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, 2002
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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 Section 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 - 10,898,110 shares as of September 30, 2002
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1
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
Bridge Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
DEC. 31 SEP. 30
2001 2002
(Audited) (Unaudited)
------------ ------------
Assets
Current assets:
Cash $ 2,413,295 $ 1,747,380
Restricted cash - 198,115
Accounts receivable less allowance
for doubtful accounts of $308,106
and $390,208 11,035,057 8,027,049
Tax refund receivable 500,000 -
Other receivables 76,296 108,030
Inventory 21,692,543 15,720,764
Due from related party 22,143 34,045
------------ ------------
Total current assets 35,739,334 25,835,383
Property and equipment, net 2,681,018 2,394,144
Goodwill, net of amortization 1,949,417 1,949,417
Investments 198,717 89,996
Other assets 96,213 96,213
------------ ------------
Total assets $ 40,664,699 $ 30,365,153
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Bank overdraft $ 36,152 $ 65,632
Line of credit 9,000,000 4,454,076
Current portion of long term debt 46,901 11,902
Accounts payable, net of accrued rebates
and credits of $698,470 and $1,891,855 18,019,422 12,362,170
Accrued taxes payable 6,440 302,285
Deferred income tax 4,097 2,561
Accrued liabilities 1,941,560 2,143,765
Current portion of related party loan 75,118 75,118
Shareholder loan 2,130,000 3,050,000
------------ ------------
Total current liabilities 31,259,690 22,467,509
Related party loans less current portion 914,861 885,840
Long term debt, less current portion 328,300 328,300
------------ ------------
Total liabilities 32,502,851 23,681,649
------------ ------------
Minority interest 820,378 894,290
Shareholders' equity:
Common stock; par value $0.01 per share,
authorized 100,000,000 shares,10,863,186
and 10,898,110 shares outstanding 108,632 108,981
Additional paid-in capital 9,783,013 9,908,478
Related party receivable (340,000) (340,000)
Treasury stock (2,000) (2,000)
Retained earnings (accumulated deficit) (2,187,679) (3,863,900)
Accumulated other comprehensive loss (20,496) (22,345)
------------ ------------
Total shareholders' equity 7,341,470 5,789,214
------------ ------------
Total liabilities and shareholders' equity $ 40,664,699 $ 30,365,153
============ ============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
2
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
-------------------------- --------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2001 2002 2001 2002
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $ 47,253,682 $ 28,433,033 $109,678,377 $ 82,317,127
Cost of sales 44,836,775 26,873,121 102,934,982 77,968,955
------------ ------------ ------------ ------------
Gross profit 2,416,907 1,559,912 6,743,395 4,348,172
Research and development 281,362 114,180 936,383 502,030
Selling, general and
administrative expense 2,555,924 1,766,839 6,701,744 5,348,321
----------- ------------ ------------ ------------
Income (loss) from
operations (420,379) (321,107) (894,732) (1,502,179)
Other income (expense):
Interest income
(expense), net (223,444) (214,045) (588,283) (675,952)
Gain on sale of investment - - _ 536,427
Other income 4,855 70,613 110,991 178,448
----------- ------------ ------------ ------------
Income before
income taxes (638,968) (464,539) (1,372,024) (1,463,256)
Income taxes provision 96,997 54,290 256,846 139,053
----------- ------------ ------------ ------------
Net income (loss) (735,965) (518,829) (1,628,870) (1,602,309)
Minority interest (50,781) (28,495) (137,870) (73,912)
----------- ------------ ------------ ------------
Net income (loss)
applicable to common
shares $(786,746) $ (547,324) $(1,766,740) $(1,676,221)
=========== ============ ============ ============
Basic weighted average
number of common
shares outstanding 10,863,186 10,898,110 10,863,186 10,879,049
=========== ============ ============ ============
Basic earnings
per share $ (0.07) $ (0.05) $ (0.16) $ (0.15)
=========== ============ ============ ============
Diluted weighted average
number of common
shares outstanding 10,863,186 10,898,110 10,863,186 10,879,049
=========== ============ ============ ============
Diluted income (loss)
per share $ (0.07) $ (0.05) $ (0.16) $ (0.15)
=========== ============ ============ ============
Comprehensive income
and its components
consist of the
following:
Net income $(786,746) $ (547,324) $(1,766,740) $(1,676,221)
Foreign currency
translation
adjustment,
net of tax (15,975) 2 (6,993) (1,616)
----------- ------------ ------------ ------------
Comprehensive
income $(802,721) $ (547,322) $(1,773,733) $(1,677,837)
=========== ============ ============= ============
See accompanying summary of accounting policies and notes to consolidated
financial statements.
