Gateway Resources U.S.A., Inc.

Balance Sheets

(Unaudited)

March 31,

March 31,

2008

2007

Assets

Current Assets

Cash

$

63,000

$

24,629

Accounts Receivable

65,567

22,652

Project Accounts Receivable

0

64

Brokerage Account

0

0

Prepaid Expenses

2,716

3,144

131,283

50,489

Property and Equipment (Note 2)

642,982

581,183

Inventory

0

Other Assets (Note 3)

84,479

79,497

Total Assets:

$

858,744

$

711,169

Liabilities and Shareholders Equity

Current Liabilities

Bank Indebtedness (Note 4)

$

0

0

Operating Loans

305,571

278,612

Accounts Payable

65,093

15,574

Accounts Payable To JV Partners

0

0

370,664

294,186

Long Term Liabilities

Long Term Debt (Investors)

99,141

55,822

Long Term Debt (Institutions)

57,720

16,245

Intercompany Debt to Gateway Resources Ltd.

19,704

2,950

176,565

75,017

Shareholders' Equity

Opening retained earnings

(292,058)

(251,596)

Share capital (Note 5)

250,317

250,317

Paid in Capital Surplus

363,706

383,706

Profit/(loss)

(10,450)

(40,461)

311,515

341,966

Total Liabilities:

$

858,744

711,169

Approved by the Directors

See accompanying notes

______________________________

Statements of Income and Retained Earnings

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2008

2007

Revenues

Consulting income

$

0

$

0

Hanks Oil Field Services Income

548

1,118

Operational Services

0

0

2008

2007

Oil Sales BBLS

6,595

5,364

550,099

342,569

Gas Sales MCF

1,965

1,871

10,942

1,985

Total sales:

561,041

344,554

Royalties and taxes

(139,310)

(81,684)

Production expenses

(237,650)

(140,538)

Total cost of sales:

(376,960)

(222,222)

Total oil and gas income:

184,081

122,332

Asset Sales//Capital Gains

47,457

Equipment Rental

Interest and other

4,936

6,342

Total income:

$

189,565

$

177,249

Expenses

General Operations

Contract labor

$

$

Travel expense

20,271

22,963

Repairs and maint.

3,027

678

Communications

3,016

2,885

Expenses/supplies

5,055

3,491

$

31,369

$

30,017

Oil & Gas Operations

Lease rentals

$

9,500

$

9,660

Field Seismic costs

Data processing

95

286

Insurance

5,033

Loss on asset sale

6,620

Depletion of property costs

9,957

11,896

Drilling expenses

$

26,172

$

26,875

Expenses this page:

$

57,541

$

56,892

______________________________

Statements of Income and Retained Earnings (Continued)

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2008

2007

Income from previous page:

$

189,565

$

177,249

Expenses from previous page:

57,541

56,892

Expenses (Continued)

Office and Administrative

Contract labor

$

17,550

$

42,420

Employee insurance

3,137

Expenses/supplies/Taxes

3,724

5,387

Training

844

638

Legal/accounting

20,000

34,000

Communications

2,972

2,533

Rent & Utilities

Travel/Entertainment

6,587

7,345

Share trades

Interest expense

36,540

20,505

Depreciation and amortization

51,120

47,990

$

142,474

$

160,818

Total expenses:

$

200,015

$

217,710

Net (loss)/gain:

$

(10,450)

$

(40,461)

Retained Earnings

Beginning of year

(292,056)

(251,595)

Retained earnings at end of year

(302,506)

(292,056)

Note 1 - Accounting Policies

Gateway Resources U.S.A., Inc. was incorporated under the laws of the State of Oklahoma May 21, 1990. Gateway Resources U.S.A., Inc. is a controlled subsidiary of Gateway Resources Ltd., and Alberta Canada corporation. The Corporation was 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.

(b) Subsidiary Corporation

Investment by the 96% parent corportion, Gateway Resources Ltd. is accounted for by the equity method, by which original cost of the shares is adjusted for the corporation's share of income less dividends recieved.

