<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from
__________to __________
Commission File No. 1-4766
----------------------
GATEWAY ENERGY CORPORATION
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 44-0651207
------------------------------- -------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
10842 Old Mill Road, Suite #5
Omaha, NE 68154
--------- ------
(Address of principal executive offices)
Issuer's telephone number (402) 330-8268
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
---- ----
APPICABLE ONLY TO CORPORATE ISSUERS
As of December 31, 1995 the Issuer had 26,136,081 shares of its common
stock outstanding.
Transitional Small Business Disclosure Format Yes No X
------ ------
<PAGE>
FORM 10-QSB
PART I
ITEM 1. FINANCIAL STATEMENTS
Page
Unaudited Consolidated Balance Sheet
as of November 30, 1995. 5
Unaudited Consolidated Statements of Operations for
the three months and nine months ended November 30, 1995,
and November 30, 1994. 7
Unaudited Consolidated Statements of Cash Flows for
the nine months ended November 30, 1995, and November 30, 1994. 8
Notes to Consolidated Financial Statements 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Between November 30, 1994 and September 1, 1995, the Company acquired three
gathering systems and one delivery system for approximately $1.9 million. These
acquisitions added 42 miles of pipeline and 66,000 MCF/D capacity to its
existing pipeline network.
The Company also opened operations (Gateway Pipeline Company and its
subsidiary Castex Energy, Inc.) in Houston, Texas with the acquisition of
certain oil and gas producing properties and lease prospects. Gateway Pipeline
has formed a marketing division and has begun to market gas produced by Castex
as well as other small amounts of gas. Since January 1, 1995, the Company has
advanced $.7 million to Gateway Pipeline and Castex for its share of drilling
costs and the acquisition of additional drilling prospects.
RESULTS OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 30, 1995 COMPARED TO 1994
Operating profit decreased from $608,600 in 1994 to $206,500 in 1995.
Operating margins from all joint ventures, including Fort Cobb Irrigation and
Fuel Authority, before depreciation increased $335,100 from 1994. This increase
was the result of new acquisitions made in 1995 of $374,400 and acquisitions
made throughout the nine month period in 1994 of $91,600. These increases were
offset by decreases of $130,800 in operating margins from properties acquired
prior to March 1, 1994.
The major decrease in net operating margins occurred on the Destino system.
The system has been shut down since May 1995 as the result of the lack of
capacity on the main interconnection to the system. This shutdown has lowered
operating margins by $104,400 from the comparable period in
-1-
<PAGE>
1994. The joint venture operator is exploring other connections and is
negotiating with the owner of the interconnected line to increase Destino's
access to the line.
Lower gas prices throughout much of 1995 have also contributed to lower
operating margins. Natural gas prices throughout the spring and summer were
substantially lower than in 1994. Natural gas prices ranged from $1.17 to $1.55
per MMBTU in 1995 compared to $1.51 to $2.01 per MMBTU in 1994. Lower gas
prices reduce the margin retained by the Company since most purchase contracts
are based on a percentage of the index or sales price. Also, producers are
reluctant to produce wells at high volume when gas prices are depressed.
The major reason for the decrease in operating profit is the costs
associated with the start up of Gateway Pipeline Company ("Pipeline") in
Houston. This operating subsidiary sustained a net operating loss of $323,000
for the nine months ended November 30, 1995. Pipeline was formed to acquire,
operate and manage gas gathering systems and acquire and develop oil and gas
producing properties. Pipeline has been actively pursuing such acquisitions and
development, however, in the nine months ended November 30, 1995, no significant
properties were acquired except a delivery system in Texas County, Oklahoma.
Pipeline and its subsidiary, Castex Energy, Inc. expect to make several
acquisitions in the fourth quarter which will generate sufficient operating
profit to cover operating overhead expenses.
Corporate general and administrative expenses increased $177,400 in 1995
compared to 1994. This increase reflects higher salaries and wages and higher
legal and accounting fees from increased corporate activities and higher costs
of shareholder and investor relations for annual and quarterly reports and other
communications. Other increases in general and administrative expenses are due
to Gateway Pipeline and Ft. Cobb Fuel Authority.
The net loss applicable to common stock of $1,426,200 is a result of the
lower operating profit discussed above and an increase in preferred stock
dividends of $897,600 of which $189,400 is attributable to greater amortization
of the Series G offering costs. The Company continues to raise funds for
investment through preferred stock issues. However, delays in investing the
funds in operating properties and start-up time required for acquired properties
have increased the preferred stock dividend requirements relative to operating
profits.
