`U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB


(Mark One)

   /X/      Quarterly  report  under  Section  13 or  15(d)  of  the  Securities
            Exchange Act of 1934

                  For the quarterly period ended June 30, 2003

   / /      Transition report under Section 13 or 15(d) of the Exchange Act


    For the transition period from _________________ to ____________________

                         Commission file number 0-13803


                            GATEWAY INDUSTRIES, INC.
                            ------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)


         DELAWARE                                              33-0637631
         --------                                              ----------
  (State or Other Jurisdiction of                            (IRS Employer
  Incorporation or Organization)                             Identification No.)


                         590 Madison Avenue, 32nd Floor
                               New York, NY 10022
                               ------------------
           (Address of Principal Executive Offices Including Zip Code)

                                  212-758-3232
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


Shares of Issuer's Common Stock Outstanding at July 15, 2003:  4,192,105

Transitional Small Business Disclosure Format:  Yes / /   No  /X/







                                      INDEX


Part I - Financial Information                                       Page Number
------------------------------

Item 1.   Condensed Consolidated Financial Statements (Unaudited):

          Condensed Consolidated Balance Sheets
          June 30, 2003 and December 31, 2002..........................     2

          Condensed Consolidated Statements
          of Operations - Three Months Ended
          June 30, 2003 and 2002.......................................     3

          Condensed Consolidated Statements
          of Operations - Six Months Ended
          June 30, 2003 and 2002.......................................     4

          Condensed Consolidated Statements
          of Cash Flows - Six Months Ended
          June 30, 2003 and 2002.......................................     5

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

Item 2.   Management's Discussion and Analysis or Plan of Operation....    10

Item 3.   Controls and Procedures......................................    15


Part II - Other Information
---------------------------

Item 2.   Changes in Securities and Use of Proceeds....................    16

Item 6.   Exhibits and Reports on Form 8-K.............................    17

          Signatures...................................................    18

                                       1





PART I.     FINANCIAL INFORMATION

ITEM 1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                      CONDENSED CONSOLIDATED BALANCE SHEETS


                    ASSETS                                              June 30, 2003     December 31, 2002
                                                                         (Unaudited)

     Cash and cash equivalents                                           $  1,363,119      $  1,844,512
     Investments                                                               25,517              --
     Accounts receivable, net                                               1,012,925           800,766
     Prepaid expenses                                                         162,299            94,652
     Other current assets                                                      53,798            45,584
                                                                         ------------      ------------

            Total current assets                                            2,617,658         2,785,514

     Fixed assets, net                                                        403,328           379,050

     Software, net                                                            182,091           165,066
     Goodwill, net                                                          2,751,288         2,751,288
     Security deposits                                                         25,154            18,857
                                                                         ------------      ------------

             Total assets                                                $  5,979,519      $  6,099,775
                                                                         ============      ============

          LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
     Accounts payable and accrued expenses                               $    445,206      $    278,308
     Deferred income                                                          226,682           227,537
     Customer deposits                                                         40,788            40,958
     Current portion, capital lease                                            45,759            10,010
                                                                         ------------      ------------

            Total current liabilities                                         758,435           556,813

     Capital lease obligation                                                  85,793            16,165
                                                                         ------------      ------------

            Total liabilities                                                 844,228           572,978
                                                                         ------------      ------------

Shareholders' equity
     Preferred stock, $.10 par value; 1,000,000 shares
         authorized; no shares issued and outstanding                            --                --
     Common stock, $.001 par value; 10,000,000 shares
         authorized; 4,192,105 shares issued and outstanding at June
         30, 2003 and 4,192,000 shares issued and outstanding at
         December 31, 2002                                                      4,192             4,192
     Capital in excess of par value                                        10,999,746        10,999,746
     Accumulated deficit                                                   (5,868,647)       (5,477,141)
                                                                         ------------      ------------

            Total shareholders' equity                                      5,135,291         5,526,797
                                                                         ------------      ------------

            Total liabilities and shareholders' equity                   $  5,979,519      $  6,099,775
                                                                         ============      ============

        The accompanying notes are an integral part of these statements.

                                       2




                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                       For the Three Months
                                                          Ended June 30,
                                                      2003               2002
                                                      ----               ----
Revenues                                           $ 1,577,196      $ 1,399,439
                                                   -----------      -----------

Costs and expenses
      Fulfillment and materials                        247,383          179,828
      Personnel costs                                1,059,900          891,632
      Selling, general and administrative              494,779          326,075
                                                   -----------      -----------

               Total costs and expenses              1,802,062        1,397,535
                                                   -----------      -----------

Operating (loss) income                               (224,866)           1,904
                                                   -----------      -----------

Other income (expense)
     Interest                                            2,510            7,773
     Other expense, net                                 (4,385)          (3,988)
                                                   -----------      -----------

     Total other (expense) income                       (1,875)           3,785
                                                   -----------      -----------


Net (loss) income                                  $  (226,741)     $     5,689
                                                   ===========      ===========

Net (loss) income per share - basic                $      (.05)     $       .00
                                                   ===========      ===========

Net (loss) income per share - diluted              $      (.05)     $       .00
                                                   ===========      ===========


Weighted average shares outstanding  - basic         4,192,105        4,192,024
                                                   ===========      ===========


Weighted average shares outstanding  - diluted       4,192,105        4,192,024
                                                   ===========      ===========

        The accompanying notes are an integral part of these statements.

