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 June 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 June 30, 1998: 3,592,024
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GATEWAY INDUSTRIES, INC.
INDEX
Part I - Financial Information
Page Number
Item 1. Condensed Financial Statements(Unaudited)
Condensed Balance Sheet
June 30, 1998 ..................................... 3
Condensed Statements of Operations-
Three Months and Six Months Ended
June 30, 1998 and 1997.............................. 4
Condensed Statements of Cash Flows-
Six Months Ended
June 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
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GATEWAY INDUSTRIES, INC.
Part I. FINANCIAL INFORMATION
Item 1 Condensed Financial Statements (Unaudited)
CONDENSED BALANCE SHEET
June 30, 1998
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents............................. $ 5,072,000
Equity investments available for sale................. 89,000
Prepaid expenses and other current assets............. 150,000
Total current assets............................. 5,311,000
Other assets:
Security deposit...................................... 80,000
__________
$ 5,391,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................... $ 13,000
Accrued expenses and other liabilities............... 24,000
__________
Total current liabilities....................... $ 37,000
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................................. (4,156,000)
Treasury stock, 11,513 shares....................... (46,000)
Accumulated other comprehensive loss................ (3,000)
___________
Total shareholders' equity..................... 5,354,000
___________
$ 5,391,000
See accompanying notes to condensed financial statements.
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GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Revenues $ --- $ --- $ --- $ ---
Costs and expenses:
General and administrative 108,000 71,000 158,000 135,000
Operating loss (108,000) (71,000) (158,000) (135,000)
Interest income (66,000) (74,000) (135,000) (148,000)
Other income (15,000) --- (32,000) ---
Total other income (81,000) (74,000) (167,000) (148,000)
Net income (loss) $ (27,000) $ 3,000 $ 8,000 $ 13,000
Net income (loss) per share $ (.01) $ .00 $ .00 $ .00
Weighted average number
of shares................ 3,592,024 3,592,024 3,592,024 3,592,024
See accompanying notes to condensed financial statements.
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GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
1998 1997
____ ____
Cash flows from operating activities:
Net income.................................. $ 8,000 $ 13,000
Adjustments to reconcile net income to
net cash used by operating activities:
Changes in assets and liabilities:
Prepaid expenses and other assets....... (213,000) (12,000)
Accounts payable........................ (48,000) (21,000)
Accrued expenses & other liabilities.... (15,000) (270,000)
Total adjustments (276,000) (303,000)
Net cash used by operating activities..... (268,000) (290,000)
Cash flows from investing activities:
Purchase of equity investments....... (93,000) ---
__________ __________
Net cash used by investing activities..... (93,000) ---
Net decrease in cash....................... (361,000 (290,000)
Cash and cash equivalents at beginning
of period............................. 5,433,000 6,045,000
__________ __________
Cash and cash equivalents at end of period. $5,072,000 $5,755,000
See accompanying notes to condensed financial statements.
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GATEWAY INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 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 adjust
f normal recurring accruals) necessary to make such financial statements not
misleading. Results for the three and six months ended June 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:
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
<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 with a presentation of primary EPS with a 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 quarters ended June 30,
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 June 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 six months ended June 30, 1997.
For the three and six months ended June, 1998, the Company's
comprehensive income (loss) was $(41,000) and $5,000, respectively.
The comprehensive income differs from the net income in the first six months
of 1998 due to the inclusion of the Company's unrealized loss on equity
securities in its comprehensive income.
<PAGE>
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 six months ended June 30, 1998.
Expenses for the six month period ended June 30, 1998 aggregated $158,000,
consisting of general and administrative costs. Legal fees related to
potential investment transactions were the major cause of increased G & A for
the current time period. General and administrative expenses for the six
month period ended June 30, 1997 totaled $135,000.
NET INTEREST INCOME AND OTHER INCOME
During the first half of 1998, the Company recognized $167,000 of net
interest income and other income compared with $148,000 in the comparable
period of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $5,072,000 at June 30,
1998 and $5,433,000 at December 31, 1997. Decreases in liabilities and
increase in assets combined to account for the decrease in cash. At
June 30, 1998, the Company's working capital balance was $5,274,000.
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.
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 six
months ended June 30, 1998.
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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: August 10, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extraced from the June 30,
1998 condensed financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,072,000
<SECURITIES> 89,000
<RECEIVABLES> 107,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,311,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,391,000
<CURRENT-LIABILITIES> 37,000
<BONDS> 0
0
0
<COMMON> 4,000
<OTHER-SE> 5,350,000
<TOTAL-LIABILITY-AND-EQUITY> 5,391,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 135,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
