Gateway Resources Ltd. & Gateway Resources (U.S.A.), Inc.

Balance Sheets

(Unaudited)

March 31,

March 31,

2008

2007

Assets

Current Assets

Cash

$

64,752

$

27,974

Project Cash Calls

0

0

Accounts Receivable

68,747

27,732

Brokerage Account

0

0

Prepaid Expenses

2,743

3,571

136,242

59,277

Property and Equipment (Note 2)

660,915

672,021

Inventory

0

0

Other Assets (Note 3)

94,832

95,729

Total Assets:

$

891,989

$

827,027

Liabilities and Shareholders Equity

Current Liabilities

Bank Indebtedness (Note 4)

$

0

153

Operating Loan

308,597

316,449

Accounts Payable

65,738

17,689

Accounts Payable to JV Partners

0

0

374,335

334,291

Long Term Liabilities

Private loans

100,122

63,403

Private Debentures

0

0

Institutional Loans

58,291

18,451

158,413

81,854

Shareholders' Equity

Opening retained earnings

(542,104)

(494,747)

Share capital (Note 5)

921,471

952,986

Profit/(loss)

(20,126)

(47,357)

359,241

410,882

Total Liabilities:

$

891,989

827,027

Approved by the Directors

See accompaning notes

Gateway Resources Ltd. & Gateway Resources (U.S.A.), Inc.

Statements of Income and Retained Earnings

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2008

2007

Revenues

Consulting income

$

0

$

0

Operational Services

0

0

2008

2007

Oil Sales BBLS

6,801

5,665

568,758

406,877

Gas Sales MCF

1,965

1,871

11,050

2,255

Total sales:

579,808

409,132

Royalties and taxes

(140,838)

(93,022)

Production expenses

(246,925)

(170,914)

Total cost of sales:

(387,763)

(263,936)

Total oil and gas income:

192,045

145,196

Asset Sales

0

53,902

Scorp Income - Hanks Oil Field Services

553

1,269

Equipment Rental

0

0

Interest and other

4,986

7,203

Total income:

$

197,584

$

207,570

Expenses

General Operations

Contract labour

$

0

$

0

Travel expense

20,472

26,081

Repairs and maint.

3,057

770

Communications

3,046

3,277

Expenses/supplies

5,105

3,965

$

31,680

$

34,093

Oil & Gas Operations

Lease rentals

$

10,594

$

10,997

Field Seismic costs

0

0

Data processing

96

325

Insurance

0

5,716

OK/Alberta Rebate

0

0

Loss on lost or stolen items

0

0

Loss on junked assets

6,686

0

Depletion of property costs

10,388

13,997

Drilling expenses

0

0

$

27,764

$

31,035

Expenses this page:

$

59,444

$

65,128

Gateway Resources Ltd. & Gateway Resources (U.S.A.), Inc.

Statements of Income and Retained Earnings (Continued)

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2008

2007

Income from previous page:

$

197,584

$

207,570

Expenses from previous page:

59,444

65,128

Expenses (Continued)

Office and Aministrative

Contract labour

$

19,523

$

49,981

Employee health insurance

3,168

0

Expenses/supplies

3,791

6,149

Training

852

725

Legal/accounting

20,563

38,922

Rent

0

0

Communications

3,001

2,877

Travel

6,652

8,342

Share trades

0

0

Foreign exchange

12,174

4,960

Interest expense

36,902

23,316

Depreciation and ammortization

51,640

54,527

$

158,266

$

189,799

Total expenses:

$

217,710

$

254,927

Net (loss)/gain:

$

(20,126)

$

(47,357)

Retained Earnings

Beginning of year

(542,104)

(494,747)

Retained earnings at end of year

(562,230)

(542,104)

Note 1 - Accounting Policies

Gateway Resources Ltd. was incorporated under the Business Corporations Act of Alberta May 18, 1989. Gateway Resources (U.S.A.), Inc. was incorporated under the laws of the State of Oklahoma May 21, 1990. The Corporations were formed to engage in oil and gas exploration and production. Significant accounting policies of the Corporations are summarized below:

(a) Basis of Presentation

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles. This presentation is for the combined assets of both Gateway Resources Ltd. and Gateway Resources U.S.A., Inc.

(b) Subsidary Corporation

Gateway Resources (U.S.A.), Inc., an Oklahoma corporation, is the 96% owned subsidiary of Gateway Resources Ltd. This financial statement does not reflect the dilution of assets to the shareholder of Gateway Resources Ltd. due to sales of shares in Gateway Resources U.S.A., Inc.

