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 September 30, 2001
------------------------
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
---------
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 Sept. 30, 2001
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2
PART I -- FINANCIAL INFORMATION
-------------------------------
ITEM 1. FINANCIAL STATEMENTS
Bridge Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, September 30,
2000 2001
(Audited) (Unaudited)
------------- -------------
Assets
Current assets:
Cash $ 4,870,836 $ 1,347,559
Accounts receivable less allowance
for doubtful accounts of $465,656
and $683,255 17,666,626 14,945,675
Consumption tax receivable - 21,220
Advances to employees 42,898 13,133
Other receivables 1,057,217 87,019
Inventory, less provision of $619,504
and $2,155,513 (note 5) 16,991,615 23,131,009
Due from related party 21,932 12,667
Other current assets 219,192 400,525
------------ ------------
Total current assets 40,870,316 39,958,807
Property and equipment, net 716,384 2,520,764
Goodwill, net of amortization of $598,210
and $1,075,891 2,586,324 2,108,643
Purchased intangibles 190,000 190,000
Deferred income tax 63,201 60,614
Advance to Bridge R&D Ltd. (Hong Kong) - 26,194
Investments 229,862 229,862
Other assets 66,834 97,247
------------ ------------
Total assets $ 44,722,921 $ 45,192,131
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 4,000,000 $ 4,034,669
Bank overdraft - 80,970
Current portion of the long term debt 155,980 -
Accounts payable, net of accrued rebates
and credits of $860,580 and $2,460,125 23,180,434 20,713,415
Accured taxes payable 537,401 477,152
Deferred income tax 26,425 39,740
Payable to employee - 15,642
Accrued liabilities 1,148,870 1,303,600
Shareholder loan, including interest 2,888,919 1,691,050
Line of credit in CMS 2,000,000 4,000,000
------------ ------------
Total current liabilities 33,938,029 32,356,238
3
Long term shareholder loan - 2,696,658
Long term related party loan - 996,656
Long term loan, less current portion 621,023 610,973
------------ ------------
Total liabilities 34,559,052 36,660,525
------------ ------------
Minority interest 667,224 808,394
Shareholders' equity
Common stock; par value $0.01 per share,
authorized 100,000,000 shares, 10,863,186
shares outstanding at December 31, 2000
and Sept. 30, 2001 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)
Stock subscribed - -
Retained earnings (accumulated deficit) 354,745 (1,411,995)
Accumulated other comprehensive loss (47,871) (54,564)
------------ ------------
Total shareholders' equity 9,496,645 7,723,212
------------ ------------
Total liabilities and shareholders' equity $ 44,722,921 $ 45,192,131
============ ============
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 Nine Months Ended
-------------------------- --------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2000 2001 2000 2001
----------- ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $ 28,338,705 $ 47,253,682 $ 75,593,535 $109,678,377
Cost of sales 26,022,715 44,836,775 68,175,758 102,934,982
------------ ------------ ------------ ------------
Gross profit 2,315,990 2,416,907 7,417,777 6,743,395
Research and development 159,656 281,362 563,232 936,383
Selling, general and
administrative expense 1,869,196 2,555,924 5,426,770 6,701,744
----------- ------------ ------------ ------------
Income (loss) from
operations 287,138 (420,379) 1,427,775 (894,732)
Other income (expense):
Interest expense (114,804) (223,444) (272,929) (588,283)
Other income 8,051 4,855 122,493 110,991
------------ ------------ ------------ ------------
Income (loss) before
income taxes 180,385 (638,968) 1,277,339 (1,372,024)
Income taxes provision 36,617 96,997 378,099 256,846
------------ ------------ ------------ ------------
Net income (loss) 143,768 (735,965) 899,240 (1,628,870)
Minority interest (12,141) (50,781) (230,329) (137,870)
------------ ------------ ------------ ------------
Net income (loss)
applicable to
common shares $ 131,627 $ (786,746) $ 668,911 $ (1,766,740)
============ ============ ============ ============
Basic weighted average
number of common
stock outstanding 10,853,186 10,863,186 10,650,529 10,863,186
============ ============ ============ ============
Basic earnings (loss)
per share $ 0.01 $ (0.07) $ 0.06 $ (0.16)
============ ============ ============ ============
Diluted weighted
average number of
common stock
