U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X]     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

        For the quarterly period ended March 31, 2006.

[ ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

                        COMMISSION FILE NUMBER: 000-27879

                           GATEWAY DISTRIBUTORS, LTD.
                 (Name of small business issuer in its charter)

                NEVADA                                    88-0301278
   (State or other jurisdiction of                    (I.R.S. Employer
    incorporation or organization)                   Identification No.)

       2555 EAST WASHBURN AVENUE,                           89081
        NORTH LAS VEGAS, NEVADA                          (Zip Code)
(Address of principal executive offices)

                                 (702) 317-2400
                           (Issuer's telephone number)

     Check  whether  the  issuer  (1)  filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]

     State  the  number of shares outstanding of each of the issuer's classes of
common  equity,  as  of  the  latest  practicable date:  As of May 19, 2006, the
issuer  had  10,117,010,636  shares  of its common stock issued and outstanding.

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Exchange  Act).  Yes [ ]  No [X]

     Transitional Small Business Disclosure Format (check one):  Yes [ ]  No [X]


<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                      <C>
PART I - FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . .     1
     Item 1.  Financial Statements. . . . . . . . . . . . . . . . . . . .     2
     Item 2.  Management's Discussion and Analysis or Plan of Operation .    18
     Item 3.  Controls and Procedures . . . . . . . . . . . . . . . . . .    22
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . .    24
     Item 1.  Legal Proceedings . . . . . . . . . . . . . . . . . . . . .    24
     Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds    24
     Item 3.  Defaults Upon Senior Securities
     Item 4.  Submission of Matters to a Vote of Security Holders.
     Item 5.  Other Information . . . . . . . . . . . . . . . . . . . . .    24
     Item 6.  Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . .    25
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    25
</TABLE>


<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM  1.     FINANCIAL  STATEMENTS.

As used herein, the term "Company" refers to Gateway Distributors, Ltd., a
Nevada corporation, and its subsidiaries and predecessors unless otherwise
indicated.  Unaudited, interim, condensed, consolidated financial statements
including a balance sheet for the Company as of the period March 31, 2006, and
statements of operations, and statements of cash flows, for interim periods up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F-14 and are incorporated herein
by this reference.

BASIS  OF  PRESENTATION

The  accompanying  consolidated  interim  unaudited  financial  statements  are
presented  in  accordance  with  accounting principles generally accepted in the
United  States of America for interim financial information and the instructions
for  Form  10-QSB  and  Item 310 under subpart A of Regulation S-B. Accordingly,
they  do not include all of the information and footnotes required by accounting
principles  generally  accepted  in  the  United  States of America for complete
financial  statements. The accompanying statements should be read in conjunction
with  the audited financial statements for the year ended December 31, 2005.  In
the opinion of management, all adjustments considered necessary in order to make
the  financial  statements  not misleading have been included. Operating results
for  the  quarter and period ended March 31, 2006 are not necessarily indicative
of  results  that  may  be  expected  for  the year ended December 31, 2006. The
financial  statements  are  presented  on  the  accrual  basis.

                      [THIS SPACE LEFT BLANK INTENTIONALLY]


<PAGE>
                   GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARIES


                                  - CONTENTS -

<TABLE>
<CAPTION>
                                                  PAGE NUMBER
                                                  -----------
<S>                                               <C>
Financial Statements:

    Balance Sheet                                     F-1

    Statement of Operations                           F-3

    Statement of Stockholders - Equity                F-4

    Statement of Cash Flows                           F-5

    Notes to Financial Statements                     F-7
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                   GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES
                      UNAUDITED CONSOLIDATED BALANCE SHEET
                    (CONDENSED, INTERIM FINANCIAL STATEMENTS)

                                                                 March 31,
                                                                   2006
                                                                -----------
<S>                                                             <C>
                               ASSETS

CURRENT ASSETS:
    Cash and cash equivalents                                   $   11,032
    Accounts Receivable                                             23,756
    Inventories                                                    351,279
    Due From Chelsea Collection                                     90,000
    Prepaids                                                             -
                                                                -----------
                                          Total Current Assets     476,067
                                                                -----------

PROPERTY & EQUIPMENT
    Property and Equipment, at cost                              1,676,980
    (Less) accumulated depreciation and amortization              (335,084)
                                                                -----------
                                    Total Property & Equipment   1,341,896
                                                                -----------

MINORITY INTEREST IN SUBSIDIARY                                          -
                                                                -----------

OTHER ASSETS
    Prepaid Advertising                                            230,572
    Product Awaiting Marketing                                     183,650
    Formulas                                                       536,500
    Cal-Bay International Restricted Stock Held for Investment   1,361,005
    Chelsea Collection Restricted Stock Held for Investment        400,000
    Other Assets                                                    15,238
                                                                -----------
                                            Total Other Assets   2,726,965
                                                                -----------

Total Assets                                                     4,544,928
                                                                ===========
</TABLE>

                      See Notes to the Financial Statements


                                       F-1
<PAGE>
<TABLE>
<CAPTION>
                   GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES
                      UNAUDITED CONSOLIDATED BALANCE SHEET
                    (CONDENSED, INTERIM FINANCIAL STATEMENTS)

                                                      March 31,
                                                        2006
                                                    -------------
<S>                                                 <C>
                      LIABILITIES
CURRENT LIABILITIES:

Accounts payable:
  Trade Regular                                     $    276,358
  Set aside for prior amounts due and payable            344,035
Accrued expenses:
  Payroll and employee benefits                          222,282
  Payroll taxes                                          173,113
  Interest                                               420,944
  Other                                                   46,251
Stock Investors                                          288,078
Current maturities of long-term debt                   1,663,590
                                                    -------------
Total current liabilities                              3,434,651
                                                    -------------

LONG-TERM DEBT                                           939,099

                                                    -------------
Total Liabilities                                      4,373,750
                                                    -------------

                 STOCKHOLDERS' EQUITY

Preferred stock - $.001 par value
  Authorized - 400,000,000 shares
    Series A Preferred
       Authorized - 100,000,000 shares
       14,972,125 issued and outstanding                  14,972
    Series B Preferred
       Authorized - 100,000,000 shares
       15,000,000 issued and outstanding                  15,000
    No Series Designated Preferred
       Authorized - 200,000,000 shares
       Issued and outstanding - none
Common stock, - $.001 par value
  Authorized - 25,000,000,000 shares
  Issued and outstanding - 6,817,010,636               6,817,010
  Additional paid-in capital                          15,022,204
  Accumulated (deficit)                              (21,698,008)

                                                    -------------
Net Stockholders' Equity                                 171,178
                                                    -------------

Total Liabilities & Stockholders' Equity            $  4,544,928
                                                    =============
</TABLE>

                      See Notes to the Financial Statements


                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                                GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES
                             UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (CONDENSED INTERIM FINANCIAL STATEMENTS)

                                                                          Quarter Ended    Quarter Ended
                                                                            March 31,        March 31,
                                                                              2006             2005
                                                                         ---------------  ---------------
<S>                                                                      <C>              <C>
SALES                                                                    $      203,570   $      201,686

COST OF SALES                                                                    44,119           45,584
                                                                         ---------------  ---------------

GROSS PROFIT                                                                    159,451          156,102
                                                                         ---------------  ---------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
    Depreciation Expense                                                          7,266           24,709
    Professional Services Not Classified Elsewhere                            1,446,461          124,360
    Development of Jeunesse by Francois Product Line                             81,229           62,071
    Product Development                                                          17,285          250,626
    All Other Selling, General and Administrative                               369,760          198,758
                                                                         ---------------  ---------------

TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                            1,922,001          660,524
                                                                         ---------------  ---------------

INCOME (LOSS) FROM OPERATIONS                                                (1,762,550)        (504,422)
                                                                         ---------------  ---------------
OTHER INCOME (EXPENSE):
    Gain on Sale of Property held for short term investment                           -           37,139
    Debt Forgiveness Income                                                      40,465                -
    (Loss) on Sale of Subsidiary - Los Cabos Beverage                                 -           (8,256)
    (Loss) change in reporting QDS of Arizona as an investment                        -          (68,535)
    (Impairment)  reporting Subsidiary QDS of Arizona as an investment                -           (9,101)
    (Loss) on Investment in QDS                                                 200,000                -
    Interest Expense                                                                  -          (45,905)
    Other Income                                                                      -                -
                                                                         ---------------  ---------------
TOTAL OTHER INCOME (EXPENSE):                                                  (159,535)         (94,658)
                                                                         ---------------  ---------------

NET INCOME (LOSS) BEFORE MINORITY INTEREST                                   (1,922,085)        (599,080)

MINORITY INTEREST                                                                     -                -
                                                                         ---------------  ---------------
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAX                            (1,922,085)        (599,080)

