SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
FILED PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported):
March 21, 2000
Commission file number 0-13803
GATEWAY INDUSTRIES, INC.
(Name of small business issuer in its charter)
Delaware 33-0637631
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 East 52nd Street, 21st Floor
New York, New York 10022
(Address of principal executive offices including zip code)
Issuer's telephone number, including area code: 877-431-2942
<PAGE>
Current Report of Form 8-K
Amendment Number 1
Table of Contents
Page
Item 7. Financial Statements, Proforma Financial Information
And Exhibits............................................... 2
(A) Financial Statements of Company Acquired.
Oaktree Systems, Inc.............................. 3
(B) Pro Forma Financial Information..................... 18
(C) Exhibits............................................ 23
Signatures .................................................. 24
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL
INFORMATION AND EXHIBITS
(A.) FINANCIAL STATEMENTS OF COMPANY ACQUIRED
OAKTREE SYSTEMS, INC.
Financial Statements
December 31, 1999
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Oaktree Systems, Inc.
Calverton, New York
We have audited the accompanying balance sheets of Oaktree Systems, Inc. (an `S'
Corporation) as of December 31, 1999 and 1998, and the related statements of
operations, retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Oaktree Systems, Inc. as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1999 in
conformity with generally accepted accounting principles.
/s/ Coughlin Foundotos Cullen & Danowski, LLP
Coughlin Foundotos Cullen & Danowski, LLP
February 2, 2000
<PAGE>
OAKTREE SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------- -------------
ASSETS
<S> <C> <C>
Current assets
Cash and equivalents $ 70,780 $ 1,080,013
Accounts receivable 545,375 303,845
Other receivables 3,067 4,780
Prepaid expenses 6,021 5,453
Total current assets 625,243 1,394,091
Property and equipment, net 257,057 241,708
Intangible assets, net 13,181 --
Other assets
Due from stockholders 79,165 69,286
------------- -------------
Total assets $ 974,646 $ 1,705,085
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank loans - current portion 101,251 45,090
Line of credit 582,482 --
Capital lease obligation - current portion 22,950 27,430
Accounts payable 132,566 34,550
Accrued expenses 65,140 38,960
Customers' deposits 7,512 1,419,516
Due to stockholders 354 18,782
------------- -------------
Total current liabilities 912,255 1,584,328
------------- -------------
Long-term liabilities
Bank loans - long-term portion 12,640 48,143
Capital lease obligations - long-term portion 5,686 28,549
Note payable 15,000 15,000
------------- -------------
Total long-term liabilities 33,326 91,692
------------- -------------
Total liabilities 945,581 1,676,020
------------- -------------
</TABLE>
<PAGE>
OAKTREE SYSTEMS, INC.
BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Stockholders' equity
Common stock, no par value; 2,000 shares
authorized, 1,406 shares issued and
outstanding 20,100 20,100
Paid-in capital 8,965 8,965
Retained earnings -- --
------------- -------------
Total stockholders' equity 29,065 29,065
------------- -------------
Total liabilities and stockholders' equity $ 974,646 $ 1,705,085
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
OAKTREE SYSTEMS, INC.
STATEMENTS OF OPERATIONS
For the years ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Sales $ 2,979,109 $ 2,427,877 $ 2,328,775
Cost of sales 647,146 245,788 390,482
------------- ------------- -------------
Gross margin 2,331,963 2,182,089 1,938,293
Selling, general and administrative expenses 2,269,552 1,888,937 1,712,960
------------- ------------- -------------
Net income from operations 62,411 293,152 225,333
Other income/(expense)
Interest income 19,071 35,612 25,079
Interest expense (55,677) (32,896) (25,736)
------------- ------------- -------------
Net income before taxes 25,805 295,868 224,676
Franchise tax provision 533 3,329 854
------------- ------------- -------------
Net income $ 25,272 $ 292,539 $ 223,822
============ ============ ============
Proforma information (unaudited)
Historical net income before taxes 25,805 295,868 224,676
Proforma income tax provision (5,924) (117,643) (83,855)
------------- ------------- -------------
Proforma net income $ 19,881 $ 178,225 $ 140,821
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
OAKTREE SYSTEMS, INC.
