UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 2001
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or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to ____________
Commission file number 000-24767
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Bridge Technology, Inc.
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(Exact name of registrant as specified in its charter)
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
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(Address of principal executive offices) (Zip Code)
(714) 891-6508
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Secion 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed
by a court.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.01 Par Value - 10,863,186 shares as of June 30, 2001
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2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
Bridge Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
DEC. 31 JUN. 30
2000 2001
(Audited) (Unaudited)
------------ ------------
Assets
Current assets:
Cash $ 4,870,836 $ 1,273,496
Accounts receivable less allowance
for doubtful accounts of $465,656
and $456,170 17,666,626 11,471,879
Advances to employees 42,898 33,897
Other receivables 1,057,217 136,196
Inventory, less provision of $619,504
and $819,658 16,991,615 29,558,308
Due from related party 21,932 28,894
Other current assets 219,192 284,247
------------ ------------
Total current assets 40,870,316 42,786,917
Property and equipment, net 716,384 2,259,183
Goodwill, net of amortization of $598,210
and $916,664 2,586,324 2,267,870
Purchased intangibles 190,000 190,000
Deferred income tax 63,201 75,509
Investments 229,862 224,862
Other assets 66,834 127,613
------------ ------------
Total assets $ 44,722,921 $ 47,936,954
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 6,000,000 $ 8,000,000
Current portion of long term debt 155,980 69,259
Accounts payable, net of accrued rebates
and credits of $860,580 and $760,563 23,180,434 24,239,467
Accured taxes payable 537,241 440,435
Deferred income tax 26,425 -
Accrued liabilities 1,148,870 919,706
Shareholder loan, including interest 2,888,919 4,476,109
------------ ------------
Total current liabilities 33,938,029 38,139,976
Long term debt, less current portion 621,023 600,595
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Total liabilities 34,559,052 38,740,571
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3
Minority interest 667,224 757,613
Shareholders' equity:
Common stock; par value $0.01 per share,
authorized 100,000,000 shares,
10,863,186 shares outstanding 108,632 108,632
Additional paid-in capital 9,308,139 9,308,139
Related party receivable (225,000) (225,000)
Treasury stock (2,000) (2,000)
Retained earnings (accumulated deficit) 354,745 (712,112)
Accumulated other comprehensive loss (47,871) (38,889)
------------ ------------
Total shareholders' equity 9,496,645 8,438,770
------------ ------------
Total liabilities and shareholders' equity $ 44,722,921 $ 47,936,954
============ ============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
4
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended Six Months Ended
-------------------------- --------------------------
June 30, June 30, June 30, June 30,
2000 2001 2000 2001
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $ 25,503,867 $ 34,616,027 $ 47,254,830 $ 62,406,391
Cost of sales 22,304,818 32,999,988 42,153,043 58,092,382
------------ ------------ ------------ ------------
Gross profit 3,199,049 1,616,039 5,101,787 4,314,009
Research and development 211,861 448,886 403,576 655,021
Selling, general and
administrative expense 1,898,116 2,162,538 3,557,574 4,220,184
----------- ------------ ------------ ------------
Income (loss) from
operations 1,089,072 (995,385) 1,140,637 (561,196)
Other income (expense):
Interest expense, net (106,733) (217,495) (158,125) (364,933)
Other income, net 46,630 37,362 114,442 106,210
----------- ------------ ------------ ------------
Income (loss) before
income taxes 1,028,969 (1,175,518) 1,096,954 (819,919)
Income taxes provision 270,210 57,825 341,482 159,849
----------- ------------ ------------ ------------
Net income (loss) 758,759 (1,233,343) 755,472 (979,768)
Minority interest (157,391) (46,549) (218,188) (87,089)
----------- ------------ ------------ ------------
Net income (loss)
applicable to common
shares $ 601,368 $(1,279,892) $ 537,284 $(1,066,857)
=========== ============ ============ ============
Basic weighted average
number of common
shares outstanding 10,635,637 10,863,186 10,548,087 10,863,186
=========== ============ ============ ============
Basic earnings
per share $ 0.06 $ (0.12) $ 0.05 $ (0.10)
=========== ============ ============ ============
Diluted weighted average
number of common
shares outstanding 11,047,451 10,959,901
=========== ============
Diluted income (loss)
per share $ 0.05 $ 0.05
=========== ============
5
Comprehensive income
and its components
consist of the
following:
Net income $ 601,368 $(1,279,892) $ 537,284 $(1,066,857)
Foreign currency
translation
adjustment,
net of tax 8,566 (6,734) 5,024 (8,982)
----------- ------------ ------------ ------------
Comprehensive
income $ 609,934 $(1,286,626) $ 542,308 $(1,057,875)
