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 March 31, 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 ______________
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 [ ] 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 March 31, 2001
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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Bridge Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, March 31,
2000 2001
(Audited) (Unaudited)
------------ ------------
Assets (Note 4)
Current assets:
Cash $ 4,870,836 $ 3,428,643
Accounts receivable less allowance
for doubtful accounts of $465,656
and $399,043 17,666,626 7,652,087
Advances to employees 42,898 38,898
Other receivables 1,057,217 326,843
Inventory, less provision of $619,504
and $640,767 16,991,615 25,698,682
Due from related party 21,932 91,706
Other current assets 219,192 332,229
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Total current assets 40,870,316 37,569,088
Property and equipment, net 716,384 709,706
Goodwill, net of amortization of $598,210
and $757,437 2,586,324 2,427,097
Purchased intangibles 190,000 190,000
Deferred income tax 63,201 57,540
Advance to affiliate - 1,180,907
Investments 229,862 229,862
Other assets 66,834 81,777
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Total assets $ 44,722,921 $ 42,445,977
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 6,000,000 $ 8,000,000
Current portion of long term debt 155,980 106,350
Accounts payable, net of accrued rebates
and credits of $860,580 and $973,166 23,180,434 19,372,102
Accrued taxes payable 537,401 304,087
Deferred income tax 26,425 58,619
Accrued liabilities 1,148,870 1,094,841
Shareholder loan, including interest 2,888,919 2,474,509
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Total current liabilities 33,938,029 31,410,508
Long term debt, less current portion 621,023 599,009
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Total liabilities 34,559,052 32,009,517
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Minority interest 667,224 711,064
Commitments and Contingencies
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, 1,000 shares at cost (2,000) (2,000)
Retained earnings (accumulated deficit) 354,745 567,780
Accumulated other comprehensive loss (47,871) (32,155)
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Total shareholders' equity 9,496,645 9,725,396
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Total liabilities and shareholders' equity $ 44,722,921 $ 42,445,977
============ ============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended
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Mar. 31, Mar. 31,
2000 2001
(Unaudited) (Unaudited)
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Net sales $ 21,750,963 $ 27,790,364
Cost of sales 19,848,225 25,092,394
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Gross profit 1,902,738 2,697,970
Research and development 191,715 206,135
Selling, general and
administrative expense 1,659,458 2,057,646
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Income from operations 51,565 434,189
Other income (expense):
Interest income (expense), net (51,392) (147,438)
Other income 67,812 68,848
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Income before income taxes 67,985 355,599
Income taxes provision 71,272 102,024
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Net income (loss) (3,287) 253,575
Minority interest (60,797) (40,540)
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Net income (loss) applicable
to common shares $ (64,084) $ 213,035
============ ============
Basic weighted average number of
common stock outstanding 10,450,630 10,863,186
============ ============
Basic earnings (loss) per share $ (0.01) $ 0.02
============ ============
Diluted weighted average number
of common stock outstanding - 11,095,427
============ ============
Diluted earnings per share $ - $ 0.02
============ ============
Comprehensive income (loss) and
its components consist of the
following:
Net income (loss) $ (64,084) $ 213,035
Foreign currency translation
adjustment, net of tax (3,542) 15,716
------------ ------------
Comprehensive income (loss) $ (67,626) $ 228,751
============ ============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended
-------------------------
Mar. 31, Mar. 31,
2000 2001
(Unaudited) (Unaudited)
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Cash flows from operating activities
Net income (loss) $ (64,084) $ 213,035
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities:
Depreciation and amortization 182,392 214,161
Provision for doubtful accounts 5,984 10,000
Stock in exchange for services 3,666 -
Provision for slow moving inventory - 21,263
Deferred taxes - 32,194
Minority interest 57,886 40,540
Increase (decrease) from changes in
operating assets and liabilities:
Trade receivables 4,126,030 10,004,246