PROVISION FOR INCOME TAX                                                              -                -
                                                                         ---------------  ---------------

NET INCOME (LOSS)                                                        $   (1,922,085)  $     (599,080)
                                                                         ===============  ===============

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE                              $        (0.00)  $        (0.25)
                                                                         ---------------  ---------------

BASIC & DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK                   4,108,677,303        2,440,660
                                                                         ===============  ===============
</TABLE>

                      See Notes to the Financial Statements


                                       F-3
<PAGE>
<TABLE>
<CAPTION>
                                            GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES
                                     UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                    FOR THE PERIODS ENDED MARCH 31, 2006 AND DECEMBER 31, 2005

                                        Preferred Stock            Common Stock
                                        Par Value $0.001         Par Value $0.001         Paid in
                                     ---------------------  -------------------------     Excess      Accumulated    Net Equity
                                       Shares     Amount       Shares        Amount       of Par       (Deficit)    (Deficiency)
                                     ----------  ---------  -------------  ----------  ------------  -------------  -------------
<S>                                  <C>         <C>        <C>            <C>         <C>           <C>            <C>
Balance - December 31, 2004           4,972,125  $   4,972         98,590  $       99  $19,224,980   $(18,872,196)  $    357,855

Common Stock Issued:
  For Services - Restricted Stock                           1,975,100,042   1,975,100   (1,262,199)                      712,901
  Cancelled Not Sold                                         -242,749,998    -242,750       22,750                      (220,000)
  For Services - Unrestricted Stock                           853,400,002     853,400     (375,173)                      478,227
  For Cash                                                    381,162,000     381,160      (68,153)                      313,007
Loss for the Period                                                                                      (903,728)      (903,728)
Preferred Stock Issued
  Preferred Stock B                  15,000,000     15,000                                                                15,000
  Preferred Stock A                  10,000,000     10,000                                                                10,000

                                     ----------  ---------  -------------  ----------  ------------  -------------  -------------
Balance for December 31, 2005        29,972,125     29,972  2,967,010,636   2,967,009   17,542,205    (19,775,924)       763,262

Common Stock Issued:
  For Services - Unrestricted Stock                         3,850,000,000   3,850,000   (2,520,000)                    1,330,000

Loss for the Period                                                                                    (1,922,085)    (1,922,085)

                                     ----------  ---------  -------------  ----------  ------------  -------------  -------------
Balance for March 31, 2006           29,972,125     29,972  6,817,010,636   6,817,009   15,022,205    (21,698,009)       171,177
</TABLE>

                      See Notes to the Financial Statements


                                       F-4
<PAGE>
<TABLE>
<CAPTION>
                                GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES
                              UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (CONDENSED INTERIM FINANCIAL STATEMENTS)

                                                                            Quarter Ended     Year Ended
                                                                              March 31,      December 31,
                                                                                2006             2005
                                                                           ---------------  --------------
<S>                                                                        <C>              <C>
OPERATING ACTIVITIES:
Net (loss)                                                                 $   (1,922,085)  $    (903,728)
Adjustments to reconcile Net (loss)
  to net cash from (to) operating activities:
  Stock issued for Services                                                     1,330,000         862,022
  Stock issued for Debt                                                                 -               -
  Depreci. & Amortization Prop & Equip                                              7,266          47,132
  Loss on Sale of Fixed Assets                                                          -               -
  Minority Interest                                                                     -          72,364
  Forgiveness of Debt                                                                   -               -
  Loss on Formulas, Trademark, Goodwill, & Debt Elimination
    of Grandma Hammans in Exchange for 51% of Los Cabos
Changes in operating assets & liabilities which increase (decrease) cash
  flow:
  Accounts Receivable                                                             200,000        (178,122)
  Inventories                                                                      21,997         120,923
  Properties Held for Short Term Investments                                            -         179,741
  Prepaid Expenses & Other Current Assets                                               -          25,500
  Accounts Payable and Commissions                                                 19,585        (128,532)
  Accrued Liabilities                                                              83,362          26,989
                                                                           ---------------  --------------
Net cash provided by operating activities                                        (259,875)        124,289
                                                                           ---------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Product Development Awaiting Production                                               -          (4,000)
  Capital (Outlays)  / Disposals                                                        -       4,237,309
  (Purchase) of Formulas                                                                -               -
  Purchase of Property                                                         (1,266,001)              -
  Other Assets                                                                     25,530           7,938
                                                                           ---------------  --------------
Net cash provided (used) from investing activities                             (1,240,471)      4,241,247
                                                                           ---------------  --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net Proceeds from Term Debt After Principal Payments                          1,224,073               -
  Principal Payment on Debts (over) net proceedds Term Debt                             -      (2,820,033)
  Stock Sales for Cash; Net                                                             -         338,009
  Investments                                                                     194,000      (1,827,366)
                                                                           ---------------  --------------
Net cash provided (used) from financing activities                              1,418,073      (4,309,390)
                                                                           ---------------  --------------

NET INCREASE (DECREASE) IN CASH EQUIVALENTS                                       (82,273)         56,146

CASH AND CASH EQUIVALENTS - Beginning of Period                                    93,305          37,159
                                                                           ---------------  --------------

Cash at end of period                                                      $       11,032   $      93,305
                                                                           ===============  ==============
</TABLE>

                      See Notes to the Financial Statements


                                       F-5
<PAGE>
<TABLE>
<CAPTION>
                      GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                                                           Quarter Ended   Year Ended
                                                             March 31,    December 31,
                                                               2006           2005
                                                           -------------  ------------
<S>                                                        <C>            <C>
SUPPLEMENTAL DISCLOSURE

CASH PAID FOR:
  Interest                                                             0       192,645
  Taxes                                                                0             0


NON CASH INVESTING AND FINANCING ACTIVITIES

STOCK ISSUED FOR:
  Services                                                     1,330,000       862,022
  Debt                                                                 0             0
  Investors                                                      194,000       338,009

FORMULA EXCHANGED FOR DEBT PAYOFF
  Payoff of Grandma Hamman's debt in exchange for formula              0             0
</TABLE>

                      See Notes to the Financial Statements


                                       F-6
<PAGE>
                   GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 2006

NOTE  1  -  BASIS  OF  PRESENTATION:

     The  consolidated  interim  condensed  financial  statements  at  March 31,
     2006  and  for the periods ended March 31, 2006 and 2005 are unaudited, but
     include  all  adjustments, which the Company considers necessary for a fair
     presentation.

     The  accompanying  unaudited  financial  statements  are  for  the  interim
     periods  and  do  not  include  all disclosures normally provided in annual
     financial  statements, and should be read in conjunction with the Company's
     Form  10-KSB  for  the  year  ended  December  31,  2005.  The accompanying
     consolidated  unaudited  interim financial statements for the periods ended
     March 31, 2006 and 2005 are not necessarily indicative of the results which
     can  be  expected  for  the  entire  year.

     The  preparation  of  financial  statements  in  conformity with accounting
     principles  generally  accepted  in  the  United States of America requires
     management  to  make  estimates  and  assumptions  that affect the reported
     amounts  of  assets and liabilities at the date of the financial statements
     and  the  reported  amounts  of  revenues and expenses during the reporting
     period.  Actual  results  could  differ  from  those  estimates.


NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES:

     Principles  of  Consolidation
     -----------------------------

     As  of  March  31,  2006,  the  Company  has  the  following  wholly  owned
     subsidiaries:

          -    The Right  Solution  Gateway  (multilevel  marketing  and  retail
               sales)
          -    Grandma  Hammans  Specialty  Foods  (an  inactive  corporation)
          -    Gateway  Venture  Holdings,  Inc.  (house  and  manage  the  real
               estate,  vehicles  and  equipment  of  the  Company)
          -    Gateway  Corporate  Administration,  Inc.  (an  inactive
               corporation)

     The  Company  also  owns  a  51%  interest in Quality Distribution Services
     of Arizona, a wholesale distributor of non-alcoholic beverages and food. In
     2004,  the  Company  reported  the  operations  of  QDS  in  the  financial
     statement.  Beginning in 2005, the Company did not report the operations of
     this  company  in  the  financial  statements,  but  recognized  it  as  an
     investment,  not  as  an  equity  position (See Note "Investment in Quality
     Distribution  Services of Arizona" ("QDS")). During the first quarter 2006,
     the Company wrote off it's investment in QDS as the sale of the interest in
     the subsidiary has received no commitment from potential buyers. The search
     for  buyers will continue, although there is little interest in QDS at this
     time.

     The  accompanying  consolidated  financial  statements  include  the
     accounts  of its subsidiaries, except for QDS. All significant intercompany
     balances  and  transactions  have  been  eliminated.


