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 September 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)
212-813-1500
---------------------------
(Issuer's Telephone Number, Including Area Code)
Shares of Issuer's Common Stock Outstanding at October 21, 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
September 30, 2002 and December 31, 2001................... 2
Condensed Consolidated Statements
of Operations - Three Months Ended
September 30, 2002 and 2001................................ 3
Condensed Consolidated Statements
of Operations - Nine Months Ended
September 30, 2002 and 2001................................ 4
Condensed Consolidated Statements
of Cash Flows - Nine Months Ended
September 30, 2002 and 2001................................ 5
Notes to Condensed Consolidated Financial Statements....... 6
Item 2. Management's Discussion and Analysis....................... 8
Item 3. Controls and Procedures.................................... 11
Part II - Other Information
---------------------------
Item 6. Exhibits and Reports on Form 8-K........................... 12
Signatures................................................. 13
1
Part I. Financial Information
---------------------
Item 1. Condensed Consolidated Financial Statements
-------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS September 30, 2002 December 31, 2001
Cash and cash equivalents $ 1,791,724 $ 2,041,315
Accounts receivable, net 857,048 863,702
Prepaid Expenses 92,567 70,590
Other current assets 36,979 44,602
------------ ------------
Total current assets 2,778,318 3,020,209
Fixed assets, net 398,040 407,251
Other assets 201,653 254,843
Goodwill, net 2,751,288 2,751,288
------------ ------------
Total assets $ 6,129,299 $ 6,433,591
============ ============
Liabilities and Shareholders' Equity
Liabilities
Accounts payable and accrued expenses $ 223,472 $ 570,218
Deferred income 226,287 269,735
Customer deposits 42,887 69,942
Current portion, capital lease 9,709 8,196
------------ ------------
Total current liabilities 502,355 918,091
Capital lease obligation 18,655 22,781
------------ ------------
Total liabilities 521,010 940,872
------------ ------------
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 September
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 (5,395,649) (5,511,219)
Treasury stock, 11,513 shares of common stock, at cost (45,904) (45,904)
------------ ------------
Total shareholders' equity 5,608,289 5,492,719
------------ ------------
Total liabilities and shareholders' equity $ 6,129,299 $ 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 September 30,
2002 2001
---- ----
Revenues $ 1,418,896 $ 1,146,449
----------- -----------
Costs and expenses
Fulfillment and materials 127,649 50,467
Personnel costs 870,910 740,723
Selling, general and administrative 330,648 552,690
----------- -----------
Total costs and expenses 1,329,207 1,343,880
----------- -----------
Operating income or (loss) 89,689 (197,431)
----------- -----------
Other income
Interest 7,274 21,019
Other income (expenses), net (3,691) (2,952)
----------- -----------
Total other income 3,583 18,067
----------- -----------
Net income (loss) $ 93,272 $ (179,364)
=========== ===========
Net Income (loss) per share - basic and diluted $ .02 $ (.04)
=========== ===========
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 Nine Months
Ended September 30,
2002 2001
---- ----
Revenues $ 4,242,514 $ 3,156,953
----------- -----------
Costs and expenses
Fulfillment and materials 436,561 111,173
Personnel costs 2,615,547 2,242,929
Selling, general and administrative 1,086,363 1,402,833
----------- -----------
Total costs and expenses 4,138,471 3,756,935
----------- -----------
Operating income or (loss) 104,043 (599,982)
----------- -----------
Other income
Interest 22,446 82,394
Other income (expenses), net (10,919) (3,657)
----------- -----------
Total other income 11,527 78,737
----------- -----------
Net income (loss) $ 115,570 $ (521,245)
=========== ===========
Net Income (loss) per share - basic and diluted $ .03 $ (.12)
=========== ===========
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 Nine Months
Ended September 30,
2002 2001
---- ----
Cash flows from operating activities:
Net Income (loss) $ 115,570 $ (521,245)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation 87,060 61,606
Amortization of goodwill and other intangibles 53,190 179,293
Provision for bad debt -- --
Changes in assets and liabilities net of assets and liabilities acquired:
Accounts receivable 6,654 (523,636)
Work in process -- (3,446)
Prepaid expenses and other (14,354) (47,829)
Security deposit -- 39,441
Accounts payable (346,746) 91,936
Deferred income (43,448) (8,814)
Customer deposits (27,055) 277,708
----------- -----------
Net cash used in operating activities (169,129) (454,986)
----------- -----------
Cash flows from investing activities:
Purchase of property, plant, and equipment (72,201) (66,232)
----------- -----------
Net cash used in investing activities (72,201) (66,232)
----------- -----------
Cash flows from financing activities:
Payments of obligation on capital lease (8,261) (11,065)
----------- -----------
Net cash used by financing activities (8,261) (11,065)
----------- -----------
Net decrease in cash and cash equivalents (249,591) (532,283)
Cash and cash equivalents at beginning of period 2,041,315 2,604,421
----------- -----------
Cash and cash equivalents at end of period $ 1,791,724 $ 2,072,138
=========== ===========
Supplemental cash flow information:
Cash paid during the year for
Income taxes $ 12,450 $ 60,365
Interest Expense $ 10,919 $ 4,726
Supplemental information:
Oaktree acquired $23,953 of assets under a capital lease in 2001 and $5,648 in
2002.
