sec document
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, 2002
/ / 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, 21st Floor
New York, NY 10022
(Address of Principal Executive Offices Including Zip Code)
877-431-2942
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Shares of Issuer's Common Stock Outstanding at July 18, 2002: 4,192,024
Transitional Small Business Disclosure Format: Yes / / No /X/
INDEX
Part I - Financial Information Page Number
------------------------------
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
June 30, 2002 and December 31, 2001................... 2
Condensed Consolidated Statements
of Operations - Three Months Ended
June 30, 2002 and 2001................................ 3
Condensed Consolidated Statements
of Operations - Six Months Ended
June 30, 2002 and 2001................................ 4
Condensed Consolidated Statements
of Cash Flows - Six Months Ended
June 30, 2002 and 2001................................ 5
Notes to Condensed Consolidated Financial Statements.. 6
Item 2. Management's Discussion and Analysis.................. 8
Part II - Other Information
---------------------------
Item 6. Exhibits and Reports on Form 8-K....................... 12
Signatures............................................. 15
1
Part I. Financial Information
---------------------
Item 1. Condensed Consolidated Financial Statements
-------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS June 30, 2002 December 31, 2001
Cash and cash equivalents $ 1,714,679 $ 2,041,315
Accounts receivable, net 889,966 863,702
Prepaid Expenses 83,982 70,590
Other current assets 38,206 44,602
------------ ------------
Total current assets 2,726,833 3,020,209
Fixed assets, net 404,859 407,251
Other assets 219,383 254,843
Goodwill, net 2,751,288 2,751,288
------------ ------------
Total assets $ 6,102,363 $ 6,433,591
============ ============
Liabilities and Shareholders' Equity
Liabilities
Accounts payable and accrued expenses $ 291,379 $ 570,218
Deferred income 227,537 269,735
Customer deposits 37,709 69,942
Current portion, capital lease 9,260 8,196
------------ ------------
Total current liabilities 565,885 918,091
Capital lease obligation 21,460 22,781
------------ ------------
Total liabilities 587,345 940,872
------------ ------------
Shareholders' equity
Preferred stock, $.10 par value; 1,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock, $.001 par value; 10,000,000 shares
authorized; 4,192,024 shares issued and outstanding at June
30, 2002 and December 31, 2001, respectively 4,192 4,192
Capital in excess of par value 11,045,650 11,045,650
Accumulated deficit (5,488,920) (5,511,219)
Treasury stock, 11,513 shares of common stock, at cost (45,904) (45,904)
------------ ------------
Total shareholders' equity 5,515,018 5,492,719
------------ ------------
Total liabilities and shareholders' equity $ 6,102,363 $ 6,433,591
============ ============
The accompanying notes are an integral part of these statements
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended June 30,
2002 2001
---- ----
Revenues $ 1,399,439 $ 1,040,610
----------- -----------
Costs and expenses
Fulfillment and materials 179,828 54,098
Personnel costs 891,632 747,685
Selling, general and administrative 326,075 408,870
----------- -----------
Total costs and expenses 1,397,535 1,210,653
----------- -----------
Operating income or (loss) 1,904 (170,043)
----------- -----------
Other income
Interest 7,773 28,211
Other income (expenses), net (3,988) 1,089
----------- -----------
Total other income 3,785 29,300
----------- -----------
Net income (loss) $ 5,689 $ (140,743)
=========== ===========
Net Income (loss) per share - basic and diluted $ .00 $ (.03)
=========== ===========
Weighted average shares outstanding used in
computing basic and diluted net loss per share 4,192,024 4,192,024
=========== ===========
The accompanying notes are an integral part of these statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Six Months
Ended June 30,
2002 2001
---- ----
Revenues $ 2,823,618 $ 2,010,504
----------- -----------
Costs and expenses
Fulfillment and materials 308,912 60,705
Personnel costs 1,744,637 1,502,206
Selling, general and administrative 755,715 850,144
----------- -----------
Total costs and expenses 2,809,264 2,413,055
----------- -----------
Operating income or (loss) 14,354 (402,551)
----------- -----------
Other income
Interest 15,172 61,375
Other income (expenses), net (7,227) (706)
----------- -----------
Total other income 7,945 60,669
----------- -----------
Net income (loss) $ 22,299 $ (341,882)
=========== ===========