NOTE  3  -  GRANDMA  HAMMANS  AND  LOS  CABOS  BEVERAGE:

     The  Company  purchased  the  assets  of  Grandma Hamman's Specialty Foods,
     LLC,  from  Blaine  Wendtland  on August 15, 2002. On December 21, 2004 the
     assets  and  liabilities of Grandma Hammans, other than some minor residual
     receivables  and payables, passed to Blaine Wendtland in exchange for a 51%
     interest  in  the  sale  of  private  label water that Blaine Wendtland had
     developed.  To  date the subsidiary, Grandma Hammans, remains inactive.

     On  December  30,  2004,  the  Company formed a corporation named Los Cabos
     Beverage,  Inc.  ("Los  Cabos")  and  acquired  a  51%  ownership  with the
     remaining 49% going to Blaine Wendtland. Los Cabos was formed to handle the
     operations  of  the  sale  of  private  label  water discussed in the prior
     paragraph.  Operations  were  to  begin  in


                                      F-7
<PAGE>
     2005.  The Company invested no initial money for this joint venture, but it
     did  provide  a place of operation in its warehouse and limited funding for
     payroll  and  selected  other  expenses.

     During  January  and  February  of  2005  Los  Cabos  sales  did  not  meet
     expectations.  Management  determined that the operations would not be cost
     effective for the Company. On February 28, 2005 the Company entered into an
     agreement  with  Blaine  Wendtland  wherein  he  assumed  all ownership and
     obligations  and  the  Company terminated its commitments and relationships
     with  Los  Cabos and with Blaine Wendtland. There is a loss on the disposal
     of  this  subsidiary  of  $8,256  for operations while the Company owned it
     during  2005.


NOTE  4  -  LICENSING / PURCHASE AGREEMENT WITH THE CHELSEA COLLECTION INC. (A
            RELATED  PARTY):

     The  Company  entered  into  an  agreement  December  12,  2003  with  The
     Chelsea  Collection  Inc,  a Nevada corporation ("Chelsea Collection") that
     was  finalized on March 15, 2004 and later clarified on a few points May 4,
     2004.  Chelsea  Collection  is  now being traded on pink sheets as a public
     entity. Chelsea Collection is majority owned by the officers of the Company
     and  Francois  Vautour,  an  unrelated  third party of the Company. Chelsea
     Collection  in  an  agreement  dated November 25, 2003 acquired among other
     things  from  Francois  Vautour and assigns, except for Romania, all United
     States and Canada rights, trademarks, formulas and licenses of the Jeunesse
     by  Fran  ois  Vautour  and  the  GH3  skin  care  line.

     In  the  agreement  the  Company  has  with Chelsea Collection, the Company
     will  have  the  opportunity to acquire the same Francois Vautour skin care
     line  from  Chelsea  Collection  for  virtually the same price and terms as
     Chelsea  Collection  is  buying  it from Francois Vautour. The terms of the
     agreement  involves  a  purchase price of $4,000,000, payments are computed
     based  on  15%  of  the  gross sales less cost of goods sold with a minimum
     weekly  payment of $10,000. Once the purchase price is paid, then a royalty
     of  up  to  15% of the gross sales less cost of goods sold steps into place
     and  continues  thereafter.  The  cost  outlays  have  been  charged to the
     statement  of  operations as a selling, general and administrative expense,
     which were $487,863 for all of 2005 and $81,229 for the period, ended March
     31,  2006.

     No  title  or  ownership  passes  to  the  Company or to Chelsea Collection
     until  the  November 25, 2003 agreement between Chelsea Collection and Fran
     ois  Vautour  is  satisfied, the payment of which is described in the prior
     paragraph.  The  Company  has  opted  not to capitalize the purchase price.
     Therefore,  all  monies  paid  have  been  expensed.

     The  Company  is  responsible  for  all  product  research  and development
     for  current  and  future  marketing  as  well as carrying inventory on all
     Gateway  Distributors'  products. An infomercial developed late in 2004 has
     been  charged  to the balance sheet as an asset under "Prepaid Advertising"
     for  $230,573.  This  remains  unchanged  during 2005 and 2006. At year end
     (December  31,  2006),  management  will  evaluate  the  infomercial  for
     impairment.

     During  the  third  quarter  2005,  the  Company sold to Chelsea Collection
     its  controlling  block  of preferred restricted stock in Polar WearZ, Inc.
     (refer  to  note "Real Estate Sales") for $250,000. Chelsea Collection name
     changed  the  corporation to "The Chelsea Collection, Inc." As of March 31,
     2006,  Chelsea Collection had paid off all but approximately $90,000 of the
     $250,000  sales  price.

NOTE  5  -  INVESTMENT  IN  QUALITY DISTRIBUTION SERVICES OF ARIZONA ("QDS"):

     On  May  30,  2004,  an  agreement  was  signed  with  Quality Distribution
     Services of Nevada creating a wholesale beverage distribution center in the
     Phoenix,  Arizona  area.  For  this  joint  venture,  Quality  Distribution
     Services  of  Arizona,  Inc  ("QDS")  was incorporated in Nevada on June 7,
     2004,  of  which  51%  is  owned  by  Gateway.

     The  Company  invested  $282,700  during  2004  and another $50,000 through
     March 31, 2005 to assist in the development of the company. The other party
     to  the  joint  venture  has  secured  the  warehouse and equipment and has
     guaranteed  payments  of  such  as  well  as  continue  providing  for  the
     operations  of  QDS.


                                     F - 8
<PAGE>
     Management  has  determined  it  is  in  the  best  interest of the Company
     not  to  continue funding this joint venture. Negotiations are presently in
     process  wherein  the  Company would dispose of its interest. Management is
     unsure what the settlement price will be upon disposing of this investment.
     In  2005,  the  Company recognized an investment of $200,000 out of a total
     investment of $332,700. The difference of $132,700 was recognized as a loss
     in 2004 as well as $9,101 impairment loss in 2005 upon presenting QDS as an
     investment in 2005 instead of a subsidiary as in 2004. Management evaluated
     this  investment and decided to write-off the $200,000 in the first quarter
     of  2006.  In  addition, no operations of this subsidiary are recognized in
     the  consolidated  statement of operations for 2005 and 2006, as management
     has  taken  the  position  that  the  subsidiary  is not under its control.


NOTE  6  -  REAL  ESTATE  SALES:

     During  the  first  quarter  of  2005,  the  Company borrowed an additional
     $400,000  from a financial institution on a 6.5% equity line secured by the
     office  and  warehouse  property  located  at  3220 Pepper Lane, Las Vegas,
     Nevada.  Proceeds  were  used  for  remodeling  the  office  and  warehouse
     property. This loan was paid off upon sale of the building on September 30,
     2005.

     On  February  28,  2005  the  Company  sold  the  Shellstone  residential
     property  real  estate in Las Vegas for approximately $369,000. The gain on
     this  sale  has been recognized in the 2005 Statement of Operations as part
     of  the  "Gain  on  Sale  of  Property  Held  for  Short  Term Investment".

     In  a  single  agreement  on  June  2,  2005,  the  Company sold Aspen Cove
     Resort (property) and the subsidiary Aspen Cove Resort, Inc. (operations of
     Aspen  Cove  Resort),  hereafter  referred  to  as "Aspen Cove," to Cal-Bay
     International  ("Cal-Bay").  Aspen  Cove sold for approximately $2,600,000,
     adjusted  to  the  estimated  fair  value  of the Cal-Bay stock received in
     exchange  for partial payment as discussed later in this note. The sale was
     paid  for  with (1) restricted Preferred Series B stock of Cal-Bay, (2) the
     controlling  block  of  stock  (restricted preferred stock) in Polar WearZ,
     Inc.,  an  inactive no asset corporation trading on the pink sheets, valued
     at  $200,000,  (3)  mortgage  debt  assumption,  and  (4)  cash paid to the
     mortgage  holder  catching  up the past due mortgage payments. The Mortgage
     Note  was  paid  off  in  March 2006. Because there was no distinction made
     between  the  sale  of the Aspen Cove property and operations (subsidiary),
     the  transaction  was  recognized  as  one  sale  and netted into one gain,
     effective  June  2, 2005. The operations of Aspen Cove Resort are reflected
     only  thru June 2, 2005, the date the Company ceased owning the operations.
     In July 2005. Cal-Bay included as part of the payment in exchange for Aspen
     Cove  approximately  800,000  free  trading shares of common stock in Polar
     WearZ,  Inc  (approximately  15%  of  the common stock) valued at $400,000.