                                       3




                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                        For the Six Months
                                                          Ended June 30,
                                                      2003             2002
                                                      ----             ----
Revenues                                          $ 3,066,519      $ 2,823,618
                                                  -----------      -----------

Costs and expenses
      Fulfillment and materials                       413,933          308,912
      Personnel costs                               2,120,568        1,744,637
      Selling, general and administrative             921,198          755,715
                                                  -----------      -----------

               Total costs and expenses             3,455,699        2,809,264
                                                  -----------      -----------

Operating (loss) income                              (389,180)          14,354
                                                  -----------      -----------

Other income (expense)
     Interest                                           5,156           15,172
     Other expense ,net                                (7,482)          (7,227)
                                                  -----------      -----------

     Total other (expense) income                      (2,326)           7,945
                                                  -----------      -----------


Net (loss) income                                 $  (391,506)     $    22,299
                                                  ===========      ===========

Net (loss) income per share - basic               $      (.09)     $       .01
                                                  ===========      ===========

Net (loss) income per share - diluted             $      (.09)     $       .01
                                                  ===========      ===========


Weighted average shares outstanding - basic         4,192,105        4,192,024
                                                  ===========      ===========


Weighted average shares outstanding - diluted       4,192,105        4,192,024
                                                  ===========      ===========

        The accompanying notes are an integral part of these statements.

                                       4





                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                                                         For the Six Months
                                                                                           Ended June 30,
                                                                                      2003              2002
                                                                                      ----              ----
Cash flows from operating activities:
      Net (loss) income                                                         $  (391,506)     $    22,299
            Adjustments to reconcile net (loss) income to
            net cash used in operating activities:
      Depreciation                                                                   74,486           57,590
      Amortization of software costs                                                 45,031           35,460
            Changes in assets and liabilities net of assets and liabilities
              acquired:
            Accounts receivable                                                    (212,159)         (26,264)
            Prepaid expenses and other                                              (62,916)          (6,996)
            Security deposit                                                         (6,297)            --
            Accounts payable                                                        166,898         (278,839)
            Deferred income                                                            (855)         (42,198)
            Customer deposits                                                          (170)         (32,233)
                                                                                -----------      -----------

                  Net cash used in operating activities                            (387,488)        (271,181)
                                                                                -----------      -----------

Cash flows from investing activities:
            Purchase of property, plant, and equipment                              (58,033)         (50,428)
            Purchase of investments                                                 (25,517)            --
                                                                                -----------      -----------

            Net cash used in investing activities                                   (83,550)         (50,428)
                                                                                -----------      -----------

Cash flows from financing activities:

            Payments of obligation on capital lease                                 (10,355)          (5,027)
                                                                                -----------      -----------

      Net cash used in financing activities                                         (10,355)          (5,027)
                                                                                -----------      -----------

      Net decrease in cash and cash equivalents                                    (481,393)        (326,636)
      Cash and cash equivalents at beginning of period                            1,844,512        2,041,315
                                                                                -----------      -----------
      Cash and cash equivalents at end of period                                $ 1,363,119      $ 1,714,679
                                                                                ===========      ===========

Supplemental cash flow information:
Cash paid during the year for
      Income taxes                                                              $    19,860      $    14,182
      Interest expense                                                          $     5,364      $     4,855

Supplemental information:
Oaktree acquired $101,749 of assets under capital leases in 2003 and $4,770 in
2002.

        The accompanying notes are an integral part of these statements.

                                       5




              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003
                                   (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  include all adjustments
(consisting only of normal recurring accruals)  considered  necessary for a fair
presentation. Results for the six months ended June 30, 2003 are not necessarily
indicative  of the results that may be expected  either for any other quarter in
the year ending  December  31, 2003 or for the entire year ending  December  31,
2003. 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, 2002.

NOTE  2.    OPERATIONS

      Gateway  Industries,  Inc. (the "Company") was incorporated in Delaware in
July 1994 and acquired all of the outstanding  common stock of Oaktree  Systems,
Inc.  ("Oaktree") in March 2000. Oaktree provides real-time database development
consolidation  and  management  services,  such as database  marketing,  product
fulfillment,  subscription  fulfillment,  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. The Company's officers and Steel Partners Services, Ltd.
(an entity controlled by the Company's  Chairman) devote significant time to the
Company's administration and exploring potential acquisitions and other business
opportunities.

NOTE 3.     NET INCOME (LOSS) PER SHARE

      Net income  (loss) per share was  calculated  using the  weighted  average
number of common shares outstanding.  For the six months ended June 30, 2003 and
2002, stock options excluded from the calculation of diluted loss per share were
1,069,000   and  592,500,   respectively,   as  their  effect  would  have  been
antidilutive.  For the three months ended June 30, 2003 and 2002,  stock options
excluded  from the  calculation  of diluted  loss per share were  1,069,000  and
592,500,   respectively,   as  their  effect   would  have  been   antidilutive.
Accordingly,  basic  and  diluted  income  per share is the same for each of the
three month and six month periods ended June 30, 2003 and 2002.