3
Bridge Technology, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Nine Months Ended
-------------------------
Sept. 30, Sept. 30,
2001 2002
----------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net income (loss) $(1,766,740) $(1,676,221)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 701,508 382,712
Provision for doubtful accounts 9,021 173,485
Stock compensation - 114,399
Gain on disposal of investment - (536,373)
Minority interest 137,870 73,912
Increase (decrease) from changes in
operating assets and liabilities:
Restricted cash - (198,115)
Trade receivables 2,711,944 2,834,522
Inventory (6,139,394) 5,983,195
Deferred income taxes (23,998) (1,536)
Other receivables 970,198 15,959
Other current assets (247,868) (47,693)
Accounts payable (2,467,019) (5,657,252)
Accrued liabilities 154,730 202,205
Income taxes payable (41,569) 295,845
Tax refund receivable - 500,000
----------- -----------
Net cash(used)provided by operating activities (6,001,317) 2,459,044
----------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (2,028,207) (95,838)
Due from related party - (11,902)
Proceeds from disposal of investment - 645,094
----------- -----------
Net cash(used)provided by investing activities (2,028,207) 537,354
----------- -----------
Cash flows from financing activities
Bank overdraft 80,970 29,480
Repayments on loans payable (166,030) (34,999)
Proceeds from line of credit 2,000,000 -
Repayments of line of credit - (4,545,924)
Proceeds from related party loans 3,398,058 1,000,000
Repayments of related party loans (803,344) (29,021)
Repayments on shareholder loan - (80,000)
----------- -----------
Net cash provided(used)by financing activities 4,509,654 (3,660,464)
----------- -----------
Effect of exchange rate changes on cash (3,407) (1,849)
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Net decrease in cash and cash equivalents (3,523,277) (665,915)
Cash and cash equivalents, beginning of period 4,870,836 2,413,295
----------- -----------
Cash and cash equivalents, end of period $ 1,347,559 $ 1,747,380
=========== ===========
Supplemental information
Cash paid during the period for:
Interest $ 715,474 $ 644,863
Income taxes 300,000 2,586
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See accompanying summary of accounting policies and notes to consolidated
financial statements.
4
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 active subsidiaries:
Bridge R&D, Inc. 100% Established on June 1, 1997
PTI Enclosures, Inc. 100% Merged on December 14, 1998
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 or 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 nine months period ended
September 30,2002 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2002. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 2001.
The accompanying unaudited consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. During the year
ended December 31, 2001, the Company incurred a net loss of $2,542,000 and used
cash of $3,635,000 in its operations. Management has undertaken certain actions
in an attempt to improve the Company's liquidity and return the Company to
profitability. On July 24, 2002, the Company entered into a loan modification
and extension agreement with a commercial bank for its outstanding balance of
$4 million at December 31, 2001, which was reduced by $100,000 payment made in
2002. Pursuant to the terms of the new agreement, monthly interest only
payments are to be made through maturity, $50,000 was due and paid by September
15, 2002 and no less than $1,000,000 is due on November 30, 2002. The Company
owns 90% of all issued and outstanding shares in CMS and pledged 65% of all
issued and outstanding shares in CMS against this outstanding balance and the
maturity date of the note has been extended until November 30, 2002. However,
if the Company makes all of the foregoing payments on a timely basis and has
not otherwise defaulted on the loan, the maturity date for the remaining unpaid
principal balance will be extended until June 30, 2003. Additionally, the
Company's major shareholders have subordinated the outstanding loans to the
Bank debt and have also indicated an interest in converting their debt to
equity along with the acceptance of additional outside financing.
Operationally, management's plans include continuing actions to cut or curb
nonessential expenses and focusing on improving sales of Autec. No assurance
can be given that the Company will be successful in extending or modifying its
line of credit or that the Company will be able to return to profitable
operations.
Looking for alternatives, the Company is currently seeking a global financing
agreement with a major international bank to replace existing credit lines in
the U.S. and Hong Kong. No assurance can be given that the alternative funding
source will be available.
Management of the Company is actively pursuing certain other action plans, such
as selling controlling interest in Autec and Ningbo and/or selling a portion of
its equity interest in CMS in exchange for cash proceeds to provide working
capital and repay part or all of the outstanding bank loans. At November 14,
2002, no formal binding offers and/or letter of credits have been received.
5
Note 2. - Income Taxes and Refund Receivable
As of December 31, 2001, a valuation allowance has been provided for that
portion of the net deferred tax asset for which management has determined that
it is more likely than not that it will not be realized.
In July 2002, the Company filed its consolidated income tax return for the year
ended December 31, 2001 claiming tax refund of approximately $580,000. During
September 2002, the Company received from the IRS a total refund of $585,818.
Note 3. - Shareholders' Equity
In May 2002 the Company granted a warrant to a consultant which allows him to
purchase 15,000 shares of common stock with an exercise price at $0.55 per
share and expiration date at January 15, 2005 in lieu of payroll payable of
$9,675.
In May 2002, the Company issued aggregate 34,924 shares of common stock to a
vendor in lieu of payment for purchasing certain inventory. The shares issued
were priced at the fair market value of $0.37 and $0.32 at respective issuing
dates.
In June 2002, the Company issued a warrant of purchase 30,000 share of common
stock with an exercise price of $0.55 per share and expiration date at June 30,
2007 for settlement of a lawsuit. As result of this issuance, the Company
recorded the fair value of $5,778 for the warrant.
In October 2002 the Company granted a warrant to a consultant which allows him
to purchase 18,000 shares of common stock with an exercise price at $0.33 per
share and expiration date at January 15, 2005 in lieu of payroll payable of
$5,850.
Note 4. - Inventory
Inventory consists of:
December 31, September 30,
2001 2002
------------ ------------
Service parts $ 1,633,919 $ 1,112,851
Work in process 329,730 274,397
Finished goods 20,528,669 15,427,784
Allowance for slow moving items (799,775) (1,094,268)
------------ ------------
$ 21,692,543 $ 15,720,764
============ ============
Note 5. - Goodwill
Effective January 1,2002, the Company adopted Statement of Financial Accounting
Standards No. 142 Goodwill and Other Intangible Assets (SFAS 142). Under SFAS
142, Goodwill and indefinite life intangible assets are no longer amortized but
will be reviewed annually, or more frequently if impairment indicators arise,
for impairment. The Company discontinued the amortization of its goodwill
balances effective January 1, 2002. The initial testing of goodwill for
possible impairment was completed in August 2002, and no impairment was
indicated.
