sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
GATEWAY INDUSTRIES, INC.
------------------------
(Name of Registrant as Specified in Its Charter)
---------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
-2-
GATEWAY INDUSTRIES, INC.
--------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 18, 2003
--------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of GATEWAY INDUSTRIES, INC., a Delaware corporation (the "Company"),
will be held at the Marriott Midtown East Courtyard, located at 866 Third
Avenue, New York, New York 10022, on December 18, 2003 at 11:00 A.M., local
time, for the following purposes:
1. To elect four members of the board of directors of the Company
to serve until the next annual meeting of stockholders and
until their successors have been duly elected and qualify;
2. To ratify the appointment of Grant Thornton LLP as the
Company's independent auditors for the year ending December 31,
2003; and
3. To transact such other business as may properly be brought
before the Meeting or any adjournment thereof.
The board of directors has fixed the close of business on November
19, 2003 as the record date for the Meeting. Only stockholders of record on the
stock transfer books of the Company at the close of business on that date are
entitled to notice of, and to vote at, the Meeting.
By Order of the Board of Directors
/s/ Maritza Ramirez
-------------------
Maritza Ramirez
CHIEF FINANCIAL OFFICER
Dated: November 20, 2003
New York, New York
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE
URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE THAT
IS PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
GATEWAY INDUSTRIES, INC.
590 MADISON AVENUE, 32ND FLOOR
NEW YORK, NEW YORK 10022
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 18, 2003
----------------
INTRODUCTION
This Proxy Statement is being furnished to stockholders by the board
of directors of GATEWAY INDUSTRIES, INC., a Delaware corporation (the
"Company"), in connection with the solicitation of the accompanying Proxy for
use at the 2003 Annual Meeting of Stockholders of the Company (the "Meeting") to
be held at the Marriott Midtown East Courtyard, located at 866 Third Avenue, New
York, New York 10022, on December 18, 2003, at 11:00 A.M., local time, or at any
adjournment thereof.
The approximate date on which this Proxy Statement and the
accompanying Proxy will first be sent or given to stockholders is November 20,
2003. The mailing address of the Company's principal executive offices is 590
Madison Avenue, 32nd Floor, New York, New York 10022.
At the Meeting, stockholders will be asked: (1) to elect four (4)
members of the board of directors of the Company (the "Board of Directors" or
the "Board") to serve until the next annual meeting of stockholders and until
their successors have been duly elected and qualify; (2) to ratify the
appointment of Grant Thornton LLP as the Company's independent auditors for the
fiscal year ending December 31, 2003; and (3) to transact such other business as
may properly be brought before the Meeting or any adjournment thereof.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on November 19,
2003, the record date (the "Record Date") for the Meeting, will be entitled to
notice of, and to vote at, the Meeting and any adjournment thereof. As of the
close of business on the Record Date, there were 4,192,105 outstanding shares of
the Company's common stock, $.001 par value (the "Common Stock"). Each of such
shares is entitled to one vote. There was no other class of voting securities of
the Company outstanding on that date. A majority of the outstanding shares
present in person or by proxy is required for a quorum.
VOTING OF PROXIES
Shares of Common Stock represented by Proxies that are properly
executed, duly returned and not revoked will be voted in accordance with the
instructions contained therein. If no specification is indicated on the Proxy,
all such shares will be voted (i) for the election as directors of the persons
who have been nominated by the Board, (ii) for the ratification of the
appointment of Grant Thornton LLP as the Company's independent auditors for the
fiscal year ending December 31, 2003 and (iii) on any other matter the Board is
not aware of a reasonable time before this solicitation that may properly be
brought before the Meeting in accordance with the judgment of the person or
persons voting the Proxies.
The execution of a Proxy will in no way affect a stockholder's right
to attend the Meeting and to vote in person. Any Proxy executed and returned by
a stockholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Meeting, or by execution of a subsequent proxy that is presented to
the Meeting or if the stockholder attends the Meeting and votes by ballot,
except as to any matter or matters upon which a vote shall have been cast
pursuant to the authority conferred by such Proxy prior to such revocation.
The cost of solicitation of the Proxies being solicited on behalf of
the Board will be borne by the Company. In addition to the use of the mails,
proxy solicitation may be made by telephone, telegraph and personal interview by
officers, directors and employees of the Company. The Company will, upon
request, reimburse brokerage houses and persons holding Common Stock in the
names of their nominees for their reasonable expenses in sending soliciting
material to their principals.