NOTE 4.     RECENT ACCOUNTING PRONOUNCEMENTS

      In April 2002, the Financial  Accounting  Standards  Board ("FASB") issued
Statement  of  Financial   Accounting  Standards  No.  145  RESCISSION  OF  FASB
STATEMENTS NO. 4, 44, AND 64,  AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL
CORRECTIONS  SFAS 145. This  Statement  rescinds FASB Statement No. 4, REPORTING
GAINS  AND  LOSSES  FROM  EXTINGUISHMENT  OF  DEBT,  and an  amendment  of  that
Statement,  FASB  Statement  No.  64,  EXTINGUISHMENTS  OF DEBT MADE TO  SATISFY
SINKING-FUND  REQUIREMENTS.  This Statement also rescinds FASB Statement No. 44,
ACCOUNTING FOR INTANGIBLE  ASSETS OF MOTOR CARRIERS.  This Statement amends FASB
Statement No.

                                       6





13,  ACCOUNTING FOR LEASES,  to eliminate an inconsistency  between the required
accounting  for  sale-leaseback  transactions  and the required  accounting  for
certain  lease  modifications  that have  economic  effects  that are similar to
sale-leaseback   transactions.   This   Statement  also  amends  other  existing
authoritative  pronouncements  to make various  technical  corrections,  clarify
meanings,  or describe their applicability  under changed conditions.  Effective
January 1, 2003,  the Company  adopted the  provisions of SFAS 145 which did not
have a material impact on the results of operations or financial position of the
Company for the six months ended June 30, 2003.

      In July 2002,  the FASB  Issued  Statement  No. 146  ACCOUNTING  FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL  ACTIVITIES SFAS 146. This Statement  addresses
financial  accounting and reporting for costs  associated  with exit or disposal
activities  and  nullifies  Emerging  Issues Task Force  (EITF)  Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)."  The
principal  difference  between  this  Statement  and Issue  94-3  relates to its
requirements  for  recognition of a liability for a cost associated with an exit
or disposal  activity.  This  Statement  requires  that a  liability  for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred.  Under  Issue 94-3,  a liability  for an exit cost as defined in Issue
94-3 was  recognized at the date of an entity's  commitment to an exit plan. The
provisions  of this  Statement  are  effective  for exit or disposal  activities
initiated  after  December  31,  2002.  Effective  January 1, 2003,  the Company
adopted the  provisions of SFAS 146 which did not have a material  impact on the
results of  operations  or financial  position of the Company for the six months
ended June 30, 2003.

      In November  2002,  the FASB  issued  Interpretation  No. 45,  "GUARANTORS
ACCOUNTING  AND  DISCLOSURE  REQUIREMENTS  FOR  GUARANTEES,  INCLUDING  INDIRECT
GUARANTEES OF  INDEBTEDNESS  OF OTHERS" ("FIN 45"). FIN 45 requires that certain
guarantees  be initially  recorded at fair value,  which is  different  from the
general  current  practice of recording a liability only when a loss is probable
and reasonably  estimable.  FIN 45 also requires a guarantor to make significant
new disclosures for virtually all guarantees. The Company adopted the disclosure
requirements  under FIN 45 for the quarter  ended March 31, 2003 and has adopted
the initial  recognition and initial  measurement  provisions for any guarantees
issued or modified  after March 31, 2003.  The adoption of FIN 45 did not have a
material  impact on the  results of  operations  or  financial  position  of the
Company for the six months ended June 30, 2003.

      On December 31, 2002, the FASB issued SFAS No. 148,  "ACCOUNTING FOR STOCK
BASED COMPENSATION TRANSITION AND DISCLOSURE, SFAS 148 AMENDS FASB STATEMENT NO.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION", to provide alternative methods of
transition  to SFAS  123's  fair  value  method of  accounting  for  stock-based
employee  compensation.  SFAS 148 also amends the disclosure  provisions of SFAS
123 and APB Opinion No. 28, INTERIM FINANCIAL  REPORTING,  to require disclosure
in the summary of significant  accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee  compensation on reported
net income and  earnings per share in annual and interim  financial  statements.
While  SFAS 148 does not amend  SFAS 123 to require  companies  to  account  for
employee stock options using the fair value method, the disclosure provisions of
SFAS 148 are applicable to all companies with stock-based employee compensation,
regardless  of whether  they account for the  compensation  using the fair value
method of SFAS 123 or the intrinsic  value method of APB Opinion 25. The Company
adopted the required disclosure provisions of SFAS 148. See Note 5.

      In January 2003, the FASB issued  interpretation No. 46, "CONSOLIDATION OF
VARIABLE  INTEREST ENTITIES - AN INTERPRETATION OF ARB No. 51" ("FIN 46"), which
addresses  consolidation  of  variable  interest  entities.  FIN 46 expands  the
criteria for  consideration  in determining  whether a variable  interest entity

                                       7





should  be   consolidated   by  a  business   entity,   and  requires   existing
unconsolidated  variable interest  entities (which include,  but are not limited
to, Special  Purpose  Entities,  or SPE's) to be  consolidated  by their primary
beneficiaries  if the entities do not  effectively  disburse risks among parties
involved.  This interpretation applies immediately to variable interest entities
created  after  January 31,  2003,  and variable  interest  entities in which an
enterprise  obtains an interest  after that date. It applies in the first fiscal
year or interim  period  beginning  after June 15,  2003,  to variable  interest
entities  in which an  enterprise  holds a variable  interest  that it  acquired
before  February  1, 2003.  The  adoption  of FIN 46 is not  expected  to have a
material  impact on the  results of  operations  or  financial  position  of the
Company.

