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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
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|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-13803
GATEWAY INDUSTRIES, INC.
(Name of small business issuer in its charter)
Delaware 33-0637631
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
750 Lexington Avenue
New York, New York 10022
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 212-446-5205
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Securities registered under Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock $.001 par value
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act of 1934 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
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Registrant's revenues from continuing operations for its most recent
fiscal year $ -0-
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. Yes X No
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The aggregate market value of voting stock held by non-affiliates of the
Registrant at March 14, 1997 was approximately $3,816,000 based on the last sale
price of $2 1/8 for such stock on that date.
As of March 14, 1997, the Registrant had 3,603,000 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None
ITEMS OMITTED:
Items 6 and 7 have been omitted pursuant to Rule 12b-25 and will be filed by
Amendment.
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PART I
ITEM 1. BUSINESS
The Company
Through December 21, 1996, Gateway Industries, Inc. (the "Company")
was engaged in the manufacture and sale of mirror and glass products
through its formerly wholly-owned subsidiary, Marsel Mirror & Glass
Products, Inc. ("Marsel"), which it acquired on November 24, 1995. On
December 21, 1996, the Company sold all the outstanding shares of Marsel to
Richard A. Hickland for $1.00. Mr. Hickland gave the Company the right to
repurchase 50% of the outstanding shares until December 21, 1999 for $2.00.
In addition, the agreement with Mr. Hickland contains provisions relating
to the allocation between the Company and Mr. Hickland and/or Marsel of
sums from the sale or liquidation of Marsel or the sale of equity in Marsel
by Mr. Hickland or Marsel. The sale to Mr. Hickland followed (i) the
expiration of Marsel's credit facility with its commercial lender and said
bank's demand for immediate repayment of all outstanding balances, (ii)
Marsel's failure to negotiate an acceptable financing agreement with a new
commercial lender, and (iii) the failure of National Bank of Canada to
extend the expiration date of its letter of credit securing Marsel's
obligations under the IDA Bonds. Subsequent to the sale to Mr. Hickland,
Marsel filed for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Code.
During the third quarter of 1996, the Company completed a "Rights
Offering" whereby each shareholder of the Company was granted the right to
purchase additional shares of common stock at $2.25 per share. A total of
2,568,456 shares were purchased in the Offering, and the Company received
net proceeds therefrom of $5,649,000.
Prior to September 1994, the Company's principal business was the
design, development, manufacture and sale of local area network ("LAN")
communication products for use in IBM and compatible personal computers. On
September 14, 1994, the Company completed the sale of substantially all its
assets relating to its LAN business. During the second quarter of 1994, the
Company had ceased revenue producing activities in anticipation of the
sale. From the second quarter of 1994 until the acquisition of Marsel on
November 22, 1995, the Company had no operating business.
The Company currently has no operating business. The Board of
Directors is pursuing various strategic alternatives which include the
possible use of the Company's remaining net assets to acquire, merge,
consolidate or otherwise combine with an operating business or businesses.
As yet, the Baord has not identified any potential candidates or entity
types with which to combine.
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The Company was incorporated under the laws of the State of Delaware
in July 1994. On September 22, 1994, Gateway Communications, Inc. (the
Company's predecessor), a California Corporation, was merged into the
Company. Immediately preceding the merger, Gateway Communications, Inc.
effected a one-for-five reverse stock split. Thereafter, each outstanding
share of common stock of Gateway Communications, Inc., no par value, was
automatically converted into one share of the Company's Common Stock, $.001
par value ("Common Stock"). The Company's headquarters are located at 750
Lexington Avenue, New York, York 10022, and its telephone number is (212)
446-5217.
Employees
As of March 14, 1997, the Company had no full time employees, although
the Company's Chairman and Acting President devote time to the Company's
administrative needs.
ITEM 2. PROPERTY
The Company subleases space on a month-to-month basis at 750 Lexington
Avenue, New York, New York.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended December 31, 1996.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market for Common Stock
Since November 17, 1994, the Company's Common Stock has traded
over-the-counter using the symbol, GWAY, in what is commonly referred to as
the "Bulletin Board." The following table sets forth the high and low bid
and ask prices during each quarter of the last two fiscal years, as quoted
on the Bulletin Board. Such prices represent prices between broker-dealers
and do not include retail markups and markdowns, or any commissions to the
broker-dealer. The prices do not reflect prices in actual transactions.
BID PRICES ASK PRICES
HIGH($) LOW($) HIGH($) LOW($)
1996
FIRST QUARTER 8.25 4.25 9.00 4.50
SECOND QUARTER 7.75 3.50 8.25 4.50
THIRD QUARTER 4.50 2.13 5.25 2.50
FOURTH QUARTER 3.63 2.50 4.50 3.13
1995
FIRST QUARTER 3.50 2.75 4.44 3.75
SECOND QUARTER 3.44 2.00 4.44 3.63
THIRD QUARTER 3.63 2.00 4.63 3.63
FOURTH QUARTER 4.25 2.88 4.75 3.88
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Dividends
The Company has not paid dividends on the Common Stock and does not
anticipate doing so in the foreseeable future.