The Company has retained MacKenzie Partners, Inc. ("MacKenzie") to
solicit proxies at a cost of approximately $3,750, plus certain out-of-pocket
expenses. If the Company requests MacKenzie to perform additional services,
MacKenzie will bill the Company at its usual rate.
VOTING RIGHTS
Holders of each share of Common Stock are entitled to one vote for
each share held on all matters. The holders of a majority of the outstanding
shares of Common Stock, whether present in person or represented by proxy, will
constitute a quorum for the election of directors and the ratification of the
appointment of Grant Thornton LLP, and any other matters that may come before
the Meeting.
Broker "non-votes" and the shares as to which a stockholder abstains
from voting are included for purposes of determining whether a quorum of shares
is present at a meeting. A broker "non-vote" occurs when a nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner.
A plurality of the total votes cast by holders of Common Stock is
required for the election of directors. In tabulating the vote on the election
of directors, broker "non-votes" will be disregarded and will have no effect on
the outcome of such vote.
-2-
The affirmative vote of a majority of the votes cast by holders of
Common Stock entitled to vote is required to approve the proposal to ratify the
appointment of Grant Thornton LLP. In tabulating the votes on the proposal to
ratify the appointment of Grant Thornton LLP, abstentions and broker "non-votes"
will be disregarded and will have no effect on the outcome of such vote.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning ownership of
the Company's Common Stock, as of the Record Date, by each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
Common Stock, each director, each executive officer as defined in Item 402(a)(2)
of Regulation S-B of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and by all directors and executive officers of the Company as a
group. Unless otherwise indicated, the address for each director, executive
officer or five percent stockholder is in care of the Company, 590 Madison
Avenue, 32nd Floor, New York, New York 10022.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------------------ ------------ -----
Steel Partners II, L.P. 1,674,208 39.9%
Warren G. Lichtenstein 1,815,760(2) 42.3%
Ronald W. Hayes 112,840(3) 2.7%
810 Saturn Street, Suite 16-432
Jupiter, Florida 33477-4398
Jack L. Howard 147,720(4) 3.4%
Gary W. Ullman 19,000(5) *
420 Woodland Acres Crescent
Maple, Ontario
Canada L6A1G2
Maritza Ramirez 5,000(6) *
c/o Oaktree Systems, Inc.
657 Dowd Avenue
Elizabeth, New Jersey 07206
George Soros 827,716(7) 19.7%
Soros Fund Management LLC
888 Seventh Avenue
New York, New York 10022
-3-
Frank Mackay, Jr. 469,120(8) 11.0%
c/o Oaktree Systems, Inc.
4462 Middle Country Road
Calverton, New York 11933-1185
All directors and executive officers 2,150,320(9) 47.5%
as a group (seven persons)
-----------------
* Less than 1%.
(1) A person is deemed to be the beneficial owner of voting securities
that can be acquired by such person within 60 days after the Record
Date upon the exercise of options, warrants or convertible
securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants or convertible
securities that are held by such person (but not those held by any
other person) and that are currently exercisable (i.e., that are
exercisable within 60 days after the Record Date) have been
exercised. Unless otherwise noted, the Company believes that all
persons named in the table have sole voting and investment power
with respect to all shares beneficially owned by them.
(2) Consists of (i) 1,674,208 shares of Common Stock owned directly by
Steel Partners II, L.P. ("Steel"), which is also separately listed
in the security ownership table, (ii) 41,552 shares of Common Stock
owned directly by Mr. Lichtenstein, and (iii) 100,000 shares of
Common Stock issuable upon the exercise of options within 60 days of
the Record Date granted to Mr. Lichtenstein. As the sole managing
member of the general partner of Steel, Mr. Lichtenstein has sole
voting and investment power over the 1,674,208 shares owned by
Steel. Mr. Lichtenstein disclaims beneficial ownership of the shares
of Common Stock owned by Steel except to the extent of his pecuniary
interest therein.
(3) Consists of (i) 32,340 shares of Common Stock owned directly by Mr.
Hayes, (ii) 16,000 shares of Common Stock owned by Mr. Hayes'
spouse, and (iii) 64,500 shares of Common Stock issuable upon the
exercise of options within 60 days of the Record Date granted to Mr.
Hayes.
(4) Consists of (i) 44,420 shares of Common Stock owned directly by Mr.
