited to travel costs, automobile costs, office
expenses, costs of samples, telephone, utilities, insurance,
business licenses, entertainment, any compensation payable to
employees of the Company and other necessary expenses.
7. Nature of Relationship.
(a) Independent Contractor. The relationship between the Client
and Company is that of an Independent Contractor, and neither
the Company nor his employees, agents or representatives shall
considered partners, servants, agents, associates, employees,
or joint ventures of or with Client. Client is interested only
in the results obtained by Company, who shall have sole control
of the manner and means of performing under this Agreement.
8. Termination. This Agreement shall terminate upon the occurrence of
any of the following:
(a) Discretionary Termination. Either party shall have the
absolute right to terminate this Agreement for any reason by
giving the other party written notice of such termination which
shall specify an effective termination date which is at least
thirty (3) days after the date of such notice.
(b) Breach by Company. Client shall have the right to immediately
terminate this Agreement at any time in the event that the
Company shall breach any provisions of this Agreement
applicable to the Client. In such event, Client shall give the
Company written notice of its election to terminate this
Agreement for such breach which shall specify the effective
termination date and identify the breach of this Agreement on
the part of the Company.
(c) Non-performance by Company. If Company is unable to complete
this R&D project as contemplated herein, the Client shall be
entitled to 50% ($150,000) refund of the fees paid as
compensation for Company's non-performance. Company shall pay
such compensation to Client within 30 days from the day the
Client notifies Company of non-performance.
9. Nondisclosure of Proprietary Information and Return of Client's
Property.
(a) Nondisclosure of Agreement Terms. The Company shall not
disclose to, or discuss with, any person or entity any of the
terms and conditions of this Agreement (the "Agreement Terms"),
except (i) to Company's counsel, (ii) to Company's employees and
agents who need to know the Agreement Terms in order to carry
out the terms of this Agreement or his business, provided,
however, that the Company agrees to advise such employees and
agents of the confidential nature of the Agreement Terms and to
obtain the agreement of such employees and agent to protect the
secrecy of the Agreement Terms: (iii) with Client's prior
written consent; (iv) as may effectuate the terms of this
Agreement.
(b) Nondisclosure of Proprietary Information. During the term of
this Agreement and for two (2) years thereafter, the Company
shall not disclose to, or discuss with, any person or entity any
confidential or proprietary information regarding any aspects of
Client, including without limitation any information relating to
Client's financial affairs, business, operations, products,
customers, that is not public knowledge ("Proprietary
Information"), except (i) to Company's counsel, (ii) to
Company's employees and agents who need to know such information
in order to carry out the terms of this Agreement or his
business, provided, however, that the Company agrees to advise
such employees and agents of the confidential nature of the
Proprietary Information and to obtain the agreement of such
employees and agents to protect the secrecy of such Proprietary
Information, (iii) with Client's prior written consent; (iv) as
may be required by law or regulation; or (v) as may be required
to effectuate the terms of this Agreement.
(c) Return of Proprietary Information, Client's property.
Immediately upon termination of this Agreement for any reason,
the Company (i) shall return (A) any documents (B0 any property
which belongs to Client, immediately to Client
(d) Remedies. The Company hereby acknowledges and agrees that (i)
if it breaches this Section 8, the damage to Client will be
substantial, although difficult to ascertain, and money damages
will not afford Client an adequate remedy, and (ii) if the
Company is in breach of this Section 8, Client shall be
entitled, in addition to all other rights and remedies as may be
provided by law, to specific performance, injunctive and other
equitable relief to prevent or restrain in breach of this Secion
8.
10. Miscellaneous Provisions.
(a) Arbitration. In the event of any dispute between the parties
relating to this Agreement or any party's performance
hereunder, the parties agree that such dispute shall be
resolved by means of binding arbitration in accordance with the
commercial arbitration rules of the American Arbitration
Association and to be held in Orange County, California.
Judgment upon the award rendered by the arbitration(s) may be
entered in any court of competent jurisdiction. Depositions
may be taken and other discovery obtained during such
arbitration proceedings to the same extent as authorized in
civil judicial proceedings in the state of California. The
arbitrator(s) shall be limited to awarding compensatory damages
and shall have no authority to award punitive, exemplary or
similar type damages. The prevailing party in the arbitration
proceeding shall be entitled to recover its expenses, including
the costs of the arbitration proceeding, and reasonable
attorney's fees.