Holders of Record
At March 14, 1997, the approximate number of holders of record of the
Common Stock was approximately 1,350.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
To be filed by Amendment
ITEM 7. FINANCIAL STATEMENTS
To be filed by Amendment
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Ronald W. Hayes 59 Director of the Company
810 Saturn Street
Suite 16-432
Jupiter, FL 33477-4398
Jack Howard 35
2927 Montecito Avenue Acting President and
Santa Rosa, CA 95404 Director of the Company
Warren G. Lichtenstein 31
750 Lexington Avenue Chairman of the Board of
New York, NY 10022 Directors of the Company.
Warren G. Lichtenstein was appointed a director of the Company in May
1994 and became Chairman of the Board in October 1995. He served as
President and Director of Marsel from its inception in July 1995 until
shortly after the acquisition of its business in November 1995, and
continued as a director until its disposition in December 1996. Mr.
Lichtenstein has served as the President of a General Partner of Steel
Partners, L.P. since 1990, and a managing member of Steel Partners, LLC,
the General Partner of Steel Partners II, L.P. since 1993. Mr. Lichtenstein
has been Chairman of Steel Partners Services, Ltd. since 1993. From 1988 to
1990, he was an acquisition/risk arbitrage analyst with Ballantrae
Partners, L.P., a private investment partnership. Mr. Lichtenstein serves
on the Board of Directors of Alpha Technologies Group, Inc., a thermal
management and connector company; SL Industries, Inc., a New York stock
exchange company engaged in the manufacture and sale of
electrical-mechanical and specialty products; Saratoga Springs Water, Inc.,
a bottler and distributor of spring water; and Roses Stores, Inc., a chain
of retail stores.
Ronald W. Hayes was appointed a director of the Company in May 1993. Mr.
Hayes is also the owner of Lincoln Consulters & Investors, Inc., an investing
and consulting firm.
Jack Howard was appointed Acting President of the Company in September
1994. Mr. Howard had previously been elected a director of the Company in
May 1994. Since 1989, he has been a principal of the Mutual Securities,
Inc., a division of Cowles Sabol & Co. (securities brokers). He was a
registered representative with F.A.S. Securities (securities brokers) from
1984 to 1989. Mr. Howard serves on the Board of Directors of Roses Stores,
Inc.
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Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange act of 1934 requires the
Company's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater-than 10% shareholders are
required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on its review of the copies
of such reports furnished to the Company and written representations that
no other reports were required, during the fiscal year ended December 31,
1996 all Section 16(a) filing requirements applicable to its officers,
directors and greater-than 10% beneficial owners were satisfied.
Board Meetings and Committees
The Board of Directors of the Company held four formal meetings during
the fiscal year ended December 31, 1996. Additionally it acted twice by
unanimous written consent. Presently, the Board of Directors has no
standing committees. Each director, other than Mr. Hayes, attended in person
(or participated by telephone) more than 75% of the total number of Board
meetings held during the last fiscal year.
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ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth all compensation paid to the Company's
Acting President during 1996. No other executive officer received annual
compensation at the rate of $100,000 or more during the fiscal year ended
December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Fiscal Annual Compensation All Other
Name and Principal Position Year Salary($) Bonus($) Options(#) Compensation
- --------------------------- ---- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Jack Howard 1996 -0- -0- -0- -0-
Acting President (1) 1995 -0- -0- 32,500 -0-
</TABLE>
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(1) Mr. Howard was appointed Acting President of the Company in September 1994.
Mr. Howard receives no salary or bonus for services rendered as Acting
President.
Stock Options
No executive officer was granted options during the last fiscal year.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
The following table sets forth information concerning options
exercised during the fiscal year ended December 31, 1996 and the number of
unexercised options held by the Company's executive officers at the end of
such fiscal year:
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised in-the-Money
Shares Value Options at Options at
Acquired on Realized FY-End(#) FY-End($)
Name Exercise(#) ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- ----------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Jack Howard 0 0 10,500/22,000 0/0
Warren G. 0 0 35,333/66,667 0/0
Lichtenstein
</TABLE>
(1) Based on the average high/low bid/ask prices for the Common Stock as
reported by the National Quotations Bureau, as of December 31, 1996.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 14, 1997
regarding the beneficial ownership of the Common Stock by each person known
by the Company to own beneficially more than 5% of the Common Stock, by
each director and executive officer, individually, and by all directors and
executive officers as a group. Shares listed below have been adjusted to
reflect the one-for-five reverse stock split effective September 22, 1994.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Ownership of Class
- ------------------- ----------- --------
<S> <C> <C>
Warren G. Lichtenstein
750 Lexington Avenue
New York, NY 10022............................................. 1,806,609(1)(2) 49.7%
Ronald W. Hayes
810 Saturn Street
Jupiter, FL 33477-4398......................................... 36,840(3) 1.0%
Jack Howard
2927 Montecito Avenue
Santa Rosa, CA 95404........................................... 23,420(4) 0.7%
Steel Partners II, L.P.
750 Lexington Avenue
New York, NY 10022............................................. 892,608(2) 24.8%
Steel Partners Services, Ltd.
