-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R/1nJOeqnSVllQuxdo2UjAcOan7e6VJtvrRh+ZlmFTlv2qjertDuVdm3+vFbeAgU EEWh84CwQa5VlLtynRNOVg== 0000950116-97-000014.txt : 19970107 0000950116-97-000014.hdr.sgml : 19970107 ACCESSION NUMBER: 0000950116-97-000014 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961221 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970106 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GATEWAY INDUSTRIES INC /CA/ CENTRAL INDEX KEY: 0000725876 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 953702929 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13803 FILM NUMBER: 97501655 BUSINESS ADDRESS: STREET 1: 101-01 FOSTER AVENUE CITY: BROOKLYN STATE: NY ZIP: 11236 BUSINESS PHONE: 7182729700 MAIL ADDRESS: STREET 1: 101-01 FOSTER AVENUE CITY: BROOKLYN STATE: NY ZIP: 11236 FORMER COMPANY: FORMER CONFORMED NAME: GATEWAY COMMUNICATIONS INC DATE OF NAME CHANGE: 19920703 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) December 21, 1996 ----------------- GATEWAY INDUSTRIES, INC. --------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 0-13803 33-0637631 --------------- ---------------- ------------------- (State or other (Commission File (IRS Employer jurisdiction of Number) Identification No.) incorporation) 750 Lexington Avenue, 27th Floor, New York, NY 10022 - ------------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code 212-446-5217 ------------ 1375 Fourth Street, Suite 202, Santa Rosa, CA ------------------------------------------------------------ (Former Name or Former Address, If Changed Since Last Report) Item 2. Acquisition or Disposition of Assets. On December 21, 1996, Gateway Industries, Inc. (the "Company") sold all the outstanding shares of its wholly-owned subsidiary, Marsel Mirror and Glass Products, Inc. ("Marsel"), to Richard A. Hickland, pursuant to a Stock Purchase Agreement dated that date. Mr. Hickland paid $1.00 for the shares, and he and Marsel gave the Company the right to purchase 50% of the then outstanding shares until December 21, 1999 for $2.00. In addition, the Stock Purchase Agreement contains provisions relating to the allocation between the Company and Mr. Hickland and/or Marsel of sums from sale or liquidation of Marsel or the sale of equity in Marsel by Mr. Hickland or Marsel including the reimbursement of $75,000 previously delivered by the Company to Marsel's lender as cash collateral for loans to Marsel, and of certain guarantees previously issued by the Company to certain of Marsel's venders. The accompanying pro forma financial statements assume that the Company will be required to make payment on the guarantees and will not be reimbursed by Marsel. The Company does not believe that it will have any further liabilities with respect to Marsel or that continuing losses at Marsel will have any adverse effect on the Company's financial condition. The purchase price and terms were determined in arms' length negotiations between the Company and Mr. Hickland, following the expiration of Marsel's credit facility with Fleet National Bank and said bank's demand for immediate repayment of all outstanding balances, Marsel's failure to negotiate a financing agreement with a new commercial lender, the failure of National Bank of Canada to extend the expiration date of a letter of credit beyond December 31, 1996 and continuing losses at Marsel. There was no material relationship between the Company or any of its affiliates, or between any director or officer of the Company or any associate of any such director or officer, and Mr. Hickland prior to said transaction. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (b) Pro Forma Financial Information. The following pro forma financial information is filed herewith: - Pro Forma Statement of Operations for Year ended December 31, 1995 - Pro Forma Statement of Operations for nine months ended September 30, 1996 - Pro Forma Balance Sheet as at September 30, 1996 - Notes to Pro Forma Financial Statements (c) Exhibits. Exhibit 1................................. Stock Purchase Agreement, dated December 21, 1996, between Gateway Industries, Inc. and Richard A. Hickland SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Gateway Industries. Inc. (Registrant) By: /s/ Warren G. Lichtenstein ----------------------------------- Warren G. Lichtenstein, Chairman of the Board and Principal Financial and Accounting Officer Gateway Industries, Inc. Pro Forma Financial Statements (Unaudited) Gateway Industries, Inc. Pro Forma Financial Statements Basis of Presentation (Unaudited) The following pro forma balance sheet as of September 30, 1996 and the statements of operations for the year ended December 