Gateway Resources U.S.A., Inc.

Balance Sheets

(Unaudited)

March 31,

March 31,

2011

2010

Assets

Current Assets

Cash

$

28,760

$

13,700

Accounts Receivable

49,898

44,872

Project Accounts Receivable

0

0

Brokerage Account

0

0

Prepaid Expenses

2,829

2,810

81,487

61,382

Property and Equipment (Note 2)

611,156

648,492

Inventory

0

Other Assets (Note 3)

67,814

74,466

Total Assets:

$

760,457

$

784,340

Liabilities and Shareholders Equity

Current Liabilities

Bank Indebtedness (Note 4)

$

0

Operating Loans

297,310

227,322

Accounts Payable

27,216

36,987

Accounts Payable To JV Partners

324,526

264,309

Long Term Liabilities

Long Term Debt (Investors)

173,000

167,234

Long Term Debt (Institutions)

93,040

152,180

Intercompany Debt to Gateway Resources Ltd.

11,678

15,778

277,718

335,192

Shareholders' Equity

Opening retained earnings

(429,184)

(350,728)

Share capital (Note 5)

250,317

250,317

Paid in Capital Surplus

363,706

363,706

Profit/(loss)

(26,626)

(78,456)

158,213

184,839

Total Liabilities:

$

760,457

784,340

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

Hanks Oil Field Services Income

151

1,210

Operational Services

0

0

2011

2010

Oil Sales BBLS

6,329

6,447

510,245

435,171

Gas Sales MCF

8,006

6,128

21,797

17,755

Total sales:

532,042

452,926

Royalties and taxes

(124,911)

(106,897)

Production expenses

(236,326)

(218,973)

Total cost of sales:

(361,237)

(325,870)

Total oil and gas income:

170,805

127,056

Asset Sales//Capital Gains

0

28

Equipment Rental

Interest and other

3,273

3,467

Total income:

$

174,229

$

131,761

Expenses

General Operations

Contract labor

$

$

Travel expense

29,704

22,325

Repairs and maint.

5,659

6,863

Communications

7,912

6,779

Expenses/supplies

7,411

5,286

$

50,686

$

41,253

Oil & Gas Operations

Lease rentals

$

8,700

$

7,300

Field Seismic costs

Data processing

Insurance

4,116

5,475

Loss on asset sale

Depletion of property costs

10,846

22,636

Drilling expenses

$

23,662

$

35,411

Expenses this page:

$

74,348

$

76,664

______________________________

Statements of Income and Retained Earnings (Continued)

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2011

2010

Income from previous page:

$

174,229

$

131,761

Expenses from previous page:

74,348

76,664

Expenses (Continued)

Office and Administrative

Contract labor

$

14,850

$

6,850

Employee insurance

Expenses/supplies/Taxes

4,730

4,902

Training

115

285

Legal/accounting

14,500

11,200

Communications

387

506

DOT Expenses

1,900

50

Travel/Entertainment

2,056

6,078

Share trades

Interest expense

45,209

48,820

Depreciation and amortization

42,760

54,862

$

126,507

$

133,553

Total expenses:

$

200,855

$

210,217

Net (loss)/gain:

$

(26,626)

$

(78,456)

Retained Earnings

Beginning of year

(429,184)

(350,728)

Retained earnings at end of year

(455,810)

(429,184)

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

2011

2010

Development drilling expense

$

669,749

$

669,749

Oil and Gas leases

4,944

4,944

Long term oil and gas equipment

540,462

532,492

Short term oil and gas equipment

71,443

69,409

Facilities construction

13,556

13,556

Buildings

9,045

9,045

Exploration seismic

25,957

24,683

Exploration labor

3,775

3,775

Exploration databases

4,309

4,309

Exploration equipment

21,994

21,994

Automobiles

106,726

106,126

Construction Equipment

54,243

54,243

Office furniture and equipment

3,657

3,344

Computer software

10,636

10,337

Computer hardware

44,602

40,822

Incorporation costs

1,139

1,139

$

1,586,237

$

1,569,967

Less depreciation & depletion & Amortization

(975,081)

(921,475)

$

611,156

$

648,492

Note 3 - Other Assets

2011

2010

Oklahoma Corporation Commission

surety deposit

$

25,000

$

25,000

Investment in Hanks Oil Field Services

100

100

Equity Due From Hanks Oil Field Services

5,505

5,114

Loan to Blaine Exploration Ltd.

37,209

44,252

67,814

74,466

Note 4 - Bank Indebtedness

2011

2010

Checks issued in excess of cash

$

0

$

0

Note 5 - Share Capital

2011

2010

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,

2011

2010

Operations Revenue

Consulting income

$

0

$

0

Hanks Oil Field Services Income

151

1,210

Operational Services

0

0

2011

2010

Oil Sales BBLS

6,329

6,447

510,245

435,171

Gas Sales MCF

8,006

6,128

21,797

17,755

Total sales:

532,042

452,926

Royalties and taxes

(124,911)

(106,897)

Production expenses

(236,326)

(218,973)

Total cost of sales:

(361,237)

(325,870)

Total oil and gas income:

170,805

127,056

Equipment Rental:

0

0

Total operations income:

$

170,956

$

128,266

Operations Expenses

General Operations

Contract Labor

$

0

$

0

Travel/auto

(29,704)

(22,325)

Insurance

(4,116)

(5,475)

Lease rentals

(8,700)

(7,300)

Rent & Utilities

(1,900)

(50)

Repairs & maint.

(5,659)

(6,863)

Expenses/supplies

(7,411)

(5,286)

Communications

(7,912)

(6,779)

$

(65,402)

$

(54,078)

Office and Administrative

Contract labor

$

(14,850)

$

(6,850)

Employee health insurance

0

0

Expenses/supplies

(4,730)

(4,902)

Legal/accounting

(14,500)

(11,200)

Training

(115)

(285)

Travel

(2,056)

(6,078)

Communications

(387)

(506)

Share trades

0

0

$

(36,638)

$

(29,821)

Total operations expenses:

(102,040)

(83,899)

Cash flow from operations:

$

68,916

$

44,367

Cash flow per share:

4.664

3.003

______________________________

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:

$

68,916

$

44,367

Interest & Financing

Interest and other

3,273

3,467

Interest expense

(45,209)

(48,820)

(41,936)

(45,353)

Cash flow before special items:

$

26,980

$

(986)

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 junked equipment

0

0

Oil equipment sales/Capital Gains

0

28

Cash flow before non cash items:

$

26,980

$

(958)

Non cash items

Depreciation & Amortization

(42,760)

(54,862)

Depletion of property costs

(10,846)

(22,636)

(53,606)

(77,498)

Net (loss)/gain:

$

(26,626)

$

(78,456)

Per Share

(1.80)

(5.31)

Retained Earnings

Beginning of year

(429,184)

(350,728)

At end of year

$

(455,810)

$

(429,184)