STATEMENTS OF RETAINED EARNINGS
For the years ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Retained earnings, beginning of year $ -- $ -- $ --
Net income 25,272 292,539 223,822
Distributions to stockholders (25,272) (292,539) (223,822)
------------- ------------- -------------
Retained earnings, end of year $ -- $ -- $ --
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
OAKTREE SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 25,272 $ 292,539 $ 223,822
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 104,775 96,274 66,696
Net change in operating assets and liabilities:
(Increases) decreases in:
Accounts receivable (241,530) (73,612) (60,404)
Other receivables 1,713 (105) (4,675)
Prepaid expenses (568) (2,146) (3,201)
Increases (decreases) in:
Accounts payable and accrued expenses 124,196 12,766 (12,750)
Due to stockholders (18,428) 18,782 --
Customers' deposits (1,412,004) (170,523) 638,992
------------- ------------- -------------
Net cash (used in) provided by operating activities (1,416,574) 173,975 848,480
------------- ------------- -------------
Cash flows from investing activities:
Withdrawals from (additions to) investment -- 7,276 (3,067)
Acquisition of equipment and improvements (119,976) (42,419) (114,414)
Payments for logo and website development (13,329) -- --
------------- ------------- -------------
Net cash used in investing activities (133,305) (35,143) (117,481)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from line of credit 590,000 -- --
Principal payments on line of credit (7,518) -- --
Proceeds from issuance of long-term debt 65,747 109,673 --
Principal payments on long-term debt (45,089) (39,900) (56,014)
Principal payments on capital lease obligations (27,343) (28,415) (12,850)
Reduction in due from stockholders (9,879) 15,578 61,766
Stockholder distributions (25,272) (292,539) (223,822)
------------- ------------- -------------
Net cash provided by (used in) financing activities 540,646 (235,603) (230,920)
------------- ------------- -------------
Net (decrease) increase in cash and equivalents (1,009,233) (96,771) 500,079
Cash and equivalents - beginning of year 1,080,013 1,176,784 676,705
------------- ------------- -------------
Cash and equivalents - end of year $ 70,780 $ 1,080,013 $ 1,176,784
============= ============= =============
</TABLE>
<PAGE>
OAKTREE SYSTEMS, INC.
STATEMENTS OF CASH FLOWS (Continued)
For the years ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Supplemental disclosures:
Interest paid $ 49,519 $ 28,452 $ 17,107
Taxes paid 4,170 529 325
Supplemental schedule of non-cash investing
and financing activities:
Non-cash investing and financing transactions
for the acquisition of equipment financed by
capital leases $ -- $ 68,153 $ 11,783
</TABLE>
See accompanying notes to financial statements.
<PAGE>
OAKTREE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1999, 1998 and 1997
1. GENERAL BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business
- ---------------------
Oaktree Systems, Inc. (the Company) was incorporated under the laws of New
York State in July of 1982. It is primarily engaged in database management. The
databases are maintained for numerous nationally known not-for-profit and
for-profit entities and are used by the Company for bulk mailings. During 1999,
the Company entered into web site design and maintenance, as well as opening an
online store.
B. Use of Estimates
- -------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
C. Cash and Equivalents
- -----------------------
For purposes of reporting cash flows, the Company considers all cash
accounts which are not subject to withdrawal restrictions or penalties, and
certificates of deposit with original maturities of 90 days or less to be cash
or cash equivalents.
D. Property, Equipment and Depreciation
- ---------------------------------------
Property and equipment are carried at cost. Depreciation of property and
equipment is computed using straight-line and accelerated methods over the
estimated useful lives of the assets. The estimated useful lives of the assets
are as follows:
Leasehold improvements 30 years
Furniture and fixtures 5-7 years
Equipment 7 years
E. Intangible Assets and Amortization
- -------------------------------------
Intangible assets consist of the costs to create the Company logo and
artwork and website development, and is being amortized using the straight line
method over a period of 15 years. Amortization expense for the years ended
December 31, 1999, 1998, and 1997 was $148, $0 and $0 respectively.