The accompanying notes are an integral part of these statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 nine months ended September 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 real-time
database development consolidation and management services, such as database
marketing, Product fulfillment, subscription fulfillment, 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 nine months ended
September 30, 2002 and 2001, stock options excluded from the calculation of
diluted loss per share were 592,500 and 492,500, respectively, as their effect
would have been antidilutive. Accordingly, basic and diluted income per share is
the same for each of the three and nine months ended September 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 September 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 September
30, 2002. The Company recorded amortization of goodwill for the three months
ended September 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 September 30, 2001
would have been $127,364 or $.03 per share.
6
Nine Months Ended September 30, 2002
If the Company continued amortizing goodwill, the net income would
have decreased by $156,000 or $.04 per share for the nine months ended September
30, 2002. The Company recorded amortization of goodwill for the nine months
ended September 30, 2001 of $156,000. If this standard was adopted as of January
1, 2001 the pro-forma net loss for the nine months ended September 30, 2001
would have been $365,245 or $.09 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 $183,000, net of
accumulated amortization of $180,000 at September 30, 2002 and is included in
other assets. Amortization expense was $53,190 for each of the nine months ended
September 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 5. 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 6. Reclassification
Certain amounts from the prior year have been reclassified to
conform to the current year presentation.
Note 7. Repurchase of Common Stock
The Company approved on September 30, 2002 the repurchase of 10% of
the outstanding shares, or approximately 420,000 shares, of the Company's common
stock. Repurchases may be made in open market or in negotiated transactions.
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. We believe 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 should generate
quarter-to-quarter growth.
8
REVENUES AND EXPENSES
Three Months ended September 30, 2002 compared to three months ended September
30, 2001.
The Company had revenues of $1,418,896 for the three months ended
September 30, 2002 compared to $1,146,449 for the comparable period in 2001, a
24% 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 $315,000 of revenue is derived
from these new services. Oaktree introduced these services in 2001.
Fulfillment and materials costs were $127,649 for the three months
ended September 30, 2002 compared to $50,467 for the comparable period in 2001,
a 153% 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 $870,910 for the three months ended September
30, 2002 compared to $740,723 for the comparable period in 2001, an 18%
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 $330,648 for the
three months ended September 30, 2002 compared to $552,690 for the comparable
period in 2001, a 40% decrease. This was due primarily to cost reductions
achieved by implementing improvements to internal policies and procedures which
reduced unnecessary spending.
Other income & expenses were $7,274 and $3,691, respectively,
for the three months ended September 30, 2002 compared to $21,019 and $2,952,
respectively, for the comparable period in 2001, an 80% net decrease. This
decrease was primarily due to decreasing money market rates earned on cash held
by the Company.
The Company had net profits of $93,272 for the three months ended
September 30, 2002 compared to a net loss of $179,364 for the comparable period
in 2001, a 152% increase. This increase was primarily due to increased sales and
internal restructuring of processes and procedures.
Nine Months ended September 30, 2002 compared to nine months ended September 30,
2001.
