Gateway Resources Ltd.

Balance Sheets

(Unaudited)

March 31,

March 31,

2011

2010

Assets

Current Assets

Cash

$

884

$

268

Project Cash Calls

0

0

Accounts Receivable

0

0

Project Accounts Receivable

0

0

GST

106

90

Due from Gateway Resources U.S.A., Inc.

457,246

461,044

Due from Gateway Oil & Gas, Inc.

16,657

16,657

474,893

478,059

Property and Equipment (Note 2)

11,288

11,292

Investment in U.S. Subsidiary (Note 3)

245,048

245,048

Total Assets:

$

731,229

$

734,399

Liabilities and Shareholders Equity

Current Liabilities

Bank Indebtedness (Note 4)

$

0

0

Accounts Payable and Accruals

1,890

1,890

1,890

1,890

Long Term Liabilities

Long Term Debt (Note 5)

0

0

Shareholders' Equity

Opening retained earnings

63,832

68,370

Share capital (Note 6)

668,676

668,676

Profit/(loss)

(3,169)

(4,537)

729,339

732,509

Total Liabilities:

$

731,229

734,399

Approved by the Directors

See accompanying notes

______________________

Statements of Income and Retained Earnings

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2011

2010

Revenues

Consulting income

$

0

$

0

2011

2010

Oil Sales BBLS

0

11

0

558

Gas Sales MCF

0

0

0

0

Total sales:

0

558

Royalties and taxes

0

0

Production expenses

(510)

(2,415)

Total cost of sales:

(510)

(2,415)

Total oil and gas income:

(510)

(1,857)

Asset Sales

0

0

Interest and other

0

0

Total income:

$

(510)

$

(1,857)

Expenses

General Operations

Contract labour

$

0

$

0

Travel expense

0

0

Repairs and maint.

0

0

Communications

0

0

Expenses/supplies

0

0

$

0

$

0

Oil & Gas Operations

Lease rentals

$

512

$

512

Field Seismic costs

0

0

Data processing

0

0

Insurance

0

0

Alberta Royalty Rebate

0

0

Loss on lost or stolen items

0

0

Loss on junked assets

0

0

Depletion of property costs

0

17

Drilling expenses

0

0

$

512

$

529

Expenses this page:

$

512

$

529

______________________

Statements of Income and Retained Earnings (Continued)

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2011

2010

Income from previous page:

$

(510)

$

(1,857)

Expenses from previous page:

512

529

Expenses (Continued)

Office and Administrative

Contract labour

$

1,800

$

1,800

Employee health insurance

0

0

Expenses/supplies

37

39

Training

0

0

Legal/accounting

305

305

Rent

0

0

Communications

0

0

Travel

0

0

Share trades

0

0

Foreign exchange

0

0

Interest expense

0

0

Depreciation and amortization

5

7

$

2,147

$

2,151

Total expenses:

$

2,659

$

2,680

Net (loss)/gain:

$

(3,169)

$

(4,537)

Retained Earnings

Beginning of year Plus rounding Error $1

63,832

68,370

Retained earnings at end of year

60,663

63,833

Note 1 - Accounting Policies

Gateway Resources Ltd. was incorporated under the Business Corporations Act of Alberta May 18, 1989. The Corporation was formed to engage in oil and gas exploration and production. Significant accounting policies of the Corporation are summarized below:

(a) Basis of Presentation

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles except that they have not been prepared in consolidated form. Consolidated financial statements of the Corporation and its subsidiary would differ from the accompanying financial statements.

Consolidated financial statements of the Corporation and its subsidiary have not been prepared as to the Corporation's shareholders have access to all pertinent information concerning the resources and result of operations of the Corporation and its subsidiary. As non-consolidated financial statements have not been prepared for general purposes, some users may require further information.

(b) Subsidiary Corporation

Investment in the 96% owned subsidiary corporation, Gateway Resources (U.S.A.), Inc., an Oklahoma corporation, is accounted for by the equity method, by which the original cost of the shares is adjusted for the Corporation's share of income less dividends received.

(C) Oil and Gas Property

An interest in a non-producing oil and gas property is recorded at cost and is being amortized over ten years. Straight line method.

An interest in a producing oil and gas property is recorded at cost and is depleted by the cost depletion method. The oil and gas reserves are estimated and the property is depleted by the percentage of oil and gas reserves produced to date.