=========== ============ ============ ============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
6
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Six Months Ended
-------------------------
June 30, June 30,
2000 2001
----------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net income (loss) $ 537,284 $(1,066,857)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 377,831 428,051
Provision for doubtful accounts 1,845 18,017
Provision for slow moving inventory - 200,154
Stock in exchange for services 3,666 -
Minority interest 218,188 87,089
Increase (decrease) from changes in
operating assets and liabilities:
Trade receivables 37,110 6,176,730
Inventory 5,260,911 (12,766,847)
Other receivables (3,431) 921,021
Advances to employees 1,200 9,001
Prepaid and other assets (113,998) (65,055)
Related party receivable 25,000 -
Deferred income taxes - 38,733
Other assets (44,738) (60,779)
Accounts payable (7,618,372) 1,059,033
Accured liabilities (739,410) (234,164)
Income taxes payable 156,302 (96,806)
Other liabilities 42,464 -
Due from other shareholders of CMS (1,673,510) -
Due from related party (12,366) (6,962)
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Net cash used in operating activities (3,544,024) (5,391,932)
----------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (112,119) (1,652,397)
Acquisition of CMS, net of cash acquired (5,293,164) -
----------- -----------
Net cash used in investing activities (5,405,283) (1,652,397)
----------- -----------
Cash flows from financing activities
Proceeds from loans payable 2,291,500 -
Repayments on loans payable (386,346) (107,149)
Proceeds from line of credit - 2,000,000
Proceeds from exercise of warrants 36,750 -
Proceeds from related party loans 2,900,000 2,341,870
Repayments of related party loans (100,000) (800,000)
Stock subscription colllected 4,316,645 -
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Net cash provided by financing activities 9,058,549 3,434,721
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7
Effect of exchange rate changes on cash 1,985 12,268
----------- -----------
Net increase in cash and cash equivalents 111,227 (3,597,340)
Cash and cash equivalents, beginning of period 2,900,029 4,870,836
----------- -----------
Cash and cash equivalents, end of period $ 3,011,256 $ 1,273,496
=========== ===========
Supplemental information
Cash paid during the period for:
Interest $ 172,776 $ 371,805
Income taxes 84,821 300,000
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Supplemental disclosure of non-cash activities:
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 $3,666 on a pro rata basis was
recognized and included as a general and administrative expense.
In May 2000, the Company acquired five patents, including design and tooling
from an unrelated entity for $190,000, in exchange for 40,000 shares of common
stock at market price of $4.75 per share.
In May 2000, the Company exercised an option to acquire the remaining 30%
interest in CMS Technology Limited (CMS) in exchange for 360,000 shares of the
Company's common stock at market price of $6.50 per share. The acquisition
was effective May 15, 2000. The fair market value of 30% interest of CMS
amounted to $1,824,050. Consequently the Company recognized goodwill of
$515,950, which will be amortized over a five-year period on a straight-line
basis.
See accompanying summary of accounting policies and notes to consolidated
financial statements.
8
Bridge Technology, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
Organization and Business
-------------------------
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. 100% Established on June 1, 1997
Newcorp Technology Limited (in Japan) 100% Merged on November 1, 1997
PTI Enclosures, Inc. 100% Merged on December 14, 1998
Newcorp Technologies, Inc. (USA) 100% Established on March 23, 1999
Pacific Bridge Net 100% Established on August 16, 1999
Autec Power Systems, Inc. 100% Merged on December 1, 1999
CMS Technology Limited 90% Acquired on January 3, 2000 (60%)
Acquired on May 15, 2000 (30%)
Bridge Technology Ningbo Co. Ltd. 100% Established on May 28, 2001
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-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for fair presentation have been included. Operating results for the three
month and six month periods ended June 30, 2001 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2001.
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, 2000.
Note 2. - Income Taxes
As of December 31, 2000 and June 30, 2001, a valuation allowance has been
provided for that portion of the net deferred tax asset which management
cannot determine, with reasonable certainty, that the benefit will be
realized.
One of the subsidiaries of the Company has net operating loss carryforwards
which are separate return year losses in the amount of approximately $16,000,
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 carryforward is subject to an annual limitation.
9
Note 3. - Shareholders' Equity
In February 2001, the Company issued 150,000 warrants, with an exercise price
ranging from $3.00 to $5.00 per share and vesting immediately, to outside
consultants in exchange for their services to be provided.