     The  valuation  of  Cal-Bay  stock  received  from  the  sale of Aspen Cove
     and  the  Valley Drive real estate, is for a guaranteed minimum sales price
     of  $0.05  per share upon conversion from preferred "B" non voting stock to
     voting  common  stock. The preferred stock is non-dilutable and, as per the
     agreement,  upon  sale as common stock it is guaranteed to sell for no less
     than $0.05 per share, or additional shares will be issued to compensate for
     any shortage. The market value of the common stock of Cal-Bay International
     remained  relatively stable for over two years until November 25, 2005 when
     a reverse split took place. Since then, the stock has retained a value well
     above  the  $0.05 per share guarantee. It is unknown if this will continue.
     Based  on  that  history,  and that the stock is non-dilutable and it has a
     minimum  sales  value of $1,600,000, Management has assigned the 32,000,000
     shares of preferred stock a value of $1,600,000 discounted by $348,501 to a
     present  value  of  10%  per  year for 3 1/2 years giving an estimated fair
     value  of  $1,251,499.  The unrestricted common stock received in the third
     quarter  2005  in  Polar WearZ, Inc. (assigned a value of $400,000) was not
     included  in  the  second  quarter  2005. This changes the recognized sales
     price  from approximately $2,200,000 as previously recognized in the second
     quarter 2005 to $2,600,000. The adjusted gain on this sale of approximately
     $1,276,000  has been recognized in the 2005 Statement of Operations as part
     of  the  "Gain  on  Sale  of  property."

     In  addition,  during  the  second  quarter  2005,  the  Company  sold  a
     residential  property  in  Las Vegas for approximately $250,000 to Cal-Bay.
     Under  the  terms  of  the agreement the purchase payment is made up of (1)


                                      F-9
<PAGE>
     3,200,000,  later  adjusted  to  2,800,000,  shares  of  Cal-Bay
     International  non-dilutable Preferred "B" stock, guaranteed value at $0.05
     per  share,  (2)  and  debt assumption of the underlying mortgage, and, (3)
     cash  paid  to  the  mortgage  holder  catching  up  the  past due mortgage
     payments.  The value of the stock is $140,000 (previously recognized in the
     second quarter 2005 at $160,000) discounted to the present value at 10% per
     year  for  3  1/2  years,  computing to an estimated fair value of $109,506
     (previously  recognized  in  the  second  quarter  2005  at $125,150). This
     changes  the recognized sales price from approximately $250,000 to $235,365
     instead  of  approximately  $251,000 as previously recognized in the second
     quarter  2005.  The  loss  on  this  sale  has  been recognized in the 2005
     Statement  of  Operations  as "Loss on Sale of Valley Dr House" of $26,024,
     previously  recognized  in  the  second  quarter  2005  as  $10,380).

     On  September  30,  2005,  the  Company  closed  on  the  sale  of  its Las
     Vegas,  Nevada  property  located  at  3220  Pepper  Lane, which housed its
     warehouse  and  office facilities for a gain that has been reported as part
     of  the  "Gain on Sale of Property" on the statement of operations in 2005.

     The  Company  purchased  a  smaller  commercial property on March 13. 2006.
     The  warehouse/operations  have been moved to the new building. The offices
     are  operating  out of a temporary location while the office portion of the
     building  is  completed.


NOTE  7  -  REVERSE  STOCK  SPLIT:

     On  March  28,  2005,  the  Company  did  a  500 for 1 reverse stock split.
     The  financial  statements  have  reflected  this  reverse  stock  split
     retroactively  to  inception.


NOTE  8  -  EMPLOYEE  STOCK  INCENTIVE  PLAN  ("ESIP"):

     Since  2003,  the  Company  has  filed  with  the  Security  and  Exchange
     Commission  ("SEC")  forms  S-8 notifying of Employee Stock Incentive Plans
     ("ESIP")  and its increases in stock approved to issue under such plans. No
     additional  increases  in  stock  have  been submitted or approved to issue
     under  such  plans  since  August  2004.

     During  2004,  the  total  number  of  shares  approved  to  issue in these
     plans  was  18,200,000,000  (18  billion,  200  million).  Stock  issued to
     employees through the plan is not affected by reverse splits until after it
     has  been  sold. The remaining unissued stock at any time remains unchanged
     despite  what  happens  to the stock once it is issued. i.e., stock reverse
     splits, dividends, etc. As of March 31, 2006, the remaining shares approved
     to  issue  under  the  ESIP  plans  are  2,301,150,000.

     During  2005,  the  Company  issued  1,433,250,000  shares  out of the ESIP
     plan  before  stock  splits.  The  number  of  shares after stock splits is
     recognized on the statement of stockholders equity. The net proceeds to the
     Company  from employee stock sales during 2005 were approximately $228,000.

     During  January  1  through  March  31, 2006 no stock was issued out of the
     ESIP  plan.  There are currently no shares issued and unsold under the ESIP
     plan.


NOTE  9  -  RECEIVABLE  ESIP  STOCK  PLAN:

     Stock  sales  through  the  Employee  Stock  Incentive  Plan (ESIP) sold at
     quarter  end  are  reported  as  a  receivable  rather than negative equity
     provided  they  are  received within 45 days after quarter end. Funds to be
     received from the ESIP Plan are reported as "Receivable ESIP Stock Plan" as
     a current asset in the amount of $0. There is no receivable on stock issued
     by  March  31, 2006, the sale proceeds of which would have been received by
     the  Company  during  April  2006.


                                        F - 10
<PAGE>
NOTE  10  -  NON-EMPLOYEE,  DIRECTORS  AND  CONSULTANTS  RETAINER  STOCK PLAN
             ("RSP"):

     The  Company  continually  seeks  to  improve  its  financial  position  by
     seeking investors in exchange for equity in the Company. The value assigned
     to  the stock for these transactions will vary based on the market value of
     the  stock  or  services  performed  at the time, whichever is more readily
     ascertainable.

     Since  2003,  the  Company  has  filed  with  the  Security  and  Exchange
     Commission  ("SEC")  forms  S-8  notifying  of  Non-Employee  Directors and
     Consultants  Retainer  Stock  Plans  ("RSP")  and  its  increases  in stock
     approved  to  issue under such plans. No additional increases in stock have
     been  submitted  or  approved  to issue under such plans since August 2004.

     During  2004,  the  total  number  of  shares  approved  to  issue in these
     plans  were  8,500,000,000  (8  billion  500 million). The number of shares
     approved to issue through the plan is not affected by reverse stock splits.
     The  remaining  unissued  stock  at any time remains unchanged despite what
     happens  to  the  stock  once  it  is  issued.  i.e., stock reverse splits,
     dividends,  etc.  As of March 31, 2006, the total remaining shares approved
     to  issue  under  the  RSP  plans  are 43,000,000. During 2005, the Company
     issued  1,093,000,000  shares  out of the RSP plan before stock splits. The
     number  of  shares  after  stock  splits  is recognized on the statement of
     stockholders  equity.

     During  January  1  through  March  31,  2006,  the  Company  issued
     3,850,000,000  shares  out  of  the  RSP  plan.


NOTE  11  -  AUTHORIZATION  OF  SERIES  "B"  PREFERRED  STOCK AND ISSUANCE OF
             RESTRICTED  PREFERRED  "B"  STOCK  TO  CONSULTANTS:

     On  January  18,  2005,  the  Company  authorized  100,000,000  shares  of
     Series  B  Preferred  Stock  with  a par value of 0.001 per share. Series B
     preferred  stock  is convertible to common stock on a one for one basis and
     has  no  voting  rights.

     During  2005,  the  Company  issued  15,000,000 restricted shares of Series
     B  preferred  stock  to  consultants for services rendered with an assigned
     value  of  $15,000.

     During  January  1  through  March  31,  2006, the Company issued no shares
     of  Series  B  preferred  stock


NOTE  12 -  RESTRICTED STOCK ISSUED TO OFFICERS (RELATED PARTY TRANSACTIONS):

     During  2005,  the  Company  issued  to  officers  23,000,000  shares  of
     restricted  common  stock,  valued  at  approximately  $10,000.

     During  January  1  through  March  31, 2006, the Company did not issue any
     restricted  common  stock  to  officers.


NOTE  13  -  NEPOTISM  DISCLOSURE  (RELATED  PARTY  TRANSACTIONS):

     The  son  of  the  Chief  Operations  Officer  serves  as Vice President of
     Operations  with additional responsibilities in Information Technology. Two
     other  children  of  the  officers  work  part  time  for  the  Company  in
     non-managerial  positions. During 2005, the daughter of the Chief Executive
     Officer  worked  as  Marketing  Representative (reassigned March 1, 2005 to
     non-managerial  responsibilities  and has since terminated employment).


                                     F - 11
<PAGE>
NOTE  14  -  RECLASSIFICATION  AND  RESTATEMENTS:

     Selected  items  in  the  March  31,  2005  financial  statements  as
     previously  reported  have  been reclassified and restated to be consistent
     with  the  unaudited  financial  statements  as  of  March  31,  2006.

     The  Company  has  no  off-balance  sheet  arrangements.