(d) Property and Equipment

Equipment is recorded at cost and depreciated over the estimated useful lives of the various classes of assets. Assets in their respective country are depreciated according to the normally accepted tax methods used. Some of which are presented below:

Long term oil and gas equipment

7 year half year convention

Short term oil and gas equipment

5 year half year convention

Geological equipment

30% Reducing balance method

(e) Goods and Service Tax

Revenues are recorded net of the Goods and Service Tax ("GST") collected. Purchases of goods or services are recorded net of the GST that is recoverable. GST that is not recoverable is included in the cost of the goods or services to which it relates. The net amount due to, or from, the taxation authorities with respect to GST is included in accounts payable, or accounts receivable, as appropriate.

Note 2 - Property and Equipment

2011

2010

Canadian Development Expense

$

45,522

$

45,522

Oil and Gas leases

4,325

4,325

Long term oil and gas equipment

11,040

11,040

Short term oil and gas equipment

990

990

Exploration Equipment

3,257

3,257

Exploration seismic

2,551

2,551

Exploration labour

0

0

Office furniture and equipment

16

16

Computer Software

1,700

1,700

$

69,401

$

69,401

Less depreciation & depletion & Amortization

(58,113)

(58,109)

$

11,288

$

11,292

Note 3 - Investment in Subsidiary

In 1999 Gateway Resources U.S.A., Inc. began to sell shares to US investors. 4,999 US shares were allocated to Gateway Resources Ltd. at Canadian book value of $202,382. An additional $3,000 of shares were purchased by Gateway Resources Ltd. prior to year end.

2011

2010

Gateway Resources U.S.A., Inc. Equity

$

244,980

$

244,980

Gateway Oil & Gas, Inc. Equity

68

68

245,048

245,048

Note 4 - Bank Indebtedness

2011

2010

Cheques issued in excess of cash

$

0

$

153

Note 5 - Long Term Debt

2011

2010

Loans From Private Investors

$

0

$

0

Private Convertible Debentures

0

0

$

0

$

0

Note 6 - Share Capital

2011

2010

Common shares, no par value

$

668,676

$

668,676

Authorized - Unlimited number

Issued

Shares

1,317,269

Shares

1,317,269

Fully Diluted

Shares

1,317,269

Shares

1,317,269

New shares issued

Shares

0

Shares

0

Other Statistics

Canadian Land (net holdings acres)

20

20

______________________

Statements of Income, Cash Flow and Retained Earnings

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2011

2010

Operations Revenue

Consulting income

$

0

$

0

2011

2010

Oil Sales BBLS

0

11

0

558

Gas Sales MCF

0

0

0

0

Total sales:

0

558

Royalties and taxes

0

0

Production expenses

(510)

(2,415)

Total cost of sales:

(510)

(2,415)

Total oil and gas income:

(510)

(1,857)

Total operations income:

$

(510)

$

(1,857)

Operations Expenses

General Operations

Contract Labour

$

0

$

0

Travel/auto

0

0

Insurance

0

0

Lease rentals

(512)

(512)

Alberta royalty rebate

0

0

Repairs & maint.

0

0

Expenses/supplies

0

0

Communications

0

0

$

(512)

$

(512)

Office and Administrative

Contract labour

$

(1,800)

$

(1,800)

Employee health insurance

0

0

Expenses/supplies

(37)

(39)

Legal/accounting

(305)

(305)

Training

0

0

Rent

0

0

Travel

0

0

Communications

0

0

Share trades

0

0

$

(2,142)

$

(2,144)

Total operations expenses:

(2,654)

(2,656)

Cash flow from operations:

$

(3,164)

$

(4,513)

Cash flow per share:

(0.002)

(0.003)

______________________

Statements of Income, Cash Flow and Retained Earnings (Continued)

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2011

2010

Cash flow from previous page:

$

(3,164)

$

(4,513)

Interest & Financing

Interest and other

0

0

Interest expense

0

0

0

0

Cash flow before special items:

$

(3,164)

$

(4,513)

Exploration and Development

Field seismic costs

0

0

Drilling expenses

0

0

Total E & D:

$

0

$

0

Special one time items

Loss on lost or stolen items

0

0

Loss on junked equipment

0

0

Oil equipment sales

0

0

Cash flow before non cash items:

$

(3,164)

$

(4,513)

Non cash items

Foreign exchange

0

0

Depreciation & Amortization

(5)

(7)

Depletion of property costs

0

(17)

(5)

(24)

Net (loss)/gain:

$

(3,169)

$

(4,537)

Retained Earnings

Beginning of year

63,833

68,370

At end of year

$

60,664

$

63,833