sec document

DEF 14A 1 formdef14a04162_12022002.htm sec document

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 /X/

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 2, 2002
--------------

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 offices of Olshan Grundman Frome Rosenzweig & Wolosky
LLP, located at 505 Park Avenue, New York, New York 10022, on December 2, 2002
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, 2002; 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
4, 2002 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

Maritza Ramirez
Chief Financial Officer

Dated: November 7, 2002
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.
150 EAST 52ND STREET, 21ST FLOOR
NEW YORK, NEW YORK 10022
----------------

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS

DECEMBER 2, 2002
----------------

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 2002 Annual Meeting of Stockholders of the Company (the "Meeting") to
be held at the offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP,
located at 505 Park Avenue, New York, New York 10022, on December 2, 2002, 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 7,
2002.

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, 2002; 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 4,
2002, 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 4,192,087 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
year ending December 31, 2002 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 $5,000, 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, abstentions and 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, shares as to which a stockholder
abstains are considered shares entitled to vote on the proposal and therefore an
abstention would have the effect of a vote against such proposal. Broker
non-votes, however, are not considered shares entitled to vote on the proposal
and are not included in determining whether the proposal is approved.

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, the Chief Executive Officer, 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
150 East 52nd Street, 21st 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 1,796,341(2) 42.0%

Ronald W. Hayes 110,840(3) 2.6%
810 Saturn Street, Suite 16-432
Jupiter, Florida 33477-4398

Jack L. Howard 179,387(4) 4.2%

Gary W. Ullman 17,000(5) *
420 Woodland Acres Crescent
Maple, Ontario
Canada L6A1G2

George Soros 827,716(6) 19.7%
Soros Management LLC
888 Seventh Avenue
New York, NY 10022

All directors and executive officers 2,148,568(7) 47.5%
as a group (seven persons)

-3-

-----------------
* 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"), (ii) 38,800 shares of Common
Stock owned directly by Mr. Lichtenstein, and (iii) 83,333 shares of
Common Stock issuable upon the exercise of options within 60 days of
the Record Date granted to Mr. Lichtenstein. Mr. Lichtenstein is the
sole managing member of the general partner of 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) 62,500 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) 124,167 shares of Common Stock issuable upon the
exercise of options within 60 days of the Record Date granted to Mr.
Howard.

(5) Consists of 17,000 shares of Common Stock issuable upon the exercise
of options within 60 days of the Record Date.

(6) As reported in the stockholder's most recent Schedule 13D.

(7) Includes the shares and options shown in footnotes (2) to (5) above
and 45,000 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.

-4-

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 37 1994

Jack L. Howard 41 1994

Ronald W. Hayes 64 1993

Gary W. Ullman 61 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 President and Chief Executive
Officer since December 1997. 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
Caribbean Fertilizer Group Ltd., a private company engaged in the production of

-5-

agricultural products in Puerto Rico and Jamaica, since June 2000. Mr.
Lichtenstein is also a director of the following publicly held companies:
Puroflow Incorporated, a designer and manufacturer of precision filtration
devices; ECC International Corp., a manufacturer and marketer of
computer-controlled simulators for training personnel to perform maintenance and
operator procedures on military weapons; and United Industrial Corporation, a
designer and producer of defense, training, transportation and energy systems.

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 a director of the following publicly held companies: Pubco Corporation, a
printing supplies and construction equipment manufacturer and distributor; and
Castelle, a maker and marketer of application server appliances.

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 been Chairman and Chief Executive Officer of HMR Foods,
Inc., a food conglomerate in the home meal replacement business, since September
2002. 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.

-6-

MEETINGS

The Board of Directors held two meetings during the year ended
December 31, 2001. All of the members of the Board of Directors attended at
least 75% of the meetings. 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 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, 2001, the
Compensation Committee was composed of Ronald Hayes and Gary Ullman. The
Compensation Committee did not hold any meetings during the year ended December
31, 2001.