In accordance with SFAS 142, prior period amounts are not restated. A
reconciliation of reported net income to net income adjusted for the exclusion
of amortization of goodwill and indefinite life intangible assets follows:
September 30,
-----------------------------
2001 2002
----------- ------------
Reported net loss $ (1,766,740) $ (1,676,221)
Add back: Goodwill amortization 477,680 -
----------- ------------
Adjusted net income (1,289,060) (1,676,221)
Basic weighted average number of common
stock outstanding 10,863,186 10,879,049
Basic earnings per share $ (0.16) $ (0.15)
Adjusted earnings per share $ (0.12) $ (0.15)
Diluted weighted average number of common
stock outstanding 10,863,186 10,879,049
Diluted earnings per share $ (0.16) $ (0.15)
Adjusted diluted earnings per share $ (0.12) $ (0.15)
========== ===========
6
Note 6. - Legal Proceedings
On November 14, 2001, a complaint was filed by Oppenheimer Wolff & Donnelly LLP
in the Orange County Superior Court, Santa Ana, California against the Company
for fees allegedly owed by the Company. The Company intends to vigorously
defend this claim because the amount invoiced was deemed excessive comparing to
the quality of services rendered. The estimated liability including interest,
costs and statutory attorney's fees of approximately $100,000 is recorded in
accrued liabilities. At December 31, 2001 and September 30, 2002. In July 2002,
a non-binding arbitration was conducted resulting in an $84,000 decision. At
September 30, 2002, the Company has accrued a contingent liability of 84,000.
The Company intends to diligently pursue its rights in court if a reasonable
settlement cannot be reached.
On April 16, 2002, a complaint was filed by Danton Mak Esq. in the Superior
Court of Los Angeles against Autec Power Systems, Inc. for fees allegedly owed
by Autec. The matter was submitted to binding arbitration scheduled for hearing
in April 2002. An estimated liability of $136,000 has been recorded at December
31, 2001. In July 2002 this matter has been settled for $110,000 by stipulation
of four equal payments of $27,500 due on June 1, July 1, August 1 and September
1, 2002, which were made according to schedule.
On April 24,2002 a complaint was filed against the Company in the Orange County
Superior Court, Santa Ana, California by Mason Tarkeshian for fees alleged to
be due on an acquisition which was not consummated. The complaint sought for
damage of approximately $2 million where as the Company believes that the
complaint was without merit and would be resolved in favor of the Company.
The Company tendered this case to the insurance carrier for settlement and had
not accrued any liabilities for this matter as of December 31, 2001. In 2002,
this complaint was settled by the Company's insurance carrier and the Company.
The Company's portion of contribution to the settlement was to issue a warrant
to purchase 25,000 shares of common stock of Bridge at $0.55 per share. The
Company issued that warrant in July 2002 and is awaiting the receipt of a
specific and general release.
On October 1, 2001, a complaint was filed by a Trustee in U.S. Bankruptcy
Court against the Company for an alleged transfer of assets, technology,
trade secrets, confidential information, business opportunities from Allied
Web, a corporation owned by the Company's former President and Director, which
filed for liquidation under federal bankruptcy laws on April 6, 2000. At
December 31, 2001, management of the Company was unable to assess the
possibility of incurring future liability and estimate the reasonable amount of
contingent liability. Therefore, the Company did not record any accrued
liability for this matter. In July 2002, this case was settled in principal
with a major participation by the Company's insurance carrier. Accordingly,
the Company accrued a contingent liability of approximately $265,000 as of
September 30, 2002. On November 8, 2002, the Bankruptcy Judge dismissed this
suit for failure to appear or prosecute. The Company expects the Bankruptcy
Judge will set aside the dismissal and reinstate the action. However, as of
November 14, 2002, Bridge is unaware of whether the Bankruptcy Judge has so
acted. The Bankruptcy Trustee and the Company have negotiated a tentative
settlement, contingent upon the approval of a prior Officer/Director, another
individual and other active Officers and Directors.
On December 12, 2001, a former shareholder of Autec Power Systems has filed a
complaint in Ventura County Superior Court against the controlling shareholder
of Autec, Mr. Winston Gu and Bridge Technology, Inc. alleging that the
complainant did not receive sufficient exchange of shares in this acquisition
by Bridge Technology, Inc. The Company believes that the complaint is without
merit and will defend it vigorously. At December 31, 2001, management of the
Company was unable to assess the possibility of incurring future liability and
estimate the reasonable amount of contingent liability. Therefore, the Company
has not record any liability for this matter at December 31, 2001. As of
November 14, 2002, the Company is unable to predict any consequence about this
matter.
Note 7. - Line of Credits
Note Payable to Commercial Bank
In 2000, the Company obtained a revolving line of credit, as amended, from a
commercial bank with an aggregate amount of principal not to exceed $4,000,000.
Advances bear interest at the prime rate (5.25% at December 31, 2001). The
outstanding balance at December 31, 2001 and September 30, 2002 was $4,000,000
and $3,850,000, respectively. Outstanding interest and principal was originally
payable no later than June 30, 2001. The revolving line of credit is subject to
certain restrictive covenants and is collateralized by substantially all of
assets located in the US. As of December 31, 2001, the Company had not repaid
the bank for amounts due under the line of credit and, therefore, was in
default. On July 24, 2002, the Company entered into a loan modification and
extension agreement with the bank. Pursuant to the terms of the new agreement,
monthly interest payments are to be made through maturity, $50,000 is due by
September 15, 2002and no less than $1,000,000 is due on November 30, 2002 and
the maturity date of the note has been extended until November 30, 2002.
