UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X]  QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2000

                                       or

[ ]  TRANSACTION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ to_______

Commission File Number:  0-25055
                        ---------


                            Galaxy Enterprises, Inc.
                           -------------------------
        (Exact name of small business issue as specified in its charter)


                      Nevada                                 88-031-5212
                --------------                             ----------------
         (State or other jurisdiction of                  (I.R.S. Employer
         incorporation or organization)                   Identification No.)


                     754 Technology Avenue, Orem, Utah 84097
                   ------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (801) 227-0004
                           --------------------------
                           (Issuer's telephone number)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter  period that the  registrant  was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days
Yes [ X ] No [ ].

         State the number of shares  outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of __April 21, 2000__

              Classes of Common Stock               Number of shares outstanding
             --------------------------            -----------------------------
              Common Stock, $.007 par value                      6,218,5449

Transitional Small Business Disclosures Forms
         (Check one):

         Yes [    ]  No [ X ]

<PAGE>

                            Galaxy Enterprises, Inc.

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

                              INDEX TO FORM 10-QSB

                         PART I -- FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)                               Page

         Condensed Consolidated Balance Sheets --
         March 31, 2000 and December 31, 1999............................  3

         Condensed Consolidated Statements of Operations --
         Three Months ended March 31, 2000 and 1999......................  4

         Condensed Consolidated Statements of Cash Flows --
         Three months ended March 31, 2000 and 1999 .....................  5

         Notes to Condensed Consolidated Financial Statements............  6

Item 2.  Management's Discussion and Analysis of

         Financial Condition and Results of Operations...................  7


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings..............................................  12

Item 2.  Changes in Securities and Use of Proceeds......................  12

Item 3.  Defaults Upon Senior Securities................................  12

Item 4.  Submission of Matters to a Vote of Security Holders............  12

Item 5.  Other Information..............................................  12

Item 6.  Exhibits and Reports on Form 8-K...............................  12


<PAGE>

                         PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>

                    Galaxy Enterprises, Inc. and Subsidiaries
            Unaudited Condensed Consolidated Statement of Operations

                                                                 Three Months               Three Months
                                                                     Ended                      Ended
                                                                March 31, 2000             March 31, 1999
                                                               ------------------      ------------------------


 <S>                                                               <C>                           <C>
 REVENUE
   Sales                                                             $ 6,282,626                   $ 2,879,031
   Cost of sales                                                       4,563,186                     1,944,500
                                                               ------------------      ------------------------
                                           GROSS PROFIT                1,719,440                       934,531

 OPERATING EXPENSES
   Selling                                                             2,405,087                     1,281,558
   General and administrative                                          1,136,359                       481,693
   Depreciation                                                           33,611                        25,724
   Amortization                                                           16,545                        14,450
                                                               ------------------      ------------------------
                               TOTAL OPERATING EXPENSES                3,591,602                     1,803,425
                                                               ------------------      ------------------------
                                OPERATING INCOME (LOSS)               (1,872,162)                     (868,894)

 OTHER INCOME (EXPENSES)
   Interest income                                                            35                         2,229
   Other income (expense)                                                (29,130)                       (6,169)
   Interest expense                                                       (4,856)                       (3,639)
                                                               ------------------      ------------------------
                          TOTAL OTHER INCOME (EXPENSES)                  (33,951)                       (7,579)
                                                               ------------------      ------------------------
                      INCOME (LOSS) BEFORE INCOME TAXES               (1,906,113)                     (876,473)

 Income tax expense (benefit)                                                800                       (45,192)
                                                               ------------------      ------------------------

 Income before cumulative effect of
      a change in accounting principal                                (1,906,913)                     (831,281)

 Cumulative effect on prior years of
     accounting change                                                                              (5,450,651)

                                      NET INCOME (LOSS)             $ (1,906,913)                 $ (6,281,932)
                                                               ==================      ========================


 Weighted average shares outstanding:
   Basic and Diluted                                                   5,951,830                     5,625,272

 Net income per share:
   Basic and Diluted                                                   $ (0.320)                     $ (1.117)
                                                               ==================      ========================
</TABLE>
<PAGE>


<TABLE>
<CAPTION>

                                   Galaxy Enterprises, Inc. and Subsidiary
                            Unaudited Condensed Consolidated Balance Sheet as of:

                                                                           Unaudited              Audited
                                                                         March 31, 2000         Dec 31, 1999
                                                                        -----------------     -----------------
<S>                                                                  <C>                    <C>
  ASSETS