F. Advertising
- --------------
The Company follows the policy of charging the costs of advertising to
expense as incurred. Total advertising expense was $18,261, $13,666 and $16,378
for the years ended December 31, 1999, 1998 and 1997, respectively.
G. Income Taxes
- ---------------
For Federal and New York State income tax purposes, the Company is being
treated as an `S' Corporation as provided by applicable tax laws. Under these
provisions, any taxable income of the `S' Corporation is passed through to the
stockholders. Accordingly, no provision for Federal income tax has been made in
the accompanying financial statements. Provision has been made for applicable
state minimum franchise taxes. See Note 14 for proforma income tax information.
H. Revenue Recognition
- ----------------------
Revenues are recognized upon delivery of services. Billings on contracts
which extend beyond one month are deferred and then recognized as earned.
Customer deposits are used to pay for printing and materials for customer
mailings. The Company receives these deposits and then makes payments as
directed by the customer for printing and materials as a service only.
I. Other Comprehensive Income
- -----------------------------
Other comprehensive income, as defined, includes all changes in equity
during a period from non-owner sources. To date, the Company has not had any
transactions that are required to be reported as other comprehensive income.
J. Segment Information
- ----------------------
The Company has adopted Statement of Financial Accounting Standards No. 131
("SFAS No. 131"), "Disclosures About Segments of an Enterprise and Related
Information." SFAS No. 131 establishes standards for the way companies report
information about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company has determined that it
operates as one business segment, a provider of internet marketing services.
K. Reclassifications
- --------------------
Certain amounts in the 1997 financial statements have been reclassified to
conform to 1998 presentations.
2. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
1999 1998
------------- -------------
Leasehold improvements $ 7,736 $ 7,736
Furniture and fixtures 96,168 87,594
Equipment 828,807 717,405
------------- -------------
Total 932,711 812,735
Accumulated depreciation (675,654) (571,027)
------------- -------------
$ 257,057 $ 241,708
============= =============
Depreciation expense for the years ended December 31, 1999, 1998 and 1997
was $104,627, $96,274 and $66,696, respectively.
3. DUE TO/DUE FROM STOCKHOLDERS
Amounts due to and due from stockholders bear interest at 6% per annum and
are due on demand.
4. BANK LOANS
Bank loans consisted of the following:
<PAGE>
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Installment loan - monthly payments of
$3,227 including interest at 10% payable
through April 2001 $ 48,144 $ 80,282
Credit cards with varying interest rates 65,747 12,951
------------- -------------
Total indebtedness 113,891 93,233
Less: current portion 101,251 45,090
------------- -------------
Long-term portion $ 12,640 $ 48,143
============ ============
</TABLE>
The long-term portion of the bank loans at December 31, 1999 matures during
the year ended December 31, 2001.
5. LINE OF CREDIT
A. The Company has a $100,000 working capital line of credit with a bank. The
line of credit is unsecured and personally guaranteed by the stockholders. It
bears interest at prime plus 2% and is due to expire on August 31, 2000. The
total of all amounts outstanding against the line of credit was $82,482, and $0
at December 31, 1999 and 1998, respectively.
B. The Company has a second line of credit in the amount of $500,000 with a
bank. The line of credit is secured by all assets of the Company. It bears
interest at 1.5% over the highest Wall Street Journal prime rate and is due to
expire June 30, 2000. The total amount outstanding on the line of credit was
$500,000 and $0 at December 31, 1999 and 1998, respectively.