Howard, (ii) 5,800 shares of Common Stock owned by JL Howard, Inc.,
a California corporation controlled by Mr. Howard, (iii) 5,000
shares of Common Stock held by Mr. Howard in joint tenancy with his
spouse, and (iv) 92,500 shares of Common Stock issuable upon the
exercise of options within 60 days of the Record Date granted to Mr.
Howard. Mr. Howard and his spouse have shared voting and investment
power over the 5,800 shares owned by JL Howard, Inc. and the 5,000
shares owned in joint tenancy.
(5) Consists of 19,000 shares of Common Stock issuable upon the exercise
of options within 60 days of the Record Date granted to Mr. Ullman.
-4-
(6) Consists of 5,000 shares of Common Stock issuable upon the exercise
of options within 60 days of the Record Date granted to Ms. Ramirez.
(7) As reported in the stockholder's most recent Schedule 13D.
(8) Consists of (i) 405,840 shares of Common Stock owned directly by Mr.
Mackay, and (ii) 63,280 shares of Common Stock issuable upon the
exercise of options within 60 days of the Record Date. Mr. Mackay is
an employee of Oaktree Systems, Inc. ("Oaktree"), the Company's
operating subsidiary.
(9) Includes the shares and options shown in footnotes (2) to (6) above
and 50,000 shares of Common Stock issuable upon the exercise of
options within 60 days of the Record Date held by executive officers
who are not specifically named in the security ownership table.
-5-
PROPOSAL I--ELECTION OF DIRECTORS
NOMINEES
Unless otherwise specified, all Proxies received will be voted in
favor of the election of the persons named below as directors of the Company, to
serve until the next Annual Meeting of Stockholders of the Company and until
their successors shall be duly elected and qualify. Each of the nominees
currently serves as a director of the Company. The terms of office of the
current directors expire at the Meeting and when their successors are duly
elected and qualify. Management has no reason to believe that any of the
nominees will be unable or unwilling to serve as a director, if elected. Should
any of the nominees not remain a candidate for election at the date of the
Meeting, the Proxies will be voted in favor of those nominees who remain
candidates and may be voted for substitute nominees selected by the Board.
The names, principal occupation of and certain other information
about each of the nominees are set forth below:
FIRST YEAR
NAME AGE BECAME DIRECTOR
---- --- ---------------
Warren G. Lichtenstein 38 1994
Jack L. Howard 42 1994
Ronald W. Hayes 65 1993
Gary W. Ullman 62 2000
---------------
WARREN G. LICHTENSTEIN has served as a director and Chief Executive
Officer of the Company since 1994 and as Chairman of the Board since 1995. Mr.
Lichtenstein has served as the Chairman of the Board, Secretary and the Managing
Member of Steel Partners, L.L.C., the general partner of Steel, since January 1,
1996. Prior to such time, Mr. Lichtenstein was the Chairman and a director of
Steel Partners, Ltd., the general partner of Steel Partners Associates, L.P.,
which was the general partner of Steel, from 1993 until prior to January 1,
1996. Mr. Lichtenstein was the acquisition/risk arbitrage analyst at Ballantrae
Partners, L.P., a private investment partnership formed to invest in risk
arbitrage, special situations and undervalued companies, from 1988 to 1990. Mr.
Lichtenstein has served as a director of WebFinancial Corporation, a consumer
and commercial lender, since 1996 and as its Chief Executive Officer since
December 1997. From December 1997 to November 2003, he served as President of
WebFinancial Corporation. Mr. Lichtenstein has served as a director of SL
Industries, Inc., a designer and producer of proprietary advanced systems and
equipment for the power and data quality industry, from 1993 to 1997 and since
January 2002. He has served as Chairman of the Board and Chief Executive Officer
of SL Industries, Inc. since February 2002. Mr. Lichtenstein has served as a
director and the President and Chief Executive Officer of Steel Partners, Ltd.,
a management and advisory company that provides management services to Steel and
other affiliates of Steel, since June 1999 and as its Secretary and Treasurer
since May 2001. He has also served as Chairman of the Board of Directors of
-6-
Caribbean Fertilizer Group Ltd., a private company engaged in the production of
agricultural products in Puerto Rico and Jamaica, since June 2000. Mr.
Lichtenstein is also a director of United Industrial Corporation, a designer and
producer of defense, training, transportation and energy systems, and has served
as its Chairman since October 2003. Mr. Lichtenstein devotes such time to the
business affairs and operations of the Company as he deems necessary to perform
his duties, which changes from time to time.
