Margate Reports Results

YALE, Mich., Oct. 22 -- Margate Industries, Inc. (Nasdaq: CGUL - news) today reported results for the third quarter ended September 30, 2001.

The Yale, Mich.-based holding company reported a net loss of $1.3 million, or $0.69 per share, on net sales of $1.1 million in the third quarter of 2001, compared with net income of $135,317, or $0.07 per share, on net sales of $2.8 million in the same period last year.

Margate said the 2001 quarterly results included non-recurring pre-tax expenses of approximately $858,000 related to the recent termination of its proposed merger with USA Teleport as well as its August 2001 decision to close a Wisconsin facility and consolidate operations in Michigan. Margate also said it wrote off approximately $700,000 of bad debt related to a major customer in the quarter.

Margate, which cleans and finishes gray-iron castings used primarily in cars and light trucks, attributed its decreased sales in the quarter to the slowdown in the North American automotive industry. Margate said the lower sales levels were not enough to offset fixed operating costs, resulting in a third-quarter operating loss of approximately $294,000, which was in line with management expectations.

``These are difficult times for everyone in the automotive industry, and Margate is no exception,'' said William H. Hopton, president and chief executive officer of Margate Industries. ``We are aggressively managing our operations and continue to look for opportunities to improve productivity and quality. The consolidation of our foundry-services operations under one roof has helped reduce expenses, and we have continued to pay down long-term debt.''

Hopton continued: ``The downturn in the auto industry is further evidence of our need to diversify. While we are making the appropriate adjustments to our business and are financially strong, Margate must also continue to look for additional opportunities for growth. The board and management of Margate remain committed to pursuing alliances, mergers or acquisitions that will create long-term value for shareholders.''

For nine months ended September 30, 2001, Margate reported a net loss of $1.3 million, or $0.68 per share, on net sales of $5.0 million, compared with net income of $571,591, or $0.34 per share, on net sales of $8.5 million in the same period of 2000.

Margate Industries employs approximately 75 at Yale Industries, which provide cleaning, grinding, chipping and finishing of iron castings.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this news release include certain predictions and projections that may be considered forward-looking statements under securities law. These statements involve a number of important risks and uncertainties that could cause actual results to differ materially including, but not limited to, the performance of the automotive industry, certain customers and affiliated companies, as well as other economic, competitive and technological factors involving the Company's operations, markets, services, products and prices.

                  MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED INCOME STATEMENTS
                                    (unaudited)

                       Three Months Ended        Nine Months Ended
                          September 30,            September 30,
                        2001         2000        2001         2000


    NET SALES         $1,139,764  $2,755,795   $5,013,530  $8,521,263

    COST OF SALES      1,257,373   2,346,617    4,808,067   6,835,662

    GROSS PROFIT
     (LOSS)             (117,609)    409,178      205,463   1,685,601

    SELLING, GENERAL
     AND ADMINISTRATIVE
      EXPENSES           176,460     266,660      663,302     801,864

    OPERATING INCOME
     (LOSS)             (294,069)    142,518     (457,839)    883,737

    OTHER INCOME (EXPENSE):
      Dividend and interest
       income              8,813      29,812       73,275     113,829
      Interest expense    (4,996)     (1,859)      (7,762)    (10,014)
      Bad Debts - Service
       Fees             (700,000)          -     (700,000)          -
      Organizational Costs
                        (212,239)          -     (212,239)          -
      Loss on Disposal
       of fixed assets
                        (645,647)          -     (645,647)          -
      Other               32,433      (2,026)     173,946     (92,961)
    TOTAL OTHER INCOME
     (EXPENSE)        (1,521,636)     25,927   (1,318,427)     10,854

    INCOME (LOSS) FROM OPERATIONS
     BEFORE PROVISION FOR
      INCOME TAXES    (1,815,705)    206,317   (1,776,266)    894,591

    PROVISION FOR FEDERAL
     INCOME TAXES       (511,000)     71,000     (498,000)    323,000

    NET INCOME
     (LOSS)          $(1,304,705)   $135,317  $(1,278,266)   $571,591
                     ============ =========== ============ ===========

    BASIC EARNINGS (LOSS)
     PER COMMON SHARE    ($0.694)     $0.073      ($0.680)     $0.339

    WEIGHTED AVERAGE
     SHARES
      OUTSTANDING      1,879,542   1,863,460    1,879,542   1,685,301

SOURCE: Margate Industries, Inc.