U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1998
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
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
(State or Other Jurisdiction of Incorporation or Organization)
33-0637631
(IRS Employer Identification No.)
150 East 52nd Street
New York, NY 10022
(Address of Principal Executive Offices)
(212)813-1500
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) 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[ ]
Transitional small business disclosure format (check one):
Yes[ ] No[X]
Shares of Issuer's Common Stock Outstanding at September 30, 1998:
3,592,024
<PAGE>
GATEWAY INDUSTRIES, INC.
INDEX
Part I - Financial Information
Page Number
Item 1. Condensed Financial Statements(Unaudited)
Condensed Balance Sheet
September 30, 1998 .............................. 3
Condensed Statements of Operations-
Three Months and Nine Months Ended
September 30, 1998 and 1997...................... 4
Condensed Statements of Cash Flows-
NIne Months Ended September 30, 1998 and 1997..... 5
Notes to Condensed Financial Statements.......... 6
Item 2. Management's Discussion and Analysis
or Plan of Operations............................ 8
Part II - Other Information
Item 5. Other Information................................ 9
Item 6. Exhibits and Reports on Form 8-K................. 9
Signatures....................................... 10
<PAGE>
GATEWAY INDUSTRIES, INC.
Part I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
CONDENSED BALANCE SHEET
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents................................ $ 5,058,000
Equity investments available for sale.................... 89,000
Prepaid expenses and other current assets................ 142,000
__________
Total current assets................................ 5,289,000
Other assets:
Security deposit......................................... 80,000
__________
$ 5,369,000
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued expenses and other liabilities.................. $ 24,000
__________
Total current liabilities.......................... 24,000
Commitments
Shareholders' equity:
Preferred stock, $.10 par value, 1,000 shares
authorized, no shares issued or outstanding........ ---
Common stock, $.001 par value, 10,000,000 shares
authorized, 3,592,024 shares issued
(including treasury shares).......................... 4,000
Capital in excess of par value.......................... 9,555,000
Accumulated deficit..................................... (4,164,000)
Treasury stock, 11,513 shares........................... (46,000)
Accumulated other comprehensive loss.................... (4,000)
___________
Total shareholders' equity......................... 5,345,000
___________
$ 5,369,000
===========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Sept 30, Ended Sept 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues $ --- $ --- $ --- $ ---
Costs and expenses:
General and administrative 75,000 93,000 233,000 228,000
------- ------- -------- --------
Operating loss (75,000) (93,000) (233,000) (228,000)
Other income:
Interest income 66,000 75,000 201,000 224,000
Other income --- --- 32,000 ---
------ ------ ------- -------
Total other income 66,000 75,000 233,000 224,000
Net income (loss) $ (9,000) $(18,000) $ 0 $ (4,000)
========== ========= ========= ==========
Net income (loss) per share $ .00 $ (.01) $ .00 $ .00
Weighted average number
of shares................ 3,592,024 3,592,024 3,592,024 3,592,024
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended Sept 30,
1998 1997
____ ____
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................... $ 0 $ (4,000)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Changes in assets and liabilities:
Prepaid expenses and other assets....... (205,000) 6,000
Accounts payable........................ (60,000) (13,000)
Accrued expenses & other liabilities.... (18,000) (271,000)
Total adjustments (283,000) (278,000)
Net cash used by operating activities........ (283,000) (282,000)
Cash flows from investing activities:
Purchase of equity investments.......... (93,000) ---
__________ __________
Net cash used by investing activities........ (93,000) ---
Net decrease in cash......................... (376,000) (282,000)
Cash and cash equivalents at beginning
of period............................... 5,434,000 6,044,000
__________ __________
Cash and cash equivalents at end of period... $5,058,000 $5,762,000
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
GATEWAY INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
1. General
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instruction 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 financial statements contain
all adjustments (consisting only of normal recurring accruals) necessary to
make such financial statements not misleading. Results for the three and
nine months ended September 30, 1998, are not necessarily indicative of the
results that may be expected either for any other quarter in the year
ending December 31, 1998 or for the entire year ending December 31, 1998.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997.
2. Operations
The Company currently has no operating business. Management 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; however, there
is no assurance that any such alternatives will occur.