In April 2001, the Company issued 15,000 warrants, at an exercise price of
$3.00 and vesting immediately, to an Advisory Board member.
Note 4. - Inventory
Inventory consists of:
December 31, June 30,
2000 2001
------------ ------------
Service parts $ 1,505,715 $ 1,605,078
Work in process 558,406 1,110,853
Finished goods 15,546,998 27,662,035
Allowance for slow moving items (619,504) (819,658)
------------ ------------
$ 16,991,615 $ 29,558,308
============ ============
Note 5. - Relationship With Worldwide Wireless Networks, Inc.
In February 2001, the Company confirmed, through a news release, that it
unilaterally severed the relationship with Worldwide Wireless Networks, Inc.
(WWN). During the second quarter of 2001, the Company entered into a verbal
settlement with WWN to cancel all agreements, including the exchange of shares
of common stock, between the two companies. In May 2001, this settlement
agreement was reduced to writing by Worldwide Wireless Networks, Inc. and
signed by the Company's President. As of June 30, 2001, Worldwide Wireless
Networks, Inc. has not signed, nor complied with the settlement agreement.
Note 6. - Financing Agreement With A Lender
The Company on May 14, 2001 entered into a $27 million comprehensive credit
facility with IBM Global Credit with the interest rate fixed at the prime
rate. The credit facility is specific in that it provides for asset based
revolving line of credit up to $9 million for the Company's all U.S. based
operating units with the balance of $18 million set aside for the Company's
Asian unit. With the maximum line at $27 million when the Asian unit exceed
$18 million, the effect is to reduce the funds that may be available for the
U.S. operating entities. As of June 30, 2001, the Company's U.S. operating
entities have not drawn funds from this line of credit.
IBM has completed their prefunding due diligence and has verbally extended the
credit facilities commitment date. IBM has under advisement to extend the $27
million facility to $30 million with no commitment as of 8/15/2001.
Note 7. - Newly Established Subsidiary in China
The Company established a wholly owned subsidiary, Bridge Technology Ningbo
Co. Ltd. (Ningbo), in City of Ningbo, Zhejiang Province of China and started
its trial production on May 28, 2001. The total registered capital committed
by the Company is US$10 million. The Company has infused approximately $1.8
million of capital as of June 30, 2001 and will continue to inject the
remaining $8.2 million of capital before December 31, 2001. It is estimated
that the second phase of production facility will be finished in December
2001.
10
In connection with the start-up of operation, Ningbo leases approximately
110,000 square feet of manufacturing facility. The lease is accounted for as
operating lease with a monthly payment of $12,513 commencing April 2001
through December 2005.
During May and June 2001, Ningbo incurred approximately $270,225 net loss
including the start-up cost of approximately $189,000.
Note 8. - Subsequent Events
In July 2001, the Company agreed to distribute to shareholders two "rights"
for every 10 shares held. Each "right" entitles the shareholder to buy one
"unit" at a price yet to be determined. Each "unit" consists of one share of
common stock and one common stock purchase warrant. The warrants will be
exercisable for three years after the closing date, unless redeemed by the
Company earlier, at an exercise price of 125% of the "unit" price. The total
dollar amount of the offering is expected to be $5,000,000.
Note 9. - Violation of Loan Covenant
As of June 30, 2001, the Company's US-based operation was not in compliance
with one of debt covenants prescribed by one commercial bank that provided the
Company with a revolving line of credit. The Company is contacting with its
bank officer to obtain a waiver.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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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 June 30, 2001 as Compared to
the Three Months Ended June 30, 2000
------------------------------------------------------------------------------
Net sales of $34,616,027 for the three months ended June 30, 2001 increased by
$9,112,160 (35.7%) over net sales of $25,503,867 for the same period of 2000.
The increase was due primarily to the inclusion of CMS Technologies Limited
revenue for the period ended June 30, 2001 less a decrease in revenues in the
Company's subsidiary, Autec Power Systems, Inc.
Gross profit for the three months ended June 30, 2001 was $1,616,039, a 49.5%
decrease when compared to $3,199,049 for the three months ended June 30, 2000,
reflecting higher volume of revenue attributed to the inclusion of CMS
Technology Limited for the period ended June 30, 2001. Gross profit as a
percentage of net sales declined from 12.5% for the three months ended June
30, 2000 to 4.7% for the three months ended June 30, 2001. The decrease is
principally due to the decrease of revenue with higher gross margin incurred
in the Company's power supplies manufacturing subsidiary, Autec Power Systems,
Inc.