Net Income (loss) per share - basic and diluted $ .01 $ (.08)
=========== ===========
Weighted average shares outstanding used in
computing basic and diluted net loss per share 4,192,024 4,192,024
=========== ===========
The accompanying notes are an integral part of these statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
2002 2001
---- ----
Cash flows from operating activities:
Net Income (loss) $ 22,299 $ (341,882)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation 57,590 39,128
Amortization of goodwill and other intangibles 35,460 119,134
Provision for bad debt -- 4,000
Changes in assets and liabilities net of assets and liabilities acquired:
Accounts receivable (26,264) (270,607)
Work in process -- (56,000)
Prepaid expenses and other (6,996) (47,978)
Security deposit -- 39,441
Accounts payable (278,839) 177,448
Deferred income (42,198) 4,198
Customer deposits (32,233) (127,899)
----------- -----------
Net cash provided or (used) in operating activities (271,181) (461,017)
----------- -----------
Cash flows from investing activities:
Purchase of property, plant, and equipment (50,428) (12,990)
----------- -----------
Net cash provided or (used) in investing activities (50,428) (12,990)
----------- -----------
Cash flows from financing activities:
Payments of obligation on capital lease (5,027) (9,765)
----------- -----------
Net cash provided or (used) by financing activities (5,027) (9,765)
----------- -----------
Net decrease in cash and cash equivalents (326,636) (483,772)
Cash and cash equivalents at beginning of period 2,041,315 2,604,394
----------- -----------
Cash and cash equivalents at end of period $ 1,714,679 $ 2,120,622
=========== ===========
Supplemental cash flow information:
Cash paid during the year for
Income taxes $ 14,182 $ 27,996
Interest Expense $ 4,855 $ 4,726
Supplemental information:
Oaktree acquired $23,953 of assets under a capital lease in 2001 and $4,770 in
2002.
The accompanying notes are an integral part of these statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
(Unaudited)
NOTE 1. GENERAL
The accompanying unaudited condensed consolidated 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 six months ended June 30, 2002 are
not necessarily indicative of the results that may be expected either for any
other quarter in the year ending December 31, 2002 or for the entire year ending
December 31, 2002. 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, 2001.
NOTE 2. OPERATIONS
Gateway Industries, Inc. (the "Company") was incorporated in
Delaware in July 1994. It acquired all of the outstanding common stock of
Oaktree Systems, Inc. ("Oaktree") in March 2000. Oaktree provides database
development consolidation and management services, and web site design and
maintenance to customers. Such customers are principally not-for-profit
entities, health care providers and publishers throughout the United States.
The Company had no full time employees from December 1996 until the
acquisition of Oaktree in March 2000. The Company's officers and Steel Partners
Services, Ltd. (an entity controlled by the Company's Chairman) devoted
significant time to the Company's administration and in exploring potential
acquisitions and other business opportunities.
NOTE 3. NET INCOME (LOSS) PER SHARE
Net Income (loss) per share was calculated using the weighted
average number of common shares outstanding. For the three and six months ended
June 30, 2002 and 2001, stock options excluded from the calculation of diluted
loss per share were 592,500 and 610,500 respectively as their effect would have
been antidilutive. Accordingly, basic and diluted income per share is the same
for each of the three and six months ended June 30, 2002 and 2001.
NOTE 4. ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 142 Goodwill and Other Intangible
Assets. Under SFAS No. 142, goodwill and indefinite lived intangible assets are
no longer amortized but will be reviewed at least annually for impairment.
Separable intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. The Company completed the
first of the required impairment tests of goodwill during the three months ended
March 31, 2002 and no adjustment to the carrying value of goodwill was required.
THREE MONTHS ENDED JUNE 30, 2002
If the Company continued amortizing goodwill the net income would
have decreased by $52,000 or $.01 per share for the three months ended June 30,
2002. The Company recorded amortization of goodwill for the three months ended
June 30, 2001 of $52,000 if this standard was adopted as of January 1, 2001 the
pro-forma net loss for the three months ended June 30, 2001 would have been
$88,743 or $.02 per share.
