Weekly News Period of Dec 16, 2003 to Jan 7, 2004

December turned out to be a great month for us as I was able to spend much more time on fixing the wells and less time in hospitals and clinics.  I still have a long list of wells to pull and fix but am working on them as much as possible.  I have been working 7 days per week when possible and the results are starting to show up in the production numbers.  January will be kind of an off month no matter what I do, but I am hoping for a great February, only time will see as weather is such a factor this time of year.

I am really excited about the internal bank concept announced in the previous news letter.  It is a slow simple concept, but is growing in my mind.  An interesting factor of this concept is that the equity of this internal bank fund, will be a direct measurement of the health of the company.  The other cash flow and monies are used in general operations, but this is purely for internal financing.  If the internal equity fund is healthy, our company will be healthy.  I know it sounds trivial, but last month the balance of the Internal Bank Fund (IBF) was $222 this month it is $591.  I expect to make significant deposits to this fund in the next few months.  I find myself thinking all the time now what could I do with $500 this month that would make $1000 for next month.  In addition this fund will be used to manage our debt and will borrow funds from third parties to expand our financial muscle as the cash flow to the fund warrants it.

I believe to get the value of our stock off center we are going to have to make an important transaction, that will unlock the ability of our company to grow and allow Canadians and Americans to recover some equity from their stock should they decide to sell.  For years Gateway Resources USA has been a subsidiary of the Canadian parent Gateway Resources Ltd.  In 2004 that will changed and Gateway Resources will no longer be a controlled subsidiary of Gateway Resources Ltd.  This is primarily due to my share bonus that I have taken each year to compensate for my low wages.  These bonuses have slowly increased the US ownership of the USA company.  In addition  because of Canadian tax laws which are unfavorable for foreign ownership of small corporations, we are maxed out on the ability for Americans to own more of the parent company.  In addition there are still significant internal funds on the books which were not converted to stock in the US company, but are still shown as debt to the Canadian parent on the US books.  I propose to change all of this and simplify the books by eliminating the relationship between the two companies.

When the smoke clears we will have two entirely independent companies.  The majority of the assets will reside in the US company.  Canadians who are owners in the parent company will be issued stock directly in the US company, as well as retain their shares in the Canadian company.  Thus US citizens can then purchase the shares of Canadians held in the US company, and Canadians also may increase their ownership in the US company directly if desired.  Thus I can start to promote our stock again in the US, with out the complicated burden of trying to explain the relationship held by the dormant Canadian parent.  I presume once the debts are retired and the efficacy of retaining the Canadian company is past, it will be shut down.

I propose to level the floor on all of this, that is convert the internal debt between the two companies into stock, and issue shares to Canadians and Americans in each of their respective entities, according to their just portion of the assets of each company.  What this will do in effect will entirely separate Gateway Resources Ltd. From Gateway Resources USA, Inc.  The exciting thing for me in all of this is that we again open the door to rasing funds through selling of stock, and this has the potential to accentuate our ability to undertake a drilling program in the fall of 2004.

I haven't worked up the details of the transaction at this time, but will begin doing so, especially as Mar 2004 is the end of our corporate year and would be a good time to complete such a transaction.  I believe this will be a non taxable event, unless the owner of shares actually sells their stock.  In most cases there will be a capital loss as the value of the shares for many are less than they paid for them.

Still struggling with finding a new helper as Casey has not worked out.  However John Gallie is feeling much better now and seems to be not falling over.  He cut himself off 3 of the 4 mental drugs he had been taking and it seems to have improved his stamina. He is also eating more balanced meals.  Really John has been a good reliable helper who has been with me since 1998.  However I will still be looking for a new helper who has some physical horsepower, an alert mind, is reliable, and can be trained to take on more functions.  It hasn't happened yet, but I hope to solve that problem in the next few months.