NOTE  15  -  PRODUCTS PENDING PRODUCTION RECLASSISFIED TO PREPAID ADVERTISING
             COSTS AND PRODUCT AWAITING MARKETING:

     During  2004  and  before,  Company  acquired sizeable capital investments.
     Management,  in  an  effort to use wisely and prudently the funds received,
     looks  at  different  alternatives  in which to invest. Some of the funding
     goes  into  the  search and subsequent development of selected projects and
     products.

     The  types  of  costs  the  Company  incurs for product development include
     direct  costs  associated  with the search, evaluation and market study for
     the product development involved. These costs include: 1) outside services,
     2)  travel,  3)  testing  and  analysis,  and 4) other direct cost that may
     arise. In accounting for these costs, the Company charges to operations all
     preliminary  and  research  costs  as  well  as all costs stemming from all
     issuances  of  stock  for services. The Company only recognizes as an asset
     those direct costs associated with those projects the Company considers are
     beyond  research  and  that  the  Company  has concluded are viable for the
     future  benefit  of  the Company. The Company expenses all amounts paid for
     services  and  products  that are paid by stock, including the common stock
     that  is  issued  by  the  Company  under  its  Non-Employee, Directors and
     Consultants  Retainer  Stock  Plan  ("Plan").

     On  June  30,  2005,  management  reclassified  $230,572  from  "Products
     Pending  Production"  to "Prepaid Advertising Costs" as an "Other Asset" on
     the Balance Sheet. This is for an infomercial completed and ready to use in
     selected  geographic  areas.  Amortization of this prepaid advertising will
     begin  when  the advertising campaigns begin, expected to be sometime after
     March  31,  2006  and will be based over an estimated useful life yet to be
     determined.  Management  is of the opinion that the estimated fair value of
     prepaid  advertising  exceeds  the  cost  recognized  on the Balance Sheet.
     Management  will  evaluate  the  estimated  fair value at December 31, 2006
     (year  end)  for  impairment.

     The  remaining  $187,650  left  in  "Products  Pending Production" has been
     reclassified  to  "Product Awaiting Marketing" as an "Other Asset." This is
     the  first  product  within  the  Pete  Rose line. It is now completed with
     product  on hand and it is awaiting dissemination pending negotiations with
     third parties as to how it will be marketed. The Company does not recognize
     products  as inventory, or as a current asset, until the marketing approach
     is established. The Company originally had a marketing approach worked out,
     but  has  since  stopped  the route originally selected to reconsider other
     marketing  approaches. Management is of the opinion that the estimated fair
     value  of  product  awaiting  marketing  exceeds the cost recognized on the
     Balance  Sheet.  Management  will  evaluate  the  estimated  fair  value at
     December  31,  2006  (year  end)  for  impairment.


NOTE 16  -  CONSIDERATIONS AFFECTING THE COMPANY'S ABILITY TO CONTINUE AS A
--------------------------
            GOING CONCERN:

     There  have  been  significant  recurring  losses  and  negative cash flows
     from  operations,  which  have resulted in a working capital deficiency. In
     the  event the Company is unable to raise additional operating capital, the
     aforementioned  conditions  raise  substantial  doubt  about  the Company's
     ability  to  continue  as  a going concern. The financial statements do not
     include  any  adjustments  that  might  result  from the occurrence of such
     conditions,  and have been prepared assuming that the Company will continue
     as  a  going  concern.

     The  Company  has  reassessed  its  operating  commitments  and  continues
     taking  steps  to  assure that it focus on its core business going forward.
     The  Company  continues  seeking  means and ways to raise funds and to make


                                      F-12
<PAGE>
     operations  profitable.  Management  is  of the opinion that the Company is
     taking adequate measures to assure itself that it has the ability to remain
     a  going  concern.


NOTE  17  -  COMMITMENTS  AND  CONTINGENCIES:

     COMMITMENTS:
     -----------

     On  or  about  November  27,  2003  the Company entered into an arrangement
     to  invest  in  the  development  and marketing of a cosmetic line owned by
     Francois  Vautour.  The  products  of  Francois  Vautour  were  previously
     successfully  marketed  in  various parts of the world. To acquire the full
     rights,  exclusive  of  Romania,  the  cosmetic  line required a $4,000,000
     commitment  plus  the  costs  of  marketing.

     Although  the  Company  desired  to  acquire  the  rights  and ownership of
     the  line,  it  was greater than the Company felt was prudent for it to do.
     So, to put a stop loss feature in the agreement the two key officers of the
     Company,  Rick  Bailey,  CEO  and  Flo  Ternes,  COO,  formed  The  Chelsea
     Collection,  LLC  ("LLC"),  an  entity  to provide the spring board for the
     Company  to acquire the rights and to minimize the Company's risk. This was
     agreeable  with  Francois  Vautour  and  LLC. Refer to Note above "Products
     Pending  Production  Reclassed  to  Prepaid  Advertising  Costs and Product
     Awaiting  Marketing".

     On  a  separate  matter,  dealing  with  a marketing consultant the Company
     signed  in  August  of 2003 a consulting agreement committing to a ten-year
     contract  to  provide  training  for the company distributors. Compensation
     will be based on the ability of the consultant to sign up new distributors.
     Management  believes  it  will  be  a  self-funding  and revenue generating
     program.  Management  has also signed another agreement, dated December 19,
     2005  with an additional consultant for additional training and recruitment
     services.

     CONTINGENT  LIABILITIES:
     -----------------------

     The  Company  has  no  errors  or  omissions  insurance  for  Directors and
     Officers.

     In  the  normal  course  of  business  the  Company experienced a change in
     position  by  the  Bureaus  of  Consumer  Protection of Nevada and Maryland
     dealing  with a now discontinued product the Company previously sold to the
     public.  See  Note  18  Subsequent  Events.

     A  creditor  of  the  Company,  Allergy  Research group / Nutricology filed
     in the District Court of Clark County, Nevada an action against the Company
     on  an unpaid open account for goods and merchandise, Case No. A-487334, in
     the  amount  of  $168,000. The Company contested the amount claimed and has
     made  payment  toward  the  uncontested  amount while negotiations with the
     plaintiff  continued.  The Company offered to pay, through counsel, the sum
     of  $50,000  with  a  payment  of  $10,000 upon acceptance of the offer and
     $5,000  per month until paid. The offer was accepted and payments are being
     made  with  a  balance  of  $30,000  owing  as  of  March  31,  2006.

     The  Company  has  recognized,  in  the  financial  statements, part of the
     "accounts  payable"  in the liabilities of the balance sheet to cover these
     contingencies.

     OTHER:
     ------

     The  Company  originally  acquired  TRSG  Corporation  ("TRSG"),  effective
     January 11, 2001, by passing all of its assets and selected debt to TRSG in
     exchange  for  approximately  78%  of the stock ownership of TRSG. When the
     Company  later  sold  its  approximately  76%  interest  in TRSG, effective
     December  31,  2002,  it  received  $15,000 for the stock. It also acquired
     all of the assets of TRSG, its operations, and selected debt from TRSG. The
     disposal  of  TRSG  December  31,  2002  effectively  brought back into the
     Company  what  it had before it acquired TRSG in the first place, effective
     January 11, 2001. These transactions, both the original acquisition as well
     as


                                     F - 13
<PAGE>
     the  subsequent  disposal,  are  reported  under  the  purchase  method  of
     accounting,  with  reported  costs recognized as it was in the hands of the
     predecessor. Under the terms of the agreement, TRSG chooses which creditors
     it  continues to owe for $200,000 in debt, and all others are passed to the
     Company.  The  creditors  of TRSG have not agreed upon this agreement. TRSG
     has  ongoing  legal  matters  that  may  or  may not implicate the Company.
     Management  is  unable to estimate the possible loss exposure, but believes
     the  ultimate  outcome  to  be minimal for the Company because the debts of
     TRSG  paid  by  the  Company  are  debts  of  TRSG  and  not  the  Company.

     In  addition,  complaints  filed  by  the  Security and Exchange Commission
     against Suburban Capital also names the Company and its CEO is not settled.
     At  this  juncture,  legal  counsel  is unable to predict what the possible
     outcome  of  these  matters  will  be.

     The  Company  has  unidentified  liabilities  of  $344,035  reported on the
     balance sheet under current liabilities titled "Set aside for prior amounts
     due  and  payable."  These are a portion of liabilities recognized in prior
     years'  financial  statements,  reduced  from  $1,682,886 to $400,000 as of
     December  31, 2004. The Company has been unsure and unable to identify what
     they  represent.  Some go back as much as ten years ago. Some may represent
     debts  recorded  in  prior mergers and acquisitions that the Company is not
     responsible  to  pay.  Others  may have come about by erroneously recording
     liabilities  that  were  already paid. Others may be duplicated liabilities
     that  did  not  belong  as  debt  in  the  first  place.