CURRENT ASSETS
  Cash                                                                $           81,455    $          132,741
  Trade accounts receivable (net of allowance of
        $984,249 and $677,551 respectively)                                    2,089,525             1,112,947
  Related party trade accounts receivable                                        136,405                52,518
  Inventories                                                                     87,395               102,203
  Prepaid expenses                                                               393,909               336,148
  Prepaid income taxes                                                             5,030                 5,030
  Employee advances                                                               94,170                89,660
  Credit card reserves                                                           447,628               248,431
                                                                        -----------------     -----------------
                                              TOTAL CURRENT ASSETS             3,335,517             2,079,678

EQUIPMENT                                                                        262,456               259,577

OTHER ASSETS
  Goodwill                                                                       833,889               850,434
  Other                                                                           41,342                40,940
                                                                        -----------------     -----------------
                                                                                 875,231               891,374
                                                                        -----------------     -----------------
                                                      TOTAL ASSETS    $        4,473,204    $        3,230,629
                                                                        =================     =================

  LIABILITIES AND EQUITY

CURRENT LIABILITIES
  Trade accounts payable                                              $        1,021,290    $        1,808,482
  Related party trade account payable                                             92,269
  Bank overdraft                                                                 420,274               348,907
  Accrued expenses                                                               438,212               469,286
  Income taxes payable                                                             1,000                 1,100
  Notes payable - current portion                                                543,347               161,486
  Deferred revenue - current portion                                          13,120,224            10,334,844
  Customer deposits                                                              532,439               285,226
                                                                        -----------------     -----------------
                                         TOTAL CURRENT LIABILITIES            16,169,055            13,409,331

DEFERRED REVENUE                                                                 780,661               410,719
NOTES PAYABLE                                                                      4,820                 4,269

STOCKHOLDERS' EQUITY
  Common stock par value $.007, Authorized 25,000,000 shares,
    5,965,449 and 5,947,514 issued and outstanding respectively                   41,757                41,632
  Additional paid-in-capital                                                   2,048,069             2,034,923
  Unearned stock compensation                                                   (153,000)             (159,000)
  Retained earnings                                                          (14,418,158)          (12,511,245)
                                                                        -----------------     -----------------
                              TOTAL STOCKHOLDERS' EQUITY (DEFICIT)           (12,481,332)          (10,593,690)
                                                                        -----------------     -----------------
                                      TOTAL LIABILITIES AND EQUITY    $        4,473,204    $        3,230,629
                                                                        =================     =================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                    Galaxy Enterprises, Inc. and Subsidiaries
            Unaudited Condensed Consolidated Statement of Cash Flows
               For the three months ending March 31, 2000 and 1999

                                                                            2000                      1999
                                                                   -----------------------   -----------------------

<S>                                                                        <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)                                                           $  (1,906,913)            $  (6,281,932)
Adjustments to reconcile net earnings to net
cash flows from (used by)  operating activities:
  Depreciation                                                                     33,611                    25,724
  Amortization                                                                     16,545                    14,450
  Defered Compensation                                                              6,000

  Changes in operating assets and liabilities:
    Increase in accounts receivable                                            (1,060,465)                 (168,781)
    (Increase) decrease in inventories                                             14,808                  (26,000)
    Increase in prepaid expenses                                                  (57,761)                 (469,742)
    (Increase) decrease in credit card reserves                                  (199,197)                  (54,958)
    Increase in employee advances                                                  (4,510)
    Decrease (increase) in other assets                                              (402)                   19,800
    Increase in bank overdraft                                                     71,367
    (Decrease) increase in accounts payable                                      (694,924)                  (42,410)
    Increase (decrease) in accrued expenses                                       (31,074)
    Increase in customer deposits                                                 247,213                    51,561
    (Decrease) increase in accrued income taxes payable                                                     (45,192)
    Increase in deferred revenue                                                3,155,322                 6,183,745
    Increase (decrease) in other current liabilities                                                         30,784
                                                                   -----------------------   -----------------------
          Net cash flows (used by) operating activities                     $    (410,380)            $    (762,951)
                                                                   -----------------------   -----------------------

CASH FLOWS FROM INVESTING ACTIVITIES

  Purchase of equipment                                                           (36,589)                  (52,030)
                                                                   -----------------------   -----------------------
          Net cash used by investing activities                                   (36,589)                  (52,030)
                                                                   -----------------------   -----------------------