JACK L. HOWARD has served as Vice President of the Company since
December 2001 and as a director since May 1994. From September 1994 to December
2001, Mr. Howard served as President of the Company. For more than the past five
years, Mr. Howard has been a registered principal of Mutual Securities, Inc., a
registered broker-dealer. Mr. Howard has served as a director of WebFinancial
Corporation since 1996 and as its Vice President since December 1997. Mr. Howard
is also a director of Pubco Corporation, a printing supplies and construction
equipment manufacturer and distributor. Mr. Howard devotes such time to the
business affairs and operations of the Company as he deems necessary to perform
his duties, which changes from time to time.
RONALD W. HAYES has served as a director of the Company since May
1993. For more than the past five years, Mr. Hayes has been the owner of Lincoln
Consultors & Investors, Inc., an investing and consulting firm.
GARY W. ULLMAN has served as a director of the Company since October
2000. Mr. Ullman has served as the President and Chief Executive Officer of The
IntraPac Group Inc., a manufacturer of pharmaceutical, cosmetic, personal care
and dentistry products, since August 2003. From September 2002 to August 2003,
he served as Chairman and Chief Executive Officer of HMR Foods, Inc., a food
conglomerate in the home meal replacement business. From January 1998 to
September 2002, Mr. Ullman served as President and Chief Executive Officer of
Unitron, Inc., a designer, manufacturer and distributor of hearing aids. From
June 1996 to January 1998, Mr. Ullman was Chief Executive Officer of Fluid
Packaging, a contract manufacturer of pharmaceuticals and beauty products. Prior
to 1996, Mr. Ullman served for 26 years as Chief Executive Officer of CCL
Industries, Inc., a manufacturer of consumer products, containers and labels.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES.
-7-
MEETINGS
The Board of Directors held three meetings during the fiscal year
ended December 31, 2002. From time to time, the members of the Board act by
unanimous written consent pursuant to the laws of the State of Delaware.
The Board of Directors has a Stock Option and Compensation
Committee, which makes recommendations concerning salaries and incentive
compensation for employees of and consultants to the Company. For the fiscal
year ended December 31, 2002, the Stock Option and Compensation Committee was
composed of Ronald Hayes and Gary Ullman. The Stock Option and Compensation
Committee did not hold any meetings during the year ended December 31, 2002.
The Board of Directors does not have a Nominating Committee, the
customary functions of which are performed by the entire Board of Directors.
The Board of Directors has an Audit Committee, which reviews the
Company's financial statements and accounting policies, resolves potential
conflicts of interest, receives and reviews the recommendations of the Company's
independent auditors and confers with the Company's independent auditors with
respect to the training and supervision of internal accounting personnel and the
adequacy of internal accounting controls. The Audit Committee held five meetings
during the fiscal year ended December 31, 2002. For the fiscal year ended
December 31, 2002, the members of the Audit Committee were Ronald Hayes and Gary
Ullman. All members of the Company's Audit Committee are independent as
independence is defined in Rule 4200(a)(15) of the NASD listing standards. The
Board of Directors has adopted a written charter for the Audit Committee which
was included in the Company's proxy statement for its 2001 annual meeting of
stockholders. The Company is in the process of preparing a new charter for the
Audit Committee that complies with The Sarbanes-Oxley Act of 2002.
All the current members of the Board of Directors attended at least
75% of the aggregate of the total number of meetings held by the Board and the
total number of meetings held by all committees of the Board during fiscal 2002.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board has furnished the following report
on its activities with respect to its oversight responsibilities during the
fiscal year ended December 31, 2002. The report is not deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission ("SEC")
or subject to the SEC's proxy rules or to the liabilities of Section 18 of the
Exchange Act, and the report shall not be deemed incorporated by reference into
any prior or subsequent filing by the Company under the Securities Act of 1933,
as amended, or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference to such filing.
-8-
The Audit Committee has reviewed and discussed the audited financial
statements with the management of the Company and has discussed matters required
to be discussed by SAS 61 (Codification of Statements on Auditing Standards, AU
Section 380) with Grant Thornton LLP, the Company's independent auditors for the
fiscal year ended December 31, 2002. The Audit Committee has received the
written disclosures and the letter from Grant Thornton LLP, as required by the
Independent Standards Board Standard No. 1, and has discussed with Grant
Thornton LLP the independence of Grant Thornton LLP. Based on the review and
discussions involving the foregoing, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Company's annual report for the fiscal year ended December 31, 2002.