     As  of  March  31,  2006,  Management  continues negotiations, initiated in
     2003,  with  the  Internal  Revenue  Service ("IRS") to settle back payroll
     taxes  due  and  anticipates  a  settlement  by  the-end  of  2006.

     The  Company  has  not recognized any contingent liability for these items.


NOTE  18  -  SUBSEQUENT  EVENTS:

     The  SEC  has  requested  the  company respond to questions they had raised
     regarding the filing of the Company's 10-KSB as of December 31, 2004 due to
     changes in filing requirements. Management responded to these questions and
     also  filed  an Amended 2004 10-KSB ("10-KSB/A"). The 10-KSB/A expanded the
     explanations  and  disclosures  to  the financial statements. Subsequent to
     filing  the  10-KSB/A  2004,  the  SEC  raised additional questions seeking
     further  clarification.  Management has filed responses to these additional
     questions,  and  regards  these  questions  as  ones seeking clarification.
     Management  does  not  anticipate any further changes to the prior reported
     statements.

     A  settlement  was  made  with  the  Maryland  Attorney  General  on  the
     investigation  regarding  a  change  in position by the Bureaus of Consumer
     Protection  of  Nevada and Maryland dealing with a now discontinued product
     the  Company  previously  sold  to the public. On May 4, 2006, Assurance of
     Voluntary  Compliance  documents were signed. This includes a Civil Penalty
     of  $100,000 and restitution to consumers of $25,000. If the amount paid to
     consumers  for  claims  is  less  than  $25,000,  the Civil Penalty will be
     increased  to  the  difference  between  $25,000  and  the  amount  paid in
     restitution. The Civil Penalty is payable in monthly installments of $5,000
     and  the  restitution  is  to  be  paid  as  claims  are  presented.


                                         F-14
<PAGE>
ITEM  2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATIONS.

FORWARD-LOOKING  INFORMATION

     Much of the discussion in this Item is "forward looking". Actual operations
and  results  may  materially  differ  from present plans and projections due to
changes  in  economic  conditions,  new business opportunities, changed business
conditions,  and  other  developments. Other factors that could cause results to
differ materially are described in the Company's filings with the Securities and
Exchange  Commission.

     There  are  several  factors  that  could cause actual results or events to
differ  materially  from  those anticipated, and include, but are not limited to
general  economic,  financial and business conditions, changes in and compliance
with  governmental  laws  and  regulations,  including various state and federal
environmental  regulations, the Company's ability to obtain additional financing
from  outside  investors  and/or  bank  and  mezzanine lenders and the Company's
ability  to  generate sufficient revenues to cover operating losses and position
the  Company  to  achieve  positive  cash  flow.

     Readers  are  cautioned  not to place undue reliance on the forward-looking
statements  contained  herein,  which  speak  only  as  of the date hereof.  The
Company believes the information contained in this Form 10-QSB to be accurate as
of  the  date  hereof.  Changes may occur after that date.  The Company will not
update  that  information  except as required by law in the normal course of its
public  disclosure  practices.

     Additionally,  the  following  discussion regarding the Company's financial
condition  and  results  of  operations  should  be read in conjunction with the
financial  statements  and  related  notes contained in Item 1 of Part I of this
Form  10-QSB,  as  well  as the financial statements in Item 7 of Part II of the
Company's  Form  10-KSB  for  the  fiscal  year  ended,  December  31,  2005.

MANAGEMENT'S PLAN OF OPERATIONS

GENERAL

     The  Company  was originally incorporated in the State of Nevada on May 26,
1993.  The  Company  markets and distributes different nutritional and/or health
and  skin  care  products.  The products which the Company sells are intended to
provide  nutritional supplementation to the users; the products are not intended
to  diagnose,  treat,  cure  or  prevent  any  disease.

CURRENT BUSINESS PLAN

     The  Company's  current  purpose  is  to  seek,  investigate  and,  if such
investigation  warrants, acquire an interest in business opportunities presented
to  the  Company  by  persons or firms who or which desire to seek the perceived
advantages  of  a corporation  which is registered under the Securities Exchange
Act  of  1934,  as  amended.  The  Company  does  not restrict its search to any
specific  business;  industry  or geographical location and may participate in a
business  venture  of  virtually  any  kind  or  nature.

     The  Company  may  seek  a  business  opportunity  with entities which have
recently  commenced  operations, or which wish to utilize the public marketplace
in  order  to  raise  additional capital in order to expand into new products or
markets,  to  develop  a new product or service or for other corporate purposes.
The  Company  may  acquire  assets  and  establish  wholly owned subsidiaries in
various  businesses  or  acquire  existing  businesses  as  subsidiaries.

     As  part of the Company's investigation of potential merger candidates, the
Company's  officers  and  directors will meet personally with management and key
personnel,  may  visit  and  inspect  material  facilities,  obtain  independent
analysis  or  verification  of certain information provided, check references of
management  and  key personnel and take other reasonable investigative measures,
to  the  extent  of  the Company's financial resources and management expertise.
The  manner  in  which the Company participates in an opportunity will depend on
the  nature  of the opportunity, the respective needs and desires of the Company
and  other  parties,  the  management of the opportunity, the Company's relative
negotiation  strength  and  that  of  the  other  management.


<PAGE>
     The  Company  intends to concentrate on identifying preliminary prospective
business  opportunities  that  may be brought to the Company's attention through
present  associations  of  its  officers  and directors, or by stockholders.  In
analyzing  prospective  business  opportunities,  the Company will consider such
matters  as the available technical, financial and managerial resources; working
capital  and  other  financial  requirements;  history  of  operations,  if any;
prospects  for  the  future;  nature  of  present  and expected competition; the
quality  and  experience  of  management services which may be available and the
depth  of  that  management;  the potential for further research, development or
exploration;  specific  risk  factors  not now foreseeable but which then may be
anticipated  to  impact  the  Company's  proposed  activities; the potential for
growth  or expansion; the potential for profit; the perceived public recognition
or  acceptance  of  products, services or trades; name identification; and other
relevant  factors.

     The  Company's  officers and directors will meet personally with management
and key personnel of the business opportunity as part of the investigation.  The
Company  will  not acquire or merge with any company for which audited financial
statements  cannot  be obtained within a reasonable period of time after closing
of  the  proposed  transaction,  as  required  by  the  Exchange  Act.

     The Company will not restrict its search to any specific kind of firms, but
may acquire a venture which is in its preliminary or development stage, which is
already  in  operation,  or  which  is in essentially any stage of its corporate
life.  It  is  impossible  to predict at this time the status of any business in
which  the  Company  may  become engaged, in that such business may need to seek
additional  capital,  may  desire to have its shares publicly traded or may seek
other  perceived  advantages  which  the  Company  may  offer.

RECENT CHANGES IN CAPITAL STRUCTURE

     None

RESULTS OF OPERATIONS

CONTINUING OPERATIONS

FIRST QUARTER COSTS AND CHANGES IN FINANCIAL CONDITIONS

     The  balance  of  current  assets  at  December  31, 2005 was approximately
$580,000  compared  to  a  balance  of $476,000 at March 31, 2006, a decrease of
$104,000.  The  balance  of  current  liabilities  was $2,853,000 and $3,435,000
respectively,  for  the  same  periods,  an  increase of $582,000. The resulting
current ratio at December 31, 2005 was 0.20 to 1. The current ratio at March 31,
2006  is .14 to 1. The current ratio indicates that the Company's ability to pay
the  Company's  obligations  has  worsened  since  December  31,  2005.

REVENUE & OPERATING EXPENSES

THREE MONTHS ENDED MARCH 3, 2006 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------------------------
2005
----

     Total  net  sales and revenues were at approximately $204,000 for the three
months  ended  March  31,  2006 compared to $202,000 for the prior period a year
earlier,  an  increase  of  1  percent. This insignificant increase reflects the
slight  increase  in  sales.

     The  Company's  gross  profit  for  the  three  months ended March 31, 2006
compared  to  2005  increased  to  $159,000  from  $156,000.  Gross  profit as a
percentage  of  sales  increased  to 78 percent in 2006 from 77 percent in 2005.

     Total operating expenses (selling, general and administrative expenses) for
the  three  months ended March 31, 2005 compared to 2005 increased by $1,261,000
to  $1,922,000  from  $661,000 in the prior period.  This was primarily due to a
significant increase in services paid with stock issuances for professional fees
of  the  Company  during  the  period.

     Loss from operations for the three months ended March 31, 2006 increased to
a  loss  of $1,763,000 from a loss of $504,000 compared to the same period 2005,
an  increase  of  $1,258,000.  The  Company's increase in the operating loss was
primarily  the  result of the increase in services paid with stock issuances for
professional services and marketing efforts.  Sales still remain insufficient to
cover  the  Company's  operating  needs.


