U.S. SECURITIES AND EXCHANGE COMMISSION  Washington, D.C. 20549   FORM 10-QSB


(Mark One)
        [X]                    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
                                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended March 31, 2001
OR


[   ]                    
TRANSITION REPORT PURSUANT TO SECTION 13 OR
                                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ___________ to ___________
Commission File number 0-13803   GATEWAY INDUSTRIES, INC.  (Exact name of registrant as specified in its charter)DELAWARE
(State or other jurisdiction of incorporation or organization)33-0637631
(I.R.S. Employer Identification No.)
                                          150 East 52nd Street 21st Floor, New York, NY 10022
                                   (Address of registrant's principal executive offices) (Zip Code)
                                                            (877) 431-2942
                                         (Registrant's telephone number, including area code)


Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 [  ]

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by
Sections 12, 13, or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes [X]    No [  ]

Shares of Issuer's Common Stock Outstanding at March 31, 2001:  4,192,024
                Transitional small business disclosure format:  Yes [  ]    No [X]


GATEWAY INDUSTRIES, INC. AND SUBSIDIARY

                                                                 INDEX


|Part I  - Financial Information                                   | Page Number
|----------------------------------------------------------------- | -----------
|Item 1.  Condensed Consolidated Financial Statements (Unaudited):
|                                                                 
|Condensed Consolidated Balance Sheet                             
|March 31, 2001                                                    | 2          
|                                                                 
|Condensed Consolidated Statements                                
|of  Operations - Three Months Ended                              
|March 31, 2001 and 2000                                           | 3          
|                                                                 
|Condensed Consolidated Statements                                
|of  Cash Flows - Three Months Ended                              
|March 31, 2001 and 2000                                           | 4          
|                                                                 
|Notes to Condensed Consolidated Financial Statements              | 5          
|                                                                 
|Item 2.  Management's Discussion and Analysis                    
|or Plan of Operations                                             | 7          
|                                                                 
|Part II - Other Information                                      
|                                                                 
|Item 1.  Legal Proceedings                                        | 9          
|                                                                 
|Item 6.  Exhibits and Reports on Form 8-K                         | 9          
|                                                                 
|Signatures                                                        | 10         

GATEWAY INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
                                                               March 31, 2001
                                                                (Unaudited)


|ASSETS                                                                     
|---------------------------------------------------------------------------
|                                                                           
|Current assets                                                             
|Cash and cash equivalents                                                  
|Accounts receivable (net of allowance for doubtful                         
|accounts of $9,000)                                                        
|Prepaid expenses and other                                                 
|Total current assets                                                       
|                                                                           
|Non current assets                                                         
|Property, plant and equipment, net of accumulated depreciation of $58,000  
|Goodwill and other intangibles, net of accumulated amortization of $248,000
|Total non current assets                                                   
|                                                                           
|Total assets                                                               
|                                                                           
|                                                                           
|                                                                           
|LIABILITIES AND SHAREHOLDERS' EQUITY                                       
|                                                                           
|Current liabilities                                                        
|Accounts payable and accrued expenses                                      
|Deferred income                                                            
|Customer deposits                                                          
|Current portion of capital lease obligation                                
|Total current liabilities                                                  
|Non current liabilities                                                    
|Capital lease obligation                                                   
|Total liabilities                                                          
|                                                                           
|                                                                           
|                                                                           
|Shareholders' equity                                                       
|Preferred stock, $.10 par value, 1,000,000 shares authorized,              
|no shares issued or outstanding                                            
|Common stock, $.001 par value, 10,000,000 shares authorized,               
|4,192,024 shares issued (including treasury shares)                        
|Capital in excess of par value                                             
|Accumulated deficit                                                        
|Treasury stock, 11,513 shares of common stock-at cost                      
|                                                                           
|Total shareholders' equity                                                 
|                                                                           
|                                                                           
|Total liabilities and shareholders' equity                                 
|                                                                           

See accompanying notes.


GATEWAY INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                (Unaudited)


|                                                      | For the Three Months       Ended March 31,
|----------------------------------------------------- | ------------------------------------------
|                                                      | 2001                                      
|                                                     
|Sales                                                 | $ 1,096,000                               
|Cost of sales                                         | 227,000                                   
|Gross profit                                          | 869,000                                   
|                                                     
|Costs and expenses:                                  
|Payroll expenses                                      | 658,000                                   
|General and administrative                            | 245,000                                   
|Depreciation and amortization                         | 80,000                                    
|Professional fees                                     | 54,000                                    
|Occupancy                                             | 64,000                                    
|                                                     
|Total costs and expenses                              | 1,101,000                                 
|                                                     
|Operating loss                                        | (232,000)                                 
|                                                     
|Other income:                                        
|Interest income                                       | 32,000                                    
|Other income (expense)                                | (1,000)                                   
|                                                     
|Total other income                                    | 31,000                                    
|                                                     
|Net loss                                              | $    (201,000)                            
|                                                      |                                      
|                                                     
|Net loss per share - basic and diluted                | $             (.05)                       
|                                                     
|Weighted average number of shares - basic and diluted | 4,192,024                                 

See accompanying notes.