However, if the Company makes all of the foregoing payments on a timely basis
and has not otherwise defaulted on the loan, the maturity date for the
remaining unpaid principal balance will be extended until June 30, 2003. In
exchange for agreeing to the modifications, the Company granted to the bank a
security interest in the 65% of all issued and outstanding common stock of CMS,
subordinated the loans due to the Company's shareholders, and issued two
warrants to the bank each of which grants the bank the right to purchase 250,000
shares of the Company's common stock at a per share price of $1.00. If the
Company makes the 1,000,000 curtailment on or before November 30, 2002, the
maturity date of the loan will be extended to June 30, 2003 and one of the
warrants will be cancelled.
7
Note Payable to IBM
In 2000, the Company's 90% owned Hong Kong based subsidiary, CMS, entered into
a revolving credit arrangement with International Business Machines Corp("IBM")
for the purposes of financing CMS' purchases from IBM. The facility was
originally set to expire in 2001 but has been extended until October 31, 2002.
Advances under the loan arrangement are secured by CMS' receivables and certain
of its other assets, as well as by a guaranty provided by the Company, with
interest at a variable rate of prime (as determined by the Hong Kong and
Shanghai Banking Corporation) plus 2% (11.5% at December 31, 2001) with a floor
of 9%. At December 31, 2001, outstanding borrowings totaled $5,000,000. The
arrangement also provides restrictions on CMS' ability to transfer funds to the
Company or any other subsidiaries without IBM's written consent. At December
31, 2001, CMS' net assets subject to this restriction were $8,346,680.
In July 2002, CMS paid off the entire outstanding balance of US$5 million and
reduced its regular trade accounts payable to IBM from approximately $11.9
million at December 31, 2001 to approximately $8.8 million as of September 30,
2002.
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.
OVERVIEW
Founded in 1997, Bridge Technology, Inc., is in the business of developing,
marketing and selling computer peripherals and computer system enhancement
products. The Company has established operating divisions and subsidiaries
under separate business lines. Each of these operating entities is focused on
certain specific product and sales channels.
During the quarter ended September 30, 2002, total assets decreased by
$10,299,546 from $40,664,699 at December 31, 2001 to $30,365,153 at September
30, 2002. The decrease was due primarily to the decrease in accounts receivable
of approximately $3.0 million, the decrease of approximately $6.0 million in
inventory and the decrease in cash of approximately $1.0 million.
The accounts receivable turnover index (defined as quarterly net sales divided
by ending accounts receivable, multiplied by 4) was 14.2 at September 30, 2002,
compared with 12.9 at December 31, 2001 and 12.7 at September 30, 2001.
Although the accounts receivable balance decreased by $3,008,008 at December
31, 2001, the accounts receivable turnover increase due to more aggressive
collections actions.
The inventory turnover index (defined as quarterly factor cost excluding non-
recurring costs divided by ending inventory, multiplied by 4) was 6.8 at
September 30, 2002, down from 8.6 at year-end of fiscal 2001 and down from 7.5
at September 30, 2001. Inventories declined $5,971,779 versus the balance at
December 31, 2001 and declined by $7,410,245 compared with September 30, 2001.
The decrease of inventory turnover is due to less procurement from IBM during
the quarter ended September 30, 2002.
Total debt at September 30, 2002 was $23,681,649 reflecting an $8,821,202
decrease from December 31, 2001. As of September 30, 2002 total debt was
409.1 percent of total capital, compared with 442.7 percent at December 31,
2001. The Company decrease in debt is mainly due to the payoff of the IBM
loan balance during 2002.
____
The following table sets forth our revenue components for the three months
ended September 30, 2002 and 2001 respectively.
Three Months Ending,
-----------------------------
Sept.30, 2001 Sep.30, 2002
------------- ------------
Net Sales:
Manufacturing 8.5% 7.4%
Distribution 91.5% 92.6%
------------- ------------
Total 100.0% 100.0%
============= =============
Geographically we operate on United States and Asia. Our customers are mainly
concentrate in the China.
8
Our cost of sales is made up of the cost of materials used, obsolescence costs,
labor, depreciation, and overhead relating to manufacturing and distribution.
Our expenses can be classified into three categories: selling expense, general
and administrative expense, and research and development expense. Selling
expenses include expenses for payroll and payroll taxes for employees working
in the selling department, advertising, insurance, utilities and other expenses
directly related to selling activities. General and administrative expenses
include management payroll, property taxes, rental expense, depreciation of
fixed assets used by the management function, utilities, employee fringe
benefits, office supplies, travel and entertainment, professional expense,
outside services and other expenses related to management and administration
processes. Research and development expenses include payroll and payroll taxes
, travel, and any other expenses directly related to the research activities.
Critical Accounting Policies
Use of Estimates
Our consolidated financial statements have prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to use estimations and
assumptions and make judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. We based our estimations on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances, the result of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions and conditions.
Rebates and Credits Receivable
CMS Technology Co. Ltd. ("CMS"), one of our subsidiaries, is an authorized
distributor of IBM products in the territory including China, Vietnam,
Philippines and Hong Kong. As a common practice in the computer parts
distribution business, IBM periodically updates its price list for all its
products and provides certain incentive programs to attract its authorized
distributors to sell more of its products. As a result of changes in price
list (usually decreases in prices), CMS is entitled to receive certain rebates
and credits for the inventory held and sold by the Company within the specified
period of time as defined by IBM through submitting the necessary applications
forms. In general, once applications are approved by IBM these rebates and
credits approved by IBM will be deducted from CMS's accounts payable to IBM and
decrease the cost of goods sold or inventory correspondingly. However, at the
end of reporting period, CMS has to estimate the relevant rebates and credit
receivable based on the quantity of inventory on hand and anticipated approval
for rebates and credits receivable from IBM, therefore, the actual results
could differ from our estimated amount.
