PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Bridge Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, September 30,
1997 1998
(Audited) (Unaudited)
Assets
Current assets:
Cash $ 55,032 $ 245,774
Accounts receivable 1,614,622 929,147
Subscription receivable 1,150,000 -
Other receivables 96,941 259,561
Inventory 98,717 303,971
Advance to TAD Corporation - 150,000
Note receivable - 150,000
Other current assets 21,085 71,897
Total current assets 3,036,397 2,110,350
Property and equipment, net 94,085 126,256
Trademark, net of amortization
of $4,550 and $7,800 3,800 541
Insurance receivable 21,903 -
Deferred income tax 54,580 53,736
Investment in other companies - 160,000
Other assets 24,900 31,000
Total assets $ 3,235,665 $ 2,481,883
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 1,506,014 $ 950,433
Accrued liabilities 16,857 14,151
Loans payable 302,115 258,403
Dividends payable - 750
Other liabilities 14,654 22,723
Total current liabilities 1,839,640 1,246,460
Loans payable, less current maturities - 148,721
Commitments and Contingencies
Shareholders' equity
Convertible, cumulative and redeemable preferred
stock $1 stated value per share, 500 shares
authorized and outstanding,
redeemable at $50,000 50,000 -
Common stock; par value $0.01 per share, authorized
10,000,000 shares, 1,606,240 shares outstanding at
December 31, 1997, 4,256,240 shares outstanding at
September 30, 1998 16,062 42,562
Additional paid-in capital 742,560 2,041,060
Stock subscribed 1,150,000 -
Accumulated deficit (559,154) (995,650)
Translation adjustment (3,443) (1,270)
Total shareholders' equity 1,396,025 1,086,702
Total liabilities and
shareholders'equity $ 3,235,665 $ 2,481,883
See accompanying summary of accounting policies and notes to consolidated
financial statements
F1
Bridge Technology, Inc. Subsidiaries
Consolidated Statements of Operations
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1998 1997 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales 1,135,474 1,520,879 $ 3,120,985 $3,332,487
Cost of sales 808,056 1,297,515 2,633,016 2,897,604
Gross profit 327,418 223,364 487,969 434,883
Selling, general and
administrative expense 260,435 342,663 545,104 854,357
Income (Loss) from
operations 66,983 (119,299) (57,135) (419,474)
Other income(expense):
Interset (expense)
income net (347) (9,816) (8,714) (23,546)
Other income(expense) 2,966) 13,351 (28,660) 7,979
Exchange gain(loss) 2,500 2,065 2,500 2,065
Loss before income taxe(83,830) (113,699) (92,009) (432,976)
Income Taxes provision:
Current 594 520 594 520
Deferred (30,928) - (30,928) -
Net loss (53,496) (114,219) (61,675) (433,496)
Dividends applicable
to preferred Stock (750) (750) (1,500) (3,000)
Net loss applicable
to common shares (54,246) (114,969) (63,175) (436,496)
Weighted average
number of common
stock outstanding $ 1,295,370 $ 3,508,957 $ 1,038,841 $2,750,379
Loss per share $ (0.04) $ (0.03) $ (0.06) $ (0.16)
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-2
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1998
(Unaudited) (Unaudited)
Cashflows from operating activities
Net loss $ (63,175) $ (436,496)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 30,912 21,530
Recognition of deferred tax asset (59,866) -
Increase (decrease) from changes
in operating assets and liabilities:
Trade receivables (245,516) 685,475
Inventory (115,354) (205,254)
Other receivables (39,671) (162,620)
Prepaid and other assets (676) (50,812)
Note receivable - 150,00O
Advance to TAD Corporation - 150,000
Other assets (51,393) 15,803
Accounts payable and accrued liabilities 150,637 (558,287)
Other liabilities 159,455 8,819
Net cash provided by (used in)
operating activities (233,147) (981,842)
Cash flows from investing activities
Purchase of property, plant and equipment (96,402) (50,451)
Investment in Trademark (7,800) -
Investment in other companies - (160,000)
Net cash used in investing activities (104,202) (210,451)
Cash flows from financing activities
Borrowings on loans payable 93,085 105,009
Payments on loans payable (30,946) -
Net proceeds from issuance of preferred stock 50,000 -
Net proceeds from issuance of common stock 125,000 1,275,000
Net cash provided by financing activities 237,139 1,380,009
Effect of exchange rate changes on cash (2,905) 3,026
Net increase (decrease) in cash
and cash equivalents (103,115) 190,742
Cash and cash equivalents, beginning of year 225,249 55,032
Cash and cash equivalents, end of year $ 122,134 245,774
Supplemental information:
Cash paid during the year for:
Interest $ 8,714 23,546
Income taxes 594 520
See accompanying summary of accounting policies and notes to consolidated
financial statements.