Submitted by the Audit Committee
Ronald W. Hayes
Gary W. Ullman
MANAGEMENT
EXECUTIVE OFFICERS OF THE COMPANY WHO ARE NOT DIRECTORS
JAMES R. HENDERSON (age 45) has served as President of the Company
since December 2001. Mr. Henderson has served as a Vice President of Steel
Partners, Ltd., a management and advisory company, since March 2002. Steel
Partners, Ltd. has provided management services to Steel and its affiliates
since March 2002. Mr. Henderson served as a Vice President of an entity
previously known as Steel Partners Services, Ltd., a management and advisory
company, from August 1999 through March 2002. Steel Partners Services, Ltd.
provided management services to Steel and other affiliates of Steel until March
2002, when Steel Partners, Ltd. acquired the rights to provide certain
management services from Steel Partners Services, Ltd. He has also served as
President and Chief Operating Officer of WebFinancial Corporation since November
2003 and as Vice President of Operations of WebFinancial Corporation since
September 2000. Mr. Henderson served as a director and acting Chief Executive
Officer of ECC International Corp., a manufacturer and marketer of computer
controlled simulators for training personnel to perform maintenance and operator
procedures on military weapons, from December 1999 and July 2002, respectively,
until September 2003. He has served as a director of SL Industries, Inc. since
January 2002. From January 2001 to August 2001, Mr. Henderson served as
President of MDM Technologies, Inc., a direct mail and marketing company that
was principally controlled by the Company's Chief Executive Officer and
Chairman. From 1996 to July 1999, Mr. Henderson was employed in various
positions with Aydin Corporation, a defense-electronics manufacturer, which
included a tenure as President and Chief Operating Officer from October 1998 to
June 1999. Prior to his employment with Aydin Corporation, Mr. Henderson was
employed as an executive with UNISYS Corporation, an e-business solutions
provider. Mr. Henderson devotes such time to the business affairs and operations
of the Company as he deems necessary to perform his duties, which changes from
time to time.
-9-
MARITZA RAMIREZ (age 43) has served as Chief Financial Officer of
the Company since May 2002 and as Chief Financial Officer of Oaktree since
August 2001. From February 2001 to July 2001, Ms. Ramirez served as Vice
President of Finance and Administration of MDM Technologies, Inc., a direct mail
and marketing company that was principally controlled by the Company's Chief
Executive Officer and Chairman. From November 1999 to February 2001, she served
as a Vice President of Finance of Edgix Corporation, a start-up global Internet
content delivery company. From April 1998 to November 1999, she was a financial
business development consultant to numerous start-up corporations. From November
1988 to April 1998, she served as Director of Finance and the Controller of
Radio-Active Media, Inc., a national radio syndication and public company (a
division of Jacor Communications, Inc.). Ms. Ramirez has over 15 years of
experience in financial management and accounting system implementations of
start-ups and small to midsize companies.
STEVEN WOLOSKY (age 48) has served as Secretary of the Company since
May 2002. For more than the past five years, Mr. Wolosky has been a partner of
Olshan Grundman Frome Rosenzweig & Wolosky LLP, counsel to the Company. Mr.
Wolosky is also a director of SL Industries, Inc.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the
compensation paid by the Company during the fiscal years ended December 31,
2002, 2001 and 2000 to the Company's Chief Executive Officer and Chief Financial
Officer. No other executive officer of the Company received annual compensation
in excess of $100,000 during the fiscal year ended December 31, 2002.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)
--------------------------- ---- --------- -------- ---------- ---
Warren Lichtenstein, 2002 -- -- -- 280,000(1)
Chairman and Chief
Executive Officer
2001 -- -- 50,000 280,000(1)
2000 -- -- -- 280,000(1)
Maritza Ramirez, 2002 100,000(2) 25,000(2) -- --
Chief Financial Officer
2001 41,667(3) -- 5,000(3) --
2000 -- -- -- --
-10-
--------------------
(1) Represents aggregate management fees earned by Steel Partners, Ltd.
(for a portion of 2002) and Steel Partners Services, Ltd. (for a
portion of 2002 and for 2001 and 2000), entities controlled by
Warren Lichtenstein, from the Company. For information relating to
the management functions performed by such entities, see "Certain
Relationships and Related Transactions."
(2) Such compensation represents the aggregate compensation paid to Ms.
Ramirez in her capacity as the Chief Financial Officer of both the
Company and Oaktree. The bonus was paid in 2003 for services
performed in 2002.