CASH FLOWS FROM FINANCING ACTIVITIES

  Cash from notes payable                                                         450,000
  Repayment of notes                                                              (67,588)                  (25,000)
  Common stock issued for cash                                                     13,271                 1,454,500
                                                                   -----------------------   -----------------------
          Net cash flows from financing activities                                395,683                 1,429,500
                                                                   -----------------------   -----------------------

NET INCREASE (DECREASE) IN CASH                                                   (51,286)                  614,519

CASH AT THE BEGINNING OF THE PERIOD                                               132,741                    24,718
                                                                   -----------------------   -----------------------
CASH AT THE END OF THE PERIOD                                               $      81,455             $     639,237
                                                                   =======================   =======================
</TABLE>
<PAGE>

                            GALAXY ENTERPRISES, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

In the opinion of management,  the accompanying  unaudited interim  consolidated
financial  statements  reflect all  adjustments,  consisting of normal recurring
adjustments,  necessary to present fairly the financial position, and results of
operations and cash flows of Galaxy  Enterprises,  Inc. ("the "Company") for the
respective  periods  presented.  The results of operations for an interim period
are not  necessarily  indicative  of the results,  which may be expected for any
other interim period, or for the year as a whole.

Certain  information  and footnote  disclosures  normally  included in financial
statements presented in accordance with generally accepted accounting principles
have been omitted.  The accompanying  unaudited interim  consolidated  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements and notes in the Company's  Form 10-KSB for the year ending  December
31, 1999. All  inter-company  accounts and transactions  have been eliminated in
consolidation.

Revenue Recognition

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 - Revenue  Recognition in Financial  Statements  (SAB 101). SAB
101  provided   guidance  on  various  revenue   recognition   issues  including
nonrefundable  fees received upon entering into arrangements to provide products
or services. The Company receives such fees on many of the products and services
it provides.  In prior years,  the Company  recognized  such fees at the time of
sale based on the belief that its ongoing obligation did not involve significant
cost or effort and should not impact revenue recognition. Upon evaluation of the
accounting  requirements of SAB 101, the Company determined that it was required
to adopt SAB 101's  provisions  and that revenue  recognition  will more closely
parallel  the time  period  over which the  revenue is earned.  Adoption  of the
applicable  provisions  of SAB 101 is to be reported  as a change in  accounting
principle in accordance with APB Opinion No. 20, Accounting Changes.

As a result of applying  SAB 101,  the Company  adopted new revenue  recognition
policies. Such policies are as follows:

Revenue  from  customer  web site  hosting and related  products and services is
deferred and  recognized  over a twenty-four  month period which  represents the
twelve  months in which a customer can activate a web site plus twelve months of
free hosting upon  activation.  Revenue from web site hosting rights that expire
is recognized at the point of expiration.  Revenue from manufactured  multimedia
products is recognized when products are shipped. Fees received from the sale of
third-party  merchant  credit card  processing  services  are  reported on a net
basis.  On  a  quarterly  basis,  management  reviews  all  aspects  of  revenue
recognition  and adjusts  recognition  of revenue as  required,  based on actual
activation and expiration experience.

At the time of adoption in December 1999, the Company recorded a charge of $5.45
million, which represented the cumulative effect on prior years of the change in
accounting principle regarding revenue recognition.  The adoption of this change
was reflected in the  Company's  annual report filed on Form 10-KSB for the year
ended  December  31,  1999 and was  effective  for all of 1999.  Therefore,  the
accompanying  unaudited  consolidated financial statements for the quarter ended
March 31, 1999 have been adjusted to reflect the  cumulative  effect  adjustment
and the adoption of the new revenue recognition policies.

Credit Card Reserves

Credit card reserves  represent  amounts of money due the Company from banks and
credit card processing  companies who have handled Visa,  Master Card,  American
Express and  Discover  Card  transactions.  The Company  establishes  an account
receivable  at the time the  customer's  credit card is charged.  Later when the
cash is received from a credit card  processing  company and placed in a Company
bank account the receivable is credited.  Some processing  companies require the
Company  to leave on deposit  with them an amount of money  equal to 5% of daily
credit card transactions  until a limit is reached.  The limit is normally equal
to one half month's processing volume.  These deposits are also included in this
category.

Customer Deposits

Customer  Deposits  represent  advance  payments  made by some  customers to the
Company at the time an order is placed. The prepayment is between 33% and 67% of
the total purchase price. The customer is invoiced for the difference when title
to the products transfers to the customer.