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Organization and Business
Bridge Technology, Inc. (the Company) was organized under the laws of the
State of Nevada on April 15, 1969. The Company is located in California and
is primarily engaged in development and distribution of various hardware,
software, and peripheral products used in computer systems and sales to value
added resellers and system integrators. The Company has two wholly-owned
subsidiaries. The domestic one was formed in April 1997 and commenced
operation on June 1, 1997 with the name of Bridge R&D, Inc. The other is
Newcorp Technology Limited, which started operation in Japan on January 19,
1995.
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for fair presentation have been included. Operating results for the
six months period ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending Decemeber 31, 1998.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-KSB for
the year ended December 31, 1997.
Note 2. Income Taxes
As of December 31, 1997, for federal income tax purposes, the Company had
approximately $63,000 in net operating loss carryforwards expiring through
2001. The annual utilization of the operating loss carryforward may be
significantly limited due to the adverse resolution, if any, with respect to
the loss carryover provisions of Internal Revenue Code Section 382 in
connection with certain stock issuances by the Company.
Note 3.- Shareholders' Equity
On December 31, 1997, the Company completed fifteen subscriptions of common
stock for a total of 2,500,000 shares for $.50 per share. Among the
2,500,000 shares of common stock subscribed, 300,000 shares were subscribed
for by an officer. During the first nine months of 1998, the Company issued
a total of 2,500,000 shares of common stock for these private placements.
In July 1998, the Company officially cancelled the issuance 5,000 shares of
common stock in exchange for the name of CD System from an unrelated third
party.
In September 1998, the Company conducted another private placement to issue
50,000 shares of common stock to an individual at $0.50 per share for
proceeds of $25,000.
In the end of September 1998, the Company converted the 500 shares of
preferred stock into 100,000 shares of common stock based upon the conversion
ratio that one share ofpreferred stock can be converted into 200 shares of
common stock.
Note 4. Investment in Other Companies
On August 14, 1998, the Company sold its investment of $150,000 in the common
stock of PTI Enclosures, Inc. to an individual at the original price. The
purchase price was paid by a personal not paying 6% interest per annum, and
the note is due and payable on or before December 30, 1998.
The Company has invested $150,000 in a digital recording technology project
managed by TAD Corporation, a Tokyo, Japan based product development and
design group. The project is a design of low cost DVD-RAM drive that can be
configured to provide high capacity digital recording systems for large mass
storage devices. The Company's investment accounted for approximately 10%
of the total project funding. The other $150,000 advanced to TAD Corporation
is expected to be returned to the Company before December 31, 1998.
The Company has invested $10,000 in Newcorp Czech, a Prague, Czech Republic
based Value Added reseller and marketer of computer and communications
equipment. Newcorp signed an agreement with MHM, the largest Eastern
European marketing organization for EMC RAID systems, where MHM will market,
sell and support ADTX RAID systems customers in Czech, Poland, Hungary and
Slovakia. F-4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations Except for historical information contained herein, the
matters set forth in this report are forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Act of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially. The Company
disclaims any obligations to update these forward-looking statements.
Results of Operations for the Three Months ended September 30, 1998 as
compared to the Three Months Ended September 30, 1997
Net Sales of $1,520,879 for the three months ended September 30, 1998
increased by $385,405 (33.9%) over net sales of $1,135,474 for the same
period of 1997. The increase was due primarily to the Company's entry into
the RAID business.
Gross Profit for three months ended September 30, 1998 was $223,364 a
31.8% decrease when compared to $327,418 for the three months ended September
30, 1997, reflecting lower gross margin attributed to the Company's new RAID
business. Gross profits as a percentage of net sales decreased from 28.8% to
14.7% for the three months ended September 30, 1998.
Selling, general and administrative expenses increased by $82,228 to
$342,663 in the three months ended September 30, 1998 compared to $260,435
for the three months ended September 30, 1997. As a percentage of revenue,
these expenses decreased from 22.9% in the three months ended from September
30, 1997 to 22.5% in the three months ended September 30, 1998. The
difference is due to lower sales costs related to higher volume for the
DataStor division.
Operating results decreased from an income of $66,983 in three months
ended September 30, 1997 to operation loss $119,299 in the three months ended
September 30, 1998 principally reflecting lower gross profit margins in the
three months ended September 30, 1998. Operating results as a percentage of
revenue decreased 13.7% from a positive 5.9% in the three months ended
September 30, 1997 to a negative 7.8% in the three months ended September 30,
1998.
Other income expenses decreased by $145,213 from $150,813 other expenses
in the three months ended September 30, 1997 when compared to other income of
$5,600 for the three months ended September 30, 1998.
Net loss increased to $114,969 or $0.03 per share for the three months
ended September 30, 1998 compared to $54,246 or $0.04 per share on a lower
number of shares outstanding for the three months ended September 30, 1997.
Results of Operations Nine Months Ended September 30, 1998 as compared to the
Nine Months Ended September 30, 1997.
Net Sales of $3,332,487 for the nine months ended September 30, 1998
increased by $211,502 (6.3%) over net sales of $3,120,985 for the nine months
ended September 30, 1997. The increase was due to the market entrance of the
Company's RAID products.