11
Research and development expenses increased by $237,025 to $448,886 in the
three months ended June 30, 2001, compared to $211,861 for the three months
ended June 30, 2000. This represents a 111.9% increase and is due to Autec
investing extra resources to develop designs for the next generation of power
supplies products.
Selling, general and administrative expenses increased by $264,422 to
$2,162,538 in the three months ended June 30, 2001 compared to $1,898,116 for
the three months ended June 30, 2000. Part of the increase can be attributed
to a goodwill amortization charge of $146,328 included in selling, general and
administrative expenses in the three months ended June 30, 2000 as a result of
the acquisition of CMS Technology Limited. As a percentage of revenue, these
expenses decreased from 7.4% in the three months ended June 30, 2000 to 6.2%
in the three months ended June 30, 2001. The decline is largely due to the
inclusion of CMS Technology Limited for the three months ended June 30, 2001
and lower selling, general and administrative expenses on a percentage of
sales basis relative to revenue for the three months ended June 30, 2001
compared to the same period in 2000.
Operating results decreased from income of $1,089,072 in the three months
ended June 30, 2000 to loss of $995,385 in the three months ended June 30,
2001. The decrease principally reflects losses from the Company's subsidiary,
Autec Power Supplies, Inc. Income from operations as a percentage of revenue
decreased from income of 4.3% in the three months ended June 30, 2000 to loss
of 2.9% in the three months ended June 30, 2001.
Net interest increased $110,762 from expense of $106,733 in the three months
ended June 30, 2000 compared to the expense of $217,495 in the three months
ended June 30, 2001. Other income decreased from $46,630 in the three months
ended June 30, 2000, compared to the $37,362 in the three months ended June
30, 2001.
Net income decreased from $601,368 or $0.06 per share for the three months
ended June 30, 2000 compared to loss of $1,279,892 or $0.12 per share on a
higher number of shares outstanding for the three months ended June 30, 2001.
Results of Operations for the Six Months Ended June 30, 2001 as Compared to
the Six Months Ended June 30, 2000
-----------------------------------------------------------------------------
Net sales of $62,406,391 for the six months ended June 30, 2001 increased by
$15,151,561 (32.1%) over net sales of $47,254,830 for the same period of 2000.
The increase was due primarily to the inclusion of CMS Technologies Limited
revenue for the period ended June 30, 2001.
Gross profit for the six months ended June 30, 2001 was $4,314,009, a 15.4%
decrease when compared to $5,101,787 for the six months ended June 30, 2000,
reflecting losses from the Company's subsidiary, Autec Power Supplies, Inc.
Gross profit as a percentage of net sales declined from 10.8% for the six
months ended June 30, 2000 to 6.9% for the six months ended June 30, 2001.
The decrease is principally due to lower margin of CMS Technology Limited.
Research and development expenses increased by $251,445 to $655,021 in the six
months ended June 30, 2001, compared to $403,576 for the six months ended June
30, 2000. This represents a 62.3% increase and is due to Autec investing
extra resources to develop improved product designs for the year 2002.
12
Selling, general and administrative expenses increased by $662,610 to
$4,220,184 in the six months ended June 30, 2001 compared to $3,557,574 for
the six months ended June 30, 2000. Part of the increase can be attributed to
a goodwill amortization charge of $279,757 included in selling, general and
administrative expenses in the six months ended June 30, 2000 as a result of
the acquisition of CMS Technology Limited. As a percentage of revenue, these
expenses decreased from 7.5% in the six months ended June 30, 2000 to 6.8% in
the six months ended June 30, 2001. The decline is largely due to the
inclusion of CMS Technology Limited for the six months ended June 30, 2001 and
lower selling, general and administrative expenses relative to revenue for the
six months ended June 30, 2001 compared to the same period in 2000.
Operating results decreased from income of $1,140,637 in the six months ended
June 30, 2000 to loss of $561,196 in the six months ended June 30, 2001. The
decrease principally reflects losses incurred by the Company's subsidiary,
Autec Power Supplies, Inc. Income from operations as a percentage of revenue
decreased from 2.4% in the six months ended June 30, 2000 to loss of 0.9% in
the six months ended June 30, 2001.
Net interest increased $206,808 from expense of $158,125 in the six months
ended June 30, 2000 compared to the expense of $364,933 in the six months
ended June 30, 2001. Other income decreased from $114,442 in the six months
ended June 30, 2000, compared to the $106,210 in the six months ended June 30,
2001.
