<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 AND
EXCHANGE ACT OF 1934 FOR QUARTER ENDED JUNE 30, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-13803
GATEWAY INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified 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: 212-446-5216
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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 [ ]
Transition Small Business Disclosure Format (check one):
Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable data.
As of August 1, 1997, the Registrant had approximately 3,592,000 shares of
Common Stock outstanding.
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Gateway Industries, Inc.
Index.
Part I--Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet--June 30, 1997 ............... 3
Condensed Consolidated Statements of Operations--
Three and Six Month Periods Ended June 30, 1997 and 1996 .......... 4
Condensed Consolidated Statements of Cash Flows--
Six Months Ended June 30, 1997 and 1996 ........................... 5
Notes to Condensed Consolidated Financial Statements .............. 6
Item 2. Management's Discussion and Analysis or Plan of Operations .......... 7
Item 6. Exhibits ............................................................ 7
Part II--Other Information
None
2
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Gateway Industries, Inc.
Condensed Consolidated Balance Sheet (Unaudited)
June 30, 1997
Assets
Current assets:
Cash and cash equivalents $ 5,755,000
Prepaid expenses and other current assets 28,000
-----------
Total current assets 5,873,000
-----------
Total assets $ 5,873,000
===========
Liabilities and Shareholders' equity
Current liabilities:
Accounts payable $ 4,000
Accrued expenses and other liabilities 78,000
-----------
Total current liabilities 82,000
===========
Shareholders' equity:
Preferred stock, $.10 par value, 1,000,000 shares authorized,
no shares issued and outstanding --
Common stock, $.001 par value, 10,000,000 shares authorized,
3,592,022 shares issued and outstanding 4,000
Capital in excess of par value 9,555,000
Accumulated deficit (3,812,000)
Treasury stock, 11,513 shares (46,000)
-----------
Total shareholders' equity 5,701,000
-----------
Total liabilities and shareholders' equity $ 5,873,000
===========
See accompanying notes.
3
<PAGE>
Gateway Industries, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ -- 3,968,000 $ -- $ 8,399,000
Cost of sales -- 3,604,000 -- 7,536,000
----------- ----------- ----------- -----------
Gross profit -- 364,000 -- 863,000
Sales and marketing -- 335,000 -- 693,000
General and administrative expenses 71,000 652,000 135,000 1,063,000
----------- ----------- ----------- -----------
Operating Loss (71,000) (623,000) (135,000) (893,000)
Other income (expense):
Interest income 74,000 8,000 148,000 15,000
Interest expense -- (192,000) -- (377,000)
-- 9,000
Other income -- 2,000 -- 1,000
----------- ----------- ----------- -----------
Total other income (expense) 74,000 (182,000) 148,000 (361,000)
----------- ----------- ----------- -----------
Net income (loss) $ 3,000 (805,000) $ 13,000 $(1,254,000)
=========== =========== =========== ===========
Net income (loss) per share $ -- $ (.79) $ -- $ (1.22)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 3,592,000 1,024,000 3,592,000 1,024,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes
4
<PAGE>
Gateway Industries, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 13,000 $(1,254,000)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization -- 173,000
Changes in operating assets and liabilities:
Accounts receivable -- 90,000
Inventories -- 171,000
Prepaid expenses and other current assets (12,000) (97,000)
Accounts payable (21,000) 397,000
Accrued expenses and other liabilities (270,000) 144,000
----------- -----------
Total Adjustments (303,000) 878,000
----------- -----------
Net cash used in operating activities (290,000) (376,000)
Cash flows from investing activities:
Purchase of machinery and equipment -- (68,000)
----------- -----------
Net cash used in investing activities -- (68,000)
Cash flows from financing activities:
Share issuance expense -- (30,000)
Purchase of treasury stock -- (46,000)
Repayments of capital lease obligations -- (116,000)
Repayments of short-term financing -- (8,569,000)
Proceeds from short-tenn financing -- 8,855,000
----------- -----------
Net cash provided by financing activities -- 94,000
----------- -----------
Net decrease in cash (290,000) (350,000)
Cash and cash equivalents at beginning of period 6,045,000 848,000
----------- -----------
Cash and cash equivalents at end of period $ 5,755,000 $ 498,000
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
1. General
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
interim consolidated financial statements contain all adjustments (consisting
only of normal recurring accruals) necessary to make such financial statements
not misleading. Results for the three and six months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
1O-KSB for the year ended December 31,1996.
2. Earnings per Share
In February 1997, the Financial Standards Board issued Statement No. 128,
Earnings per Share, which is required to be adopted on December 31, 1997. At
that time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share for these quarters is not
expected to be material.
3. Pro Forma Information (Unaudited)
On December 21, 1996, the Company sold the stock of its subsidiary Marsel Mirror
and Glass Products, Inc. ("Marsel") for $1. The operations of Marsel are
included in the statement of operations for the three and six months ended June
30, 1996.
The pro forma unaudited results of operations for the six months ended June 30,
1996, assuming the sale of Marsel had been consummated as of January 1, 1996,
are as follows:
Revenues $ --
Net loss $ 86,000
Net loss per common share $ .02
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The financial statements included in this Report as of, and for the quarter
and six months ended, June 30, 1996 contain the consolidated financial condition
and results of operation for the Company and its wholly-owned subsidiary, Marsel
Mirror & Glass Products, Inc. ("Marsel"). On December 21, 1996, the Company sold
all the outstanding shares of Marsel. The Company currently has no operating
business. Accordingly, a comparison of operating results with prior periods is
not material.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled $5,755,000 at June 30,
1997, a decrease of $290,000 from December 31, 1996. The decrease in cash during
the first quarter of 1997 was attributable to the payment in the six months
ended June 30, 1997 of guarantees of certain of Marsel's payables which were
accrued as of December 31, 1996.
While the Company seeks an acquisition or other business combination,
management believes its cash position is sufficient to cover administrative
expenses and current obligations for the foreseeable future.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 - Financial Data Schedule.
7
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SIGNATURES
In accordance with 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.
Gateway Industries, Inc.
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(Registrant)
Date: August 8, 1997 By: _________________________
-------------- Warren G. Lichtenstein
Chairman of the Board
and Principal Financial
and Accounting Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1997 CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,775,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,783,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,783,000
<CURRENT-LIABILITIES> 82,000
<BONDS> 0
0
0
<COMMON> 4,000
<OTHER-SE> 5,697,000
<TOTAL-LIABILITY-AND-EQUITY> 5,783,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 135,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,000
<EPS-PRIMARY> .004
<EPS-DILUTED> .004
</TABLE>