Impairment of Long-Lived Assets
In assessing the recoverability of long-lived assets, including goodwill and
other intangibles, we must make assumptions regarding estimated future cash
flows and other factors to determine the fair value of the respective assets.
If these estimates or their related assumptions change in the future, we may be
required to record impairment charges for these assets not previously recorded.
Accounting for Income Taxes
Significant management judgment is required in determining our provision for
income taxes, our deferred tax assets and liabilities and any valuation
allowance recorded. As of December 31, 2001, we have recorded a full valuation
allowance of approximately $940,000 against our deferred tax assets balance in
the U.S. due to uncertainties related to our deferred tax assets as a result of
our history of losses in the U.S. The valuation is based on our estimates of
taxable income in the U.S. operation and the period over which our deferred tax
assets will be recoverable. In the event that actual results differ from these
estimates or we adjust these estimates in the future periods, we may need to
change the valuation allowance, which could impact our financial position and
results of operations.
9
Results of Operations for the Three Months Ended September 30, 2002 as Compared
to the Three Months Ended September 30, 2001
------------------------------------------------------------------------------
Net sales of $28,433,033 for the three months ended September 30, 2002
decreased by $18,820,649, representing approximately a 39.83% decrease,
over net sales of $47,253,682 for the same period of 2001. The decrease
was due primarily to the decrease of approximately $4 million in U.S.
operations and approximately $15 million in Asia operations.
Asia revenue for the three months ended September 30, 2002 were $22,463,937
compared to $37,825,035 for the three months ended September 30, 2001, a
decrease of $15,361,098 or 41%. The decrease relates primarily to lower sales
volume at CMS Technology Limited.
United States revenues for the three months ended September 30, 2002 were
$5,969,096 compared to $9,428,647 for the three months ended September 30,
2001, a decrease of $3,459,551 or 36.7%. Decreases relate primarily to
decreased sales at Autec Power Systems, Inc.
Revenues for the Company's distribution businesses were $26,016,624 for the
three months ended September 30, 2002 compared to $43,740,297 for the three
months ended September 30, 2001, a decrease of $17,723,673 or 40.5%. The
decrease relates primarily to decreased sales volume at CMS Technology Limited
and excluding sales generated by a former subsidiary Newcorp Technology
(Japan).
Revenues for the Company's manufacturing businesses were $2,416,409 for the
three months ended September 30, 2002 compared to $3,513,385 for the three
months ended September 30, 2001, a decrease of $1,096,976 or 31.2%. The
decrease relates primarily to decreased sales at Autec.
Gross profit for the three months ended September 30, 2002 was $1,559,912
decreasing by $856,995 and representing approximately a 35.5% decrease,
compared to $2,416,907 for the same period of 2001. The reason for this
decrease is due mainly to the decrease in sales of Autec for the quarter ended
September 30, 2002. Gross profit as a percentage of net sales increased from
5.1% for the three months ended September 30, 2001 to 5.5% for the three months
ended September 30, 2002. The increased is principally due to the higher margin
generated through changes in the Company's product mix.
Asia gross profit as a percentage of sales for the three months ended September
30, 2002 was 3.3% compared to 3.9% for the three months ended September 30,
2001 primarily due to an increase in Return Merchandise Authorization at CMS
Technology Limited.
United States gross profit as a percentage of sales for the three months ended
September 30, 2002 was 13.6% compared to 9.8% for the three months ended
September 30, 2001. The increase is primarily attributable to increased gross
margins at Autec.
Gross profits for the Company's distribution businesses as a percentage of
sales for the three months ended September 30, 2002 was 4.5% compared to 4.2%
for the three months ended September 30, 2001.
Gross profits for the Company's manufacturing businesses as a percentage of
ales for the three months ended September 30, 2002 was 16.2% compared to 16.4%
for the three months ended September 30, 2001. The decrease is primarily
attributable to decreased gross margins at NingBo.
Research and development expenses decreased by $167,182 to $114,180 in the
three months ended September 30, 2002, compared to $281,362 for the three
months ended September 30, 2001. This represents approximately a 59.4% decrease
as a percentage of revenue. Research and development expenses decreased from
0.6% in the three months ended September 30, 2001 to 0.4% in the same period
in 2002.
Selling, general and administrative expenses decreased by $789,085 to
$1,766,839 in the three months ended September 30, 2002 compared to $2,555,924
for the three months ended September 30, 2001. As a percentage of revenue,
these expenses decreased from 5.4% in the three months ended September 30,
2001 to 6.2% in the three months ended September 30, 2002. The decrease in
expenses is due to curtailment of sundry administrative expenses for the
quarter ended September 30, 2002.
10
Losses from operations decreased from a loss of $420,379 for the three months
ended September 30, 2001 to loss of $321,107 in the three months ended
September 30, 2002. The decrease primarily reflects the cost savings efforts
instituted in 2002. Loss from operations as a percentage of revenue decreased
from 0.9% for the three months ended September 30, 2001 to a loss from
operations as a percentage of revenue to 1.1% for the three months ended
September 30, 2002.
Net interest expense decreased by $9,399 from $223,444 for the three months
ended September 30, 2001 to net interest expense of $214,045 for the three
months ended September 30, 2002. The decrease is mainly the result of loan
curtailment during the three months ended September 30, 2002.
Other income increased by $65,758 from $4,855 for the three months ended
September 30, 2001 to $70,613 for the three months ended September 30, 2002.
The main source for this increase is primarily commission rebates in the three
months ended September 30, 2002.