3. Lease Commitments
The Company has entered into a three-year operating lease for office
space in New York, NY commencing April 1, 1998. The Company has sublet
a portion of its office space to affiliated companies. Future minimum lease
payments under this lease are as follows:
<TABLE>
<CAPTION>
Commitments Deduct Sublease Rentals Net Rental Commitments
<C> <C> <C> <C>
1998 $73,000 $49,000 $24,000
1999 97,000 65,000 32,000
2000 97,000 65,000 32,000
2001 24,000 16,000 8,000
$291,000 $195,000 $96,000
</TABLE>
<PAGE>
GATEWAY INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
4. Per Share Results
The Company has adopted Statement of Financial Accounting Standard No.
128, "Earnings Per Share" (SFAS No. 128), which is effective for annual and
interim financial statements issued for periods ending after December 15,
1997. SFAS No. 128 was issued to simplify the standards for calculating
earnings per share (EPS) previously in APB No. 15, "Earnings Per Share."
SFAS No. 128 replaces the presentation of primary EPS with a presentation
of basic EPS. The new rules also require dual presentation of basic and
diluted EPS on the face of the statement of operation.
Net income per share was calculated using the weighted average number
of common shares outstanding. The effect of all common stock equivalents
is not included in the per share computation for the three and nine months
ended September 30, 1998 and 1997, as such items are anti-dilutive in these
periods; accordingly, basic and diluted income per share are the same for
the three and nine months ended September 30, 1998 and 1997.
5. Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130
established new rules for the reporting of comprehensive income and its
components; however, the adoption of SFAS 130 had no impact on the
Company's net income or shareholders' equity. SFAS 130 requires unrealized
gains or losses on the Company's available-for-sale equity investments to
be included in other comprehensive income. There was no impact on prior
period financial statements from the adoption of SFAS 130, as the Company
had no unrealized gain or loss on equity securities during the nine months
ended September 30, 1997.
For the three and nine months ended September 30, 1998, the Company's
comprehensive income (loss) was $(8,475) and $(4,000), respectively. The
comprehensive income differs from the net income in the first nine months
of 1998 due to the inclusion of the Company's unrealized gain/(loss) on
equity securities in its comprehensive income.
GATEWAY INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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 net assets to acquire, merge, consolidate or
otherwise combine with an operating business or businesses.
REVENUES AND EXPENSES
The Company had no revenues for the nine months ended September 30,
Expenses for the nine month period ended September 30, 1998
aggregated $233,000, consisting of general and administrative costs.
NET INTEREST INCOME AND OTHER INCOME
During the three quarters of 1998, the Company recognized $232,000 of
net interest income and other income compared with $224,000 in the
comparable period of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $5,058,000 at
September 30, 1998 and $5,434,000 at December 31, 1997. Decreases in
liabilities and increase in assets combined to account for the decrease
in cash. At September 30, 1998, the Company's working capital balance was
$5,265,000.
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.
YEAR 2000 ISSUE
Until recently computer programs were written to store only two digits
of date related information in order to more efficiently handle and store
data. Such programs are unable to properly distinguish between the year
1900 and the year 2000. This situation is frequently referred to as the
"Year 2000 problem." The Company believes that all of its significant
computer software is year 2000 compliant and that it will not need to modify
or replace its software so that its computer systems will function properly
with respect to dates in the year 2000 and beyond.
<PAGE>
GATEWAY INDUSTRIES, INC.
PART II. OTHER INFORMATION
ITEM 5. Other Information
Discussion to acquire Only Multimedia Network Incorporated, a
California corporation, terminated during May 1998. Gateway Industries,
Inc. has been advised that Only Multimedia Network expects certain funding
from another source.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the registrant for the
nine months ended September 30, 1998.
<PAGE>
GATEWAY INDUSTRIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GATEWAY INDUSTRIES, INC.
/S/Jack Howard
__________________________________________
Jack Howard, Acting President
Date: November 7, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1998 CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,058,000
<SECURITIES> 89,000
<RECEIVABLES> 106,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,289,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,369,000
<CURRENT-LIABILITIES> 24,000
<BONDS> 0
0
0
<COMMON> 4,000
<OTHER-SE> 5,341,000
<TOTAL-LIABILITY-AND-EQUITY> 5,369,000
<SALES> 0
<TOTAL-REVENUES> 233,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 233,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