6. CAPITAL LEASE OBLIGATIONS
The Company has entered into various capital leases for computer
equipment. Minimum commitments for the remaining terms of all agreements at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 26,002
2001 4,707
2002 1,758
--------------
Future payment of capital leases 32,467
Less: amount representing interest 3,831
Present value of net minimum lease payments 28,636
Less: current portion 22,950
Long-term portion $ 5,686
==============
</TABLE>
The capitalized cost, of all assets acquired under outstanding capital
lease obligations, of $79,935 and $64,168, less accumulated depreciation of
$41,330, and $17,165 at December 31, 1999 and 1998, respectively, is included in
property and equipment in the accompanying financial statements.
7. NOTE PAYABLE
The note payable of $15,000 bears interest at prime plus 2%. The note is to
a relative of one of the stockholders, with no fixed maturity date.
8. COMMON STOCK
The Company has authorized 2,000 shares of no par common stock. As of
December 31, 1999 and 1998, 1,406 shares were issued and outstanding.
9. PENSION PLANS
The Company has a SAR-SEP pension plan covering substantially all
employees. The Company may contribute amounts as determined by the stockholders.
The Company incurred costs totaling $7,147, $20,509 and $13,900 for the years
ended December 31, 1999, 1998 and 1997, respectively.
10. CONCENTRATION OF CREDIT RISK
At December 31, 1999 and 1998, cash deposits exceeded federally insured
limits by approximately $42,000 and $980,000, respectively.
11. MAJOR CUSTOMERS
Sales to five major customers amounted to 74% of all net sales for the year
ended December 31, 1999. Sales to four major customers amounted to 82% of all
net sales for the year ended December 31, 1998. Sales to three major customers
amounted to 76% of net sales for the year ended December 31, 1997. A breakdown
of these customers is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
Customer A 25% 15% 0%
Customer B 15% 18% 22%
Customer C 13% 38% 38%
Customer D 11% 0% 0%
Customer E 10% 11% 16%
</TABLE>
Amounts receivable from these major customers were 66%, 84% and 66% of
total accounts receivable at December 31, 1999, 1998 and 1997, respectively.
The Company has entered into several contracts with customers, which expire
at June 30, 2000, with annual options to renew. The contracts are with a
national not-for-profit organization and several of its chapters, and should
generate approximately $2,600,000 annually in contracted gross revenues with
additional revenue based on volume. Additionally, one-year contracts with other
entities have been entered into which extend into 2000, with expected annual
gross revenues of approximately $600,000.
12. COMMITMENTS AND CONTINGENCIES
A. Operating Leases
- -------------------
The Company has undertaken the responsibility to pay the auto leases for
the three officers, who are obligated under non-cancelable operating leases for
vehicles. Lease charges were $19,505, $27,005 and $24,637 for the years ended
December 31, 1999, 1998 and 1997. These leases expire March 27, April 6, and
September 15, 2000, and have remaining payments in the amounts of $1,296,
$1,994, and $3,231, respectively; totaling $6,521.
The Company is obligated under non-cancelable operating leases for its
offices in Calverton, New York and St. Paul, Minnesota, expiring December 31,
2002 and December 31, 2000, respectively. Rent expense for the years ended
December 31, 1999, 1998 and 1997 was $91,785, $85,272 and $80,260, respectively.
<PAGE>
The future minimum commitment under these agreements at December 31, 1999 is as
follows:
2000 $ 102,163
2001 93,174
2002 95,805
-------------
$ 291,142
B. Pension/Benefits Plans
- -------------------------
The Company retained a benefits consultant to evaluate the SAR/SEP plan and
its FSA plan. It was determined that the plans had some defects. The plans were
terminated as of December 31, 1999. A new 401-K plan and a cafeteria plan were
instituted effective January 1, 2000. The Company acted in good faith and any
liability resulting from the old plans is neither certain nor determinable at
this time.
C. Tax Audits
- -------------
The Company was audited for the year ended December 31, 1997 by the
Internal Revenue Service. There was no change as a result of the audit. No
subsequent years have been audited to date and the Company has not been notified
as to any impending Federal or State audits.
