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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 1
to
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 March 31, 1998.
--- Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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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 (IRS Employer
Incorporation or Organization) 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
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Shares of Issuer's Common Stock Outstanding at March 31, 1998: 3,592,024
Transitional small business disclosure format Yes No X
----- -----
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GATEWAY INDUSTRIES, INC.
INDEX
Part I - Financial Information Page Number
- ------------------------------
Item 1. Condensed Financial Statements (Unaudited):
Condensed Balance Sheet
March 31, 1998........................................ 3
Condensed Statements
of Operations - Three Months Ended
March 31, 1998 and 1997 .............................. 4
Condensed Statements
of Cash Flows - Three Months Ended
March 31, 1998 and 1997............................... 5
Notes to Condensed Financial Statements............... 6
Item 2. Management's Discussion and Analysis
or Plan of Operations................................. 7
Part II - Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K...................... 8
Signatures............................................ 9
2
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GATEWAY INDUSTRIES, INC.
CONDENSED BALANCE SHEET
March 31, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 5,111,000
Equity investments available for sale............................ 104,000
Prepaid expenses and other current assets........................ 149,000
------------
Total current assets......................................... 5,364,000
Other assets:
Security deposit................................................. 80,000
------------
Total assets ........................................................ $ 5,444,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 10,000
Accrued expenses and other liabilities........................... 39,000
------------
Total current liabilities.................................... $ 49,000
Commitments
Shareholders' equity:
Preferred stock, $.10 par value, 1,000,000 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.............................................. (4,129,000)
Treasury stock, 11,513 shares.................................... (46,000)
Accumulated other comprehensive income........................... 11,000
------------
Total shareholders' equity................................... 5,395,000
------------
Total liabilities & shareholders' equity.............................. $ 5,444,000
============
</TABLE>
See accompanying notes.
3
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GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended March 31,
1998 1997
---- ----
Revenues $ -- $ --
Costs and expenses:
General and administrative.............. 50,000 64,000
Operating loss.......................... (50,000) (64,000)
Other income:
Interest income..................... 79,000 74,000
Other income........................ 6,000 ---
Total other income.................. 85,000 74,000
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Net income ............................... $ 35,000 $ 10,000
============= ============
Net income per share......................... $ .01 $ 00
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Weighted average number of shares............ 3,592,024 3,592,024
============ ============
See accompanying notes.
4
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GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 35,000 $ 10,000
Adjustments to reconcile net income to
net cash used by operating activities:
Changes in assets and liabilities:
Equity investments available for sale..................... (94,000) --
Prepaid expenses and other assets......................... (120,000) (16,000)
Accounts payable.......................................... (50,000) (17,000)
Accrued liabilities....................................... -- (182,000)
Net cash used by operating activities......................... (229,000) (205,000)
Cash flows from investing activities:
Purchase of equity investments............................ (93,000) --
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Net cash used by investing activities......................... (93,000)
Net decrease in cash.......................................... (322,000) (205,000)
Cash and cash equivalents at beginning of period.............. 5,433,000 6,045,000
------------ ------------
Cash and cash equivalents at end of period.................... $ 5,111,000 $ 5,840,000
============ ============
</TABLE>
See accompanying notes.
5
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GATEWAY INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 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 months ended March 31, 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:
Deduct Net
Sublease Rental
Commitments Rentals Commitments
----------- --------- -----------
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
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 earning 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 operations.
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 quarters ended March 31, 1998 and
1997, as such items are anti-dilutive in these quarters; accordingly, basic and
diluted income per share are the same for the quarters ended March 31, 1998 and
1997.
6
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GATEWAY INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
March 31, 1998
(Unaudited)
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 three months ended March 31, 1997.
For the three months ended March 31, 1998, the Company's comprehensive
income was $46,000. The comprehensive income differs from the net income in the
first quarter of 1998 due to the inclusion of the Company's unrealized gain on
equity securities in its comprehensive income.
6. Subsequent Event
Discussions 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.
7
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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 three months ended March 31, 1998.
Expenses for the quarter ended March 31, 1998 aggregated $50,000, consisting of
general and administrative expense. General and administrative expenses for the
three month period ended March 31, 1997 totaled $64,000.
INTEREST INCOME, NET
During the first quarter of 1998, the Company recognized $79,000 of net
interest income compared with $74,000 in the comparable period of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $5,111,000 at March 31,
1998 and $5,433,000 at December 31, 1997. Decreases in accounts payable and
increase in other current assets and other assets combined to account for the
decrease in cash. Other assets consist of the security deposit for the office
space lease. At March 31, 1998, the Company's working capital balance was
$5,315,000.
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.
8
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PART II. OTHER INFORMATION
ITEM 5 Other Information
Discussions 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) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the registrant for
the three months ended March 31, 1998.
9
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SIGNATURES
Pursuant to the requirements 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 INDUSTRIES, INC.
/s/ Jack Howard
-------------------------------
Jack Howard, Acting President
Date: May 15, 1998
10
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1998 CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED AS ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 5,111,000
<SECURITIES> 104,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,364,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,444,000
<CURRENT-LIABILITIES> 49,000
<BONDS> 0
0
0
<COMMON> 4,000
<OTHER-SE> 5,395,000
<TOTAL-LIABILITY-AND-EQUITY> 5,444,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 50,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 35,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