Also  included in this  category  are amounts  withheld  from sales  commissions
earned by outside telemarketing  companies. It is anticipated that some customer
refunds will be made from these sales and the company retains a small percentage
of the  commissions  earned to assure  recovery of the sales  commissions in the
event that the telemarketing company is no longer earning commissions.  There is
a  contractual  limit to the amount of reserve  the  Company  is  authorized  to
retain.  Six months after termination of services by the  telemarketing  company
any unused reserve will be given to the contractor.


Item 2.  Management's Discussion and Analysis or Plan of Operation

The  following  discussion  and analysis of financial  condition  and results of
operations   should  be  read  in  conjunction  with  the  Unaudited   Condensed
Consolidated Financial Statements and Notes thereto included elsewhere herein.

Results of Operations

Three months  ended March 31, 2000  compared to the three months ended March 31,
1999.

Revenues.  The Company's sales for the three-month  period ending March 31, 2000
were  $6,282,626 as compared to $2,879,031  for the similar  period ending March
31, 1999,  an increase of 118%.  This sales  comparison  between the two periods
should  only be made  taking  into  account  the change in  revenue  recognition
policies as described in the notes to the financial statements.  The increase in
sales was  partially  due to  increased  attendance  at the  Company's  Internet
training workshops.  During the first three months of 2000 the Company conducted
83 workshops  compared  with 38 for the similar  period in 1999. In addition the
Company's Impact Media division contributed  $1,058,684 in sales. Impact Media's
assets were  purchased on May 31, 1999 so there were no  corresponding  sales in
the first quarter of 1999.

Cost of  Services/Products  Sold. Cost of sales during the first quarter of 2000
totaled  $4,563,186,  which is equal to 72.5% of revenues.  Cost of sales during
the  first  quarter  of 1999  totaled  $1,944,500,  which  is  equal to 67.5% of
revenues.  This  increase  in the cost of sales as a  percentage  of revenues is
primarily  due to an increase in the cost of  conducting  the Internet  training
workshops and programming customer  storefronts.  Another factor contributing to
the lower gross profit was an increase in telemarketing  sales, which have lower
margins.  The products sold by Impact media consist of multimedia  brochures and
shaped  compact  disks which at current  volume  levels have lower gross  profit
margins  than  the  Galaxy  products.  Cost of  sales  is made up of the cost of
tangible  products sold, the cost to conduct Internet  training  workshops,  the
cost to program customer storefronts and contract telemarketing  services.  Cost
of sales does not include depreciation.

Selling,  General and Administrative  Expenses.  Selling expenses in the quarter
were  $2,405,087 in 2000 compared to $1,281,558 in 1999.  These  expenses,  as a
percentage  of sales,  decreased  in 2000 to 38% from 45% in 1999.  The improved
percentage was the result of the Company's increased volume of Internet training
workshops  that  provided  economies of scale,  as well as the  contribution  to
revenues from Impact Medial which has lower selling  expenses in their  business
model.

Administrative  expenses  were  $1,136,359  during  the  first  quarter  of 2000
compared to $481,693 in the preceding  year's first quarter.  As a percentage of
sales  these  expenses  increased  to 18% in 2000 from 17% in 1999.  The Company
moved to larger  quarters and incurred  other  expenses  that were  necessary to
sustain the year to year growth. The operations of Impact Media also contributed
to higher administrative expenses. The Company anticipates that such expenses as
a percentage of sales will improve in the future,  as  increasing  revenues will
not require proportional increases in overhead type costs.

Depreciation.  Depreciation  expense in the first  quarter  of 2000 was  $33,611
compared  to  $25,724  in 1999.  This was the result of  purchases  of  computer
equipment, software and other long-term assets.

Amortization.  During  2000  amortization  of Goodwill  was $16,545  compared to
$14,450 in 1999.  Total  Goodwill at the end of the period was  $833,889  net of
amortization to date. The Goodwill arose from the purchase by the Company of the
assets and business interests of Profit Education Systems,  Inc., CO-OP Business
Services, Inc. and Impact Media, LLC.

Income  Taxes.  Since the  Company  incurred a loss for the  period  there is no
provision for income taxes in the current year.  The Company has not recorded an
income  tax  benefit  as a result  of the  loss for the year or other  temporary
differences  since it is uncertain as to when the Company will become profitable
and  thereby be able to use the  benefit of such  items.  The income tax benefit
recorded in the first quarter of 1999 has been written off.