outstanding 11,219,176 10,863,186 11,016,519 10,863,186
============ ============ ============ ============
Diluted income (loss)
per share $ 0.01 $ (0.07) $ 0.06 $ (0.16)
============ ============ ============ ============
5
Comprehensive income
and its components
consist of the
following:
Net income $ 131,627 $ (786,746) $ 668,911 $ (1,766,740)
Foreign currency
translation
adjustment (765) (15,975) 4,259 (6,993)
------------ ------------ ------------ ------------
Comprehensive
income $ 130,862 $ (802,721) $ 673,170 $ (1,773,733)
============ ============ ============ ============
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
Nine Months Ended
-------------------------
Sept. 30, Sept. 30,
2000 2001
----------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net income (loss) $ 668,911 $(1,766,740)
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 583,476 701,508
Provision for doubtful accounts 9,792 9,021
Stock in exchange for services 3,666 -
Minority interest 230,329 137,870
Increase (decrease) from changes in operating
assets and liabilities:
Trade receivables (2,161,803) 2,711,944
Inventory (1,419,215) (6,139,394)
Other receivables (153,547) 970,198
Advances to employees 1,200 45,407
Prepaid and other assets (290,701) (181,333)
Related party receivable 175,000 -
Deferred income taxes - (23,998)
Income tax payable - (41,569)
Interest payable - (64,600)
Other assets (46,274) (30,413)
Accounts payable 34,001 (2,467,019)
Accrued liabilities (221,562) 154,730
Other liabilities (128,996) -
Due from other shareholders of CMS (936,810) -
Due from related party (12,649) (16,929)
----------- -----------
Net cash used in operating activities (3,665,182) (6,001,317)
----------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (126,690) (2,028,207)
Acquisition of CMS, net of cash acquired (5,293,164) -
----------- -----------
Net cash used in investing activities (5,419,854) (2,028,207)
----------- -----------
Cash flows from financing activities
Proceeds from loans payable 2,588,215 -
Repayments on loans payable (486,659) (166,030)
Bank overdraft - 80,970
Proceeds from exercise of warrants 36,750 -
Proceeds from related party loans 2,900,000 3,398,058
Repayments of related party loans (250,000) (803,344)
Stock subscription collected 4,316,645 -
Proceeds from line of credit, net - 2,000,000
----------- -----------
Net cash provided by financing activities 9,104,951 4,509,654
----------- -----------
7
Effect of exchange rate changes on cash 576 (3,407)
----------- -----------
Net increase (decrease) in cash and cash equivalents 20,491 (3,523,277)
Cash and cash equivalents, beginning of period 2,900,029 4,870,836
----------- -----------
Cash and cash equivalents, end of period $ 2,920,520 $ 1,347,559
=========== ===========
Supplemental information
Cash paid during the year for:
Interest $ 296,614 $ 715,474
Income taxes 127,232 300,000
----------- -----------
Supplemental disclosure of non-cash activities:
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 a 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 Consolidated Financial Statements
(Unaudited)
Organization and Business
-------------------------
Bridge Technology, Inc. ("the Company") was organized 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 through joint ventures in 1999.
The Company has the following subsidiarsies:
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 Ltd. 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 nine month periods ended September 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. Reclassification
Certain amounts in the consolidated financial statements for September 30,
2000 have been reclassified to conform to the September 30, 2001 presentation.
Such reclassifications had no effect on shareholders' equity as previously
reported.
Note 3. Earnings Per Share Computation
We compute earnings per share in accordance with Statement of Financial
Accounting Standards Board's No. 128 which requires presentation of basic and
diluted earnings per share. Basic earnings per share is computed by dividing
income or loss available to common shareholders by the weighted average number
of common shares outstanding for the reporting period. Diluted earnings per
share reflects the potential dilution that could occur if securities or other
contracts, such as stock options and warrants to issue common stock, were
exercised or converted into common stock.