Net income decreased from $537,284 or $0.05 per share for the six months ended
June 30, 2000 compared to loss of $1,066,857 or $0.10 per share on a higher
number of shares outstanding for the six months ended June 30, 2001.
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 $2,600,000 to a
limited number of accredited investors with knowledge of the Company's
operations and plans to expand.
The Company's capital requirements have been and will continue to be
significant and its cash and cash equivalents have been sufficient to cover
its cash flow from operations. At June 30, 2001, the Company had working
capital of $4,646,941 and cash of $1,273,496 compared to a working capital of
$6,932,287 and cash of $4,870,836 at December 31, 2000. This decrease in
working capital is significant in as much as the Company has made capital
expenditure of $1,652,397 related to the new 110,000 square feet manufacturing
facility in Ningbo China. Substantial additional advances continue to be made
which has a serious effect on available working capital for domestic
operations.
The Company expects to file with the SEC within 30 days a stock rights
offering to current shareholders, the terms of which have not been announced.
Present management expects to commit to the exercising of its stock rights.
Net cash used in operating activities in the six months ended June 30, 2001
was $5,391,932 as compared to $3,544,024 used in operating activities in the
six months ended June 30, 2000, the increase in cash used is mainly due to
increase in inventory.
13
Net cash used in investing activities in the six months ended June 30, 2000
included $112,119 for the purchase of fixed assets and intangible assets in
Japan, as compared to $1,652,397 for the purchase of fixed assets in the six
months ended June 30, 2001. The increase in cash used relates to the start up
of the new manufacturing facility in Ningbo, China.
Net cash provided by financing activities in the six months ended June 30,
2000 was $9,058,549 as compared to $3,434,721 in the six months ended June 30,
2001. The change is attributable to the fact that in the first six months of
2000 there was collection of a $4,316,645 stock subscription and $2,291,000
loan proceeds.
The Company believes that it can fund the growth of its core business with
internally generated cash flow in addition to substantial cash receipts from
the proposed stock rights issue.
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 denominated by 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 120.39 Yen/dollar at October 30, 1997 to present
rate of 125.54 Yen/dollar at December 31, 2000.
Recently Issued Pronouncements
------------------------------
In June 2001, the Financial Accounting Standards Board finalized FASB
Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill
and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the
purchase method of accounting and prohibits the use of the
pooling-of-interests method of accounting for business combinations initiated
after June 30, 2001. SFAS 141 also requires that the Company recognize
acquired intangible assets apart from goodwill if the acquired intangible
assets meet certain criteria. SFAS 141 applies to all business combinations
initiated after June 30, 2001 and for purchase business combinations completed
on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that
the Company reclassify the carrying amounts of intangible assets and goodwill
based on the criteria in SFAS 141.
SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An
intangible asset with an indefinite useful life should be tested for
impairment in accordance with the guidance in SFAS 142. SFAS 142 is required
to be applied in fiscal years beginning after December 15, 2001 to all
goodwill and other intangible assets recognized at that date, regardless of
when those assets were initially recognized. SFAS 142 requires the Company to
complete a transitional goodwill impairment test six months from the date of
adoption. The Company is also required to reassess the useful lives of other
intangible assets within the first interim quarter after adoption of SFAS 142.
14
The Company has not yet determined the impact that the adoption of SFAS 141 or
SFAS 142 will have on the financial position, results of operations, or cash
flows of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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Bridge Technology, Inc. develops products in the United States and Japan and
sells primarily in North America, Asia and Europe. As a result, financial
results could be affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets. Since our
Company's products are generally initially priced in U.S. Dollars and
translated to local currency amounts, a strengthening of the dollar could make
our Company's products less competitive in foreign markets.
15
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
--------------------------
A complaint has been filed against the Company for fees alledged to be due on
an acquisition that was not consumated. The complaint seeks damages of
approximately $2,000,000. The Company has tendered this matter to its
insurance carriers. The Company believes the complaint is without merit and
will be resolved in favor of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
--------------------------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
----------------------------------------
There are no defaults upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
There are no matters submitted to a vote of security holders.
ITEM 5. OTHER INFORMATION
--------------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
There are no exhibits and reports on Form 8-K.
16
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Bridge Technology, Inc.
------------------------------
(Registrant)
Date: August 14, 2001 Winston Gu
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Winston Gu, CEO
Date: August 14, 2001 John T. Gauthier
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John T. Gauthier, CFO
Date: August 14, 2001 John Harwer
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John Harwer, President
Date: August 14, 2001 James Djen
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James Djen, Managing Director