Net  Income/Loss.  The Company  reported a Net Loss of $1,901,012  for the three
months ending March 31, 2000,  as compared to a Net Loss of  $6,281,932  for the
similar period in 1999. On a per share basis this amounted to a loss of $.32 per
share in 2000 as compared to a loss of $1.12 per share in 1999. The loss in 1999
included  the  cumulative  effect on prior years of an  accounting  change.  The
change was  relative to revenue  recognition  as is more fully  explained in the
notes to the financial  statements.  The 1999 loss before the cumulative  effect
adjustment was $831,281.

Capital Resources

New  Investments/Financing  Activities.  During  1999,  the  Company  (i) sold a
$500,000  convertible  note to the  Augustine  Fund  through  Augustine  Capital
Management,  an  institutional  investor based in Chicago,  Illinois,  (ii) sold
250,000  shares of the  Company's  common  stock to Invest  Linc  Capital  Corp.
("Invest  Linc") for  $1,000,000  and (iii) sold 228,570 shares of the Company's
common stock to Zylo Ltd. for $300,000.  During  January and February  1999, the
Augustine Fund  converted the note into 169,192  shares of the Company's  common
stock.  During the first  quarter of 2000 the  company  borrowed  $450,000  from
Netgateway,  Inc. These funds were used for merger-related  expenses and working
capital. The notes are due on the earlier of June 1, 2000 or the date the merger
between the Company and Netgateway becomes effective. It is intended between the
parties to the notes to have the due date extended since it will not be possible
to have  the  merger  effective  by June 1,  2000.  Should  the due  date not be
extended it would have a material  adverse effect on the Company.  These capital
infusions  improved  the  Company's  liquidity  and its ability to meet  ongoing
working capital needs.

Cash.  Cash on hand at March 31, 2000 totaled $81,455 as compared to $132,741 at
December  31, 1999.  Bank  overdrafts  for the same  periods  were  $420,274 and
$348,907 respectively.

Accounts  Receivable.   Accounts  receivable,  net  of  allowance  for  doubtful
accounts, was $2,089,525 at March 31, 2000 ($1,913,456 at Galaxy and $176,069 at
IMI. Inc.,  which is doing business under the name of Impact Media)  compared to
$1,112,947  at 1999  year's  end.  This  increase  is the result of the  Company
offering to finance  customer  purchases  with monthly  payments at its Internet
training  workshops and IMI,  Inc.  selling to customers in the normal course of
business on open account. The receivables  associated with the Internet training
workshops are collected for the Company by Travelers Investment  Corporation for
a fee.

Prepaid  Expenses.  Prepaid expenses at March 31, 2000 were $393,909 as compared
to $336,148 at December 31, 1999.  These prepaid  expenses are mainly the result
of  payments  made by Galaxy Mall for certain  marketing  costs  incurred in the
fourth  quarter of 1999 and the first  quarter of 2000 that  apply  directly  to
Internet  training  workshops to be held later  during the year.  Revenues to be
derived from these  expenditures  will be earned  later in 2000 and 2001.  These
marketing  costs consist of mailings to and newspaper  advertising for potential
customers for our Internet  training  workshops  that target dates in subsequent
quarters;  the travel costs, meeting rooms and supplies used by our employees to
hold "preview  sessions" which will secure  attendees to workshops in subsequent
quarters;  and  travel,  hotel and other  costs which must be prepaid to support
workshops in subsequent quarters.

Credit  Card  Reserves.  Credit card  reserves  at March 31, 2000 were  $447,628
($425,418  at Galaxy and 22,210 at IMI) as compared to $248,431 at December  31,
1999. Credit card reserves represent amounts of money due the Company from banks
and credit  card  processing  companies  who have  handled  Visa,  Master  Card,
American Express and Discover Card transactions.  Some banks require the Company
to leave on deposit  with them 5% of the credit card  proceeds  until the amount
reaches 50% of one month's  transactions.  This  reserve  earns  interest at the
bank's  certificate  of deposit  rate and will be  returned  to the company at a
future date.

Accounts Payable.  Accounts payable at March 31, 2000 totaled $1,113,559.  There
was  also  a bank  overdraft  of  $420,274  bringing  the  total  payable  up to
$1,533,833  ($1,286,921 at Galaxy and $246,912 at IMI) as compared to $2,157,389
at the end of 1999.