D. Year 2000 Compliance
- -----------------------
The Company utilizes and is dependent upon data processing systems and
software to conduct its business. The data processing systems and software
include those developed and maintained by the Company's data processor, as well
as purchased software, which is run on in-house computer networks. The Company
did a review and assessment of all hardware and software to confirm that it
would function properly in the year 2000 and the Company had a successful
crossover into year 2000. While there may be some additional expenses incurred
during the next year, to ensure year 2000 compliance, they are not expected to
have a material effect on the Company's financial statements.
13. SUBSEQUENT EVENT
Merger of Company
- -----------------
The Company's three officers/stockholders have signed a letter of intent to
sell their stock to a publicly traded corporation. Included in the agreements
are employment contracts for the three officers/stockholders.
14. INCOME TAXES
The following is a proforma look at the tax effect which would have
occurred had the Company been treated as a `C' Corporation and therefore was
subject to Federal and State corporate income taxes, instead of an `S'
Corporation for the years ended December 31, 1999, 1998 and 1997.
The components of proforma income tax expense for the years ended December
31 would have been as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Federal tax $ 3,509 $ 86,488 $ 62,542
New York State corporate taxes 2,415 31,155 21,313
------------- ------------- -------------
$ 5,924 $ 117,643 $ 83,855
============ ============ ============
</TABLE>
The actual taxes reflect only state income taxes, since the Company was a
Subchapter "S" corporation in all periods presented. A reconciliation of the
statutory Federal rate to the Company's effective tax rate, giving effect to the
Company's Subchapter "S" status, at December 31, 1999, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Statutory Federal income tax at 34% $ 3,509 $ 86,488 $ 62,542
New York State corporate taxes 2,415 31,155 21,313
Benefit of subchapter `S' status (5,924) (117,643) (83,855)
State income taxes, under subchapter
`S' status 533 3,329 854
------------- ------------- -------------
$ 533 $ 3,329 $ 854
============= ============= =============
</TABLE>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
(B). PRO FORMA FINANCIAL INFORMATION
March 21, 2000 Gateway Industries, Inc.
The unaudited Pro Forma Condensed Consolidated Statements of Operations (the
"Pro Forma Statements of Operations") for the year ended December 31, 1999 give
effect to the acquisition of Oaktree as if it had occurred on January 1, 1999.
The Pro Forma Statements of Operations are based on historical results of
operations of the Company and Oaktree for the year ended December 31, 1999 and
the quarter ended March 31, 2000. The unaudited Pro Forma Condensed Consolidated
Balance Sheet (the "Pro Forma Balance Sheet") gives effect to the acquisition of
Oaktree as if the acquisition had occurred on December 31, 1999. The Pro Forma
Statements of Operations and Pro Forma Balance Sheet and the accompanying notes
(the "Pro Forma Financial Information") should be read in conjunction with and
are qualified by the historical financial statements of the Company and Oaktree
and notes and exhibits thereto. The historical financial statements of Gateway
Industries, Inc. have been included in its Form 10-KSB for the year ended
December 31, 1999, and is incorporated by reference.
The Pro Forma Financial Information is intended for informational purposes only
and is not necessarily indicative of the future financial position or future
results of operations of the consolidated company after the acquisition of
Oaktree, or of the financial position or results of operations of the
consolidated company that would have actually occurred had the acquisition of
Oaktree been effected as of the dates described above.
<PAGE>
GATEWAY INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31, 1999
Gateway Oaktree Pro Forma
Industries, Inc. Systems, Inc. Adjustments Pro Forma
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 2,979 $ 2,979
Cost of sales - 647 647
----------- ----------- -----------
Gross income - 2,332 2,332
Selling, general and administrative
expenses 654 2,270 2,924
Amortization of goodwill and other
Intangibles - - 530 (2) 530
----------- ----------- -----------
Net income (loss) from operations (654) 62 (1,122)
Other income (expense)
Interest income 251 19 (63) (1) 207
Interest expense - (55) 50 (4) (5)
Other income 21 - 21
----------- ----------- -----------
Net income (loss) before
income taxes (382) 26 (899)
Income tax provision - 6 (5) (3) 1
----------- ----------- -----------
Net income (loss) $ (382) 20 (538) $ (900)
Basic and diluted loss per share $ (0.11) N/A $ (0.21)
Weighted average shares outstanding
used in computing basic and
diluted loss per share 3,592 N/A 600 4,192
<FN>
(1) Reduction of interest income on assumed cash used for acquisition at an
estimated 3% interest rate.