GATEWAY INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                (Unaudited)


|                                                                          | For the Three Months       Ended March 31,
|------------------------------------------------------------------------- | ------------------------------------------
|                                                                          | 2001                                      
|Cash flows from operating activities:                                    
|Net loss                                                                  | $   (201,000)                             
|Adjustments to reconcile net loss to                                     
|net cash provided by (used in) operating activities:                     
|Depreciation                                                              | 20,000                                    
|Amortization of goodwill and other intangibles                            | 60,000                                    
|Provision for bad debt                                                    | (1,000)                                   
|Changes in assets and liabilities net of assets and liabilities acquired:
|Accounts receivable                                                       | (250,000)                                 
|Prepaid expenses and other                                                | (20,000)                                  
|Security deposit                                                          | 42,000                                    
|Accounts payable                                                          | 79,000                                    
|Deferred income                                                           | (9,000)                                   
|Customer deposits                                                         | (14,000)                                  
|                                                                         
|Net cash provided by (used in) operating activities                       | (294,000)                                 
|                                                                         
|Cash flows from investing activities:                                    
|Purchase of property, plant, and equipment                                |                                          
|Purchase of Oaktree Systems Inc., net of cash acquired                    |                                          
|                                                                         
|Net cash used in investing activities                                     |                                          
|                                                                         
|Cash flows from financing activities:                                    
|                                                                         
|Payments of obligation on capital lease                                   | (8,000)                                   
|                                                                         
|Net cash provided by financing activities                                 | (8,000)                                   
|                                                                         
|Net decrease in cash and cash equivalents                                 | (302,000)                                 
|Cash and cash equivalents at beginning of period                          | 2,604,000                                 
|Cash and cash equivalents at end of period                                | $  2,302,000                              
|                                                                          |                                       

Supplemental information:
On March 21,  2000,  the Company  acquired  100% of the common  stock of Oaktree
Systems,  Inc. for  $4,078,000  which included the issuance of 600,000 shares of
common stock of Gateway Industries, Inc. (see Note 3).
Oaktree acquired $23,000 of assets under a capital lease in 2001.


See accompanying notes.


# GATEWAY INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2001
                                                              (Unaudited)


## Note  1.  General

The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instruction to Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
interim financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to make such financial statements not misleading.
Results for the three months ended March 31, 2001 are not necessarily indicative
of the results that may be expected either for any other quarter in the year
ending December 31, 2001 or for the entire year ending December 31, 2001. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys Annual Report on Form 10-KSB
for the year ended December 31, 2000.

## Note  2.  Operations

Gateway
Industries, Inc. (the Company) was incorporated in Delaware in July
1994. The Company had no operating business from December 1996 to March 2000,
when it acquired all of the outstanding common stock of Oaktree Systems, Inc.
(Oaktree). Oaktree provides database development consolidation and
management services, and web site design and maintenance to customers. Such
customers are principally not-for-profit entities, health care providers and
publishers throughout the United States.

The
Company had no full time employees from December 1996 until the acquisition of
Oaktree in March 2000. The Companys officers and Steel Partners Services,
Ltd. (an entity controlled by the Companys Chairman) devote time to the
Companys administration and in exploring potential acquisitions and other
business opportunities.

## Note  3.  Purchase of Subsidiary

In
March 2000 the Company acquired 100% of the outstanding stock of Oaktree for a
purchase price of $4,078,000, consisting of $2,000,000 in cash, the issuance of
600,000 shares of common stock of the Company, the repayment of existing Oaktree
bank debt of $640,000 and expenses of $70,000. The acquisition was accounted for
as a purchase, and, accordingly include the results of operations since the date
of acquisition. The excess of purchase price over the fair value of net assets
acquired was recorded as goodwill of $3,124,000 and other intangible assets of
$350,000 which will be amortized over 15 and 5 years, respectively.

The following consolidated condensed unaudited proforma statement of operations, as if the Oaktree
acquisition had
occurred at January 1, 2000.

|                   | Three months ended March 31,
|------------------ | ----------------------------
|                   | 2001, Actual                
|                   | (unaudited)                 
|                   |                            
|Sales              | $ 1,096,000                 
|Cost of expenses   | 1,328,000                   
|Other income       | 31,000                      
|Net loss           | $  (201,000)                
|                   |                         
|Net loss per share
|basic and diluted | $          (.05)            

Assets acquired and
liabilities acquired at estimated fair value at March 21, 2000 are as follows:

|Cash                                 | $       8,000  
|------------------------------------ | ---------------
|Accounts receivable                  | 376,000        
|Other current assets                 | 99,000         
|Fixed assets, net                    | 320,000        
|Security deposits                    | 13,000         
|Accounts payable and accrued expense | (191,000)      
|Capital leases                       | (22,000)       
|                                    
|                                    
|Total tangible net assets            | $       603,000

## Note  4.  Net
Loss Per Share

Net
loss per share was calculated using the weighted average number of common shares
outstanding.  For the three months  ended March 31, 2001 and 2000 stock  options
have been  excluded  from the  calculation  of  diluted  loss per share as their
effect would have been antidilutive.  Accordingly,  basic and diluted income per
share  are the same  for the  three  months  ended  March  31,  2001  and  2000.