(3) Such compensation was paid to Ms. Ramirez in her capacity as the
Chief Financial Officer of Oaktree. Ms. Ramirez was not employed by
the Company in 2001 and she commenced her employment with Oaktree in
August 2001. Prior thereto, Ms. Ramirez was employed by MDM
Technologies, Inc., an entity principally controlled by the
Company's Chairman and Chief Executive Officer.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
No options were awarded to Mr. Lichtenstein or Ms. Ramirez during
the fiscal year ended December 31, 2002. Neither Mr. Lichtenstein nor Ms.
Ramirez exercised any options during the fiscal year ended December 31, 2002.
The following table sets forth certain information regarding unexercised stock
options held by Mr. Lichtenstein and Ms. Ramirez as of December 31, 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME OPTIONS AT FY-END(#) AT FY-END($)
---- -------------------- ------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
Warren G. Lichtenstein 83,333/16,667 0/0(1)
Maritza Ramirez 3,333/1,667 267/133(2)
-11-
--------------------
(1) Based on the market value, as reported on the OTC Bulletin Board, of
$1.06 per share of Common Stock at December 31, 2002 and a weighted
average exercise price of $2.38 per share.
(2) Based on the market value, as reported on the OTC Bulletin Board, of
$1.06 per share of Common Stock at December 31, 2002 and an exercise
price of $.98 per share.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Officers of the Company do not receive annual compensation.
Day-to-day management functions are performed by Steel Partners, Ltd. Please see
"Certain Relationships and Related Transactions" for a description of the
contractual arrangement between the Company and Steel Partners, Ltd.
Directors who are not employees or officers of the Company are
granted options to purchase 2,000 shares upon appointment to the Company's
Board, and options to purchase 2,000 shares on the day of each annual meeting of
stockholders in which such director is elected or re-elected to office. The
current directors hold options to purchase an aggregate of 276,000 shares of
Common Stock of the Company at exercise prices ranging from $.98 to $4.25 per
share.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF NUMBER OF SECURITIES
SECURITIES TO BE WEIGHTED- REMAINING AVAILABLE FOR
ISSUED UPON AVERAGE EXERCISE FUTURE ISSUANCE UNDER
EXERCISE OF PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OUTSTANDING (EXCLUDING SECURITIES
OPTIONS OPTIONS REFLECTED IN COLUMN (a))
PLAN CATEGORY (a) (b) (c)
------------- ---- --- ---
Equity compensation 794,000 $2.38 56,000
plans approved by security
holders(1)
Equity compensation 0 0 0
plans not approved by
security holders
Total 794,000 $2.38 56,000
--------------------
(1) Consists of Amended and Restated 1990 Incentive Stock Option Plan
and 1990 Nonstatutory Stock Option Plan.
-12-
EMPLOYMENT AGREEMENTS
The Company currently has no employment agreements, compensatory
plans or arrangements with any executive officer.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
See "Certain Relationships and Related Transactions" with respect to
transactions involving management and others.
-13-
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership on Form 3 and
changes in ownership on Form 4 or Form 5 with the SEC. Such officers, directors
and greater-than ten percent stockholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by
it, or written representations from certain reporting persons, the Company
believes, during the fiscal year ended December 31, 2002, that there was
compliance with all Section 16(a) filing requirements applicable to its
officers, directors and greater-than ten percent stockholders. However, the
Company has been made aware that an employee of Oaktree who became a
greater-than ten percent stockholder in 2000 failed to file a Form 3 reporting
his beneficial ownership and failed to file the requisite Section 16(a) filing
to report the transfer of certain stock options to employees of Oaktree in 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a Management Agreement unanimously approved by the
Company's disinterested directors, an entity previously known as Steel Partners
Services, Ltd. ("SPS") provided the Company with office space and certain
management, consulting and advisory services. The Management Agreement is
automatically renewable on an annual basis unless terminated by either party,
for any reason, upon at least 60 days written notice. The Management Agreement
also provides that the Company shall indemnify, save and hold SPS harmless from
and against any obligation, liability, cost or damage resulting from SPS's
actions under the terms of the Management Agreement, except to the extent
occasioned by gross negligence or willful misconduct of SPS's officers,
directors or employees. In consideration of the services rendered by SPS, the
Company paid to SPS a fixed monthly fee, adjustable annually upon agreement of
the Company and SPS, totaling $280,000 per annum. The Company believes that the
cost of obtaining the type and quality of services rendered by SPS under the
Management Agreement was no less favorable than the cost at which the Company
could obtain from unaffiliated entities. SPS is owned by an entity which is
controlled by Warren Lichtenstein, the Company's Chairman of the Board and Chief
Executive Officer.