(C) Oil and Gas Property

An interest in a non-producing oil and gas property is recorded at cost and is being ammortized 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

2008

2007

Development drilling expense

$

633,429

$

685,861

Oil and Gas leases

9,318

9,940

Long term oil and gas equipment

501,615

521,480

Short term oil and gas equipment

57,926

61,408

Facillities construction

13,690

14,261

Buildings

9,135

10,273

Exploration seismic

27,176

30,246

Exploration labour

3,812

4,288

Exploration databases

4,352

4,894

Exploration equipment

25,469

28,238

Construction equipment

54,780

14,198

Automobiles

101,556

114,009

Office furniture and equipment

1,698

1,908

Computer software

12,139

13,441

Computer hardware

32,534

28,766

Incorporation costs

1,150

1,294

$

1,489,779

$

1,544,505

Less depreciation & depletion & Ammortization

(828,864)

(872,484)

$

660,915

$

672,021

Note 3 - Other Assets

2008

2007

$25,000 US Oklahoma Corporation Commission

surity deposit

$

25,248

$

28,395

Investment in Hanks Oil Field Services

1,796

1,387

Investment in Gateway Oil & Gas, Inc.

9,516

5,436

Loan to Blaine Exploration Ltd.

58,272

60,511

$

94,832

$

95,729

Note 4 - Bank Indebtedness

2008

2007

Cheques issued in excess of cash

$

0

$

0

Note 5 - Share Capital

2008

2007

Gateway Resources Ltd. Common shares

$

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

Gateway Resources U.S.A., Inc.

$

252,795

$

284,310

Authorized - 300,000 Common Shares

Issued - Fully Dilluted

Shares

14,776

Shares

14,776

New Shares Issued

Shares

0

Shares

1,000

Total Share Capital

$

921,471

$

952,986

Other Statistics

US Land (Gross holdings acres)

2,147

2,147

US Land (net holdings acres)

2,147

2,147

Canadian Land (net holdings acres)

20

20

Seismic Recorded (miles)

0.00

0.00

Gateway Resources Ltd. & Gateway Resources (U.S.A.), Inc.

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

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2008

2007

Operations Revenue

Consulting income

$

0

$

0

Equipment Rental

0

0

_______________________________________

553

1,269

Operational Services

0

0

2008

2007

Oil Sales BBLS

6,801

5,665

568,758

406,877

Gas Sales MCF

1,965

1,871

11,050

2,255

Total sales:

579,808

409,132

Royalties and taxes

(140,838)

(93,022)

Production expenses

(246,925)

(170,914)

Total cost of sales:

(387,763)

(263,936)

Total oil and gas income:

192,045

145,196

Total operations income:

$

192,598

$

146,465

Operations Expenses

General Operations

Contract Labour

$

0

$

0

Travel/auto

(20,472)

(26,081)

Insurance

0

(5,716)

Lease rentals

(10,594)

(10,997)

Alberta royalty rebate

0

0

Repairs & maint.

(3,057)

(770)

Expenses/supplies

(5,105)

(3,965)

Communications

(3,046)

(3,277)

$

(42,274)

$

(50,806)

Office and Administrative

Contract labour

$

(19,523)

$

(49,981)

Employee health insurance

(3,168)

0

Expenses/supplies

(3,791)

(6,149)

Legal/accounting

(20,563)

(38,922)

Training

(852)

(725)

Rent

0

0

Travel

(6,652)

(8,342)

Communications

(3,001)

(2,877)

Share trades

0

0

$

(57,550)

$

(106,996)

Total operations expenses:

(99,824)

(157,802)

Cash flow from operations:

$

92,774

$

(11,337)

Gateway Resources Ltd. & Gateway Resources (U.S.A.), Inc.

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

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2008

2007

Cash flow from previous page:

$

92,774

$

(11,337)

Interest & Financing

Interest and other

4,986

7,203

Interest expense

(36,902)

(23,316)

(31,916)

(16,113)

Cash flow before special items:

$

60,858

$

(27,450)

Exploration and Development

Field seismic costs

0

0

Data Processing

(96)

(325)

Drilling expenses

0

0

Total E & D:

$

(96)

$

(325)

Special one time items

Loss on lost or stolen items

0

0

Loss on junked equipment

(6,686)

0

Oil equipment sales

0

53,902

Cash flow before non cash items:

$

54,076

$

26,127

Non cash items

Foreign exchange

(12,174)

(4,960)

Depreciation & Ammortization

(51,640)

(54,527)

Depletion of property costs

(10,388)

(13,997)

(74,202)

(73,484)

Net (loss)/gain:

$

(20,126)

$

(47,357)

Retained Earnings

Beginning of year

(542,104)

(494,747)

At end of year

$

(562,230)

$

(542,104)