The Company had revenues of $4,242,514 for the nine months ended
September 30, 2002 compared to $3,156,953 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 $1,042,000 of revenue is
derived from these new services. Oaktree introduced these services in 2001.
Fulfillment and materials costs were $436,561 for the nine months
ended September 30, 2002 compared to $111,173 for the comparable period in 2001,
a 293% 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 $2,615,547 for the nine months ended September
30, 2002 compared to $2,242,929 for the comparable period in 2001, a 17%
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 $1,086,363 for
the nine months ended September 30, 2002 compared to $1,402,833 for the
comparable
9
period in 2001, a 23% decrease. This was due primarily to cost reductions
achieved by implementing improvements to internal policies and procedures which
reduced unnecessary spending.
Other income and expenses were $22,446 and $10,919, respectively,
for the nine months ended September 30, 2002 compared to $82,394 and 3,657,
respectively, for the comparable period in 2001, an 85% net decrease. This
decrease was primarily due to decreasing money market rates earned on cash held
by the Company.
The Company had net profits of $115,570 for the nine months ended
September 30, 2002 compared to a net loss of $521,245 for the comparable period
in 2001, a 122% increase. This increase was primarily due to increased sales and
internal restructuring of processes and procedures.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $1,791,724 at
September 30, 2002 and $2,041,315 at December 31, 2001. Subsequent to December
31, 2001, the Company's cash and cash equivalents decreased in the first and
second quarters of 2002 due to normal operating expenses and such decreases have
been partially offset in the third quarter. 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.
The Company approved on September 30, 2002 the repurchase of 10% of
the outstanding shares, or approximately 420,000 shares, of the Company's common
stock. Repurchases may be made in open market or in negotiated transactions.
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 September 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 September
30, 2002. The Company recorded amortization of goodwill for the three months
ended September 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 September 30, 2001
would have been $127,364 or $.03 per share.
Nine Months Ended September 30, 2002
If the Company continued amortizing goodwill, the net income would
have decreased by $156,000 or $.04 per share for the nine months ended September
30, 2002. The Company recorded amortization of goodwill for the nine months
ended September 30, 2001 of $156,000. If this standard was adopted as of January
1, 2001 the pro-forma net loss for the nine months ended September 30, 2001
would have been $365,245 or $0.09 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 $183,000 net of
accumulated amortization of $180,000 at September 30, 2002 and is included in
other assets. Amortization expense was $53,190 for each of the nine months ended
September 30, 2002 and 2001. There were no other intangible assets with
indefinite useful lives.
10
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.
Item 3. Controls and Procedures
-----------------------
(a) Evaluation of disclosure controls and procedures
Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company (including its consolidated
subsidiary) required to be included in the Company's periodic SEC filings.
(b) Changes in internal controls
There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
(c) Asset-Backed issuers
Not applicable.
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 Pursuant to Section 906
of the Sarbanes-Oxley Act
99.2 Certification of Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act
(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: October 31, 2002
13
CERTIFICATION
Section 302 Certification
I, Warren G. Lichtenstein, certify that:
(1) I have reviewed this quarterly report on Form 10-QSB of Gateway
Industries, Inc., a Delaware corporation (the "Registrant");
(2) Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the Registrant as of, and for, the
periods presented in this quarterly report;
(4) The Registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Registrant and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
(5) The Registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors
and the audit committee of Registrant's board of directors (or
persons performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
(6) The Registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: October 31, 2002 By: /s/ Warren G. Lichtenstein
--------------------------
Warren G. Lichtenstein
Chief Executive Officer
14
CERTIFICATION
Section 302 Certification
I, Maritza Ramirez, certify that:
(1) I have reviewed this quarterly report on Form 10-QSB of Gateway
Industries, Inc., a Delaware corporation (the "Registrant");
(2) Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the Registrant as of, and for, the
periods presented in this quarterly report;
(4) The Registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Registrant and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
(5) The Registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors
and the audit committee of Registrant's board of directors (or
persons performing the equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
(6) The Registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: October 31, 2002 By: /s/ Maritza Ramirez
-------------------
Maritza Ramirez
Chief Financial Officer
15