6
SIX MONTHS ENDED JUNE 30, 2002
If the Company continued amortizing goodwill the net income would
have decreased by $104,000 or $.02 per share for the six months ended June 30,
2002. The Company recorded amortization of goodwill for the six months ended
June 30, 2001 of $104,000 if this standard was adopted as of January 1, 2001 the
pro-forma net loss for the six months ended June 30, 2001 would have been
$237,880 or $0.06 per share.
There has been no change to the carrying value of the Company's
goodwill since January 1, 2002. The Company's intangible assets subject to
amortization primarily consists of software of approximately $200,000, net of
accumulated amortization of $162,000 at June 30, 2002 and is included in other
assets. Amortization expense was $35,460 for each of the six months ended June
30, 2002 and 2001. There were no other intangible assets with indefinite useful
lives.
In January 2002, the Company adopted SFAS No. 144, Accounting for
the Impairment or Disposal of Long Lived Assets ("SFAS 144"). This supercedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long
Lived Assets to be Disposed of, while retaining many of the requirements of such
statement. There was no significant impact on the financial statements upon
adoption.
NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2002, the Financial Accounting Standards Board ("FASB")
adopted Statement of Financial Accounting Standards 145 Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections ("SFAS 145"). This Statement rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that
Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements. This Statement also rescinds FASB Statement No. 44,
Accounting for Intangible Assets of Motor Carriers. This Statement amends FASB
Statement No. 13, Accounting for Leases, to eliminate an inconsistency between
the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. This Statement also amends other
existing authoritative pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under changed conditions.
Statement No. 145 is effective for fiscal years beginning after May 15, 2002.
The Company believes that this statement will not have a significant impact on
its results of operations or financial position upon adoption.
In July 2002, The Financial Accounting Standards Board ("FASB")
Issued Statement 146 Accounting for Costs Associated with Exit or Disposal
Activities ("SFAS 146"). This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The principal difference
between this Statement and Issue 94-3 relates to its requirements for
recognition of a liability for a cost associated with an exit or disposal
activity. This Statement requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. Under
Issue 94-3, a liability for an exit cost as defined in Issue 94-3 was recognized
at the date of an entity's commitment to an exit plan. The provisions of this
Statement are effective for exit or disposal activities that are initiated after
December 31, 2002. The Company believes that this new standard will not have a
material effect on its results of operations or financial condition.
NOTE 5. RECLASSIFICATION
Certain amounts from the prior year have been reclassified to
conform to the current year presentation.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Introduction
------------
The Company acquired Oaktree on March 21, 2000 pursuant to a Stock
Purchase Agreement. The purchase price of Oaktree was approximately $4.1
million, consisting of $2 million in cash, the issuance of 600,000 restricted
shares of Common Stock of the Company and the assumption of approximately
$650,000 of debt, which was repaid at the closing date, plus certain fees and
expenses.
Oaktree is a twenty year-old company specializing in providing cost
effective marketing solutions to organizations needing sophisticated information
management tools. In the past, these systems were found principally only on
mainframe and minicomputer systems. Oaktree has developed a sophisticated PC
based relational database that provides unlimited capacity and flexibility to
meet today's demanding informational needs. Oaktree has also implemented a
state-of-the-art Data Center that incorporates the latest Client/Server based PC
architecture. Oaktree currently manages direct marketing databases for clients
which contain over 25 million customers that include a related 100 million
transactions.
Oaktree provides a full set of database marketing solutions that
cover the full range of customer interaction. These entirely Web based solutions
allow our customers to manage their marketing promotions and the supporting
operational systems from their desktops in a real-time mode. The Internet is the
preferred medium for providing information and reports to our clients. All
reports, data access and the status of production jobs are available to
customers 24 hours a day, seven days a week simply by accessing their desktop
browsers. With Oaktree providing a single source solution, all data will reflect
a real-time status, meaning that reports will reflect information that is
accurate and up-to-date. Multiple levels of security provide a high degree of
data integrity and protection.
Oaktree's proprietary, integrated database allows clients with
e-commerce, subscription, product fulfillment and fundraising businesses to
utilize a single, customer focused database to do all of their marketing
promotions and response analysis. Clients can track their businesses on a real
time basis and make immediate decisions to adjust marketing promotions and/or
production schedules. Oaktree's new Internet initiatives and the release of its
database product DB-Cultivator will allow us to offer better expansion of
services to existing customers and will generate quarter-to-quarter growth.