## ITEM  2.  
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The
Company acquired Oaktree on March 21, 2000, for a purchase price of
approximately $4.1 million, consisting of $2 million in cash, the issuance of
600,000 restricted shares of common stock of the Company and the assumption of
approximately $640,000 of debt (which was repaid in full at closing), and
certain fees and expenses.

The
Company intends to continue to enhance Oaktrees internal growth
opportunities and efforts, and explore acquisitions of established products and
service providers that will provide opportunities to present customers to an
integrated, full-service product offering.

The
Companys ability to make further product acquisitions will depend on,
among other things, the availability of appropriate acquisition opportunities,
the ability to obtain appropriate financing and the Companys ability to
consummate acquisitions on acceptable terms. There can be no assurance that the
Company will be able to consummate any such acquisition on acceptable terms.

Oaktree
competes in a highly fragmented industry with many national and local
competitors. Competition comes from many sources including database development
companies, service bureaus, and mailhouses. Many of the competitors of Oaktree
possess substantially greater financial, technical, marketing and other
resources than Oaktree.

As
of March 31, 2001, Oaktree employed 71 full time and part time employees. None
of the employees are subject to any collective bargaining agreements and the
Company believes that the relationship with its employees is good.

## REVENUES AND
EXPENSES

The
Company had no operating business from 1996 until the acquisition of Oaktree on
March 21, 2000. Oaktree received new contracts totaling approximately $1.2
million of recurring annual revenues starting in the second half of 2000. These
new contracts were secured through Oaktrees new Internet initiatives and
the release of its new database product, DB-Cultivator 2000. Expansion of
services to existing customers also generated quarter-to-quarter growth.

During
the three months ended March 31, 2001, Oaktree had revenues of $1,096,000, cost
of sales of $227,000 and a gross profit of $869,000. Gateways consolidated
costs and expenses for the three months ended March 31, 2001 aggregated
$1,101,000, consisting of payroll expenses of $658,000, professional fees of
$54,000, general and administrative expense of $245,000, rental cost of $64,000,
and depreciation and amortization of $80,000.

During
the ten day period from March 22, 2000 to March 31, 2000, Oaktree had revenues
of $63,000 and cost of sales of $15,000 and a gross profit of $48,000.
Gateways consolidated costs and expenses for the three months ended March
31, 2000 totaled $255,000, including payroll expenses of $66,000, professional
fees of $76,000, general and administrative expenses of $104,000, rental costs
of $3,000, and depreciation and amortization of $6,000.

The
proforma income statement in Note 3 shows that the net loss for the Company for
the three months ended March 31, 2001, decreased over the proforma net loss
reported in Note 3 for the same period in 2000. Sales are higher in 2001 versus
2000 by 52% and operating loss decreased by 39% for the first quarter of 2001
over the proforma first quarter of 2000. Higher operating expenses of 31% in
first quarter 2001 over the proforma first quarter 2000 are attributable to
increased hiring of employees and increased other operating expenses at Oaktree,
that were incurred as a result of increased sales.

## OTHER INCOME

For
the three months ended March 31, 2001, other income totaled $31,000 including
interest income of $32,000 and other expense of $1,000. For the three months
ended March 31, 2000, other income consisted of interest income of $65,000 and
other income of $18,000. The difference results primarily from less cash
equivalents on hand earning interest income since the Company invested cash in
the operating business of Oaktree during March 2000.

## LIQUIDITY AND
CAPITAL RESOURCES

The
Companys cash and cash equivalents totaled $2,302,000 at March 31, 2001
and $2,604,000 at December 31, 2000. At March 31, 2001, the Companys
working capital balance was $2,446,000.

While
the Company seeks an acquisition or other business combination, management
believes its cash position is sufficient to cover administrative expenses and
current obligations for the foreseeable future.

## PART  II.  OTHER
INFORMATION

## ITEM  1.  
Legal proceedings

None


## ITEM  6.  
Exhibits and Reports on Form 8-K

(a)    Exhibits
                           None
                  (b)    Reports on Form 8-K
                           None


## 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.
| | ------------------------
|
|
|
|
|
|
| | /s/  Jack Howard        
| | Jack Howard, President  

Date:  May 15, 2001