9
The computations of the weighted-average common shares used in the computation
of basic and diluted net loss per share is based on 10,863,186 shares for the
three months and nine months ended September 30, 2001. The computations of
the weighted-average common shares used in the computation of basic and
diluted net loss per share is based on 10,853,186 and 11,219,176 shares,
respectively, for the three months ended September 30, 2000, and 10,650,529
and 11,016,519 shares, respectively, for the nine months ended September 30,
2000. Potential dilutive securities were not included in the EPS calculation
since their effect would be antidilutive. Potential dilutive securities
consisted of outstanding stock options and stock warrants.
Note 4. Income Taxes
As of December 31, 2000 and September 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.
Note 5. Shareholders' Equity
In February 2001, 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.
In April 2001, the Company issued 15,000 warrants, at an exercise price of
$3.00 and vesting immediately, to a member of the Advisory Board.
Note 6. Inventory
Inventory consists of:
December 31, September 30,
2000 2001
------------ ------------
Service parts $ 1,505,715 $ 1,482,831
Work in process 558,406 621,465
Finished goods 15,546,998 23,182,226
Allowance for slow moving items (619,504) (2,155,513)
------------ ------------
$ 16,991,615 $ 23,131,009
============ ============
December 31, September 30,
2000 2001
------------ ------------
U.S. Unit inventory $ 3,241,455 $ 2,604,959
* Asia Unit inventory 13,750,160 20,526,050
------------ ------------
$ 16,991,615 $ 23,131,009
============ ============
* Asia Unit inventory consists of IBM products received in the latter part of
a quarter and usually sold out in 30 to 45 days.
10
Note 7. Newly Established Subsidiary in China
The Company established a wholly owned subsidiary, Bridge Technology Ningbo
Co. Ltd. ("Ningbo"), in the city of Ningbo, Zhejang province of China
effective May 28, 2001. The Company committed to the Chinese government to
invest a total of $10 million in the new Ningbo production facility in two
phases. The first phase ends December 31, 2001 and total capital required to
be infused for phase one is $3.15 million. As of September 30, 2001, the
Company has infused approximately $2.6 million investment in the Ningbo
facility. The Company expects that it will be able to meet its requirement.
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 September 30, 2001 as
Compared to the Three Months Ended September 30, 2000
----------------------------------------------------------------------------
Net sales of $47,253,682 for the three months ended Sept. 30, 2001 increased
by $18,914,977 (66.7%) over net sales of $28,338,705 for the same period of
2000. This increase was due primarily to the growth of the Company's channel
distribution business in China, summarized as follows:
Three months ended Three months ended %
September 30, 2000 September 30, 2001 Change
------------------ ------------------ --------
U.S. Unit Sales $ 12,648,177 $ 9,428,647 down 25%
Asia Unit Sales 15,690,528 37,825,035 up 141%
------------------ ------------------
Total Sales $ 28,338,705 $ 47,253,682
================== ==================
Gross profit for the three months ended September 30, 2001 was $2,416,907, a
4.4% increase when compared to $2,315,990 the three months ended September 30,
2000, reflecting higher revenues for the period ended September 30, 2001.
Gross profit as a percentage of net sales declined from 8.2% for the three
months ended September 30, 2000 to 5.1% for the three months ended September
30, 2001. The decrease is principally due to losses incurred by the Company's
power electronics business in the slower U.S. market.
Research and development expenses increased by $121,706 to $281,362 in the
three months ended September 30, 2001, compared to $159,656 for the three
months ended September 30, 2000. This represents a 76.2% increase and is due
to the Company expanding its research projects in power electronics.
11
Selling, general and administrative expenses increased by $686,728 to
$2,555,924 in the three months ended September 30, 2001 compared to $1,869,196
for the three months ended September 30, 2000. Part of the increase can be
attributed to higher legal fees and to a goodwill amortization charge of
$159,227 included in selling, general and administrative expenses in the three
months ended September 30, 2001 as a result of the acquisition of CMS
Technology Limited. As a percentage of revenue, these expenses decreased from
6.6% in the three months ended September 30, 2000 to 5.4% in the three months
ended September 30, 2001. The decline is largely due to lower selling,
general and administrative expenses relative to revenue for the three months
ended September 30, 2001 compared to the same period in 2000.