THREE MONTHS ENDED NOVEMBER 30, 1995, COMPARED TO 1994
Net operating profit for the three months ended November 30, 1995 decreased
$98,900 compared to the similar period in the prior year. Properties acquired
after November 30, 1994, increased operating profit by $142,700. However,
properties acquired in the three month period in 1994 contributed $29,800 less
to operating profit in 1995 compared to 1994. Operating profit from properties
acquired before August 31, 1994, and thus owned for each quarter increased
$34,700 in 1995 compared to 1994.
Operating profit from the EPNG system increased $107,000 largely due to
increased nominations from the system. This increase from EPNG which was
acquired prior to August 31, 1994 was offset by reductions at White Ranch of
$32,300 due to increased operating costs, and at Destino of $38,900 due to a
shutdown of the system for lack of capacity on the main interconnect pipeline.
-2-
<PAGE>
Operating profit from the Rockdale system decreased $28,800 from the previous
year due to lower gas prices and higher operating costs to correct processing
inefficiencies.
The net operating profit was further adversely affected by operating losses
of $118,600 incurred by Gateway Pipeline Company. As discussed above, Pipeline
has not yet been able to acquire significant natural gas properties which
provide sufficient operating revenues to cover general and administrative
overhead.
Corporate general and administrative expenses increased by $69,800
reflecting wage and salary increases and higher legal and accounting fees.
Costs associated with improved reporting to shareholders also increased during
the current quarter. The remaining increase is due to costs at Gateway Pipeline
and Ft. Cobb Fuel Authority.
Net loss for common shares was $483,500 in 1995, a $248,500 decrease from
the prior year quarter. This decrease is due to lower operating profits
discussed above and an increase in preferred stock dividends of $235,700.
Preferred stock dividends includes an additional $31,800 of amortization for
Series G Preferred Stock. Delays in acquiring properties and start-up time
related to those properties have increased preferred stock dividends relative to
operating profits.
LIQUIDITY AND CAPITAL RESOURCES
The Company successfully raised $10,000,000 through its offering of Series
G Preferred Stock and closed the offering in January 1995. In February 1995 the
Company began offering its Series N Preferred Stock to accredited investors. As
of December 31, 1995, $2,944,000 of Series N has been sold. As of November 30,
1995, the Company had $474,700 of funds available for acquisitions.
The Company received, from its primary bank, a $750,000 bridge acquisition
line of credit. In December, $575,000 was advanced to acquire natural gas
gathering systems in Texas offshore waters. The advance will be repaid with
proceeds from Series N. The Company's subsidiary, Castex Energy, Inc., has
obtained a commitment from a major bank for a $15 million credit facility. $10
million of this commitment will be used, along with equity funds supplied by
Series N proceeds, to purchase oil and gas producing properties in Louisiana.
The remaining funds will be available to develop other lease prospects owned by
Castex.
The Company has also obtained a $650,000 bridge loan to fund certain oil
and gas acquisitions. Such bridge loan will be repaid from Series O Preferred
Stock which will be sold to accredited investors.
The Company generated cash flow from operations of $65,900 in 1995 compared
to $331,200 in 1994. In 1995, the Company used reserves of $67,700 from the
proceeds of Series N and $220,400 of reserves from the issuance of Series G, as
described in the respective Private Placement Memorandums, to pay Series N and
Series G dividends. In December the Company received one half ($140,000) of the
expected settlement in a bankruptcy proceeding. The Company believes that cash
flow from operations, its short-term borrowing capacity and the continued sales
of Series N Preferred Stock will be adequate to fund current operations and
provide the equity financing necessary to accomplish future acquisitions.
-3-
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company has been named as a third party defendent in a lawsuit
filed in the District Court of Harris County, Texas on November 28,
1995. Nuevo Energy Company, a defendant in a lawsuit filed by
Shoreham Pipeline Company as operator/manager of the Encinitas Joint
Venture, has filed a countersuit claiming damages of approximately
$4,000,000. These damages allegedly are the result of the lawsuit by
Shoreham which prevented Nuevo from selling certain leases. The
action is currently in discovery.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits:
11 Statement re Computation of Per Share
Earnings, filed herewith.
21 Subsidiaries, filed herewith.
-4-
<PAGE>
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 361,800
Trade accounts receivable, net 3,032,400
Prepaid expenses and other 444,300
Escrowed cash 230,300
------------
Total current assets 4,068,800
PROPERTY AND EQUIPMENT - AT COST
Land 10,000
Gas gathering, processing and transmission 10,695,300
Oil and gas properties, using full cost accounting 1,244,100
Office furniture and other equipment 381,500
------------
12,330,900
Less accumulated depreciation, depletion and
amortization (977,400)
------------
11,353,500
OTHER ASSETS
Cash escrowed for acquisitions 474,700
Note receivable - related party 245,300
Other 249,700
------------
969,700
------------
$ 16,392,000
------------
------------
</TABLE>
The accompanying notes are an integral part of this statement.