Deferred  Revenue.  Deferred revenue at the end of the first quarter in 2000 was
$13,900,885  ($13,262,974 at Galaxy and $637,911 at IMI) compared to $10,745,563
at the end of last year. As explained in the notes to the  financial  statements
the Company has adopted a change in accounting  principle as contemplated by SEC
Staff Accounting Bulletin 101, which resulted in this amount being deferred. The
Company defers revenue from the current quarter into the future, but brings into
the  current  quarter  amounts  deferred in earlier  periods  that have now been
earned and can thus be recognized.  As long as the Company continues to grow, as
it did in the year 2000 first quarter,  the amount deferred into the future will
be  greater  than the amount  recognized  from  prior  quarters  and will have a
negative impact on revenues and earnings. The reverse would be true should sales
fall below current levels.

Customer  Deposits.  Customer  Deposits  amounted  to $532,439 at March 31, 2000
(250,733 at Galaxy and  281,706 at IMI) as compared to $285,226 at December  31,
1999. This represents amounts paid to the company as deposits from customers for
orders to be  delivered  in the  future.  At the time the goods are  shipped and
title transfers to the customer,  the amount will be taken into income under the
Company's normal revenue recognition policies.

Equipment.  Equipment  increased  during 2000 to $262,456  from  $259,577 net of
accumulated  depreciation of $190,977 in 2000 and $157,364 at December 31, 1999.
This was due to the need for additional computers and other equipment to conduct
the Company's business. Additional capital equipment purchases will be necessary
as the Company  grows.  The Company also leases  equipment.  Leasing  allows the
Company the use of equipment  without the need to disburse  the entire  purchase
price in cash at the time of acquisition.

Stockholders'  Equity.  Total  Stockholders'  Equity  decreased  to a deficit of
$14,412,158  during the first quarter of 2000 from  $12,511,245  at December 31,
1999. This was mainly the result of the change in accounting principle described
earlier that  established the Deferred  Revenue with the resultant net loss from
operations  for the year.  Since the  increase  of the  Deferred  Revenue  was a
non-cash transaction, and no monies were required to be repaid to customers as a
result of the change,  the Company  believes it can continue to operate in spite
of the negative net worth.

Liquidity

Ratios. At March 31, 2000 the Company's  current ratio,  current assets compared
to current  liabilities,  was .21 to 1 compared to .16 to 1 as of  December  31,
1999.  This out of balance  situation is  exacerbated  by the  deferred  revenue
adjustment.

Financing  Arrangements.  The Company has worked out extended payment plans with
hotels and other vendors and is meeting its commitments under the plans. On July
30, 1998 the Company was able to arrange a bank line of credit for $100,000 with
Far West Bank of  Provo,  Utah.  This line is  intended  to assist  the  Company
through the seasonal slow periods it experiences. From July 15 through Labor Day
and again  from  Thanksgiving  Day until  January 15 of the  following  year the
business is slower than at other times.  It is the result of fewer  attendees at
the Company's  Internet training seminars during these traditional  vacation and
holiday periods.

Cash flow. Cash flows from financing activities during the first quarter of 2000
were $395,683,  including a loan from  Netgateway,  Inc. of $450,000,  which was
partially off set by repayment of a bank loan. The loan to Netgateway  comes due
during the second  quarter of 2000.  It will be necessary  to obtain  additional
equity funding or long-term loans from banks or other financial institutions for
the Company to meet its long-term goals.

In conjunction with the Merger  Agreement with Netgateway and upon  consummation
of the merger,  the Company will become a wholly owned subsidiary of Netgateway.
The merger is expected to close during the second quarter of 2000 and is subject
to the satisfaction or waiver by the parties of certain conditions.  The Company
may be required to pay a substantial  termination fee if the merger agreement is
terminated for certain specific reasons.  If required,  payment of the fee would
have a material adverse effect on the Company's business,  prospects,  financial
conditions, results of operations and its ability to raise future capital.

Business Development

Effective on May 31, 1999,  IMI, Inc., a wholly-owned  subsidiary of the Company
acquired substantially all of the assets of Impact Media, L.L.C., a Utah limited
liability  company  ("Impact  Media")  engaged in the  design,  manufacture  and
marketing of multimedia presentations, shaped compact discs and similar products
and services intended to facilitate  traditional marketing and to bridge the gap
between conventional and Internet marketing.  The assets acquired include, among
other things, equipment,  inventory,  intellectual property,  computer programs,
cash and accounts  receivable,  the primary use of which  relates to the design,
manufacture  and marketing of Impact  Media's  products and services.  It is the
present intent of the Company to continue to devote the assets to such purposes.
The transaction is more fully described in a Form 8-K filing dated July 9, 1999.