      In April 2003,  the FASB issued SFAS No. 149,  "AMENDMENT OF STATEMENT 133
ON DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES." SFAS 149 was issued to amend
and clarify  financial  accounting and reporting for derivative  instruments and
hedging  activities  under SFAS 133,  ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND
HEDGING   ACTIVITIES.   Specifically,   this  Standard   clarifies   under  what
circumstances a contract with an initial net investment meets the characteristic
of  a  derivative  and  when  a  derivative  contains  a  financing   component.
Additionally,  SFAS 149 amends the  definition of an underlying to conform it to
language  used  in  FASB  Interpretation  No.  45,  GUARANTOR'S  ACCOUNTING  AND
DISCLOSURE  REQUIREMENTS  FOR  GUARANTEES,   INCLUDING  INDIRECT  GUARANTEES  OF
INDEBTEDNESS OF OTHERS, and amends certain other existing  pronouncements.  SFAS
149 is effective for contracts  entered into or modified  subsequent to June 30,
2003 and hedging  relationships  designated  subsequent  to June 30,  2003.  The
provisions  of this  Standard are to be applied  prospectively.  The adoption of
SFAS 149 is not expected to have a material  impact on the results of operations
or financial position of the Company.

      In May 2003, the FASB issued SFAS 150,  "ACCOUNTING FOR CERTAIN  FINANCIAL
INSTRUMENTS  WITH  CHARACTERISTICS  OF BOTH  LIABILITIES  AND EQUITY."  SFAS 150
requires that certain financial instruments,  which under previous guidance were
accounted for as equity, must now be accounted for as liabilities.  The Standard
requires  that certain  freestanding  financial  instruments  be  classified  as
liabilities, including mandatorily redeemable financial instruments, obligations
to  repurchase  the issuer's  equity shares by  transferring  assets and certain
obligations  to issue a variable  number of shares.  SFAS 150 is  effective  for
financial  instruments  entered into or modified subsequent to May 31, 2003, and
otherwise is effective at the  beginning of the first interim  period  beginning
after June 15, 2003. It is to be implemented by reporting the cumulative  effect
of a change in an accounting principle for financial  instruments created before
the issuance date of the  Statement  and still  existing at the beginning of the
interim  period  of  adoption.   The  Company  does  not  anticipate   that  the
implementation  of  SFAS  150  will  have a  material  impact  on its  financial
position, results of operations or cash flows.

NOTE  5.    STOCK-BASED COMPENSATION

      In December 2002, the FASB issued SFAS No. 148, ACCOUNTING FOR STOCK BASED
COMPENSATION-TRANSITION  AND DISCLOSURE-AN AMENDMENT OF SFAS 123, which provided
alternative  methods  for a  voluntary  change  to  the  fair  value  method  of
accounting  for  stock-based  employee  compensation  and amends the  disclosure
requirements of SFAS 123. The Company has elected to continue to account for its
stock-based  employee  compensation  plans under APB Opinion 25,  ACCOUNTING FOR
STOCK  ISSUED  TO  EMPLOYEES,   and  related   interpretations.   The  following
disclosures are provided in accordance with SFAS 148.

                                       8





      As permitted by FASB Statement of Financial  Accounting  Standards No. 123
("SFAS No. 123"),  "ACCOUNTING  FOR STOCK-BASED  COMPENSATION,"  the Company has
elected to follow  Accounting  Principles  Board  Opinion No. 25 ("APB No. 25"),
"ACCOUNTING  FOR  STOCK-ISSUED  TO EMPLOYEES,"  and related  interpretations  in
accounting  for  its  employee  stock  option  plans.   Under  APB  No.  25,  no
compensation  expense is  recognized  at the time of option  grant  because  the
exercise  price of the  Company's  employee  stock option equals the fair market
value of the underlying common stock on the date of grant.

      The  exercise  price of all other  options  equals the market price of the
Company's common stock on the date of grant.  Accordingly,  no compensation cost
has  been  recognized  for  the  Company's  employee  stock  option  plans.  Had
compensation  cost for such plans been determined based on the fair value of the
options  at the grant  dates  consistent  with the method of SFAS No.  123,  the
Company's net earnings and earnings per share would have been reduced to the pro
forma amounts indicated below.