<PAGE>
     Net  interest  expense  for the three months ended March 31, 2006 was $0 as
compared  to  the  same  period  in 2005 of $46,000, down $46,000.  The interest
expense will return in the 2nd Quarter, 2006 as a new building was purchased the
end  of  the 1st Quarter, 2006 replacing the building sold in the 3rd Quarter of
2005  the  mortgage  on  which  interest  is  paid.

     Net loss increased $1,323,000 from a loss of $599,000 to $1,922,000 for the
three  months  ended March 31, 2005 and 2006 respectively.  This net increase is
primarily  attributable to the increase of professional services paid with stock
and  the  write-off  of  the  investment  in  QDS.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     As  of  March  31, 2006, the Company had a deficiency in working capital of
$2,959,000.

     Net  cash  used  for  the  first  three months operating activities came to
approximately  $1,590,000,  up  $880,000 from this period last year of $710,000.

     Cash  provided  from  investing activities during the first three months of
this  year  netted  $1,550,000,  of which approximately $1,330,000 came from the
issuance  of  stock.

     During  the  first three months of 2006, the Company's financing activities
provided  the Company with $42,000 from the purchase of the office and warehouse
building,  gaining  an  asset,  but,  acquiring  mortgage  debt.

CRITICAL ACCOUNTING POLICIES

     The  preparation  of  the  Company's  consolidated  financial statements in
conformity  with  accounting  principles generally accepted in the United States
requires  the  Company to make estimates and judgments that affect the Company's
reported  assets,  liabilities,  revenues,  and  expenses, and the disclosure of
contingent  assets  and  liabilities.  The  Company  bases  its  estimates  and
judgments  on historical experience and on various other assumptions believed to
be  reasonable  under  the  circumstances.  Future  events,  however, may differ
markedly from current expectations and assumptions.  While there are a number of
significant accounting policies affecting the consolidated financial statements,
the  Company believes the following critical accounting policy involves the most
complex,  difficult  and  subjective  estimates  and  judgments.

STOCK-BASED COMPENSATION

     In December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based
Compensation  - Transition and Disclosure.  This statement amends SFAS No. 123 -
Accounting  for  Stock-Based  Compensation,  providing  alternative  methods  of
voluntarily  transitioning  to  the fair market value based method of accounting
for  stock based employee compensation.  FAS 148 also requires disclosure of the
method  used  to account for stock-based employee compensation and the effect of
the  method in both the annual and interim financial statements.  The provisions
of  this  statement related to transition methods are effective for fiscal years
ending  after  December  15,  2002,  while  provisions  related  to  disclosure
requirements  are  effective  in financial reports for interim periods beginning
after  December  31,  2002.

     The  Company  elected  to  continue to account for stock-based compensation
plans using the intrinsic value-based method of accounting prescribed by APB No.
25,  "Accounting  for  Stock  Issued to Employees," and related interpretations.
Under  the  provisions  of  APB  No. 25, compensation expense is measured at the
grant  date  for  the  difference  between  the  fair value of the stock and the
exercise  price.

RECENT ACCOUNTING PRONOUNCEMENTS

     The Company adopted SFAS No. 142.  Under the new rules, the Company will no
longer  amortize goodwill and other intangible assets with indefinite lives, but
such  assets  will  be subject to periodic testing for impairment.  On an annual
basis,  and  when  there  is  reason  to  suspect  that  their  values have been
diminished  or  impaired,  these  assets  must  be  tested  for  impairment, and
write-downs  to  be  included in results from operations may be necessary.  SFAS
No. 142 also requires us to complete a transitional goodwill impairment test six
months  from  the  date  of  adoption.  Based


<PAGE>
upon the information at the Company's disposal, Management elected not to adjust
the  value  of  goodwill  after  making  the  annual  review.

     Any  goodwill  impairment  loss  recognized as a result of the transitional
goodwill  impairment test will be recorded as a cumulative effect of a change in
accounting principle no later than the end of fiscal year 2002.  The adoption of
SFAS  No.  142  had no material impact on the consolidated financial statements.
SFAS  No.  143  establishes  accounting  standards  for  the  recognition  and
measurement  of  an  asset  retirement  obligation  and  its  associated  asset
retirement  cost.  It  also  provides  accounting guidance for legal obligations
associated  with  the retirement of tangible long-lived assets.  SFAS No. 143 is
effective  in  fiscal  years  beginning after June 15, 2002, with early adoption
permitted.  The  Company  expects  that  the provisions of SFAS No. 143 will not
have  a  material impact on the consolidated results of operations and financial
position.  We  adopted  SFAS  No.  143  effective  January  1,  2005.

     SFAS  No.  144  establishes a single accounting model for the impairment or
disposal  of long-lived assets, including discontinued operations.  SFAS No. 144
superseded  Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS  No.  121), and APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual  and  Infrequently  Occurring  Events  and  Transactions."  The  Company
adopted  SFAS  No.  144 effective January 1, 2002.  The adoption of SFAS No. 144
had  no  material  impact  on  the  consolidated  financial  statements.

     In  April  2002,  the  FASB  issued  Statement No. 145, "Rescission of FASB
Statements  No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections."  This  Statement  rescinds  FASB Statement No. 4, "Reporting Gains
and  Losses  from  Extinguishment  of Debt," and an amendment of that Statement,
FASB  Statement  No.  64,  "Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements"  and  FASB  Statement No. 44, "Accounting for Intangible Assets of
Motor  Carriers."  This  Statement amends FASB Statement No. 13, "Accounting for
Leases,"  to  eliminate  an  inconsistency  between  the required accounting for
sale-leaseback  transactions  and  the  required  accounting  for  certain lease
modifications  that  have  economic  effects  that are similar to sale-leaseback
transactions.  The  Company  does  not  expect  the  adoption to have a material
impact  to  the  financial  position  or  results  of  operations.

     In  June  2002,  the  FASB  issued Statement No. 146, "Accounting for Costs
Associated  with  Exit  or  Disposal  Activities."  This  Statement  addresses
financial  accounting  and  reporting for costs associated with exit or disposal
activities  and  nullifies  Emerging  Issues  Task  Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)."  The
provisions  of this statement are effective for exit or disposal activities that
are  initiated  after December 31, 2002, with early application encouraged.  The
Company  does not expect the adoption to have a material impact to the financial
position  or  results  of  operations.

     In  October  2002,  the  FASB  issued  Statement  No. 147, "Acquisitions of
Certain  Financial  Institutions-an  amendment of FASB Statements No. 72 and 144
and  FASB  Interpretation  No.  9,"  which  removes  acquisitions  of  financial
institutions  from  the  scope  of  both  Statement  72 and Interpretation 9 and
requires  that those transactions be accounted for in accordance with Statements
No.  141,  Business  Combinations,  and  No.  142, Goodwill and Other Intangible
Assets.  In  addition,  this  Statement  amends SFAS No. 144, Accounting for the
Impairment  or  Disposal of Long-Lived Assets, to include in its scope long-term
customer-relationship  intangible  assets  of  financial  institutions  such  as
depositor  and  borrower-relationship  intangible  assets  and credit cardholder
intangible  assets.  The  requirements  relating  to  acquisitions  of financial
institutions are effective for acquisitions for which the date of acquisition is
on  or  after  October  1,  2002.  The  provisions related to accounting for the
impairment  or  disposal  of  certain long-term customer-relationship intangible
assets are effective on October 1, 2002.  The adoption of this statement did not
have a material impact to the financial position or results of operations as the
Company  has  not  engaged  in  either  of  these  activities.

     In  December  2002,  the  FASB  issued  Statement  No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure," which amends FASB Statement
No. 123, Accounting for Stock-Based Compensation, to provide alternative methods
of  transition  for  a  voluntary  change  to  the  fair  value  based method of
accounting  for  stock-based employee compensation.  In addition, this statement
amends  the  disclosure  requirements  of  Statement  123  to  require prominent
disclosures  in both annual and interim financial statements about the method of
accounting  for  stock-based  employee compensation and the effect of the method
used  on  reported  results.  The  transition  guidance  and


<PAGE>
annual  disclosure  provisions  of  Statement 148 are effective for fiscal years
ending  after  December  15, 2002, with earlier application permitted in certain
circumstances.  The  interim  disclosure  provisions are effective for financial
reports  containing  financial  statements  for  interim periods beginning after
December  15,  2002.  The  adoption  of  this  statement did not have a material
impact on our financial position or results of operations as we have not elected
to  change to the fair value based method of accounting for stock-based employee
compensation.