As of March 26, 2002, the Management Agreement described above was
assigned by SPS to Steel Partners, Ltd. ("SPL") and the employees of SPS became
employees of the Steel Partners Services Division of SPL. Warren Lichtenstein,
the Company's Chairman of the Board and Chief Executive Officer, is an affiliate
of SPL based on his ownership of SPL, directly and through Steel, and by virtue
of his positions as Chairman, President and Chief Executive Officer of SPL. Mr.
Lichtenstein is the sole managing member of the general partner of Steel. Mr.
Lichtenstein disclaims beneficial ownership of the shares of Common Stock of SPL
owned by Steel (except to the extent of his pecuniary interest in such shares of
Common Stock). During fiscal 2001, SPS received fees of $280,000 from the
Company for services rendered under the Management Agreement. These payments
represented in excess of five percent of the Company's consolidated gross
revenues and SPS's consolidated gross revenues during fiscal 2001. During fiscal
2002, SPS and SPL received fees of $70,000 and $210,000, respectively, for
-14-
services rendered under the Management Agreement. These payments in the
aggregate represented in excess of five percent of the Company's consolidated
gross revenues for the fiscal year. The payments to each of SPS and SPL
represented in excess of five percent of SPS's and SPL's consolidated gross
revenues, respectively, for the fiscal year.
Until July 26, 2001, the products and services of Oaktree were
marketed, in part, by MDM Technologies, Inc. ("MDM"), an entity which was
principally controlled by the Company's Chairman and Chief Executive Officer,
pursuant to a reciprocal agency agreement, dated March 21, 2000. During the year
ended December 31, 2001, the Company had sales to MDM of $86,235 and accounts
receivable from MDM of $86,235. During 2001, the Company phased out the joint
marketing arrangement with MDM and developed internal marketing strategies. No
sales were made to MDM during the year ended December 31, 2002 and the Company
had no outstanding receivables from MDM for the year ended December 31, 2002.
-15-
PROPOSAL II--RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Audit Committee has appointed Grant Thornton LLP as the
Company's independent public accountants for the fiscal year ending December 31,
2003. Although the selection of auditors does not require ratification, the
Audit Committee has directed that the appointment of Grant Thornton LLP be
submitted to stockholders for ratification due to the significance of such
appointment. If stockholders do not ratify the appointment of Grant Thornton
LLP, the Audit Committee will consider the appointment of other certified public
accountants. The approval of the proposal to ratify the appointment of Grant
Thornton LLP requires the affirmative vote of a majority of the votes cast by
holders of the Common Stock.
The Company's auditors for the fiscal year ended December 31, 2002
were Grant Thornton LLP. The Company does not expect a representative of Grant
Thornton LLP to be present at the Meeting.
FEES BILLED TO COMPANY BY GRANT THORNTON LLP DURING FISCAL 2002
AUDIT FEES: Fees billed to the Company by Grant Thornton LLP during
the Company's 2002 fiscal year for the audit of the Company's annual financial
statements and the review of those financial statements included in the
Company's quarterly reports on Forms 10-QSB totaled approximately $66,950.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: The
Company did not engage Grant Thornton LLP to provide advice to the Company
regarding financial information systems design and implementation during the
fiscal year ended December 31, 2002.
ALL OTHER FEES: Fees billed to the Company by Grant Thornton LLP
during the fiscal year ended December 31, 2002 for all other non-audit services
rendered to the Company, including tax related services, totaled approximately
$21,800.
The Audit Committee has considered whether the provision by Grant
Thornton LLP of services covered by the fees other than the audit fees is
compatible with maintaining Grant Thornton's independence, and believes that it
is compatible.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
YEAR ENDING DECEMBER 31, 2003.
-16-
ANNUAL REPORT
All stockholders of record as of the Record Date have been sent, or
are concurrently herewith being sent, a copy of the Company's 2002 Annual Report
for the year ended December 31, 2002, which contains certified financial
statements of the Company for the year ended December 31, 2002.
ANY STOCKHOLDER OF THE COMPANY MAY OBTAIN WITHOUT CHARGE A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2002
(WITHOUT EXHIBITS), INCLUDING THE COMPANY'S CERTIFIED FINANCIAL STATEMENTS, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY WRITING TO THE CORPORATE
SECRETARY, GATEWAY INDUSTRIES, INC., 590 MADISON AVENUE, 32ND FLOOR, NEW YORK,
NEW YORK 10022.