Net loss decreased by $217,136 from net loss of $735,965 for the three months
ended September 30, 2001 to net loss of $518,829 for the three months ended
September 30, 2002. These results reflect a loss of $0.07 per share for the
three months ended September 30, 2001 to a loss of $0.05 per share for the
three months ended September 30, 2002.
Results of Operations for the Nine Months Ended September 30, 2002 as Compared
to the Nine Months Ended September 30, 2001
---------------------------------------------------------------------------
Net sales of $82,317,127 for the nine months ended September 30, 2002 decreased
by $27,361,250, representing approximately a 25% decrease, over net sales
of $109,678,377 for the same period of 2001. The decrease was due
primarily to the decrease of approximately $9.0 million in U.S. operations
and approximately $18.0 million in Asia operations.
Asia revenue for the nine months ended September 30, 2002 were $64,305,410
compared to $82,494,492 for the nine months ended September 30, 2001, a
decrease of $18,189,082 or 22.1%. Decreases relate primarily to decreased sales
volume at CMS Technology Limited.
United States revenues for the nine months ended September 30, 2002 were
$18,011,717 compared to $27,183,885 for the nine months ended September 30,
2001, a decrease of $9,172,168 or 33.7%. Decreases relate primarily to
decreased sales at Autec.
Revenues for the Company's distribution businesses were $75,774,730 for the
nine months ended September 30, 2002 compared to $96,648,717 for the nine
months ended September 30, 2001, a decrease of $20,873,987 or 21.6%. Decreases
relate primarily to decreased sales volume at CMS Technology Limited and
excluding the sales of former subsidiary Newcorp Technology (Japan).
Revenues for the Company's manufacturing businesses were $6,542,397 for the
nine months ended September 30, 2002 compare to $13,029,660 for the nine months
ended September 30, 2001, a decrease of $6,487,263 or 49.8%. The decrease
relates primarily to decreased sales at Autec.
Gross profit for the nine months ended September 30, 2002 was $4,348,172
decreasing by $2,395,223 and representing approximately a 35.5% decrease,
compared to $6,743,395 for the same period of 2001. The reason for this
decrease is due mainly to the decrease in sales of Autec for the nine months
ended September 30, 2002. Gross profit as a percentage of net sales declined
from 6.1% for the nine months ended September 30, 2001 to 5.3% for the nine
months ended September 30, 2002. The decrease is principally due to the lower
margin generated through the sales of Autec. Autec's product mix has changed
to lower profit products.
Asia gross profit as a percentage of sales for the nine months ended September
30, 2002 was 3.4% compared to 4.4% for the nine months ended September 30, 2001
primarily due to an increase in Return Merchandise Authorization at CMS
Technology Limited.
United States gross profit as a percentage of sales for the nine months ended
September 30, 2002 was 12.2% compared to 11.6% for the nine months ended
September 30, 2001. The increase is primarily attributable to increased gross
margins at Autec.
Gross profits for the Company's distribution businesses as a percentage of
sales for the nine months ended September 30, 2002 was 4.5% compared to 4.2%
for the nine months ended September 30, 2001.
11
Gross profits for the Company's manufacturing businesses as a percentage of
sales for the nine months ended September 30, 2002 was 13.9% compared to 20.8%
for the nine months ended September 30, 2001. The decrease is primarily
attributable to decreased gross margins at Autec.
Research and development expenses decreased by $434,353 to $502,030 in the nine
months ended September 30, 2002, compared to $936,383 for the nine months ended
September 30, 2001. This represents approximately a 46.4% decrease.
Selling, general and administrative expenses decreased by $1,353,423 to
$5,348,321 in the nine months ended September 30, 2002 compared to $6,701,744
for the nine months ended September 30, 2001. As a percentage of revenue, these
expenses decreased 20.2% in the nine months ended September 30, 2002. The
decline is due to the cost saving effort implemented by management for the nine
months ended September 30, 2002. Cost saving efforts included significant
layoffs at Autec as well as cutbacks in operating expenses such as travel
expense and purchases of supplies.
Losses from operations increased from $894,732 for the nine months ended
September 30, 2001 to $1,502,179 in the nine months ended September 30, 2002.
The increase primarily reflects the decline in profitability at Autec. Losses
from operations as a percentage of revenue increased from 0.8% for the nine
months ended September 30, 2001 to a loss from operations as a percentage of
revenue to 1.8% for the nine months ended September 30, 2002.
Net interest expense increased by $87,669 from $588,283 for the nine months
ended September 30, 2001 to net interest expense of $675,952 for the nine
months ended September 30, 2002. The increase is mainly the result of increased
borrowings from shareholders during the nine months ended September 30, 2002.
Other income increased by $603,884 from $110,991 for the nine months ended
September 30, 2001 to $714,875 for the nine months ended September 30, 2002.
The main source for this increase is the gain on the disposal of an investment
of $536,427 in the nine months ended September 30, 2002.
Net loss decreased by $90,519 from net loss of $1,766,740 for the nine months
ended September 30, 2001 to net loss of $1,676,221 for the nine months ended
September 30, 2002. These results reflect a loss of $0.16 per share for the
nine months ended September 30, 2001 to a loss of $0.15 per share for the nine
months ended September 30, 2002.
Liquidity and Capital Resources
-------------------------------
The Company's capital requirements have been and will continue to be
significant and its cash and cash equivalents have been sufficient.
At September 30, 2002, the Company had working capital approximately $2.2
million and cash of $1.7 million compared to a working capital of
approximately $4.6 million and cash of $2.4 million at December 31, 2001.