(b) Notices. All notices, demands, requests, consents,
statements, satisfactions, waivers, designations, refusals,
confirmations, denials and other communications that may be
required or otherwise provided for or contemplated hereunder
shall be in writing and shall be deemed to be properly given
and received (i) upon delivery, if delivered in person or by
facsimile transmission with receipt acknowledged, (ii) one
business day after having been deposited for overnight delivery
with Federal Express or another comparable overnight courier
service, or (iii) three business days after having been
deposited in any post office or mail depository regularly
maintained by the U.S. Postal Service and sent by registered or
certified mail, postage prepaid, addressed as follows:
If to the Client:
Bridge Technology, Inc.
12601 Monarch Street, Garden Grove, CA 92841
Fax: (949) 890-8590
If to the Company:
TAD. Inc.
2-12-38, Aobadai, Aoba-ku, Yokohama, Kanagawa, Japan
Fax: (045) 983-1505
or such other address as either party may specify in a written notice to
the other party.
(c) Assignability. Neither party shall have the right to assign
its rights or obligations under this Agreement without the
prior written consent of the other party, which consent may be
withheld in its sole and absolute discretion.
(d) Signature of Counterparts. This Agreement may be signed in
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same instrument.
(e) Severability. If any one or more of the provisions contained
in this Agreement shall be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
(f) Amendments. This Agreement may be amended or modified only by
the written agreement of all parties.
(g) Successors. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and insure to the benefit
of the parties and their successors and assigns.
(h) Survival. All terms and provisions of this Agreement,
including without limitation the provisions of Sections 3,5,6
and 8 hereof, intended to be observed and performed after the
expiration or termination of this Agreement, shall survive such
expiration or termination, and shall continue thereafter in
full force and effect.
(i) Entire Agreement. This Agreement constitute the entire
agreement among the undersigned and supersedes all prior
agreements, whether written or oral.
(j) Further Assurances. Each party agrees to take such further
action and to execute and deliver to the other party such
additional agreements, documents and instruments as the other
party may reasonably require or deem advisable to carry into
effect the purposes of this Agreement or to better assure and
confirm unto the other party its rights, powers and remedies
hereunder
(k) Recovery of Attorney's Fees. In any action between the
parties to enforce any of the terms of this Agreement or any
action between the parties hereto in any other way pertaining
to this Agreement, the prevailing party shall be entitled to
recover the costs of suit and reasonable attorney's fees and
expenses of investigation.
(l) Title and Captions. Section titles or captions contained in
this Agreement are inserted only as a matter of convenience and
for reference purposes and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any
provisions thereof
(m) Terms. Whenever from the context it appears appropriate, each
term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in the
masculine, the feminine or the neuter gender shall include the
masculine, the feminine or the neuter
(n) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Client: Bridge Technology, Inc.
By: Jimmy Djen
---------------------
Jimmy Djen, President
Company: TAD Inc.
By: Akiko Aoyagi
------------------------
Akiko Aoyagi, President
Company's Acknowledgement
The undersigned hereby acknowledges that he has been provided with a
signed copy of the Development Consulting Agreement dated as of July 1, 1999,
by and between the undersigned and Client.
Dated: July 1, 1999
E) Five recently acquired patents. Submitted by hard copy only.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunder
duly authorized.
Registrant: BRIDGE TECHNOLOGY, INC.
By James Djen
------------------------
James Djen, President
Date: 3/30/2000
-----------------------
By John T. Gauthier
----------------------
John T. Gauthier, CFO
Date: 3/30/2000
--------------------
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant.
By James Djen
--------------------
James Djen, President
Date: 3/30/2000
--------------------
By: John Harwer
---------------------
John Harwer, Director
Date: 3/30/2000
---------------------
By: John T. Gauthier
--------------------
Date: 3/30/2000
-------------------
By: Winston Gu
------------------
Winston Gu, CEO
Date: 3/30/2000
------------------
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<ARTICLE> 5
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,900,029
<SECURITIES> 0
<RECEIVABLES> 6,047,555
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<INVENTORY> 3,157,433
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<PP&E> 1,428,539
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0
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