-5-
<PAGE>
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Notes payable $ 256,800
Current maturities of long-term debt 64,300
Accounts payable 2,218,900
Accrued expenses and other liabilities 176,300
Preferred dividends payable 226,400
-----------
Total current liabilities 2,942,700
Long-term debt less current maturities 152,600
Minority interests 54,900
Preferred stock of subsidiary 341,500
Mandatory redeemable preferred stock 8,454,200
STOCKHOLDERS' EQUITY
Preferred stock 6,300
Common stock-authorized, 30,000,000
shares of $.01 par value; issued
26,136,081 shares 261,400
Additional paid-in capital 8,287,700
Accumulated deficit (4,109,300)
-----------
Total stockholders' equity 4,446,100
-----------
$16,392,000
-----------
-----------
</TABLE>
The accompanying notes are an integral part of this statement.
-6-
<PAGE>
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30 November 30
----------------------------- ------------------------------
1995 1994 1995 1994
----------------------------- ------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Natural gas sales $ 2,663,300 $ 1,609,200 $ 6,951,400 $ 4,474,700
Transportation 210,800 226,800 619,700 542,500
Processing and other 273,500 216,100 797,100 539,200
------------ ------------ ------------ ------------
3,147,600 2,052,100 8,368,200 5,556,400
OPERATING COSTS AND EXPENSES
Cost of natural gas purchased 1,828,700 1,266,600 4,755,700 3,508,600
Operation and maintenance 576,300 337,800 1,651,600 797,400
General and administrative 451,600 158,100 1,240,800 443,300
Depreciation and depletion 193,300 93,000 513,600 198,500
------------ ------------ ------------ ------------
3,049,900 1,855,500 8,161,700 4,947,800
------------ ------------ ------------ ------------
Operating profit 97,700 196,600 206,500 608,600
OTHER INCOME (EXPENSE)
Interest income 26,000 33,600 73,000 56,300
Interest expense (26,000) (2,000) (49,000) (3,300)
Minority interests 35,000 0 83,200 0
Other 19,000 (53,100) 18,800 (53,100)
------------ ------------ ------------ ------------
54,000 (21,500) 126,000 (100)
------------ ------------ ------------ ------------
Earnings before income taxes 151,700 175,100 332,500 608,500
Income taxes 23,800 34,400 31,900 42,900
------------ ------------ ------------ ------------
NET EARNINGS 127,900 140,700 300,600 565,600
Provision for preferred dividends,
including amortization of Series G
offering costs of $114,300
$82,500, $342,800 and $153,400 611,400 375,700 1,726,800 829,200
------------ ------------ ------------ ------------
Income (loss) applicable to common stock $ (483,500) $ (235,000) $ (1,426,200) $ (263,600)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Income (loss) per common share $ (0.02) $ (0.01) $ (0.06) $ (0.01)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Number of shares used in
computing the income (loss) per
common share 26,176,700 19,901,600 23,268,200 19,406,700
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
November 30
-----------------------------
1995 1994
--------- ---------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities-
Net earnings $ 300,600 $ 565,600
Adjustments to reconcile net earnings to net
cash provided by operating activities-
Depreciation, depletion and amortization 513,600 198,500
Amortization of deferred income (33,300) (33,900)
Minority interest in net losses of subsidiaries (83,200) 100
Compensation accrued under stock award plans 30,300 -
Stock issued for fees/services 31,500 50,000
Gain on sale of property and equipment (30,700) -
Increase (decrease) in cash and cash
equivalents resulting from changes in-
Trade accounts receivable (286,900) (1,314,500)
Prepaid expenses and other current assets (399,800) (155,300)
Accounts payable 57,800 938,900
Accrued expenses and other liabilities (34,000) 81,800
--------- ---------
Net cash provided by operating activities 65,900 331,200
--------- ---------
Cash flows from investing activities-
Capital expenditures (924,200) (1,088,400)
Proceeds from sale of property 220,000 -
Acquisition of properties (1,177,100) (4,620,600)
Changes in notes receivable, net (43,300) (62,800)
--------- ---------
Net cash used in investing activities (1,924,600) (5,771,800)
--------- ---------
Cash flows from financing activities-
(Increase) decrease in escrowed cash 412,100 85,500
Payments on notes payable (20,000) (22,000)
Issuance of short-term notes 235,000 -
Common stock issued - 2,500
Payment of long-term debt (38,500) -
Proceeds from sale of preferred stock 2,657,400 6,041,500
Preferred dividends paid (1,363,400) (603,600)
Other - 24,000
--------- ---------
Net cash provided by financing activities 1,882,600 5,527,900
--------- ---------
Net change in cash and cash equivalents 23,900 87,300
Cash and cash equivalents at beginning of period 337,900 532,400
--------- ---------
Cash and cash equivalents at end of period $ 361,800 $ 619,700
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.,
-8-
<PAGE>
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying consolidated financial statements have been prepared by
the Company, without audit. In the opinion of management, such financial
statements reflect all adjustments necessary for a fair presentation of the
financial position and results of operations in accordance with generally
accepted accounting principles.