Inventory 2,629,910 (8,777,099)
Other receivables (29,659) 650,273
Advances to employees - 4,000
Prepaid and other assets (3,614) (111,096)
Related party receivable 25,000 -
Other assets - (15,000)
Accounts payable (6,233,870) (3,740,323)
Accrued liabilities (557,701) (32,453)
Income taxes payable (221,757) (233,296)
Other liabilities 53,236 1,140
Payable to employee - (35,000)
Due from other shareholders of CMS (2,549,825) -
Due from related party (16,725) 8,682
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Net cash provided by (used in) operating activities (2,593,131) (1,744,733)
=========== ===========
Cash flows from investing activities
Purchase of property, plant and equipment (69,915) (48,888)
Investment in affiliate - (1,180,907)
Repayment from (advance to) shareholder - 180,006
Acquisition of CMS, net of cash acquired (5,293,164) -
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Net cash used in investing activities (5,363,079) (1,049,789)
=========== ===========
Cash flows from financing activities
Proceeds from loans payable 1,720,291 -
Repayments on loans payable (200,000) (41,680)
Repayments on shareholder loans - (600,000)
Proceeds from line of credit - 2,016,136
Proceeds from issuance of common stock - -
Proceeds from exercise of warrants 35,000 -
Proceeds from related party 2,900,000 -
Stock subscription collected 4,316,645 -
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Net cash provided by financing activities 8,771,936 1,374,456
=========== ===========
Effect of exchange rate changes on cash (3,540) (22,127)
=========== ===========
Net increase in cash and cash equivalents 812,186 (1,442,193)
Cash and cash equivalents, beginning of period 2,900,029 4,870,836
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Cash and cash equivalents, end of period $ 3,712,215 $ 3,428,643
=========== ===========
Supplemental information:
Cash paid during the year for:
Interest $ 60,151 $ 140,063
Income taxes 16,400 300,000
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See accompanying summary of accounting policies and notes to consolidated
financial statements.
Bridge Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Organization and Business
-------------------------
Bridge Technology, Inc. ("the Company") was organized under the law 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, primarily as a supplier of wireless's equipment to
infrastructure companies.
The Company has the following subsidiaries:
Ownership
---------
Bridge R&D, Inc. 100% Established on June 1, 1997
Newcorp Technology Ltd. (in Japan) 100% Merged on November 1, 1997
PTI Enclosures, Inc. 100% Merged on December 14, 1998
Newcorp Technology, 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%)
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 months period ended March 31, 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, 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.
Note 3. Shareholders' Equity
The Company granted 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.
Note 4. Inventory
Inventory consists of:
December 31, March 31,
2000 2001
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Service parts $ 1,505,715 $ 1,940,982
Work in process 558,406 1,022,563
Finished goods 15,546,998 23,375,904
Allowance for slow moving items (619,504) (640,767)
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$ 16,991,615 $ 25,698,682
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Note 5. Advance to Affiliate
The Company has made $1,180,907 in advances towards a project in organization
in Ningbo China, for a 110,000 square feet manufacturing facility.
Note 6. Subsequent Events
In April 2001, the Company granted 15,000 warrants, at an exercise price of
$3.00 to an Advisory Board member.
On May 14, 2001, the Company signed a $27 million financing agreement with a
major lender.
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 March 31, 2001 as
Compared to the Three Months Ended March 31, 2000
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Net sales of $27,790,364 for the three months ended March 31, 2001 increased
by $6,039,401 representing approximately a 28% increase, over net sales of
$21,750,963 for the same period of 2000. The increase of $6,039,401 was due
primarily to the increase in sales of CMS and Autec for the quarter ended
March 31, 2001.
Gross profit for the three months ended March 31, 2001 was $2,697,970,
increasing by $795,232 and representing approximately a 42% increase, compared
to $1,902,738 for the same period of 2000. The reason for this increase is
due mainly to the increase in sales of CMS and Autec for the quarter ended
March 31, 2001. Gross profit as a percentage of net sales increased from
8.75% for the three months ended March 31, 2000 to 9.71% for the three months
ended March 31, 2001. The increase is due principally to the higher margin
sales generated by Autec.