In December 1999, the Company announced that it had signed a letter of intent to
be acquired  by  Netgateway.  On January 7, 2000,  Galaxy  obtained  $300,000 in
bridge  financing  from  Netgateway  for working  capital  purposes  and for the
payment of certain  professional  fees incurred by Galaxy in connection with the
proposed merger. On February 4, 2000, Netgateway advanced an additional $150,000
to  Galaxy  for  working  capital  purposes  and  for  the  payment  of  certain
professional  fees  incurred by Galaxy in connection  with the proposed  merger.
Each loan is secured by a pledge of Galaxy common stock by John J. Poelman,  the
chief  executive  officer  and  largest  shareholder  of Galaxy.  The notes bear
interest  at 9.5% and are due and  payable on the earlier of June 1, 2000 or the
consummation date of the merger.  In the Merger Agreement  Netgateway has agreed
to cause Galaxy to repay the loans following the merger.

On March 13, 2000,  Galaxy  Enterprises,  Inc. and Netgateway,  Inc., a Delaware
corporation,  issued  a press  release  concerning  the  execution  of a  Merger
Agreement  between the  parties and a  wholly-owned  subsidiary  of  Netgateway,
pursuant  to which the  subsidiary  would be merged with and into  Galaxy,  with
Galaxy remaining as the surviving  corporation in the merger and a subsidiary of
Netgateway.  Upon consummation of the merger, Netgateway will acquire Galaxy for
approximately  3.9 million shares of Netgateway  common stock, or  approximately
six  tenths of one share of  Netgateway  common  stock for each  share of Galaxy
common  stock.  In  addition,  Netgateway  has agreed to assume all  outstanding
options under  Galaxy's  1997 Stock Option Plan.  Assuming that all such options
granted as of the date of the Merger  Agreement are  outstanding  on the date of
the merger such assumed options will,  following the merger,  be exercisable for
approximately 1.1 million shares of Netgateway common stock. Consummation of the
merger is subject to certain terms,  conditions and termination rights specified
in the Merger Agreement, including approval of both companies' stockholders.

The foregoing  statements are based upon  management's  current  assumptions and
contain  forward-looking  statements  (within  the meaning of Section 27A of the
securities Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934)
regarding  the  Company  and  its  business,  financial  condition,  results  of
operations  and its  prospects.  Readers are urged to review the Company's  Form
10-KSB for the year ending December 31, 1999 for a complete  listing of the risk
factors associated with its business.


<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         None

Item 2.  Changes in Securities and Use of Proceeds

         In January,  2000,  we sold 17,935  shares of common stock to employees
exercising  stock options granted under the 1997 Employee Stock Option Plan. The
proceeds totaling $13,271 were added into our working capital.

Item 3.  Defaults Upon Senior Securities

         None

Item 4.  Submission of Matters to a Vote of Security Holders

         None

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

 Exhibit No.  Description
 -----------  -----------

     2.1      Agreement  and Plan of Merger  dated as of March 10,  2000 by and
              among  Netgateway,  Inc.,  Galaxy  Acquisition  Corp., and Galaxy
              Enterprises,  Inc.  (incorporated  by reference to Exhibit 2.1 to
              the report on Form 8-K of registrant filed on March 22, 2000).

     10.1     Promissory  Note dated  January 7, 2000 in the  principal  amount
              of $300,00 made by Galaxy  Enterprises,  Inc. and John J. Poelman
              and payable to  Netgateway,  Inc.  (incorporated  by reference to
              Exhibit  10.1 to the  report on Form 8-K of  registrant  filed on
              March 22, 2000).

     10.2     Promissory  Note dated  February 4, 2000 in the principal  amount
              of  $150,000  made  by  Galaxy  Enterprises,  Inc.  and  John  J.
              Poelman  and  payable  to  Netgateway,   Inc.   (incorporated  by
              reference   to  Exhibit  10.2  to  the  report  on  Form  8-K  of
              registrant filed on March 22, 2000).

     27.1     Financial Data Schedule

     99.1     Voting  Agreement  dated  as of  March  10,  2000,  by and  among
              Netgateway,  Inc., Galaxy  Acquisition Corp., and John J. Poelman
              (incorporated  by  reference  to  Exhibit  99.1 to the  report on
              Form 8-K of registrant filed on March 22, 2000).