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 one meeting
during the year ended December 31, 2001. For the fiscal year ended December 31,
2001, 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 drafting a new charter for the
Audit Committee that complies with The Sarbanes-Oxley Act of 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, 2001. 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
Securities Exchange Act of 1934, as amended (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.

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, 2001. 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

-7-

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, 2001.

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 44) 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 Steel Partners
Services, Ltd. ("SPS"), a management and advisory company, from August 1999
through March 2002. SPS 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 SPS. He has also served as
Vice President of Operations of WebFinancial Corporation. Mr. Henderson has
served as a director since December 1999 and acting Chief Executive Officer
since July 2002 of ECC International Corp. He has served as a director of SL
Industries, Inc. since January 2002. 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.

MARITZA RAMIREZ (age 42) has served as Chief Financial Officer of
the Company since May 2002 and as Chief Financial Officer of Oaktree Systems,
Inc., the Company's operating subsidiary, 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.

-8-

STEVEN WOLOSKY (age 46) 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,
2001, 2000 and 1999 to the Company's Chief Executive Officer. No other executive
officer of the Company received annual compensation in excess of $100,000 during
the fiscal year ended December 31, 2001.

Long-Term
Annual Compensation Compensation

Securities
Fiscal Underlying
Name and Principal Position Year Salary($)(1) Bonus($) Options(#)
--------------------------- ---- ------------ -------- ----------

Warren Lichtenstein, Chairman 2001 -- -- 50,000
and Principal Executive Officer 2000 -- -- --
1999 -- -- 50,000

--------------------

(1) For information relating to the management functions performed by
Steel Partners, Ltd. and SPS, entities controlled by Warren
Lichtenstein, please see "Certain Relationships and Related
Transactions."

OPTION GRANTS TABLE

The following table sets forth information relating to an option
grant to Mr. Lichtenstein during the fiscal year ended December 31, 2001.

Number of Percent of Total
Securities Options Granted to
Underlying Employees in Exercise
Name Options(#) Fiscal Year Price($/sh) Expiration Date
---- ---------- ----------- ----------- ---------------
Warren 50,000(1) 20.6% .98 12/19/06
Lichtenstein

--------------------
(1) Vests in three equal annual installments beginning on December 19,
2001 and becomes exercisable on December 19, 2002.

-9-

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE

Mr. Lichtenstein did not exercise any options as of December 31,
2001. The following table sets forth certain information regarding unexercised
stock options held by Mr. Lichtenstein as of December 31, 2001:

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($)(1)
---- -------------------- ---------------

Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------

Warren Lichtenstein 50,000/50,000 0/0

--------------------

(1) Based on the market value, as reported on the OTC Bulletin Board, of
$.98 per share of Common Stock at December 31, 2001.

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 an aggregate of 312,000 options to purchase Common Stock
of the Company at exercise prices ranging from $.98 to $4.25 per share.

-10-

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 790,000 $2.38 60,000
plans approved by security
holders(1)

Equity compensation 0 0 0
plans not approved by
security holders

Total 790,000 $2.38 60,000

--------------------

(1) Consists of Amended and Restated 1990 Incentive Stock Option Plan
and 1990 Nonstatutory stock option plan.

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.

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 10% 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, 2001, that there was
compliance with all Section 16(a) filing requirements applicable to its
officers, directors and 10% stockholders.

-11-

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to a Management Agreement approved by a majority of the
Company's disinterested directors, SPS provided the Company with office space
and certain management, consulting and advisory services. The Management
Agreement is automatically renewed on an annual basis until terminated by either
party, at any time and 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. During the fiscal years ended December 31,
2001 and 2000, SPS received fees of $280,000 and $280,000, respectively, from
the Company. These payments represented in excess of five percent of the
Company's consolidated gross revenues and Steel Partners, Ltd.'s consolidated
gross revenues for the applicable fiscal years. 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. and the employees of SPS
became employees of the Steel Partners Services Division of Steel Partners, Ltd.
Warren Lichtenstein, the Company's Chairman of the Board and Chief Executive
Officer, is an affiliate of Steel Partners, Ltd. based on his ownership of Steel
Partners, Ltd., directly and through Steel, and by virtue of his positions as
Chairman, President and Chief Executive Officer of Steel Partners, Ltd. 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
Steel Partners, Ltd. owned by Steel (except to the extent of his pecuniary
interest in such shares of Common Stock).