Research and development expenses increased by $14,420 to $206,135 in the
three months ended March 31, 2001, compared to $191,715 for the three months
ended March 31, 2000. This represents approximately an 8% increase and is due
to Autec's continuous effort to invest extra resources in order to develop
improved products.
Selling, general and administrative expenses increased by $398,188 to
$2,057,646 in the three months ended March 31, 2001, representing
approximately a 24% increase, compared to $1,659,458 for the three months
ended March 31, 2000. As a percentage of revenue, these expenses decreased
slightly from 7.63% in the three months ended March 31, 2000 to 7.40% in the
three months ended March 31, 2001. The decline is due to the cost saving
effort implemented by management for the quarter ended March 31, 2001.
Income from operations increased by $382,624 to $434,189 for the three months
ended March 31, 2001, representing approximately a 742% increase, compared to
income of $51,565 for the three months ended March 31, 2000. The increase
principally reflects the increase in sales of CMS and Autec and the offset
impact of increase of $398,188 in selling, general and administrative expenses
for the three months ended March 31, 2001. Income from operations as a
percentage of revenue increased from a 0.24% for the three months ended March
31, 2000 to 1.56% for the three months ended March 31, 2001.
Net interest expense increased by $96,046 from $51,392 for the three months
ended March 31, 2000 to net interest expense of $147,438 for the three months
ended March 31, 2001. The increase is the result of outstanding loans used to
purchase the 90% equity interest in CMS in 2000. Other income increased by
$1,036 from $67,812 for the three months ended March 31, 2000 to $68,848 for
the three months ended March 31, 2001.
Net income increased by $277,119 to $213,035 for the three months ended March
31, 2001, representing a significant increase, compared to net loss of $64,084
for the three months ended March 31, 2000. This result can be translated into
a loss of $0.01 per share for the three months ended March 31, 2000 to an
income of $0.02 per share for the three months ended March 31, 2001 based on a
higher number of common shares outstanding at March 31, 2001. The net income
as a percentage of revenue was 0.77% for the three months ended March 31,
2001.
Liquidity and Capital Resources
-------------------------------
The Company has received $27 million in financing from a major financial
institution, which is expected to satisfy its growth requirements.
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 March 31, 2001, the Company had working
capital of approximately $6 million and cash of $3.4 million compared to a
working capital of approximately $7 million and cash of $4.8 million at
December 31, 2000. The Company has been able to satisfy its working capital
requirements with cash generated through operations and the issuance of equity
securities, and obtaining working capital bank loans.
Net cash used in operating activities for the three months ended March 31,
2001 was $1,744,733 as compared to $2,593,131 used in operating activities for
the three months ended March 31, 2000. The difference is mainly due to
decrease in accounts payable and an increase in inventory.
Net cash used in investing activities for the three months ended March 31,
2001 was $1,049,789 mainly for the investment in China and other affiliates,
as compared to $5,363,079 mainly for the acquisition of 90% of equity interest
in CMS for the three months ended March 31, 2000.
Net cash provided by financing activities for the three months ended March 31,
2001 was $1,374,456 as compared to $8,771,936 in the three months ended March
31, 2000. The significant change is attributable to the loans obtained to
acquire the 90% equity interest in CMS and the fact that there were no common
shares issued to raise funds in the first quarter of 2001.
The Company believes that it can fund the growth of its core business with
internally generated cash flow in addition to its newly acquired financing
from a major lender.
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 March 31, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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.
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
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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.
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.
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(Registrant)
Date: May 15, 2001 Winston Gu
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Winston Gu, CEO
Date: May 15, 2001 John T. Gauthier
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John T. Gauthier, CFO
Date: May 15, 2001 John Harwer
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John Harwer, President
Date: May 15, 2001 James Djen
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James Djen, Managing Director