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, 1999.
[ ] 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 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)
877-431-2942
(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 [ ]
Shares of Issuer's Common Stock Outstanding at September 30, 1999: 3,592,024
Transitional small business disclosure format: Yes [ ] No [X]
<PAGE>
GATEWAY INDUSTRIES, INC.
INDEX
Page Number
Part I - Financial Information
Item 1. Condensed Financial Statements (Unaudited):
Condensed Balance Sheet
September 30, 1999 3
Condensed Statements
of Operations - Three Months and Nine Months Ended
September 30, 1999 and 1998 4
Condensed Statements
of Cash Flows - Nine Months Ended
September 30, 1999 and 1998 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
<PAGE>
GATEWAY INDUSTRIES, INC.
CONDENSED BALANCE SHEET
September 30, 1999
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 5,560,000
Prepaid expenses and other current assets ........... 37,000
-----------
Total current assets ................................ 5,597,000
Other assets:
Security deposit ............................................ 60,000
-----------
Total assets .................................................... $ 5,657,000
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ....................... $ 44,000
-----------
Total current liabilities ........................... $ 44,000
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 ......................................... (3,900,000)
Treasury stock, 11,513 shares ............................... (46,000)
-----------
Total shareholders' equity .......................... 5,613,000
-----------
Total liabilities & shareholders' equity ........................ $ 5,657,000
===========
See accompanying notes.
<PAGE>
GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues ............................. $ -- $ -- $ -- $ --
Costs and expenses:
General and administrative ...... 108,000 75,000 (309,000) 233,000
--------- --------- --------- ---------
Operating loss .................. (108,000) (75,000) (309,000) (233,000)
Other income:
Interest income ............ 58,000 66,000 169,000 201,000
Other income ............... -- -- 15,000 32,000
--------- --------- --------- ---------
Total other income .............. 58,000 66,000 184,000 233,000
--------- --------- --------- ---------
Net loss ............................. $ (50,000) $ (9,000) $(125,000) $ 0
========= ========= ========= =========
Net loss per share - basic and diluted $ (.01) $ -- $ (.03) $ --
========= ========= ========= =========
</TABLE>
See accompanying notes.
<PAGE>
GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................. $ (125,000) $ 0
Adjustments to reconcile net income to
net cash provided by/(used in) operating activities:
Changes in assets and liabilities:
Prepaid expenses and other assets .................. 11,000 (205,000)
Note receivable .................................... 566,000 --
Accounts payable ................................... (32,000) (60,000)
Accrued expenses and other liabilities ............. -- (18,000)
----------- -----------
Net cash provided by/(used in) operating activities ........ 420,000 (283,000)
Cash flows from investing activities:
Purchase of equity investments ..................... -- (93,000)
Net cash used by investing activities ...................... -- (93,000)
----------- -----------
Net increase/(decrease) in cash ............................ 420,000 (376,000)
Cash and cash equivalents at beginning of period ........... 5,140,000 5,434,000
----------- -----------
Cash and cash equivalents at end of period ................. $ 5,560,000 $ 5,058,000
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
GATEWAY INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1999
(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 and nine months ended September 30, 1999, are not
necessarily indicative of the results that may be expected either for any other
quarter in the year ending December 31, 1999 or for the entire year ending
December 31, 1999. 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, 1998.
2. Operations
The Company currently has no operating business. Management 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; however, there is no assurance that any such
alternatives will occur.
3. Lease Commitments
The Company entered into a three-year operating lease for office space in
New York, NY which began 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
----------- ------- -----------
1999 97,000 65,000 32,000
2000 97,000 65,000 32,000
2001 24,000 16,000 8,000
$218,000 $146,000 $72,000
4. Net Income Per Share
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 September 30, 1999
and 1998, as such items are anti-dilutive in these quarters; accordingly, basic
and diluted income per share are the same for the quarters ended September 30,
1999 and 1998.
<PAGE>
5. Comprehensive Income
For the three and nine months ended September 30, 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 nine months of
1998 due to the inclusion of the Company's unrealized gain on equity securities
in its comprehensive income. For the three and nine months ended September 30,
1999, there was no unrealized gain or loss and consequently net incomewas equal
to comprehensive income.
<PAGE>
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, 1999.
Expenses for the nine months ended September 30, 1999 aggregated $309,000,
consisting of general and administrative expense. General and administrative
expenses for the nine-month period ended September 30, 1998 totaled $233,000.
INTEREST INCOME, NET
During the first nine months of 1999, the Company recognized $169,000 of
net interest income compared with $201,000 in the comparable period of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $5,560,000 at September 30,
1999 and $5,140,000 at December 31, 1998. Collection of the note receivable owed
by Only Multimedia Network, Inc. ("OMNI") during the first quarter accounted for
the increase in cash. Other assets consist of the security deposit for the
office space lease. At September 30, 1999, the Company's working capital balance
was $5,553,000.
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.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(filed as part of the electronic filing only)
(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, 1999.
<PAGE>
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: November 12, 1999
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