(2) Amortization of goodwill and other intangibles, amortized over 15 and 5
years respectively.
(3) Reduction of tax expense to reflect consolidated pro forma income tax
position, net of certain minimum taxes.
(4) Reduction of interest expense upon assumed repayment of bank borrowing.
</FN>
</TABLE>
<PAGE>
GATEWAY INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1999
(In thousands)
<TABLE>
<CAPTION>
Gateway Oaktree Pro Forma
Industries, Inc. Systems, Inc. Adjustments Pro Forma
--------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash $ 5,465 $ 71 (2,817) (1)(2) $ 2,719
Accounts Receivable - 545 545
Prepaid 10 9 19
---------- ---------- ---------
Total current assets 5,475 625 3,283
Property and equipment, net - 257 56 (1) 313
Goodwill and other intangibles - 3,482 (1) 3,482
Other assets 84 92 (79) (2) 97
---------- ---------- ---------
Total assets $ 5,559 $ 974 $ 7,175
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable & accrued expenses $ 75 $ 205 25 (1) $ 305
Bank loans - 740 (740) (1) -
---------- ---------- -----------
Total liabilities 75 945 305
Common stock 4 20 (20) (1) 4
Additional paid in capital 9,683 9 1,377 (1) 11,069
Accumulated deficit (4,157) (4,157)
Treasury stock (46) - (46)
---------- ---------- -----------
Total stockholders equity 5,484 29 6,870
Total Liabilities & Stockholders'
Equity $ 5,559 $ 974 $ 7,175
========== ========== ===========
<FN>
(1) Recording of purchase of Oaktree Systems, Inc. (See Note A).
(2) Repayment of shareholder loan receivable at closing of Oaktree acquisition.
</FN>
</TABLE>
<PAGE>
GATEWAY INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000
Gateway Oaktree Pro Forma
Industries, Inc. Systems, Inc. Adjustments Pro Forma
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ - $ 721 $ 721
Cost of sales - 142 142
----------- ---------- -----------
Gross income - 579 579
Selling, general and administrative
expenses 153 743 896
Amortization of intangibles - - 132 132
----------- ---------- -----------
Net income (loss) from operations (153) (164) (449)
Other income (expense)
Interest income 65 2 67
Interest expense - (19) (19)
Other income 18 - 18
----------- ---------- -----------
83 (17) 66
Net income (loss) $ (70) (181) $ (383)
Basic and diluted loss per share $ (0.02) $ (0.09)
Weighted average shares outstanding
used in computing basic and
diluted loss per share 4,192 - 4,192
</TABLE>
<PAGE>
GATEWAY INDUSTRIES, INC.
Note A - The proforma adjustments to the condensed consolidated balance sheet.
The acquisition of Oaktree occurred on March 21, 2000 and the allocation of the
purchase price was done on the basis of the fair values of the assets acquired
and liabilities assumed. The purchase price consisted of $2 million in cash,
600,000 shares of Gateway Industries, Inc. common stock valued at $2.27 per
share and expenses of $85,000 and the repayment of existing bank line of credit
at closing of $643,000. The allocation of the purchase price to the assets and
liabilities of Oaktree are as follows (in thousands):
Components of assets acquired:
Working capital $ 269
Security deposits 13
Property, plant, & equipment 321
Intangible assets 3,481
------------
Total net assets acquired 4,084
============
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
(C) EXHIBITS
None
<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 hereunto duly authorized.
Gateway Industries, Inc.
(Registrant)
By /s/Jack L. Howard
----------------------------
Jack L. Howard
Acting President
Date: May 22, 2000