     99.2     Voting  Agreement  dated  as of  March  10,  2000,  by and  among
              Netgateway,  Inc., Galaxy  Acquisition Corp., and Sue Ann Cochran
              (incorporated  by  reference  to  Exhibit  99.2 to the  report on
              Form 8-K of registrant filed on March 22, 2000).

     99.3     Stock Option  Agreement  dated as of March 10, 2000, by and among
              Netgateway,  Inc. and John J. Poelman  (incorporated by reference
              to  Exhibit  99.3 to the report on Form 8-K of  registrant  filed
              on March 22, 2000).

     99.4     Pledge  Agreement,  dated as of January 7, 2000,  between John J.
              Poelman  and  Netgateway,  Inc.  (incorporated  by  reference  to
              Exhibit  99.4 to the  report on Form 8-K of  registrant  filed on
              March 22, 2000).

     99.5     Pledge Agreement,  dated as of February 4, 2000,  between John J.
              Poelman  and  Netgateway,  Inc.  (incorporated  by  reference  to
              Exhibit  99.5 to the  report on Form 8-K of  registrant  filed on
              March 22, 2000).

     (b)      Reports on Form 8-K

         On March 22, 2000 the  registrant  filed a report on Form 8-K. The Form
8-K reported on Item 5 the press release  announcing the execution of the Merger
Agreement by registrant and Netgateway, Inc. See Part I, Item 2 above.


<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Company  has duly  caused  this  report to be  signed on its  behalf by the
undersigned thereunto duly authorized.

Date:  May 15, 2000                 GALAXY ENTERPRISES, INC.


                                      /s/ Frank C. Heyman
                                    -----------------------------
                                    Frank C. Heyman
                                    Chief Financial Officer
                                    (As a duly authorized officer of the Company
                                    and as  principal  financial  officer of the
                                    Company)

<PAGE>

                                INDEX TO EXHIBITS

 Exhibit No.  Description
 -----------  -----------

     2.1      Agreement  and Plan of Merger  dated as of March 10,  2000 by and
              among  Netgateway,  Inc.,  Galaxy  Acquisition  Corp., and Galaxy
              Enterprises,  Inc.  (incorporated  by reference to Exhibit 2.1 to
              the report on Form 8-K of registrant filed on March 22, 2000).

     10.1     Promissory  Note dated  January 7, 2000 in the  principal  amount
              of $300,00 made by Galaxy  Enterprises,  Inc. and John J. Poelman
              and payable to  Netgateway,  Inc.  (incorporated  by reference to
              Exhibit  10.1 to the  report on Form 8-K of  registrant  filed on
              March 22, 2000).

     10.2     Promissory  Note dated  February 4, 2000 in the principal  amount
              of  $150,000  made  by  Galaxy  Enterprises,  Inc.  and  John  J.
              Poelman  and  payable  to  Netgateway,   Inc.   (incorporated  by
              reference   to  Exhibit  10.2  to  the  report  on  Form  8-K  of
              registrant filed on March 22, 2000).

     27.1     Financial Data Schedule

     99.1     Voting  Agreement  dated  as of  March  10,  2000,  by and  among
              Netgateway,  Inc., Galaxy  Acquisition Corp., and John J. Poelman
              (incorporated  by  reference  to  Exhibit  99.1 to the  report on
              Form 8-K of registrant filed on March 22, 2000).

     99.2     Voting  Agreement  dated  as of  March  10,  2000,  by and  among
              Netgateway,  Inc., Galaxy  Acquisition Corp., and Sue Ann Cochran
              (incorporated  by  reference  to  Exhibit  99.2 to the  report on
              Form 8-K of registrant filed on March 22, 2000).

     99.3     Stock Option  Agreement  dated as of March 10, 2000, by and among
              Netgateway,  Inc. and John J. Poelman  (incorporated by reference
              to  Exhibit  99.3 to the report on Form 8-K of  registrant  filed
              on March 22, 2000).

     99.4     Pledge  Agreement,  dated as of January 7, 2000,  between John J.
              Poelman  and  Netgateway,  Inc.  (incorporated  by  reference  to
              Exhibit  99.4 to the  report on Form 8-K of  registrant  filed on
              March 22, 2000).

     99.5     Pledge Agreement,  dated as of February 4, 2000,  between John J.
              Poelman  and  Netgateway,  Inc.  (incorporated  by  reference  to
              Exhibit  99.5 to the  report on Form 8-K of  registrant  filed on
              March 22, 2000).