Net cash provided by operating activities for the nine months ended September
30, 2002 was $2,459,044 as compared to $6,001,317 used in operating activities
for the nine months ended September 30, 2001. The change of approximately
$8,460,361 or 141.0% was primarily attributable to approximately 12.0 million
decreased in inventory, a decrease in tax refund receivable of $0.5 million
offset by approximately 3.1 million increase in accounts payable and 1.0
million increase in other receivable.
Net cash provided by investing activities for the nine months ended September
30, 2002 was $537,354 compared to 2,028,207 used in investing activities in
2001. The change was a swing of 2,565,561, or 126.5%. The net cash provided
by investing activities is mainly due to the proceeds of $645,094. In 2002 our
capital expenditures were $107,740, which related to capital investment in
Ningbo China as compared to $2,028,207 net cash used in investing activities
for the nine months ended September 30, 2001 for the initial investment in
China.
Net cash used by financing activities for the nine months ended September 30,
2002 was $3,660,464 as compared to $4,509,654 net cash provided in the nine
months ended September 30, 2001, reflecting an decrease of $8,170,118 or
181.2%. The cash outflow in financing activities included $4,545,924 of
payments on the line of credit, offset by cash inflows of $1,000,000 from a
related party loan. In 2001, proceeds under the line of credit and related
party loans were $5,398,058 compared to payments on loans of approximately
$970,000.
12
Management believes that the Company does have the economic wherewithal to
maintain its operations for the foreseeable future. In July 2002 the Company
entered into a loan modification and extension agreement with a commercial bank
for its outstanding balance of $4 million at December 31, 2001, which was
reduced by $100,000 payment made in 2002. Pursuant to the terms of the new
agreement, monthly interest only payments are to be made through maturity,
$50,000 is due by September 15, 2002 and no less than $1,000,000 is due on
November 30, 2002. The Company owns 90% of all issued and outstanding shares
in CMS and pledged 65% of all issued and outstanding shares in CMS against this
outstanding balance and the maturity date of the note has been extended until
November 30, 2002. However, if the Company makes all of the foregoing payments
on a timely basis and has not otherwise defaulted on the loan, the maturity
date for the remaining unpaid principal balance will be extended until June 30,
2003. In addition, management is negotiating with the Company's major
shareholders to convert a portion of the Company's indebtedness to them into
equity in order to improve the Company's working capital position.
Operationally, management's plans include continuing actions to cut or curb non-
essential expenses and focusing on improving the sales of Autec. No assurance
can be given that the Company will be successful in extending or modifying its
line of credit beyond June 30, 2003 or that the Company will be able to return
to profitable operations. Looking for alternatives, the Company is currently
seeking a global financing agreement with a major international bank to replace
existing credit lines in U.S. and Hong Kong. No assurance can be given that
the alternative funding source will be available.
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.
Newly Issued Accounting Standards
---------------------------------
In June 2001, Financial Accounting Standard Board issued Statement of Financial
Accounting Standards, No. 143, "Accounting for Asset Retirement Obligations,"
("FAS No. 143"). FAS No. 143 is effective for fiscal years beginning after
June 15, 2002. FAS No. 143 requires that any legal obligation related to the
retirement of long-lived assets be quantified and recorded as a liability with
the associated asset retirement cost capitalized on the balance sheet in the
period it is incurred when a reasonable estimate of the fair value of the
liability can be made. Management of the Company expects that FAS No. 143 will
be adopted on their effective dates and that the adoption will not result in
any material effects on its financial statements.
In April 2002, the FASB issued Statement of Financial Accounting standards, No.
145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections". (FAS No. 145) FAS No. 145
eliminates the current requirement that gains and losses on debt extinguishment
must be classified as extraordinary items in the income statement. Instead,
such gains and losses will be classified as extraordinary items only if they
are deemed to be unusual and infrequent, in accordance with the current GAAP
criteria for extraordinary classification. In addition, FAS No. 145 eliminates
an inconsistency in lease accounting by requiring that modifications of capital
leases that result in reclassification as operating leases be accounted for
consistent with saleleaseback accounting rules. FAS No. 145 also contains other
nonsubstantive corrections to authoritative accounting literature. The changes
related to debt extinguishment will be effective for fiscal years beginning
after May 15, 2002, and the changes related to lease accounting will be
effective for transactions occurring after May 15, 2002. Adoption of this
standard will not have any immediate effect on the Company's consolidated
financial statements. The Company will apply this guidance prospectively.
13
In June 2002, the FASB issued Statement of Financial Accounting Standards, No.
146, "Accounting for Costs Associated with Exit or Disposal Activities," (FAS
No. 146) which addresses accounting for restructuring and similar costs. FAS
No. 146 supersedes previous accounting guidance, principally Emerging Issues
Task Force (EITF) Issue No. 94-3. FAS No. 146 requires that the liability for
costs associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF No. 94-3, a liability for an exit cost was
recognized at the date of a company's commitment to an exit plan. FAS No. 146
also establishes that the liability should initially be measured and recorded
at fair value. Accordingly, FAS No. 146 may affect the timing of recognizing
future restructuring costs as well as the amount recognized. The provisions of
FAS 146 are to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. Management believes that the adoption
of this standard will not have any immediate effect on the Company's
consolidated financial statements.
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.
ITEM 4. CONTROLS PROCEDURES.
-------------------------------------------------------------------------------
(a) Evaluation of Disclosure Controls and Procedures
The Company's Chief Executive Officer and its Chief Financial Officer,
after evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-
14(c) and 15d-14(c) as of a date within 90 days of the filing date of this
quarterly report on Form 10-Q (the "Evaluation Date")), have concluded that
as of the Evaluation Date, the Company's disclosure controls and procedures
were adequate and effective to ensure that material information relating to
the Company and its consolidated subsidiaries would be made known to them
by others within those entities, particularly during the period in which
this quarterly report on Form 10-Q was being prepared.
