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 MARCH 31, 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 March 31, 1999: 3,592,024
Transitional small business disclosure format:
Yes [ ] No [X]
GATEWAY INDUSTRIES, INC.
INDEX
Part I - Financial Information Page Number
Item 1. Condensed Financial Statements (Unaudited):
Condensed Balance Sheet
March 31, 1999 3
Condensed Statements
of Operations - Three Months Ended
March 31, 1999 and 1998 4
Condensed Statements
of Cash Flows - Three Months Ended
March 31, 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>
<TABLE>
GATEWAY INDUSTRIES, INC.
CONDENSED BALANCE SHEET
March 31, 1999
(Unaudited)
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................ $ 5,645,000
Prepaid expenses and other current assets ........................ 54,000
----------
Total current assets ........................................... 5,699,000
Other assets:
Security deposit ................................................. 80,000
----------
Total assets ........................................................ $ 5,779,000
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ........................... $ 38,000
----------
Total current liabilities ..................................... $ 38,000
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 ............................................. (3,772,000)
Treasury stock, 11,513 shares ................................... (46,000)
----------
Total shareholders' equity ................................... 5,741,000
----------
Total liabilities & shareholders' equity ............................ $ 5,779,000
==========
See accompanying notes.
</TABLE>
GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended March 31,
1999 1998
Revenues ................................. $ -- $ --
---------- ----------
Costs and expenses:
General and administrative ....... 66,000 50,000
---------- ----------
Operating loss ................... (66,000) (50,000)
Other income:
Interest income .......... 68,000 79,000
Gain on sale of investment -- 6,000
---------- ----------
Total other income ....... 68,000 85,000
Net income ............................... $ 2,000 $ 35,000
========== ==========
Net income per share - basic and diluted . $ -- $ .01
========== ==========
Weighted average number of shares ........ 3,592,024 3,592,024
========== ==========
See accompanying notes.
<TABLE>
GATEWAY INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................. $ 2,000 $ 35,000
Adjustments to reconcile net income to net cash provided by/(used in)
operating activities:
Changes in assets and liabilities:
Prepaid expenses and other assets .............................. (26,000) (124,000)
Note receivable ................................................ 566,000 (90,000)
Accounts payable ............................................... (37,000) (50,000)
---------- ----------
Net cash provided by/(used in) operating activities .................... 505,000 (229,000)
Cash flows from investing activities:
Purchase of equity investments ................................. -- (93,000)
--------- ----------
Net cash used by investing activities .................................. -- (93,000)
Net increase/(decrease) in cash ........................................ 505,000 (322,000)
Cash and cash equivalents at beginning of period ....................... 5,140,000 5,433,000
---------- ----------
Cash and cash equivalents at end of period ............................. $ 5,645,000 $ 5,111,000
========== ==========
See accompanying notes.
</TABLE>
GATEWAY INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 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 ended March 31, 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
Year Commitments Rentals Committments
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 March 31, 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 March 31, 1999 and
1998.
5. COMPREHENSIVE INCOME
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. For the three months ended March
31, 1999 there was no unrealized gain or loss and consequently net income was
equal to comprehensive income.
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, 1999.
Expenses for the quarter ended March 31, 1999 aggregated $66,000, consisting of
general and administrative expense. General and administrative expenses for the
three-month period ended March 31, 1998 totaled $50,000.
INTEREST INCOME, NET
During the first quarter of 1999, the Company recognized $68,000 of net
interest income compared with $79,000 in the comparable period of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $5,645,000 at March 31,
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 March 31, 1999, the Company's working capital balance was
$5,661,000.
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.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(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, 1999.
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 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE FOR GATEWAY INDUSTRIES, INC.
</LEGEND>
<CIK> 0000725876
<NAME> GATEWAY INDUSTRIES, INC.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
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0
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