             Six months ended June 30,                       2003           2002
             ---------------------------------------------------------------------

             Actual net (loss) income                   $  (391,506)      $ 22,299
             Pro forma net (loss) income                $  (402,079)      $ 12,454

             Actual net (loss) income per share
             Basic                                      $     (0.09)      $   0.01
             Diluted                                    $     (0.09)      $   0.01

             Pro forma net (loss) per share
             Basic - Pro forma                          $     (0.10)      $   0.00
             Diluted - Pro forma                        $     (0.10)      $   0.00


             Three months ended June 30,                       2003         2002
             ---------------------------------------------------------------------

             Actual net (loss) income                   $   (226,741)     $  5,689
             Pro forma net (loss) income                $   (232,028)     $    766

             Actual net (loss) income per share
             Basic                                      $      (0.05)     $   0.00
             Diluted                                    $      (0.05)     $   0.00

             Pro forma net (loss) per share
             Basic - Pro forma                          $      (0.06)     $   0.00
             Diluted - Pro forma                        $      (0.06)     $   0.00


      The fair value of the above stock-based compensation costs were determined
using  the  Black-Scholes  option  valuation  model.  The Black  Scholes  option
valuation  model was developed  for use in  estimating  the fair value of traded
options,  which have no vesting restrictions,  are fully transferable and do not
include a discount for large block trades. In addition,  option valuation models
require the input of highly subjective  assumptions including the expected stock
price volatility,  expected life of the option and other estimates.  Because the
Company's employee stock options have  characteristics  significantly  different
from  those of traded  options,  and  because  changes of the  subjective  input
assumptions  can  materially  affect the fair value  estimate,  in  management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

                                       9





ITEM  2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

INTRODUCTION

      The  Company  acquired  Oaktree  on March  21,  2000  pursuant  to a Stock
Purchase  Agreement.  The  purchase  price of  Oaktree  was  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
$650,000 of debt,  which was repaid at the closing  date,  plus certain fees and
expenses.

      Oaktree  is a twenty  year-old  company  specializing  in  providing  cost
effective marketing solutions to organizations needing sophisticated information
management  tools.  In the past,  these systems were found  principally  only on
mainframe and  minicomputer  systems.  Oaktree has developed a sophisticated  PC
based relational  database that provides  unlimited  capacity and flexibility to
meet today's  demanding  informational  needs.  Oaktree has also  implemented  a
state-of-the-art Data Center that incorporates the latest Client/Server based PC
architecture.  Oaktree currently manages direct marketing  databases for clients
which  contain  over 25 million  customers  that  include a related  100 million
transactions.

      Oaktree provides a full set of database marketing solutions that cover the
full range of customer interaction. These entirely Web based solutions allow our
customers to manage their  marketing  promotions and the supporting  operational
systems from their  desktops in a real-time  mode. The Internet is the preferred
medium for providing  information and reports to our clients. All reports,  data
access and the status of  production  jobs are available to customers 24 hours a
day, seven days a week simply by accessing their desktop browsers.  With Oaktree
providing a single source  solution,  all data will reflect a real-time  status,
meaning that reports will reflect  information  that is accurate and up-to-date.
Multiple  levels  of  security  provide  a high  degree  of data  integrity  and
protection.

      Oaktree's proprietary, integrated database allows clients with e-commerce,
subscription,  product  fulfillment  and  fundraising  businesses  to  utilize a
single,  customer focused  database to do all of their marketing  promotions and
response  analysis.  Clients can track their businesses on a real time basis and
make  immediate  decisions  to adjust  marketing  promotions  and/or  production
schedules.  The Company  believes  Oaktree's  new Internet  initiatives  and the
release of its  database  product  DB-Cultivator  will allow us to offer  better
expansion   of   services   to   existing    customers   and   should   generate
quarter-to-quarter growth.

      Management  believes  that the  competitive  landscape  continues to favor
Oaktree's PC Database and Internet business model. Management also believes that
customers will pursue solutions that improve operating  efficiencies and improve
income  potential.  Oaktree's  products offer both  opportunities at lower costs
than traditional, mainframe competitors.

                                       10





REVENUES AND EXPENSES

THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002

      The Company had revenues of $1,577,196 for the three months ended June 30,
2003 compared to $1,399,439 for the  comparable  period in 2002. The increase is
primarily  due  to  increased   revenue  from  the  Company's  new  Subscription
Fulfillment Product released in November 2002.

      Fulfillment  and materials  costs were $247,383 for the three months ended
June 30, 2003  compared  to $179,828  for the  comparable  period in 2002.  This
increase  was due  primarily  to the cost of  operations  of the  Company's  new
Subscription Fulfillment Product, which was developed in 2002.

      Personnel  costs were  $1,059,900 for the three months ended June 30, 2003
compared to $891,632 for the  comparable  period in 2002.  This increase was due
primarily  to  costs  associated  with  the  hiring  of  new  industry  specific
management to position the Company for future growth.

      Selling,  general &  administrative  expenses  were $494,779 for the three
months  ended June 30, 2003  compared to $326,075 for the  comparable  period in
2002. This increase was due primarily to the costs  associated with the addition
of a sales department in the second quarter of 2003.

      Other  income & expenses  were  $2,510 and $4,385,  respectively,  for the
three  months ended June 30, 2003  compared to $7,773 and $3,988,  respectively,
for the  comparable  period in 2002.  The decrease in other income was primarily
due to decreasing money market rates earned on cash held by the Company.

      The Company had a net loss of $226,741 for the three months ended June 30,
2003 compared to a net profit of $5,689 for the comparable  period in 2002. This
decrease was primarily due to costs  associated  with the hiring of new industry
specific  management  and the addition of a sales  department to reposition  the
Company for future growth.


SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

      The Company had revenues of  $3,066,519  for the six months ended June 30,
2003 compared to $2,823,618 for the comparable  period in 2002. The increase was
primarily  due  to  increased   revenue  from  the  Company's  new  Subscription
Fulfillment Product released in November 2002.

      Fulfillment  and  materials  costs were  $413,933 for the six months ended
June 30, 2003  compared  to $308,912  for the  comparable  period in 2002.  This
increase  was due  primarily  to the cost of  operations  of the  Company's  new
Subscription Fulfillment Product, which was developed in 2002.

      Personnel  costs were  $2,120,568  for the six months  ended June 30, 2003
compared to $1,744,637 for the comparable  period in 2002. This increase was due
primarily  to  costs  associated  with  the  hiring  of  new  industry  specific
management and one time expenses incurred as a result of a reduction in existing
workforce.

      Selling,  general &  administrative  expenses  were  $921,198  for the six
months  ended June 30, 2003  compared to $755,715 for the  comparable  period in
2002. This increase was due primarily to the costs  associated with the addition
of a sales department in the second quarter of 2003.

                                       11





      Other income & expenses were $5,156 and $7,482, respectively,  for the six
months ended June 30, 2003 compared to $15,172 and $7,227, respectively, for the
comparable  period in 2002.  The decrease in other income was  primarily  due to
decreasing money market rates earned on cash held by the Company.

      The Company had a net loss of $391,506  for the six months  ended June 30,
2003 compared to a net profit of $22,299 for the comparable period in 2002. This
decrease was primarily due to costs  associated  with the hiring of new industry
specific  management  and the addition of a sales  department to reposition  the
Company for future growth.


LIQUIDITY AND CAPITAL RESOURCES

      The Company's  cash and cash  equivalents  totaled  $1,363,119 at June 30,
2003  and  $1,844,512  at  December  31,  2002.  The  Company's  cash  and  cash
equivalents decreased in the first six months of 2003 due primarily to the costs
associated with the hiring of new industry specific management,  the addition of
the new sales department,  one time expenses incurred as a result of a reduction
in existing  workforce and an increase in accounts  receivable of $212,159.  The
Company  continues  to  seek  an  acquisition  or  other  business  combination.
Management  believes its cash  position is  sufficient  to cover  administrative
expenses and current obligations for the foreseeable future.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

=======================================================================================================================
Contractual Cash Obligations         Payments Due by Period
                                     Total           Less than 1 year    1-3 years       4 - 5 years      After 5 years
Long Term Debt                       0
Capital Lease Obligations            $ 155,749       $ 57,769            $ 97,980
Operating Leases                     $ 516,577       $230,459            $285,664        $454
Unconditional Purchase Obligations   0
Other Long Term Obligations          0
Total Contractual Cash Obligations   $ 672,326       $288,228            $383,644        $454
=======================================================================================================================


CRITICAL ACCOUNTING POLICIES
RECENT ACCOUNTING PRONOUNCEMENTS

      In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145  RESCISSION  OF FASB  STATEMENTS  NO. 4, 44, AND 64,  AMENDMENT  OF FASB
STATEMENT  NO.  13, AND  TECHNICAL  CORRECTIONS  ("SFAS  145").  This  Statement
rescinds FASB Statement No. 4, REPORTING GAINS AND LOSSES FROM EXTINGUISHMENT OF
DEBT, and an amendment of that Statement, FASB Statement No. 64, EXTINGUISHMENTS
OF DEBT MADE TO SATISFY SINKING-FUND REQUIREMENTS.  This Statement also rescinds
FASB Statement No. 44, ACCOUNTING FOR INTANGIBLE ASSETS OF MOTOR CARRIERS.  This
Statement amends FASB Statement No. 13,  ACCOUNTING FOR LEASES,  to eliminate an
inconsistency  between the required  accounting for sale-leaseback  transactions
and the required  accounting for certain lease  modifications that have economic
effects that are similar to  sale-leaseback  transactions.  This  Statement also
amends other existing  authoritative  pronouncements  to make various  technical
corrections,  clarify meanings,  or describe their  applicability  under changed
conditions.  Effective  January 1, 2003,  the Company  adopted the provisions of
SFAS 145 which did not have a material  impact on the results of  operations  or
financial position of the Company for the six months ended June 30, 2003.

                                       12




      In July  2002,  the FASB  Issued  Statement  No. 146 ACCOUNTING  FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL  ACTIVITIES SFAS 146. This Statement  addresses
financial  accounting and reporting for costs  associated  with exit or disposal
activities  and  nullifies  Emerging  Issues Task Force  (EITF)  Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)."  The
principal  difference  between  this  Statement  and Issue  94-3  relates to its
requirements  for  recognition of a liability for a cost associated with an exit
or disposal  activity.  This  Statement  requires  that a  liability  for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred.  Under  Issue 94-3,  a liability  for an exit cost as defined in Issue
94-3 was  recognized at the date of an entity's  commitment to an exit plan. The
provisions of this Statement are effective for exit or disposal  activities that
are initiated  after December 31, 2002.  Effective  January 1, 2003, the Company
adopted the  provisions of SFAS 146 which did not have a material  impact on the
results of  operations  or financial  position of the Company for the six months
ended June 30, 2003.