The consolidated financial statements include the accounts of Gateway
Energy Corporation (formerly Gateway Gathering Systems, Inc.), its eighty
percent (80%) owned subsidiary, Gateway Pipeline Company and the Fort Cobb
Oklahoma Irrigation Fuel Authority (99% owned by the Company). The Company's
investments in its joint ventures are accounted for using the proportional
consolidation method. All significant intercompany transactions have been
eliminated in consolidation.
(2) Income Taxes
Deferred tax assets and liabilities are recognized for the expected future
tax consequences of events that have been included in the financial statements
or income tax returns. Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial statement and tax
basis of assets and liabilities as measured by the enacted tax rates in effect
when these differences reverse. Deferred tax assets are reduced by a valuation
allowance when it is more likely than not that they will not be realized.
Deferred tax expense is the result of changes in deferred tax assets and
liabilities.
(3) Preferred Stock
Gateway Pipeline Company, the Company's eighty percent (80%) owned
subsidiary, initiated a private offering of preferred stock to accredited
investors. The preferred stock has been designated as 10% Cumulative
Convertible Series A Preferred Stock. Dividends are paid quarterly at the
stated rate of 10%, with provisions for an additional 3% depending on earnings
of the properties acquired with the proceeds. The Preferred Stock is
convertible into the Company's common stock after twenty-four months at a
conversion price equal to ninety percent (90%) of the average bid price. The
Company may call the Series A Preferred Stock after twenty-four months at stated
value. The Company may require conversion after twenty-four months, if
shareholders have received cumulative dividends of thirteen percent (13%), at a
conversion price equal to eighty-five percent (85%) of the average bid price.
As of November 30, 1995, $386,000 of the Series A Preferred Stock has been sold.
-9-
<PAGE>
(4) Short-Term Promissory Note
On September 28, 1995, the Company issued a Promissory Note due December
28, 1995, to a shareholder in exchange for $235,000 in cash. The proceeds were
used for working capital purposes due to delays in collecting funds from a major
creditor. The Note bears interest at 11% per annum, and as a commitment to the
issuer, the Company issued 20,000 shares of common stock and a warrant to
purchase an additional 60,000 shares at $.25 per share. The Note was extended
to March 28, 1996 and will be repaid from the proceeds from the bankruptcy
proceedings involving a former major customer.
(5) Acquisition Letter of Credit
On December 15, 1995, the Company entered into a revolving line of credit
agreement with a bank with maximum available borrowings of $750,000. Interest
is payable monthly at 2.5% above the bank's base rate beginning in November
1995. All outstanding principal and interest is due and payable October 31,
1996, the maturity date. Interests in certain of the Company's joint ventures
and all deposit and escrow accounts at the bank have been pledged as collateral
for the line.
On December 18, 1995, the bank advanced $575,000 against this line to
purchase an 80% interest in certain gathering systems in Texas offshore waters.
Such advance is expected to be repaid from proceeds from the sales of Series N
Preferred Stock.
(6) Bridge Loan
On November 30, 1995, the Company issued two (2) Promissory Notes for a
total of $650,000 due February 28, 1996, or May 31, 1996, if extended by the
Company. The proceeds from the notes are being used to acquire the Company's
interest in the South Lake Arthur properties (See Note 7b) and are intended to
be repaid from the proceeds of Series O Preferred Stock which is being offered
to accredited investors.
The Notes provide for interest at 11% per annum which may be paid with
common stock of the Company at $.35 per share. As part of the commitment, the
Company issued 37,500 shares of common stock and warrants to purchase 82,875
shares of common stock at $.35 per share.