Operating results decreased from income of $287,138 in the three months ended
September 30, 2000 to a loss of $420,379 in the three months ended September
30, 2001. The decrease in operating results is primarily attributed to losses
incurred by the Company's power electronics business in the slower U.S.
market. Income from operations as a percentage of revenue decreased from a
1.0% profit in the three months ended September 30, 2000 to loss of 8.9% in
the three months ended September 30, 2001.
Net interest increased $108,640 from interest expense of $114,804 in the three
months ended September 30, 2000 to interest expense of $223,444 in the three
months ended September 30, 2001. Other income decreased from $8,051 in the
three months ended September 30, 2000 to the $4,855 in the three months ended
September 30, 2001.
Net income decreased from a profit of $131,627 or $0.01 per share for the
three months ended September 30, 2000 to loss of $786,746 or $0.07 per share
for the three months ended September 30, 2001.
Results of Operations for the Nine Months ended September 30, 2001 as
Compared to the Nine Months Ended September 30, 2000
-----------------------------------------------------------------------------
Net Sales of $109,678,377 for the nine months ended September 30, 2001
increased by $34,084,842 (45.1%) over net sales of $75,593,535 for the
same period of 2000. The increase was due primarily to the growth of the
Company's channel distribution business in China for the period ended
September 30, 2001, summarized as follows:
Nine months ended Nine months ended %
September 30, 2000 September 30, 2001 Change
------------------ ------------------ ----------
U.S. Unit Sales $ 31,078,328 $ 27,183,885 down 12.5%
Asia Unit Sales 44,515,207 82,494,492 up 85%
------------------ ------------------
Total Sales $ 75,593,535 $109,678,377
================== ==================
Gross profit for nine months ended September 30, 2001 was $6,743,395 a 9.1%
decrease when compared to $7,417,777 for the nine months ended September 30,
2000, reflecting losses in the Company's power electronics business for the
period ended September 30, 2001. Gross Profit as a percentage of net sales
declined from 9.8% for the nine months ended September 30, 2000 to 6.1% for
the nine months ended September 30, 2001. The decrease is principally due to
the losses incurred in the Company's power electronics business in the slower
U.S. market.
Research and development expenses increased by $373,151 to $936,383 in the
nine months ended September 30, 2001, compared to $563,232 for the nine months
ended September 30, 2000. This represents a 66.3% increase and is due to the
Company's decision to expand its research efforts and new projects in the
power electronics business.
12
Selling, general and administrative expenses increased by $1,274,974 to
$6,701,744 in the nine months ended September 30, 2001 compared to $5,426,770
for the nine months ended September 30, 2000. Part of the increase can be
attributed to higher legal fees and to a goodwill amortization charge of
$438,984 included in selling, general and administrative expenses in the nine
months ended September 30, 2001 as a result of the acquisition of CMS
Technology Limited. As a percentage of revenue, these expenses decreased
from 7.2% in the nine months ended September 30, 2000 to 6.1% in the nine
months ended September 30, 2001. The decline is largely due to the lower
selling, general and administrative expenses relative to revenue for the nine
months ended September 30, 2001 compared to the same period in 2000.
Operating results decreased from income of $1,427,775 in the nine months ended
September 30, 2000 to loss of $894,732 in the nine months ended September 30,
2001. The decrease principally reflects the losses incurred by the Company's
power electronics business, new factory startup costs and lower shipments in
the U.S market. Income from operations as a percentage of revenue decreased
from an 1.9% profit in the nine months ended September 30, 2000 to an 0.8%
loss in the nine months ended September 30, 2001.
Net interest increased $315,354 from interest expense of $272,929 in the nine
months ended September 30, 2000 to interest expense of $588,283 in the nine
months ended September 30, 2001. Other income decreased from $122,493 in
the nine months ended September 30, 2000 to the 110,991 for the nine months
ended September 30, 2001.