750 Lexington Avenue
New York, NY 10022............................................. 827,716(2) 22.9%
George Soros
888 Seventh Avenue
New York, NY 10106.............................................. 827,716(2)(5) 22.9%
Ryback Management Corporation
7711 Corondelet Avenue
St.Louis,MO 63105............................................... 528,800(6) 14.67%
Peter Cundill & Associates
15 Alton Hill
Southampton SN 01
BERMUDA........................................................ 200,000(7) 5.5%
All directors and executive officers as a
group (three persons)........................................... 1,866,959(8) 51%
</TABLE>
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(1) Includes 46,952 shares beneficially owned by Mr. Lichtenstein and 35,333
shares underlying stock options which may be acquired within 60 days, (a
total of 1,726,342 shares owned by Steel Partners II, L.P. and Steel
Partners Services, Ltd. ("Services") over which Mr. Lichtenstein possesses
voting power by virtue of his positions with such entities. He disclaims
beneficial ownership in such shares.
(2) More than one beneficial owner is listed above for the same securities,
since the total shares owned beneficially by Steel Partners II and
Services are included in the shares beneficially owned by Mr.
Lichtenstein. See Note (1) above.
(3) Includes 11,500 shares which may be acquired within 60 days through the
exercise of stock options.
(4) Includes 10,500 shares which may be acquired within 60 days through the
exercise of stock options.
(5) Represents the same shares as are reported by Services. Mr. Soros may be
deemed to beneficially own such shares in his capacity as chairman of an
investment advisory firm conducting business as Soros Fund Management LLC
("SFM LLC"), which acts as investment advisor to several foreign
investment companies including Quota Fund, N.V. ("Quota"). SFM LLC, on
behalf of Quota, has granted investment discretion over certain funds of
Quota to Services pursuant to an investment advisory contract between
Quota and Services. The Shares reported herein as being held for the
account of Quota were acquired at the discretion of Services. Pursuant to
regulations promulgated under Section 13(d) of the Securities Exchange Act
of 1934, and notwithstanding that none of Mr. Soros, SFM LLC or Quota
currently exercises voting or dispositive power over the Shares, Mr. Soros
(as the chairman and the person ultimately in control of SFM LLC) may be
deemed a beneficial owner of such shares, as a result of the contractual
authority of SFM LLC to acquire voting and dispositive power with regard
to the securities of the Issuer held for the account of Quota by Services.
(6) As reported in the Shareholder's most recent Schedule 13G. Represents
309,000 shares held by Lindner Growth Fund and 219,800 shares held by
Lindner Bulwark Fund.
(7) As reported in the Shareholder's most recent Schedule 13D.
(8) Includes 1,726,342 shares owned by Steel Partners II, L.P. and Services
over which Mr. Lichtenstein possesses voting power by virtue of his
position with such entities and 55,333 shares which may be acquired within
60 days through the exercise of stock options.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As compensation for services rendered in connection with the Marsel
acquisition, Marsel paid WGL Capital Corp. ("WGL"), an entity in which Mr.
Lichtenstein is the President and sole shareholder, $175,000 and the Company
issued to Mr. Lichtenstein options to purchase 100,000 shares of its common
stock, vesting in four equal annual installments commencing in December 1996, at
an exercise price of $3.92 per share.
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
- -------- -----------
2.1 Agreement and Plan of Merger of Gateway Industries, Inc., a
Delaware Corporation, and Gateway Communications, Inc., a
California Corporation. (a)
3.1 Articles of Incorporation. (a)
3.2 Bylaws. (a)
10.8 Amended and Restated 1990 Incentive Stock Option Plan and 1990
Nonstatutory Stock Option Plan. (b)
10.9 Form of Indemnity Agreement between the Registrant and certain of
its Officers and Directors. (c)
10.11 Stock Purchase Agreement, dated December 21, 1996, between Gateway
Industries, Inc. and Richard A. Hickland. (d)
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(a) Filed as an exhibit to Registrant's Proxy Statement for Special Meeting
of Shareholders held on September 9, 1994, such previously filed
exhibit being incorporated herein by this reference.
(b) Incorporated herein by reference from the Registrant's Form 10-KSB
filed with the Commission on or about April 14, 1996.
(c) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1989, such previously filed exhibit being
incorporated herein by this reference.
(d) Incorporated herein by reference from the Registrant's Form 8-K with
Commission on or about January 5, 1997.
(b) Reports on Form 8-K
During the last quarter of the period covered by this report the Company
did not file any reports on Form 8-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
GATEWAY INDUSTRIES, INC.
Date: March 31, 1997 By: /s/ Jack Howard
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Jack Howard, Acting President
Date: March 31, 1997 By: /s/ Warren G. Lichtenstein
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Warren G. Lichtenstein
Chairman of the Board and
Principal Financial Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 31, 1997 /s/ Jack Howard
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Jack Howard
Director
Date: March 31, 1997 /s/ Warren G. Lichtenstein
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Warren G. Lichtenstein
Director
Date:
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Ronald Hayes
Director