Until July 26, 2001, the products and services of Oaktree Systems,
Inc., the Company's operating subsidiary, were marketed, in part, by MDM
Technologies ("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, 2000, the
Company had sales to MDM of $30,000 and accounts receivable from MDM of $28,000.
During the same period, the Company had purchases from MDM of $54,000 and
accounts payable to MDM of $1,500. 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 with MDM and developed
internal marketing strategies.

-12-

PROPOSAL II--RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS

The Board of Directors has appointed Grant Thornton LLP as the
Company's independent public accountants for the fiscal year ending December 31,
2002. Although the selection of auditors does not require ratification, the
Board 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 Board 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, 2001
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 2001

AUDIT FEES: Audit fees billed to the Company by Grant Thornton LLP
during the Company's 2001 fiscal year for the audit of the Company's annual
financial statements and those financial statements included in the Company's
quarterly reports on Forms 10-QSB totaled approximately $69,000.

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, 2001.

ALL OTHER FEES: Fees billed to the Company by Grant Thornton LLP
during the fiscal year ended December 31, 2001 for all other non-audit services
rendered to the Company, including tax related services, totaled approximately
$27,000.

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, 2002.

-13-

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 2001 Annual Report
for the year ended December 31, 2001, which contains certified financial
statements of the Company for the year ended December 31, 2001.

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, 2001
(WITHOUT EXHIBITS), AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY
WRITING TO THE CORPORATE SECRETARY, GATEWAY INDUSTRIES, INC., 150 EAST 52ND
STREET, 21ST 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 2003 Annual Meeting
of Stockholders must be received by the Company at its principal office in New
York, New York within a reasonable time before the Company begins to print and
mail its proxy materials. The Company will inform stockholders of such date
either in a report filed with the SEC on Form 8-K, 10-QSB or 10-KSB and/or a
press release. Such proposals should be addressed to the Corporate Secretary,
Gateway Industries, Inc., 150 East 52nd Street, 21st 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.

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 7, 2002

-14-

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

GATEWAY INDUSTRIES, INC.

Proxy -- Annual Meeting of Stockholders
December 2, 2002

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 2002 Annual
Meeting of Stockholders of the Company to be held at the offices of Olshan
Grundman Frome Rosenzweig & Wolosky LLP at 505 Park Avenue, New York, New
York 10022, on December 2, 2002 at 11:00 A.M., local time, or at any adjournment
or adjournments thereof.

The undersigned hereby instructs said proxies or their substitutes:

1. ELECTION OF DIRECTORS:

The election of Warren G. Lichtenstein, Jack L. Howard, Ronald W.
Hayes and Gary W. Ullman to the Board of Directors, to serve until the 2003
Annual Meeting of Stockholders and until their respective successors are elected
and shall qualify.

WITHHOLD AUTHORITY
FOR ALL TO VOTE FOR ALL
NOMINEES ___ NOMINEES ___ __________________________________

__________________________________

__________________________________
TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE(S),
PRINT NAME(S) ABOVE.

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.

Dated _______________________, 2002

_____________________________ (L.S.)

_____________________________ (L.S.)
Signature(s)

NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR
HEREON. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE INDICATE THE CAPACITY IN WHICH
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CORPORATION, IT SHOULD BE SIGNED WITH FULL CORPORATE NAME BY
A DULY AUTHORIZED OFFICER.

PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY IN THE
ENVELOPE PROVIDED FOR THIS PURPOSE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.