      In November  2002,  the FASB  issued  Interpretation  No. 45,  "GUARANTORS
ACCOUNTING  AND  DISCLOSURE  REQUIREMENTS  FOR  GUARANTEES,  INCLUDING  INDIRECT
GUARANTEES OF  INDEBTEDNESS  OF OTHERS" ("FIN 45"). FIN 45 requires that certain
guarantees  be initially  recorded at fair value,  which is  different  from the
general  current  practice of recording a liability only when a loss is probable
and reasonably  estimable.  FIN 45 also requires a guarantor to make significant
new disclosures for virtually all guarantees. The Company adopted the disclosure
requirements  under FIN 45 for the quarter  ended March 31, 2003 and has adopted
the initial  recognition and initial  measurement  provisions for any guarantees
issued or modified  after March 31, 2003.  The adoption of FIN 45 did not have a
material  impact on the  results of  operations  or  financial  position  of the
Company for the six months ended June 30, 2003.

      On December 31, 2002,  the FASB issued SFAS No. 148,  ACCOUNTING FOR STOCK
BASED COMPENSATION TRANSITION AND DISCLOSURE, SFAS 148 AMENDS FASB STATEMENT NO.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION,  to provide alternative methods of
transition  to SFAS  123's  fair  value  method of  accounting  for  stock-based
employee  compensation.  SFAS 148 also amends the disclosure  provisions of SFAS
123 and APB Opinion No. 28, INTERIM FINANCIAL  REPORTING,  to require disclosure
in the summary of significant  accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee  compensation on reported
net income and  earnings per share in annual and interim  financial  statements.
While  SFAS 148 does not amend  SFAS 123 to require  companies  to  account  for
employee stock options using the fair value method, the disclosure provisions of
SFAS 148 are applicable to all companies with stock-based employee compensation,
regardless  of whether  they account for the  compensation  using the fair value
method of SFAS 123 or the intrinsic  value method of APB Opinion 25. The Company
adopted the required disclosure provisions of SFAS No. 148. See Note 5.

      In January 2003, the FASB issued  interpretation No. 46, "CONSOLIDATION OF
VARIABLE  INTEREST ENTITIES - AN INTERPRETATION OF ARB No. 51" ("FIN 46"), which
addresses  consolidation  of  variable  interest  entities.  FIN 46 expands  the
criteria for  consideration  in determining  whether a variable  interest entity
should  be   consolidated   by  a  business   entity,   and  requires   existing
unconsolidated  variable interest  entities (which include,  but are not limited
to, Special  Purpose  Entities,  or SPE's) to be  consolidated  by their primary
beneficiaries  if the entities do not  effectively  disburse risks among parties
involved.  This interpretation applies immediately to variable interest entities
created  after  January 31,  2003,  and variable  interest  entities in which an
enterprise  obtains an interest  after that date. It applies in the first fiscal
year or interim  period  beginning  after June 15,  2003,  to variable  interest
entities  in which an  enterprise  holds a variable  interest  that it  acquired
before  February  1, 2003.  The  adoption  of FIN 46 is not  expected  to have a

                                       13



material  impact on the  results of  operations  or  financial  position  of the
Company.

      In April 2003,  the FASB issued SFAS No. 149,  "AMENDMENT OF STATEMENT 133
ON DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES." SFAS 149 was issued to amend
and clarify  financial  accounting and reporting for derivative  instruments and
hedging  activities  under SFAS 133,  ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND
HEDGING   ACTIVITIES.   Specifically,   this  Standard   clarifies   under  what
circumstances a contract with an initial net investment meets the characteristic
of  a  derivative  and  when  a  derivative  contains  a  financing   component.
Additionally,  SFAS 149 amends the  definition of an underlying to conform it to
language  used  in  FASB  Interpretation  No.  45,  GUARANTOR'S  ACCOUNTING  AND
DISCLOSURE  REQUIREMENTS  FOR  GUARANTEES,   INCLUDING  INDIRECT  GUARANTEES  OF
INDEBTEDNESS OF OTHERS, and amends certain other existing  pronouncements.  SFAS
149 is effective for contracts  entered into or modified  subsequent to June 30,
2003 and hedging  relationships  designated  subsequent  to June 30,  2003.  The
provisions  of this  Standard are to be applied  prospectively.  The adoption of
SFAS 149 is not expected to have a material  impact on the results of operations
or financial position of the Company.

      In May  2003,  the FASB  issued  SFAS No.  150,  "ACCOUNTING  FOR  CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY." SFAS
150 requires that certain financial  instruments,  which under previous guidance
were  accounted  for as equity,  must now be accounted for as  liabilities.  The
Standard requires that certain freestanding  financial instruments be classified
as  liabilities,   including  mandatorily   redeemable  financial   instruments,
obligations to repurchase the issuer's equity shares by transferring  assets and
certain  obligations to issue a variable number of shares. SFAS 150 is effective
for financial  instruments  entered into or modified subsequent to May 31, 2003,
and  otherwise  is  effective  at the  beginning  of the  first  interim  period
beginning  after  June  15,  2003.  It is to be  implemented  by  reporting  the
cumulative  effect  of  a  change  in  an  accounting  principle  for  financial
instruments created before the issuance date of the Statement and still existing
at the  beginning  of the  interim  period of  adoption.  The  Company  does not
anticipate  that the  implementation  of SFAS 150 will have a material impact on
its financial position, results of operations or cash flows.

