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

Balance Sheets

(Unaudited)

March 31,

March 31,

2011

2010

Assets

Current Assets

Cash

$

29,236

$

15,111

Project Cash Calls

Accounts Receivable

49,294

48,709

Brokerage Account

0

0

Prepaid Expenses

2,789

3,045

81,319

66,865

Property and Equipment (Note 2)

613,766

713,933

Inventory

0

0

Other Assets (Note 3)

83,577

97,409

Total Assets:

$

778,662

$

878,207

Liabilities and Shareholders Equity

Current Liabilities

Bank Indebtedness (Note 4)

$

0

0

Operating Loan

293,088

246,303

Accounts Payable

28,721

41,965

Accounts Payable to JV Partners

0

0

321,809

288,268

Long Term Liabilities

Private loans

170,543

181,198

Private Debentures

0

0

Institutional Loans

91,719

164,887

262,262

346,085

Shareholders' Equity

Opening retained earnings

(696,040)

(606,599)

Share capital (Note 5)

915,438

939,894

Profit/(loss)

(24,807)

(89,441)

194,591

243,854

Total Liabilities:

$

778,662

878,207

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,

2011

2010

Revenues

Consulting income

$

0

$

0

Operational Services

0

0

2011

2010

Oil Sales BBLS

6,329

6,457

503,000

472,066

Gas Sales MCF

8,006

6,128

21,487

19,238

Total sales:

524,487

491,304

Royalties and taxes

(123,137)

(115,823)

Production expenses

(233,480)

(239,672)

Total cost of sales:

(356,617)

(355,495)

Total oil and gas income:

167,870

135,809

Asset Sales

0

30

Scorp Income - Hanks Oil Field Services

149

1,311

Equipment Rental

0

0

Interest and other

3,227

3,756

Total income:

$

171,246

$

140,906

Expenses

General Operations

Contract labour

$

0

$

0

Travel expense

29,282

24,189

Repairs and maint.

5,579

7,436

Communications

7,800

7,345

Expenses/supplies

7,306

5,727

$

49,967

$

44,697

Oil & Gas Operations

Lease rentals

$

9,088

$

8,422

Field Seismic costs

0

0

Data processing

0

0

Insurance

4,058

5,932

OK/Alberta Rebate

0

0

Loss on lost or stolen items

0

0

Loss on junked assets

0

0

Depletion of property costs

10,692

24,543

Drilling expenses

0

0

$

23,838

$

38,897

Expenses this page:

$

73,805

$

83,594

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,

2011

2010

Income from previous page:

$

171,246

$

140,906

Expenses from previous page:

73,805

83,594

Expenses (Continued)

Office and Aministrative

Contract labour

$

16,439

$

9,222

Employee health insurance

0

0

Expenses/supplies

4,700

5,350

Training

113

309

Legal/accounting

14,599

12,440

DOT Expenses

1,873

54

Communications

382

548

Travel

2,027

6,586

Share trades

0

0

Foreign exchange

(4,610)

(102)

Interest expense

44,567

52,896

Depreciation and ammortization

42,158

59,450

$

122,248

$

146,753

Total expenses:

$

196,053

$

230,347

Net (loss)/gain:

$

(24,807)

$

(89,441)

Retained Earnings

Beginning of year

(696,040)

(606,599)

Retained earnings at end of year

(720,847)

(696,040)

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

2011

2010

Development drilling expense

$

705,761

$

771,195

Oil and Gas leases

9,197

9,682

Long term oil and gas equipment

543,827

587,995

Short term oil and gas equipment

71,419

76,195

Facillities construction

13,364

14,688

Buildings

8,917

9,800

Exploration seismic

28,139

29,295

Exploration labour

3,721

4,090

Exploration databases

4,248

4,669

Exploration equipment

24,939

27,087

Construction equipment

53,473

58,772

Automobiles

105,210

114,988

Office furniture and equipment

3,621

3,639

Computer software

12,185

12,900

Computer hardware

43,969

44,231

Incorporation costs

1,123

1,234

$

1,633,113

$

1,770,460

Less depreciation & depletion & Ammortization

(1,019,347)

(1,056,527)

$

613,766

$

713,933

Note 3 - Other Assets

2011

2010

$25,000 US Oklahoma Corporation Commission

surity deposit

$

24,645

$

27,088

Investment in Hanks Oil Field Services

5,526

5,649

Investment in Gateway Oil & Gas, Inc.

16,725

16,725

Loan to Blaine Exploration Ltd.

36,681

47,947

$

83,577

$

97,409

Note 4 - Bank Indebtedness

2011

2010

Cheques issued in excess of cash

$

0

$

0

Note 5 - Share Capital

2011

2010

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.

$

246,762

$

271,218

Authorized - 300,000 Common Shares

Issued - Fully Dilluted

Shares

14,776

Shares

14,776

New Shares Issued

Shares

0

Shares

0

Total Share Capital

$

915,438

$

939,894

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,

2011

2010

Operations Revenue

Consulting income

$

0

$

0

Equipment Rental

0

0

_______________________________________

149

1,311

Operational Services

0

0

2011

2010

Oil Sales BBLS

6,329

6,457

503,000

472,066

Gas Sales MCF

8,006

6,128

21,487

19,238

Total sales:

524,487

491,304

Royalties and taxes

(123,137)

(115,823)

Production expenses

(233,480)

(239,672)

Total cost of sales:

(356,617)

(355,495)

Total oil and gas income:

167,870

135,809

Total operations income:

$

168,019

$

137,120

Operations Expenses

General Operations

Contract Labour

$

0

$

0

Travel/auto

(29,282)

(24,189)

Insurance

(4,058)

(5,932)

Lease rentals

(9,088)

(8,422)

Alberta royalty rebate

0

0

Repairs & maint.

(5,579)

(7,436)

Expenses/supplies

(7,306)

(5,727)

Communications

(7,800)

(7,345)

$

(63,113)

$

(59,051)

Office and Administrative

Contract labour

$

(16,439)

$

(9,222)

Employee health insurance

0

0

Expenses/supplies

(4,700)

(5,350)

Legal/accounting

(14,599)

(12,440)

Training

(113)

(309)

Rent

(1,873)

(54)

Travel

(2,027)

(6,586)

Communications

(382)

(548)

Share trades

0

0

$

(40,133)

$

(34,509)

Total operations expenses:

(103,246)

(93,560)

Cash flow from operations:

$

64,773

$

43,560

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,

2011

2010

Cash flow from previous page:

$

64,773

$

43,560

Interest & Financing

Interest and other

3,227

3,756

Interest expense

(44,567)

(52,896)

(41,340)

(49,140)

Cash flow before special items:

$

23,433

$

(5,580)

Exploration and Development

Field seismic costs

0

0

Data Processing

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

30

Cash flow before non cash items:

$

23,433

$

(5,550)

Non cash items

Foreign exchange

4,610

102

Depreciation & Ammortization

(42,158)

(59,450)

Depletion of property costs

(10,692)

(24,543)

(48,240)

(83,891)

Net (loss)/gain:

$

(24,807)

$

(89,441)

Retained Earnings

Beginning of year

(696,040)

(606,599)

At end of year

$

(720,847)

$

(696,040)