(7) Subsequent Events
(a) Acquisition of Offshore Gathering Systems - On December 15, 1995,
the Company's eighty percent (80%) owned subsidiary, Shoreham
Gathering Company, acquired eight separate gathering systems in
Texas state waters offshore. The systems were purchased for cash
of $710,000 and consist of approximately 49 miles of various size
pipe. Six of the eight systems are inactive but are located in
areas where there is considerable lease and drilling activity.
-10-
<PAGE>
(b) Agreement to Purchase Production Properties - Castex Energy,
Inc., the Company's oil and gas producing company, is currently
negotiating a Purchase and Sale Agreement to acquire ownership
interests in numerous oil and gas producing properties located in
the South Lake Arthur field in Jefferson Davis and Vermillion
Parishes, in Louisiana for $11.1 million, effective July 1, 1995.
The closing is expected to be on or before February 15, 1996.
Castex has accumulated funds from Gateway ($800,000) and other
investors to make a deposit of $1.0 million and has received a
commitment from a bank for a credit facility of up to $15.0
million, $10.0 million of which will be used to complete the
acquisition and $5.0 million of which will be used to fund future
drilling activity on prospects currently controlled by Castex.
It is expected that the South Lake Arthur properties and the
lease prospects will be transferred to a limited partnership of
which Gateway Energy Corporation will own approximately 60%.
Castex Energy, Inc. will be the general partner and will manage
the limited partnership. Certain officers of Castex and other
individuals will own the remaining 40% of the limited
partnership.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GATEWAY ENERGY CORPORATION
/s/ Neil A. Fortkamp
------------------------------------
Chief Financial Officer
January 12, 1996
- -----------------------------
(Date)
-12-
<PAGE>
EXHIBIT 11
GATEWAY GATHERING SYSTEMS, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30 November 30
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 26,036,081 19,777,267 23,127,623 19,287,707
ADD SHARES ISSUABLE ASSUMING CONVERSION
OF SERIES C PREFERRED STOCK INTO
COMMON STOCK 140,625 124,375 140,625 118,958
---------- ---------- ---------- ----------
TENTATIVE NUMBER OF SHARES FOR COMPUTATION
OF PRIMARY EARNINGS PER SHARE 26,176,706 19,901,642 23,268,248 19,406,665
ADD ADDITIONAL DILUTIVE SHARES ISSUABLE
ASSUMING CONVERSION OF SERIES B, G, J,
K, L, M & N PREFERRED STOCK INTO COMMON
STOCK (1) 0 0 0 0
---------- ---------- ---------- ----------
TENTATIVE NUMBER OF SHARES FOR COMPUTION
OF FULLY DILUTED EARNINGS PER SHARE 26,176,706 19,901,642 23,268,248 19,406,665
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
LOSS APPLICABLE TO COMMON STOCK FOR
PURPOSES OF COMPUTING PRIMARY EARNINGS
PER SHARE (483,500) ($235,000) ($1,426,200) ($263,600)
ADD PROVISION FOR PREFERRED DIVIDENDS
RELATING TO CONVERTIBLE PREFERRED STOCK 0 0 0 0
--------- --------- ---------- ----------
NET EARNINGS FOR COMPUTATION OF FULLY
DILUTED EARNINGS PER SHARE ($483,500) ($235,000) ($1,426,200) ($263,600)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
EARNINGS PER COMMON SHARE - PRIMARY,
INCLUDING COMMON STOCK EQUIVALENTS ($0.02) ($0.01) ($0.06) ($0.01)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
-13-
<PAGE>
EXHIBIT 21
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
SUBSIDIAIRES
COMPANY STATE PERCENT OWNED
- ------- ----- -------------
Gateway Pipeline Co. Missouri 80%
Castex Energy, Inc. Texas 100%
Fort Cobb Oklahoma Irrigation
Fuel Authority Oklahoma 99%
Shoreham Gathering Company Nebraska 80%
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-30-1995
<CASH> 361800
<SECURITIES> 0
<RECEIVABLES> 3032400
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4068800
<PP&E> 12330900
<DEPRECIATION> 977400
<TOTAL-ASSETS> 16392000
<CURRENT-LIABILITIES> 2942700
<BONDS> 152600
261400
8454200
<COMMON> 6300
<OTHER-SE> (4178400)
<TOTAL-LIABILITY-AND-EQUITY> 16392000
<SALES> 8368200
<TOTAL-REVENUES> 8368200
<CGS> 4755700
<TOTAL-COSTS> 6920900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 490000
<INCOME-PRETAX> 332500
<INCOME-TAX> 319000
<INCOME-CONTINUING> 332500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 300600
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