                                       14





ITEM 3.     CONTROLS AND PROCEDURES

      (a) Evaluation of disclosure controls and procedures

          Within  the 90 days  prior to the  date of this  report,  the  Company
carried out an evaluation,  under the supervision and with the  participation of
the Company's  management,  including the Company's Chief Executive  Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's  disclosure controls and procedures.  Based upon that evaluation,  the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating  to  the  Company  (including  its  consolidated
subsidiary) required to be included in the Company's periodic SEC filings.

      (b) Changes in internal controls

          There were no significant  changes in the Company's  internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation.

      (c) Asset-Backed issuers

          Not applicable.

                                       15





PART II.    OTHER INFORMATION

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS

            Effective March 3, 2003, the Company granted  Christopher Lynde, the
Chief Executive Officer of the Oaktree subsidiary, nonstatutory stock options to
purchase 125,000 shares of Common Stock under the Company's Amended and Restated
1990 Incentive Stock Option Plan and 1990  Nonstatutory  Stock Option Plan at an
exercise price of $2.25 per share.  The options vest and become  exercisable one
year from the date of grant and  terminate  eight  years from the date of grant.
The issuance of the options was deemed to be exempt from registration  under the
Securities  Act of  1933,  as  amended,  in  reliance  on  Section  4(2)  of the
Securities Act as a transaction by an issuer not involving a public offering.

            On March 5, 2003, the Company agreed to grant to the Mayo Foundation
for Medical  Education and Research  ("Mayo") warrants to purchase up to 100,000
shares and 50,000  shares,  respectively,  of common  stock of the Company at an
exercise price of $1.75 per share. The warrants were issued on July 1, 2003. The
warrants were subject to the following  conditions.  The warrants to purchase up
to 100,000 shares become exercisable in four equal annual installments on July 1
of each year beginning  July 1, 2004 as long as the Oaktree  subsidiary and Mayo
continue to be parties to a certain Master Services Agreement effective November
15, 2002 (the "Master Services Agreement") and expire June 30, 2008. Each annual
installment  becomes  exercisable  only if  subscriptions to any consumer health
information publication intended for sale to the general public produced by Mayo
("Consumer  Health  Subscription  Business")  that are managed and  fulfilled by
Oaktree under the Master Services  Agreement account for at least ninety percent
of Mayo's total gross  revenues  derived from the Consumer  Health  Subscription
Business during the  twelve-month  period  preceding the applicable  installment
date. The warrants to purchase up to 50,000 shares become exercisable subject to
the  achievement  of certain  revenue  goals by Oaktree  from New  Business  (as
defined in the  warrants)  and expire  December  31, 2007.  The warrants  become
exercisable as to fifty percent of the shares if cumulative  gross revenues from
New  Business  for the  first  time  exceed  $1,000,000  for any  calendar  year
commencing  January 1, 2003 and ending  December 31, 2006.  The warrants  become
exercisable as to one hundred percent of the shares if cumulative gross revenues
from New Business exceed $2,000,000 for any calendar year commencing  January 1,
2003 and ending  December  31,  2006,  regardless  of whether any portion of the
warrants was exercisable prior thereto.  The issuance of the warrants  described
in this paragraph was deemed to be exempt from registration under the Securities
Act of 1933, as amended,  in reliance on Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering.

                                       16





ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a)   EXHIBITS

Exhibit No.       Description

10.1              Warrant issued to Mayo  Foundation  for Medical  Education and
                  Research to  purchase  100,000  shares of common  stock of the
                  Company effective March 5, 2003.

10.2              Warrant issued to Mayo  Foundation  for Medical  Education and
                  Research  to  purchase  50,000  shares of common  stock of the
                  Company effective March 5, 2003.

99.1              Certification  of Chief Executive  Officer pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002.*

99.2              Certification  of Chief Financial  Officer pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002.*

99.3              Certification  of Chief Executive  Officer pursuant to Section
                  906 of the Sarbanes-Oxley Act of 2002.**

99.4              Certification  of Chief Financial  Officer pursuant to Section
                  906 of the Sarbanes-Oxley Act of 2002.**

                  * Filed as an exhibit  pursuant to Item 601(b)31 of Regulation
                  S-B as directed by the Securities  and Exchange  Commission in
                  Release No. 33-8238.

                  ** Filed as an exhibit pursuant to Item 601(b)32 of Regulation
                  S-B as directed by the Securities  and Exchange  Commission in
                  Release No. 33-8238.


           (b)    REPORTS ON FORM 8-K

                  None

                                       17





                                   SIGNATURES


            In  accordance  with  the  requirements  of the  Exchange  Act,  the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                    GATEWAY INDUSTRIES, INC.



                                    /s/ Maritza Ramirez
                                    -------------------
                                    Maritza Ramirez, Chief Financial Officer
                                    and duly authorized signatory

Date:  July 31, 2003

                                       18`