8
REVENUES AND EXPENSES - OAKTREE SUBSIDIARY
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001.
Oaktree had revenues of $1,399,439 for the three months ended June
30, 2002 compared to $1,040,610 for the comparable period in 2001, a 34%
increase. This increase was due primarily to customers expanding their use of
Oaktree's services, including new services such as Product fulfillment, Lockbox
and Call center operations. Approximately $335,000 of revenue is derived from
these new services. Oaktree introduced these services in 2001.
Fulfillment and materials costs were $179,828 for the three months
ended June 30, 2002 compared to $54,098 for the comparable period in 2001, a
232% increase. This increase was due primarily to the cost of operations of
Oaktree's new product fulfillment facility, Lockbox and Call center operation,
which was developed in 2001.
Personnel costs were $891,632 for the three months ended June 30,
2002 compared to $747,685 for the comparable period in 2001, a 19% increase.
This increase was due primarily to the development of an internal finance and
accounting department and personnel cost associated with the new products
offered by Oaktree, which increased staff salaries.
Selling, general & administrative expenses were $171,159 for the
three months ended June 30, 2002 compared to $271,058 for the comparable period
in 2001, a 37% decrease. This was due primarily to cost reductions achieved by
implementing improvements to internal policies and procedures which reduced
unnecessary spending.
Oaktree had net profits of $153,032 for the three months ended June
30, 2002 compared to a net loss of $32,483 for the comparable period in 2001, a
571% increase. This increase was primarily due to increased sales and internal
restructuring of processes and procedures.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001.
Oaktree had revenues of $2,823,618 for the six months ended June 30,
2002 compared to $2,010,504 for the comparable period in 2001, a 40% increase.
This increase was due primarily to customers expanding their use of Oaktree's
services, including new services such as Product fulfillment, Lockbox and Call
center operations. Approximately $668,000 of revenue is derived from these new
services. Oaktree introduced these services in 2001.
Fulfillment and materials costs were $308,912 for the six months
ended June 30, 2002 compared to $60,705 for the comparable period in 2001, a
409% increase. This increase was due primarily to the cost of operations of
Oaktree's new product fulfillment facility, Lockbox and Call center operation,
which was developed in 2001.
Personnel costs were $1,744,637 for the six months ended June 30,
2002 compared to $1,502,206 for the comparable period in 2001, a 16% increase.
This increase was due primarily to the development of an internal finance and
accounting department and personnel cost associated with the new products
offered by Oaktree, which increased staff salaries.
Selling, general & administrative expenses were $447,048 for the six
months ended June 30, 2002 compared to $573,603 for the comparable period in
2001, a 22% decrease. This was due primarily to cost reductions achieved by
implementing improvements to internal policies and procedures which reduced
unnecessary spending.
9
Oaktree had net profits of $316,362 for the six months ended June
30, 2002 compared to a net loss of $126,847 for the comparable period in 2001, a
349% increase. This increase was primarily due to increased sales and internal
restructuring of processes and procedures.
INCOME AND EXPENSES NOT ASSOCIATED WITH OAKTREE SUBSIDIARY
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001
The Company's consolidated costs and expenses for the three months
ended June 30, 2002 aggregated $154,916 consisting of various selling, general
and administrative expenses and other income of $7,575 compared to $137,812
Selling, general and administrative expenses and other income of $29,552 for the
comparable period in 2001. Other income consisted of interest earned on
available cash and cash equivalents. This decrease in interest income in 2002
over the 2001 three month period was due primarily to decreasing money market
rates earned on cash held by the Company. In combining the Selling, general and
administrative expenses of the Oaktree subsidiary and the company the net profit
is reduced to $5,689 for the three month period ended June 30, 2002 compared to
a net loss of $140,743 for the comparable period in 2001, a 104% increase.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001
The company's consolidated costs and expenses for the six months
ended June 30, 2002 aggregated $308,667 consisting of various Selling, general
and administrative expenses and other income of $14,602 compared to $276,541
Selling, general and administrative expenses and other income of $61,506 for the
comparable period in 2001. Other income consisted of interest earned on
available cash and cash equivalents. This decrease in interest income in 2002
over the 2001 six month period was due primarily to decreasing money market
rates earned on cash held by the Company. In combining the Selling, general and
administrative expenses of the Oaktree subsidiary and the company the net profit
is reduced to $22,299 for the six months ended June 30, 2002 compared to a net
loss of $341,882 for the comparable period in 2001, a 106% increase.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $1,714,679 at June
30, 2002 and $2,041,315 at December 31, 2001. The Company continues to seek an
acquisition or other business combination; although no definitive agreements,
arrangements or understandings have been reached. Management believes its cash
position is sufficient to cover administrative expenses and current obligations
for the foreseeable future.