(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

Office equipment

5 year half year convention

Autos & Auto Equipment

5 year half year convention

Exploration Database

7 year half year convention

Note 2 - Property and Equipment

2008

2007

Development drilling expense

$

582,144

$

563,778

Oil and Gas leases

4,944

4,944

Long term oil and gas equipment

485,766

449,410

Short term oil and gas equipment

56,377

53,194

Facilities construction

13,556

12,556

Buildings

9,045

9,045

Exploration seismic

24,384

24,384

Exploration labor

3,775

3,775

Exploration databases

4,309

4,309

Exploration equipment

21,994

21,994

Automobiles

100,560

100,378

Construction Equipment

54,243

12,500

Office furniture and equipment

1,666

1,666

Computer software

10,337

10,337

Computer hardware

32,215

25,327

Incorporation costs

1,139

1,139

$

1,406,454

$

1,298,736

Less depreciation & depletion & Amortization

(763,472)

(717,553)

$

642,982

$

581,183

Note 3 - Other Assets

2008

2007

Oklahoma Corporation Commission

surety deposit

$

25,000

$

25,000

Investment in Hanks Oil Field Services

100

100

Equity Due From Hanks Oil Field Services

1,678

1,121

Loan to Blaine Exploration Ltd.

57,701

53,276

84,479

79,497

Note 4 - Bank Indebtedness

2008

2007

Checks issued in excess of cash

$

0

$

0

Note 5 - Share Capital

2008

2007

Common shares, no par value

$

250,317

$

250,317

Authorized - 300,000 Common

Issued -

Shares

14,776

Shares

14,776

New shares issued

Shares

0

Shares

0

Other Statistics

US Land (gross holdings acres)

2,147

2,147

US Land (net holdings acres)

2,147

2,147

Seismic Recorded (miles)

0.00

0.00

______________________________

Statements of Income, Cash Flow and Retained Earnings

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2008

2007

Operations Revenue

Consulting income

$

0

$

0

Hanks Oil Field Services Income

548

1,118

Operational Services

0

0

2008

2007

Oil Sales BBLS

6,595

5,364

550,099

342,569

Gas Sales MCF

1,965

1,871

10,942

1,985

Total sales:

561,041

344,554

Royalties and taxes

(139,310)

(81,684)

Production expenses

(237,650)

(140,538)

Total cost of sales:

(376,960)

(222,222)

Total oil and gas income:

184,081

122,332

Equipment Rental:

0

0

Total operations income:

$

184,629

$

123,450

Operations Expenses

General Operations

Contract Labor

$

0

$

0

Travel/auto

(20,271)

(22,963)

Insurance

0

(5,033)

Lease rentals

(9,500)

(9,660)

Rent & Utilities

0

0

Repairs & maint.

(3,027)

(678)

Expenses/supplies

(5,055)

(3,491)

Communications

(3,016)

(2,885)

$

(40,869)

$

(44,710)

Office and Administrative

Contract labor

$

(17,550)

$

(42,420)

Employee health insurance

(3,137)

0

Expenses/supplies

(3,724)

(5,387)

Legal/accounting

(20,000)

(34,000)

Training

(844)

(638)

Travel

(6,587)

(7,345)

Communications

(2,972)

(2,533)

Share trades

0

0

$

(54,814)

$

(92,323)

Total operations expenses:

(95,683)

(137,033)

Cash flow from operations:

$

88,946

$

(13,583)

Cash flow per share:

6.020

(0.919)

______________________________

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:

$

88,946

$

(13,583)

Interest & Financing

Interest and other

4,936

6,342

Interest expense

(36,540)

(20,505)

(31,604)

(14,163)

Cash flow before special items:

$

57,342

$

(27,746)

Exploration and Development

Field seismic costs

0

0

Data Processing

(95)

(286)

Drilling expenses

0

0

Total E & D:

$

(95)

$

(286)

Special one time items

Loss on junked equipment

(6,620)

0

Oil equipment sales/Capital Gains

0

47,457

Cash flow before non cash items:

$

50,627

$

19,425

Non cash items

Depreciation & Amortization

(51,120)

(47,990)

Depletion of property costs

(9,957)

(11,896)

(61,077)

(59,886)

Net (loss)/gain:

$

(10,450)

$

(40,461)

Per Share

(0.71)

(2.74)

Retained Earnings

Beginning of year

(292,056)

(251,595)

At end of year

$

(302,506)

$

(292,056)