31, 1995, and the nine months ended September 30, 1996 give effect to the transactions described in Note 1 to the pro forma financial statements. The pro forma information is based on historical financial statements of Gateway Industries, Inc. (the "Company") and Marsel Mirror and Glass Products, Inc. ("Marsel"), giving effect to the transactions under the assumptions and adjustments in the accompanying notes to the pro forma financial statements. The pro forma balance sheet at September 30, 1996 gives effect to the transactions as if they occurred on the balance sheet date. The pro forma statements of operations for the year ended December 31, 1995 and the nine months ended September 30, 1996 give effect to these transactions as if they occurred at the beginning of the respective periods presented. The pro forma financial statements have been prepared by the Company's management based upon the historical financial statements of the Company and Marsel. These pro forma financial statements may not be indicative of the results that actually would have occurred if the disposition had been in effect on the dates indicated. The pro forma financial statements should be read in conjunction with the historical financial statements and notes contained elsewhere herein, and in the the Company's annual report on Form 10KSB and Company's quarterly report on Form 10QSB. Gateway Industries, Inc. Pro Forma Statement of Operations (Unaudited) Year Ended December 31, 1995
Gateway Industries, Pro Forma Inc. Historical Adjustments Pro Forma -------------------- ---------------------- --------------------- Net sales $ 1,669,000 $ (1,669,000) (A) $ - Cost of sales 1,435,000 (1,435,000) (A) - -------------------- ---------------------- --------------------- Gross profit 234,000 (234,000) - Sales and marketing 168,000 (168,000) (A) - General and administrative expenses 285,000 (197,000) (A) 216,000 (B) 338,000 -------------------- ---------------------- --------------------- Operating loss (219,000) (119,000) (338,000) Other income (expense): Interest income 173,000 - (A) 173,000 Interest expense (67,000) 66,000 (A) (1,000) Other income 1,000 - (A) 1,000 Loss on sale of investment - (1,400,000) (A) (1,400,000) Write down of investment to fair value - (1,400,000) (D) (1,400,000) -------------------- ---------------------- --------------------- Total other income (expense) 107,000 (2,734,000) (2,627,000) -------------------- ---------------------- --------------------- Net loss $ (112,000) $ (2,853,000) $ (2,965,000) ==================== ====================== =====================
Gateway Industries, Inc. Pro Forma Statement of Operations (Unaudited) Nine Months Ended September 30, 1996
Gateway Industries, Pro Forma Inc. Historical Adjustments Pro Forma -------------------- ---------------------- -------------------- Net sales $ 13,447,000 $ (13,447,000) (A) $ - Cost of sales 12,179,000 (12,179,000) (A) - -------------------- ---------------------- -------------------- Gross profit 1,268,000 (1,268,000) - Sales and marketing 1,072,000 (1,072,000) (A) - General and administrative expenses 1,318,000 (1,194,000) (A) 250,000 (B) 374,000 -------------------- ---------------------- -------------------- Operating loss (1,122,000) 748,000 (374,000) Other income (expense): Interest income 22,000 - (A) 22,000 Interest expense (574,000) 574,000 (A) - Other income 30,000 - (A) 30,000 Loss on sale of investment - (1,302,000) (A) (1,302,000) Write down of investment to fair value - (1,301,000) (D) (1,301,000) -------------------- ---------------------- -------------------- Total other income (expense) (522,000) (2,029,000) (2,551,000) -------------------- ---------------------- -------------------- Net loss $ (1,644,000) $ (1,281,000) $ (2,925,000) ==================== ====================== ====================
Gateway Industries, Inc. Pro Forma Balance Sheet (Unaudited) September 30, 1996
Gateway Industries, Pro Forma Inc. Historical Adjustments Pro Forma -------------------- ---------------------- -------------------- Current assets: Cash and cash equivalents: Unrestricted $ 6,080,000 $ (16,000) (A) $ 6,064,000 Restricted - 75,000 (C) 75,000 Accounts receivable, less allowance for doubtful accounts 2,485,000 (2,482,000) (A) 3,000 Inventories 2,435,000 (2,435,000) (A) - Prepaid expenses and other current assets 285,000 (285,000) (A) - ------------------ ------------------------ ------------------ Total current assets 11,285,000 (5,143,000) 6,142,000 Property, plant and equipment, at cost, less accumulated depreciation 6,537,000 (6,537,000) (A) - ------------------ ----------------------- ------------------ Total assets $ 17,822,000 (11,680,000) $ 6,142,000 ================== ======================== ================== Current liabilities: Accounts payable $ 1,141,000 (1,128,000) (A) $ 13,000 Accrued expenses and other liabilities 955,000 (866,000) (A) 89,000 Short-term financing 3,225,000 (3,225,000) (A) - Bond payable 4,780,000 (4,780,000) (A) - Current portion of capital lease obligations 67,000 (67,000) (A) - ------------------ ------------------------ ------------------ Total current liabilities 10,168,000 (10,066,000) 102,000 Accounts payable, less current portion 300,000 (300,000) (A) - Capital lease obligations, less current portion 144,000 (144,000) (A) - Other long-term liabilities 70,000 250,000 (B) 320,000 ------------------ ------------------------ ------------------ Total liabilities 10,682,000 (10,260,000) 422,000 Shareholders' Equity: Preferred stock - - - Common stock 4,000 - 4,000 Capital in excess of par value 9,596,000 - 9,596,000 Accumulated Deficit (2,414,000) (585,000) (A) (250,000) (B) (585,000) (D) (3,834,000) Treasury stock (46,000) - (46,000) ------------------ ------------------------ ------------------ Total shareholders' equity 7,140,000 (1,420,000) 5,720,000 ------------------ ------------------------ ------------------ Total liabilities and shareholders' equity $ 17,822,000 $ (11,680,000) $ 6,142,000 ================== ======================== ==================
Gateway Industries, Inc. Notes to Pro Forma Financial Statements (Unaudited) 1. Summary of Transaction On December 21, 1996, Gateway Industries, Inc. (the "Company") sold all outstanding shares of its wholly-owned subsidiary, Marsel Mirror and Glass Products, Inc. ("Marsel"), to an unrelated third party for $1.00, pursuant to a Stock Purchase Agreement (the "Agreement"). Under the Agreement, the Company has the right to purchase 50% of the outstanding shares of Marsel until December 21, 1999 for $2.00. In addition, the Agreement contains provisions relating to the allocation between the Company and the unrelated third party of sums from the sale or liquidation of Marsel or the sale of equity in Marsel by the unrelated third party. The purchase price and terms were determined by the Company and the unrelated third party following the expiration of Marsel's credit facility and said bank's demand for immediate repayment of all outstanding balances, Marsel's failure to negotiate a financing agreement with a new commercial lender, the failure of Marsel to obtain the extension of a letter of credit securing its bond obligations beyond December 31, 1996 and Marsel's continuing losses. Since the Company has a contingent 50% interest in Marsel, the above transaction has not been accounted for as a discontinued operation. On December 23, 1996, Marsel filed for bankruptcy under chapter 11 of the Bankruptcy code. 2. Pro Forma Adjustments (A) To record the sale of the outstanding shares of its subsidiary, Marsel, to an unrelated third party for $1.00 and to eliminate the assets and liabilities and sales, cost of sales and expenses of Marsel. (B) To accrue for the guarantee made by the Company on behalf of Marsel. (C) To record escrow payment made to Marsel's lender. (D) To record the write down of investment in Marsel to fair value reflecting the fact that Marsel is in bankruptcy. EX-1 2 EXHIBIT 1 EXHIBIT 1 STOCK PURCHASE AGREEMENT THIS AGREEMENT made the 21st day of December, 1996, by and between GATEWAY INDUSTRIES, INC., a Delaware Corporation, having an address c/o Warren G. Lichtenstein, 750 Lexington Avenue, New York, New York, hereinafter the "Seller", and RICHARD A. HICKLAND, of P.O. Box 543, Salem, New York, hereinafter the "Purchaser". WHEREAS, the Seller owns all of the issued and outstanding shares of MARSEL MIRROR AND GLASS PRODUCTS, INC. (hereinafter the "Company"), a New York Corporation, having its principal place of business at 101 Foster Avenue, Brooklyn, New York; and WHEREAS, the Seller desires to sell and the Purchaser desires to purchase such shares on the terms herein stated; NOW, THEREFORE, the parties agree as follows: 1. Sale of Shares: The Seller shall sell and transfer to the Purchaser, and the Purchaser purchases and acquires from the Seller, all of the outstanding shares of the Company consisting of 200 shares of common stock and 2600 shares of preferred stock simultaneously with the execution hereof. 2. Purchase Price: The purchase price for said shares is One Dollar ($1.00). 