CRITICAL ACCOUNTING POLICIES
ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 142 Goodwill and Other Intangible
Assets. Under SFAS No. 142, goodwill and indefinite lived intangible assets are
no longer amortized but will be reviewed at least annually for impairment.
Separable intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. The Company completed the
first of the required impairment tests of goodwill during the three months ended
March 31, 2002 and no adjustment to the carrying value of goodwill was required.
THREE MONTHS ENDED JUNE 30, 2002
If the Company continued amortizing goodwill the net income would
have decreased by $52,000 or $.01 per share for the three months ended June 30,
2002. The Company recorded amortization of goodwill for the three months ended
10
June 30, 2001 of $52,000 if this standard was adopted as of January 1, 2001 the
pro-forma net loss for the three months ended June 30, 2001 would have been
$88,743 or $.02 per share.
SIX MONTHS ENDED JUNE 30, 2002
If the Company continued amortizing goodwill the net income would
have decreased by $104,000 or $.02 per share for the six months ended June 30,
2002. The Company recorded amortization of goodwill for the six months ended
June 30, 2001 of $104,000 if this standard was adopted as of January 1, 2001 the
pro-forma net loss for the six months ended June 30, 2001 would have been
$237,880 or $0.06 per share.
There has been no change to the carrying value of the Company's
goodwill since January 1, 2002. The Company's intangible assets subject to
amortization primarily consists of software of approximately $200,000, net of
accumulated amortization of $162,000 at June 30, 2002 and is included in other
assets. Amortization expense was $35,460 for each of the six months ended June
30, 2002 and 2001. There were no other intangible assets with indefinite useful
lives.
In January 2002, the Company adopted SFAS No. 144, Accounting for
the Impairment or Disposal of Long Lived Assets ("SFAS 144"). This supercedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long
Lived Assets to be Disposed of, while retaining many of the requirements of such
statement. There was no significant impact on the financial statements upon
adoption.
RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In April 2002, the Financial Accounting Standards Board ("FASB") adopted
Statement of Financial Accounting Standards 145 Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
("SFAS 145"). This Statement rescinds FASB Statement No. 4, Reporting Gains and
Losses from Extinguishment of Debt, and an amendment of that Statement, FASB
Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. This Statement also rescinds FASB Statement No. 44, Accounting for
Intangible Assets of Motor Carriers. This Statement amends FASB Statement No.
13, Accounting for Leases, to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. Statement
No. 145 is effective for fiscal years beginning after May 15, 2002. The Company
believes that this statement will not have a significant impact on its results
of operations or financial position upon adoption.
In July 2002, The Financial Accounting Standards Board ("FASB") Issued Statement
146 Accounting for Costs Associated with Exit or Disposal Activities ("SFAS
146"). This Statement addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The principal difference between this
Statement and Issue 94-3 relates to its requirements for recognition of a
liability for a cost associated with an exit or disposal activity. This
Statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. Under Issue
94-3, a liability for an exit cost as defined in Issue 94-3 was recognized at
the date of an entity's commitment to an exit plan. The provisions of this
Statement are effective for exit or disposal activities that are initiated after
December 31, 2002. The Company believes that this new standard will not have a
material effect on its results of operations or financial condition.
11
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit No. Description
----------- -----------
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
(b) Reports on Form 8-K
None
12
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GATEWAY INDUSTRIES, INC.
/s/ Maritza Ramirez
-----------------------
Maritza Ramirez, Chief Financial Officer
and duly authorized signatory
Date: August 12, 2002
13