STOCKHOLDER PROPOSALS
Stockholder proposals made in accordance with Rule 14a-8 under the
Exchange Act and intended to be presented at the Company's 2004 Annual Meeting
of Stockholders must be received by the Company at its principal office in New
York, New York no later than July 23, 2004. Such proposals should be addressed
to the Corporate Secretary, Gateway Industries, Inc., 590 Madison Avenue, 32nd
Floor, New York, New York 10022.
On May 21, 1998, the SEC adopted an amendment to Rule 14a-4, as
promulgated under the Exchange Act. The amendment to Rule 14a-4(c)(1) governs
the Company's use of its discretionary proxy voting authority with respect to a
stockholder proposal which is not addressed in the Company's proxy statement.
The new amendment provides that if a proponent of a proposal fails to notify the
Company at least 45 days prior to the month and day of mailing of the prior
year's proxy statement, then the Company will be allowed to use its
discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement. If during the prior
year the Company did not hold an annual meeting, or if the date of the annual
meeting has changed more than 30 days from the prior year, then notice must not
have been received a reasonable time before the Company mails its proxy
materials in order for the Company to be allowed to use its discretionary voting
authority when the proposal is raised. With respect to the Company's 2004 Annual
Meeting of Stockholders, if the Company is not provided notice of a stockholder
proposal, which has not been timely submitted, for inclusion in the Company's
proxy statement by October 6, 2004, the Company will be permitted to use its
discretionary voting authority as outlined above.
As of the date of this Proxy Statement, management knows of no
matters other than those set forth herein which will be presented for
consideration at the Meeting.
Maritza Ramirez
CHIEF FINANCIAL OFFICER
November 20, 2003
-17-
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GATEWAY INDUSTRIES, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 18, 2003
The undersigned, a stockholder of Gateway Industries, Inc., a
Delaware corporation (the "Company"), does hereby appoint Warren G. Lichtenstein
and Jack L. Howard, and each of them, the true and lawful attorneys and proxies
with full power of substitution, for and in the name, place and stead of the
undersigned, to vote all of the shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present at the 2003 Annual
Meeting of Stockholders of the Company to be held at the Marriott Midtown East
Courtyard, located at 866 Third Avenue, New York, New York 10022, on December
18, 2003 at 11:00 A.M., local time, or at any adjournment or adjournments
thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
ANNUAL MEETING OF STOCKHOLDERS OF
GATEWAY INDUSTRIES, INC.
DECEMBER 18, 2003
PLEASE DATE, SIGN AND MAIL
YOUR PROXY CARD IN THE
ENVELOPE PROVIDED AS SOON
AS POSSIBLE
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED
--------------------------------------------------------------------------------
THE UNDERSIGNED HEREBY INSTRUCTS SAID PROXIES OR THEIR SUBSTITUTES:
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE /X/
1. ELECTION OF DIRECTORS: The election of the nominees listed below to the
Board of Directors, to serve until the 2004 Annual Meeting of Stockholders
and until their respective successors are elected and shall qualify.
NOMINEES:
/ / FOR ALL NOMINEES / / Warren G. Lichtenstein
/ / Jack L. Howard
/ / WITHHOLD AUTHORITY / / Ronald W. Hayes
FOR ALL NOMINEES / / Gary W. Ullman
/ / FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any
individual nominee(s), mark "FOR ALL EXCEPT" and fill in
the circle next to each nominee you wish to withhold, as
shown here: /X/
2. TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS:
/ / FOR / / AGAINST / / ABSTAIN
3. DISCRETIONARY AUTHORITY:
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER AND FURTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS
HEREINBEFORE GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED TO ELECT DIRECTORS AND TO RATIFY THE
APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
The undersigned hereby revokes any proxy or proxies
heretofore given, and ratifies and confirms that all the
proxies appointed hereby, or any of them, or their
substitutes, may lawfully do or cause to be done by virtue
hereof.
____________________________________________________________
To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s) on
the account may not be submitted via this method. / /
Signature of Stockholder ______________ Date _______________
Signature of Stockholder ______________ Date _______________
NOTE: Please sign exactly as your name or names appear on
this Proxy. When shares are held jointly, each holder
should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title
as such. If the signer is a corporation, please sign
with full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership,
please sign with full partnership name by duly
authorized person, signing full title as such.