3. Seller's Representations and Warranties: The Seller represents and warrants to the Purchaser as follows: a. Corporate Status: The Company is, and will be on the closing date, a corporation duly organized, validly existing and in good standing under the laws of the State of New York; copies of the Company's certificate of incorporation and all amendments thereof to date are annexed hereto and made a part hereof. b. Title to Shares: The Seller is, and will be on the closing date, the owner, free and clear of any encumbrances, of all of the outstanding shares of the common and preferred stock of the Company. c. Seller's Authority to Sell: The sales of the shares of the company as aforesaid has been authorized by a vote of the Board of Directors of the Seller. A copy of the resolution authorizing such sale is annexed hereto and made a part hereof and the original shall be delivered to the Purchaser at closing. d. Payroll Taxes: To the best of the Seller's knowledge, the Company has paid all taxes commonly known as "payroll taxes" due and payable up to and including the date of closing. The Seller shall indemnify and hold harmless the Purchaser at all times after the date of this agreement against and in respect of all payroll taxes arising prior to the date hereof for which the Purchaser may become liable. 4. Option to Re-Purchase: The Purchaser, individually and on behalf of the Company, hereby grants to the Seller the right to purchase Fifty Percent (50%) of all of the then issued and outstanding shares of stock of the Company for the sum of Two Dollars ($2.00), said option to expire three (3) years from the date of this agreement. The said option shall be exercised by the Seller giving notice thereof to the Purchaser at the addresses set forth herein for notices. Promptly following the exercise of the option, Purchaser shall cause the Company to issue a stock certificate for such shares. 5. Closing: The closing of the sale shall take place at 101 Foster Avenue, Brooklyn, New York, simultaneously with the execution hereof. At closing, the Seller shall deliver to the Purchaser, free and clear of all encumbrances, certificates for the shares which it is required to sell in negotiable form. The Seller shall also deliver the original certificate of incorporation, together with any amendments thereto, and any and all minutes, by-laws, resolutions and the like. 6. Escrow Account and Guarantees to Vendors: The Seller has deposited with Fleet Bank the sum of $75,000.00 to be held in escrow pursuant to the conditions of a certain loan from Fleet Bank to the Company. The Seller has also issued its guarantees, contingent or otherwise, on behalf of the Company not exceeding $250,000.00. Any sums not returned to Seller from the escrow or paid by Seller under the guarantees shall be payable by the Company from the sale or liquidation of the Company, or by the Purchaser from the proceeds of the sales of any equity in the Company by either the Purchaser or the Company. The remaining sums from the sale or liquidation as aforesaid shall be divided equally between the parties. In the event that the Company is not sold or liquidated, any portion of the escrow account forfeited to the bank or any payment made by the Seller to the vendors pursuant to the guarantees, will be repaid to the Seller from excess cash flow beginning two years from the date of the sale or at such earlier time as the Purchaser, in his discretion, may determine. The Company shall be liable for the obligations created in this paragraph and the Seller shall not be personally obligated therefor except as expressly provided for herein. 7. Survival of Representations and Warranties: All representations and warranties contained herein shall survive the closing. 8. Notices: All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by mail or facsimile transmission. If to the Seller: Warren G. Lichtenstein 750 Lexington Avenue New York, New York 10022 Fax: (212-446-5240) With a copy to: Robert W. Forman, Esq. 1370 Avenue of the Americas New York, New York 10019 Fax: (212-757-4054) If to the Purchaser: Richard A. Hickland P.O. Box 543 Salem, New York 12865 Fax: (518-854-9501) With a copy to: Carusone and Carusone 491 Broadway, P.O. Box 478 Saratoga Springs, New York 12866 Fax: (518-584-7451) 9. Release: Upon transfer of the shares at closing, the Purchaser shall cause the Company to release Gateway and its officers, directors, agents, employees and affiliates, except as provided for herein. 10. Assignability: This agreement may be assigned by the Purchaser to his wife and/or children who, upon such assignment, shall become bound by the terms of this agreement. IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day and date first above written. GATEWAY INDUSTRIES, INC. By: /s/ WARREN G. LICHTENSTEIN ----------------------------------- WARREN G. LICHTENSTEIN /s/ RICHARD A. HICKLAND ----------------------------------- RICHARD A. HICKLAND -----END PRIVACY-ENHANCED MESSAGE-----