Gross Profit for the nine months ended September 30, 1998 was $434,883
a 10.9% decrease when compared to $487,969 for the nine months ended
September 30, 1997, reflecting lower gross margin attributed to the Company's
RAID products. Gross profit as a percentage of net sales decreased from
15.6% for the nine months ended September 30, 1997 to 13% for the nine
months ended September 30, 1998.
Selling, general and administrative expenses increased by $309,253 to
$854,353 in the nine months ended September 30, 1998 compared to $545,104 in
the nine months ended September 30, 1997. As a percentage of revenue,
selling, general and administrative expenses increased from 17.5% in the nine
months ended September 30, 1997 to 25.6% in the nine months ended September
30, 1998. The difference is due to higher market entrance costs for the
Company's RAID products.
Loss from operations increased from $57,135 in the nine months ended
September 30, 1997 to $419,474 in the nine months ended September 30, 1998
principally reflecting lower gross margin and higher selling, general and
administrative expenses in the nine months ended September 30, 1998.
Operating loss as a percentage of net sales increased from 1.8% in the nine
months ended September 30, 1997 to 12.6% in the nine months ended
September 30, 1998.
Other expenses decreased by $21,372 to $13,502 in the nine months ended
September 30, 1998 when compared to other expenses of $34,874 for the nine
months ended September 30, 1997. The difference was due to a $36,630 net
decrease in miscellaneous expenses offset by a $14,832 increase in interest
expense.
Net loss increased to $433,496 or $0.16 per share for the nine months
ended September 30, 1998 compared to $61,675 or $0.06 per share on a lower
number of shares outstanding for the nine months ended September 30,1997.
Liquidity and Capital Resources
Since current management acquired control of the Company in early 1997, the
Company has financed its operations with internally generated cash and with
the private placement of its securities totaling in excess of $1,600,000
to a limited number of accredited investors with knowledge of the Company's
operations and plans to expand. The private placement commenced in June 1997
and was completed on or about September 30, 1998.
The Company's capital requirements have been and will continue to be
significant and its cash and cash requirements have been sufficient to cover
its cash flow from operations. At June 30, 1998, the Company had a working
capital of $863,890 and cash and cash equivalents of $245,774 compared to a
working capital of $1,196,757 and cash and cash equivalents of $55,032 at
December 31, 1997. Since restarting operation, the Company has satisfied its
working capital requirements with cash generated through operations and the
issuance of equity securities,and obtaining loans.
Net cash used in operating activities in the nine months ended September
30, 1998 was $981,842 as compared to $233,147 in the nine months ended
September 30, 1997, the difference is mainly due to net loss and increase in
inventory, decrease in accounts payable and accrued liabilities, and changes
in other operating activities.
Net cash used in investing activities in the nine months ended September
30, 1998 was $210,451 for the purchase of fixed assets and the investment in
other companies, as compared to $104,202 for the purchase of fixed assets in
the nine months ended September 30, 1997.
Net cash provided by financing activities in the nine months ended
September 30, 1998 was $1,380,009 as compared to $237,139 in the nine months
ended June 30, 1997. This reflects the issuance of stock in private placements.
The Company believes that it can fund the growth of its core business
with internally generated cash flow in addition to substantial cash reserves
from the private placements of its common stock.
Effects of Inflation
The Company believes that inflation has not had a material effect on its net
sales and results of operations.
Effects of Fluctuation in Foreign Exchange Rates
The Company continues to buy products and services from foreign suppliers.
The Company contracts for such products and services in U.S. dollars, thus
eliminating the possible effect of currency fluctuations. The Company's
wholly-owned subsidiary, Newcorp Technology (Japan), was subject to such
currency fluctuations and subsequently suffered losses due mainly to the
decline of Japanese yen from 106 Yen/dollar to present rate of 138.29 Yen
/dollar. In May, 1998, Newcorp Japan changed its sales contracts with its
OEM customers from Japanese Yen to U.S. dollars in order to eliminate future
material effect of currency fluctuations on its net sales and results of
operations.
Year 2000 Effect
The Company's accounting software currently does not utilize a four digit
year field, however, the Company has been assured by the software manufacturer
that all necessary modifications for the year 2000 have been or will be made
and tested timely.
PART II OTHER INFORMATION
Item 1. Legal Proceeding
There are no legal proceedings either against the Company or against
third parties.
Item 2. Changes in Securities
There are no changes in securities.
Item 3. Defaults upon Senior Securities
There are no defaults upon senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
There are no matters submitted to a vote of security holders.
Item 5. Other Information
On December 14, 1998 the Company closed on its acquisition of 100% of
the shares outstanding of PTI Enclosures, Inc. as a result of direct solicit-
ation of their shareholders. PTI is a privately held California company
specializing in the design development, production and sales of mass storage
peripheral enclosures and power supplies to major OEM customers.
Item 6. Exhibits and Reports on Form 8-K
There are no exhibits and reports on Form 8-K.
SIGNATURES
Bridge Technology, Inc.
Registrant
Date ____________________ ____________________________
Signature
John J. Harwer, CEO
Date ____________________ ____________________________
Signature
John T. Gauthier, CFO