A net loss of $1,766,740 or $0.16 per share was incurred for the nine months
ended September 30, 2001 compared to a net income of $668,911 or $0.06 per
share for the same period in 2000.
Liquidity and Capital Resources
-------------------------------
The Company maintains credit facilities with IBM Global Credit in Asia which
has varied during the year from 19 million to 28 million. The Company had
negotiated a 27 million dollars credit facility with IBM Global Credit to
incorporate both the U.S. operations and the Asian operations with priority
for the China channel marketing operations. This arrangement would satisfy
the needs of the Company's Asia operations but leave little or no credit
facility availabile for the Company's U.S. operations. Therefore, the
negotiated agreement was not finalized and will not be consummated.
The Company also maintains a $4,000,000 credit facility for U.S. operations
which is not sufficient to sustain the growth planned for its domestic power
electronics business. Accordingly negotiations are in progress with banking
institutions to increase this line to $6,000,000, and curtailing the present
line at General Bank.
In addition, the Company has negotiated a long term loan of $996,656 from PTI,
LLC and entity owned by shareholders.
The Company's capital requirements continue to be substantial in light of the
Company's continued growth record. The Company's cash and cash equivalents,
with the assistance of $3,307,629 in shareholder long term loans, have been
sufficient to cover its cash flow from operations. At September 30, 2001, the
Company had working capital of $6,605,911 and cash of $1,347,559 compared to a
working capital of $6,932,287 and cash of $4,870,836 at December 31, 2000.
The Company has satisfied its working capital requirements with cash generated
through operations, bank loans and shareholders and affiliates long term
loans.
13
Net cash used in operating activities in the nine months ended September 30,
2001 was $6,001,317 as compared to $3,665,182 used in operating activities in
the nine months ended September 30, 2000, the difference is mainly due to net
loss for the period.
Net cash used in investing activities in the nine months ended September 30,
2000 was $5,419,854 primarily for the acquisition of CMS Technology Limited,
net of cash acquired, as compared to $2,028,207 for the purchase of fixed
assets in the nine months ended September 30, 2001.
Net cash provided by financing activities in the nine months ended September
30, 2000 was $9,104,951 as compared to $4,509,654 in the nine months ended
September 30, 2001. The change is attributable primarily to a $4.3 million
stock subscription collected in the nine months ended September 30, 2000.
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.
Recently Issued Statements of Financial Accounting Standards
------------------------------------------------------------
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.
The Company has not determined the impact of adopting SFAS 141 or SFAS 142.
Effects of Inflation
--------------------
The Company believes that inflation has not had a material effect on its
net sales and results of operations.
14
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.
Effect on the September 11, 2001 terrorist activity
---------------------------------------------------
The Company had begun experiencing a sharp slowdown in its power electronics
manufacturing facility beginning in June 2001. We note no appreciable decline
in business since September 11, 2001; in fact we are receiving substantial
orders which are expected to be reflected in revenues beginning in the 1st
quarter of 2002.
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 consummated. 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.
A complaint has been filed against the Company for an alledged transfer of
assets, technology, trade secrets, confidential information, business
opportunities from Allied Web, a corporation owned by the Company's President,
John Harwer. The Company never accepted assets etc. transferred from Allied
Web. The Company paid $100,000 for assets acquired from John Harwer Inc., the
exact sum John Harwer paid to a third party.
The Company considers that this action has no merit.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
--------------------------------------------------
None.
15
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
-----------------------------------------
EX-3. (i) Articles of Incorporation
EX-3.D (i) Bridge Technology, Inc. as amended August 16, 2001
EX-21 Subsidiaries of the registrant
I. Bridge Technology Ningbo Co. Ltd. (by hard copy)
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: November 14, 2001 Winston Gu
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Winston Gu, Chairman
Date: November 14, 2001 John T. Gauthier
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John T. Gauthier, CFO
Date: November 14, 2001 John Harwer
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John Harwer, President
Date: November 14, 2001 James Djen
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James Djen, CEO