     In  January  2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable  Interest  Entities."  Interpretation  46 changes the criteria by which
one  company  includes  another entity in its consolidated financial statements.
Previously,  the  criteria  were  based  on  control  through  voting  interest.
Interpretation  46  requires  a variable interest entity to be consolidated by a
company  if  that  company is subject to a majority of the risk of loss from the
variable  interest  entity's activities or entitled to receive a majority of the
entity's  residual  returns  or  both.  A  company  that consolidates a variable
interest  entity  is  called  the  primary  beneficiary  of  that  entity.  The
consolidation  requirements  of  Interpretation 46 apply immediately to variable
interest  entities  created  after  January  31,  2003.  The  consolidation
requirements  apply to older entities in the first fiscal year or interim period
beginning  after June 15, 2003.  Certain of the disclosure requirements apply in
all  financial  statements issued after January 31, 2003, regardless of when the
variable interest entity was established.  We do not expect the adoption to have
a  material  impact  to  our  financial  position  or  results  of  operations.

     In  April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS)  No.  149,  Amendment  of Statement No. 133 on Derivative Instruments and
Hedging  Activities.  SFAS  149  amends SFAS No. 133 to provide clarification on
the  financial  accounting  and  reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for  on  a  comparable  basis.  The  provisions  of  SFAS  149 are effective for
contracts  entered  into  or  modified  after  June  30,  2003,  and for hedging
relationships  designated after June 30, 2003.  The adoption of SFAS 149 did not
have  a  material  impact  on  the  results of operations or financial position.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments  with  Characteristics  of  Both  Liabilities  and  Equity. SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity.  The provisions
of  SFAS  150  are  effective for financial instruments entered into or modified
after  May  31, 2003 and to all other instruments that exist as of the beginning
of  the  first interim financial reporting period beginning after June 15, 2003.
The  adoption  of  SFAS  150  did  not  have a material impact on the results of
operations  or  financial  position.


OFF-BALANCE SHEET ARRANGEMENTS

The  Company  does  not  have  any  off-balance  sheet  arrangements.

ITEM  3.     CONTROLS  AND  PROCEDURES.

     The  term  disclosure  controls  and  procedures  means  controls and other
procedures of an issuer that are designed to ensure that information required to
be  disclosed  by  the  issuer in the reports that it files or submits under the
Exchange  Act  (15  U.S.C.  78a  et seq.) is recorded, processed, summarized and
reported, within the time periods specified in the Commission's rules and forms.
Disclosure  controls  and  procedures  include, without limitation, controls and
procedures  designed  to  ensure that information required to be disclosed by an
issuer  in  the  reports  that  it  files  or  submits under the Exchange Act is
accumulated and communicated to the issuer's management, including its principal
executive  and  principal  financial  officers,  or  persons  performing similar
functions,  as  appropriate  to  allow  timely  decisions  regarding  required
disclosure.

     The  term internal control over financial reporting is defined as a process
designed  by,  or under the supervision of, the issuer's principal executive and
principal  financial  officers,  or  persons  performing  similar functions, and
effected  by the issuer's board of directors, management and other personnel, to
provide  reasonable  assurance  regarding the reliability of financial reporting
and  the preparation of financial statements for external purposes in accordance
with  generally  accepted  accounting principles and includes those policies and
procedures  that:

     (1)     Pertain  to  the  maintenance  of records that in reasonable detail
accurately  and  fairly  reflect  the  transactions  and  dispositions  of  the
assets  of  the  issuer;


<PAGE>
     (2)     Provide  reasonable  assurance  that  transactions  are recorded as
necessary  to  permit  preparation  of  financial  statements in accordance with
generally  accepted  accounting  principles,  and  that  receipts  and
expenditures of the issuer are being made only in accordance with authorizations
of  management  and  directors  of  the  issuer;  and

     (3)     Provide  reasonable  assurance  regarding  prevention  or  timely
detection  of  unauthorized  acquisition,  use  or  disposition  of the issuer's
assets  that  could  have  a  material  effect  on  the  financial  statements.

     Evaluation  of disclosure and controls and procedures. As of the end of the
period  covered by this Quarterly report, Gateway conducted an evaluation, under
the  supervision  and  with the participation of the chief executive officer and
chief  financial  officer, of the disclosure controls and procedures (as defined
in  Rules  13a-15(e)  of  the Exchange Act). Based on this evaluation, the chief
executive  officer  and  chief  financial  officer  concluded  that  Gateway's
disclosure  controls  and  procedures  are  effective to ensure that information
required to be disclosed by Gateway in reports that are filed or submitted under
the  Exchange  Act  are  recorded, processed, summarized and reported within the
time  periods  specified  in Securities and Exchange Commission rules and forms.

     Changes in internal controls over financial reporting.  There was no change
in  Gateway internal controls, which are included within disclosure controls and
procedures,  during  the  most  recently  completed  fiscal  quarter  that  has
materially  affected,  or  is  reasonably  likely  to materially affect, Gateway
internal  controls.


<PAGE>
                           PART II - OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS.

     Reference  is  made to Item 3 of the Company's Annual Report on Form 10-KSB
for  the fiscal year ended December 31, 2005, filed with the Commission on April
17,  2006.

     A  creditor  of  the Company, Allergy Research group / Nutricology filed in
the  District  Court of Clark County, Nevada an action against the Company on an
unpaid  open account for goods and merchandise, Case No. A-487334, in the amount
of  $168,000.  The  Company  contested  the  amount claimed and has made payment
toward  the  uncontested amount while negotiations with the plaintiff continued.
The  Company  offered to pay, through counsel, the sum of $50,000 with a payment
of  $10,000  upon  acceptance of the offer and $5,000 per month until paid.  The
offer  was  accepted and payments are being made with a balance of $30,000 owing
as  of  March  31,  2006.

     A  settlement  was  made  with  the  Maryland  Attorney  General  on  the
investigation  regarding  a  change  in  position  by  the  Bureaus  of Consumer
Protection  of  Nevada  and Maryland dealing with a now discontinued product the
Company  previously  sold to the public.  On May 4, 2006, Assurance of Voluntary
Compliance documents were signed.  This includes a Civil Penalty of $100,000 and
restitution to consumers of $25,000.  If the amount paid to consumers for claims
is  less  than  $25,000,  the  Civil Penalty will be increased to the difference
between  $25,000  and  the  amount  paid  in  restitution.  The Civil Penalty is
payable  in  monthly installments of $5,000 and the restitution is to be paid as
claims  are  presented.

ITEM  2.  UNREGISTERED  SALES  OF  EQUITY  SECURITIES  AND  USE  OF  PROCEEDS.

          None.

ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES

          None.

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS.

          None

ITEM  5.  OTHER  INFORMATION.

          None.


<PAGE>
ITEM  6.  EXHIBITS AND REPORTS ON FORM 8-K.

          (a)  Exhibits

<TABLE>
<CAPTION>
EXHIBIT
  NO.                                          IDENTIFICATION OF EXHIBIT
-------  --------------------------------------------------------------------------------------------------------
<S>      <C>
  3.1**  Articles of Incorporation.
  3.2**  Amended and Restated Articles of Incorporation.
  3.3**  Articles of Amendment to the Articles of Incorporation, filed effective on June 28, 2004.
  3.4**  Certificate of Change, filed effective on September 3, 2004
  3.5**  Articles of Amendment to the Articles of Incorporation, filed effective on October 4, 2004.
         Certificate of Amendment to the Certificate of Designation for the Series A Preferred Stock, filed
  3.6**  effective on November 9, 2004.
  3.7**  Certificate of Change, filed effective on December 20, 2004.
  3.8**  Certificate of Designation for the Series B Preferred Stock, filed effective on January 18, 2005.
  3.9**  Amended By-laws.
  10.1*  Donald Hansen Settlement Agreement effective February 2004
  10.2*  Donald Hansen stock option
  10.3*  Steve Owens Option Agreement dated February 01, 2006
  10.4*  Steve Hayden Consulting Agreement dated March 01, 2006
  10.5*  Maryland Attorney General Assurance of Voluntary Compliance
  31.1*  Certification of Richard A. Bailey, Chief Executive Officer of Gateway Distributors, Ltd., pursuant to 18
         U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.
  31.2*  Certification of Richard A. Bailey, Chief Financial Officer of Gateway Distributors, Ltd., pursuant to 18
         U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.
  32.1*  Certification of Richard A. Bailey, Chief Executive Officer of Gateway Distributors, Ltd., pursuant to 18
         U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002.
  32.2*  Certification of Richard A. Bailey, Chief Financial Officer of Gateway Distributors, Ltd., pursuant to 18
         U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

-----------
*   Filed  Herewith.
**  Previously  Filed

          (b)  Reports on Form 8-K.

          On  March  24,  2006 we filed a Form 8-K disclosing termination of the
client-auditor  relationship  between  Madsen  & Associates, CPA's Inc., and the
Registrant.

                                   SIGNATURES

     In  accordance  with  the  requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                   Gateway Distributors, Ltd.
Dated May 22, 2006.
                                   By /s/ Richard A. Bailey
                                     -------------------------------
                                      Richard A. Bailey, Chief Executive Officer
                                      and Chief Financial Officer