(b) Changes in Internal Controls
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect the Company's disclosure
controls and procedures subsequent to the Evaluation Date, nor any
significant deficiencies or material weaknesses in such disclosure controls
and procedures requiring corrective actions. As a result, no corrective
actions were taken.
14
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
--------------------------
Note 6. - Legal Proceedings
On November 14, 2001, a complaint was filed by Oppenheimer Wolff & Donnelly LLP
in the Orange County Superior Court, Santa Ana, California against the Company
for fees allegedly owed by the Company. The Company intends to vigorously
defend this claim because the amount invoiced was deemed excessive comparing to
the quality of services rendered. The estimated liability including interest,
costs and statutory attorney's fees of approximately $100,000 is recorded in
accrued liabilities. At December 31, 2001 and September 30, 2002. In July 2002,
a non-binding arbitration was conducted resulting in an $84,000 decision. At
September 30, 2002, the Company has accrued a contingent liability of $84,000.
The Company intends to diligently pursue its rights in court if a reasonable
settlement cannot be reached.
On April 16, 2002, a complaint was filed by Danton Mak Esq. in the Superior
Court of Los Angeles against Autec Power Systems, Inc. for fees allegedly owed
by Autec. The matter was submitted to binding arbitration scheduled for hearing
in April 2002. An estimated liability of $136,000 has been recorded at December
31, 2001. In July 2002 this matter has been settled for $110,000 by stipulation
of four equal payments of $27,500 due on June 1, July 1, August 1 and September
1, 2002, which were made according to schedule.
On April 24, 2002 a complaint was filed against the Company in the Orange
County Superior Court, Santa Ana, California by Mason Tarkeshian for fees
alleged to be due on an acquisition which was not consummated. The complaint
sought for damage of approximately $2 million where as the Company believes
that the complaint was without merit and would be resolved in favor of the
Company. The Company tendered this case to the insurance carrier for settlement
and had not accrued any liabilities for this matter as of December 31, 2001..In
2002, this complaint was settled by the Company's insurance carrier and the
Company. The Company's portion of contribution to the settlement was to issue a
warrant to purchase 25,000 shares of common stock of Bridge at $0.55 per share.
The Company issued that warrant in July 2002 and is awaiting the receipt of a
specific and general release.
On October 1, 2001, a complaint was filed by a Trustee in U.S. Bankruptcy Court
against the Company for an alleged transfer of assets, technology, trade
secrets, confidential information, business opportunities from Allied Web, a
corporation owned by the Company's former President and Director, which filed
for liquidation under federal bankruptcy laws on April 6, 2000. At December 31,
2001, management of the Company was unable to assess the possibility of
incurring future liability and estimate the reasonable amount of contingent
liability. Therefore, the Company did not record any accrued liability for this
matter. In July 2002, this case was settled in principal with a major
participation by the Company's insurance carrier. Accordingly, the Company
accrued a contingent liability of approximately $265,000 as of September 30,
2002. On November 8, 2002, the Bankruptcy Judge dismissed this suit for failure
to appear or prosecute. The Company expects the Bankruptcy Judge will set aside
the dismissal and reinstate the action. However, as of November 14, 2002,
Bridge is unaware of whether the Bankruptcy Judge has so acted. The Bankruptcy
Trustee and the Company have negotiated a tentative settlement, contingent upon
the approval of a prior Officer/Director, another individual and other active
Officers and Directors.
On December 12, 2001, a former shareholder of Autec Power Systems has filed a
complaint in Ventura County Superior Court against the controlling shareholder
of Autec, Mr. Winston Gu and Bridge Technology, Inc. alleging that the
complainant did not receive sufficient exchange of shares in this acquisition
by Bridge Technology, Inc. The Company believes that the complaint is without
merit and will defend it vigorously. At December 31, 2001, management of the
Company was unable to assess the possibility of incurring future liability and
estimate the reasonable amount of contingent liability. Therefore, the Company
has not record any liability for this matter at December 31, 2001. As of
November 14, 2002, the Company is unable to predict any consequence about this
matter.
15
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
-----------------------------------------
99.1 Certification of Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification by the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
99.3 Certification by the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
16
SIGNATURES
----------
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, 2002 Winston Gu
----------------- -------------------------------
Winston Gu, CEO
Date: November 14, 2002 James Djen
----------------- -------------------------------
James Djen, President, CEO
Date: November 14, 2002 John T. Gauthier
----------------- -------------------------------
John T. Gauthier, CFO
Exhibit 99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2002 (the "Report") by Bridge Technology,
Inc. ("Registrant"), each of the undersigned hereby certifies that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, and
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of Registrant as of
and for the periods presented in the report.
Date: November 14, 2002 by:/s/James Djen
----------------- -------------------------------
James Djen, President, CEO
Date: November 14, 2002 by:/s/John T. Gauthier
----------------- -------------------------------
John T. Gauthier, CFO
17
18
Exhibit 99.2
CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, James Djen, certify that:
I have reviewed this quarterly report on Form 10-Q of Bridge Technology, Inc.:
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries
, is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls; and
The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 by:/s/James Djen
----------------- -------------------------------
James Djen, President, CEO
19
Exhibit 99.3
CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, John T. Gauthier, certify that:
I have reviewed this quarterly report on Form 10-Q of Bridge Technology, Inc.:
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors(or persons performing the equivalent function):
all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls; and
The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 by:/s/John T. Gauthier
----------------- -------------------------------
John T. Gauthier, CFO