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

                                   FORM 10-QSB

     |X| Quarterly Report pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

                For the quarterly period ended: December 31, 2005

         |_| Transition Report pursuant to 13 or 15(d) of the Securities
                              Exchange Act of 1934

                 For the transition period __________to_________

                        Commission File Number: 000-26017

                      GATEWAY INTERNATIONAL HOLDINGS, INC.
        (Exact name of small Business Issuer as specified in its charter)

              Nevada                                       95-3819300
---------------------------------              ---------------------------------
  (State or other jurisdiction                 (IRS Employer Identification No.)
of incorporation or organization)

        3840 East Eagle Drive
         Anaheim, California                                 92807
----------------------------------------                   ----------
(Address of principal executive offices)                   (Zip Code)

          Issuer's telephone number, including area code: 714-630-6253
       Securities registered under Section 12(b) of the Exchange Act: None

      Securities registered under Section 12(g) of the Exchange Act: Common
                        Stock, par value $0.001 per share

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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

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

As of May 19, 2006, there were 41,653,288 shares of the registrant's Common
Stock issued and outstanding.

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|


                                       1
<PAGE>

                      GATEWAY INTERNATIONAL HOLDINGS, INC.
                                   Form 10-QSB
                  For the three months ended December 31, 2005

                                TABLE OF CONTENTS

PART I -  FINANCIAL INFORMATION ...........................................    3

          ITEM 1.  CONDENSED FINANCIAL STATEMENTS (UNAUDITED) .............    3

          ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN
                            OF OPERATION ..................................   20

          ITEM 3.  CONTROLS AND PROCEDURES ................................   32

PART II -  OTHER INFORMATION ..............................................   33

          ITEM 1.  LEGAL PROCEEDINGS ......................................   33

          ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND
                            USE OF PROCEEDS ...............................   36

          ITEM 3.  DEFAULTS UPON SENIOR SECURITIES ........................   36

          ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                            HOLDERS .......................................   36

          ITEM 5.  OTHER INFORMATION ......................................   36

          ITEM 6.  OTHER EXHIBITS .........................................   36


                                       2
<PAGE>

      PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                                     2005
Assets                                                                          ------------
<S>                                                                             <C>
Current Assets:
Cash and cash equivalents                                                       $    772,627
Trade accounts receivable, less allowance for doubtful accounts of $110,000        2,256,895
Other receivables                                                                     32,672
Inventories                                                                        2,252,397
                                                                                ------------
Total current assets                                                               5,314,591

Property and equipment,  net                                                       2,974,152

Other Assets:
Deposits and prepayments                                                              14,849
Intangible assets, less accumulated amortization of $506,260                       3,399,140
Goodwill                                                                          10,811,934
                                                                                ------------
Total Assets                                                                    $ 22,514,666
                                                                                ============

Liabilities and Stockholders' Equity

Current Liabilities:
Accounts payable                                                                $  3,117,521
Accrued expenses                                                                     194,280
Customer deposits                                                                    166,007
Income tax payable                                                                    15,961
Current Portion of notes payable                                                     800,252
Current portion of notes payable to related parties                                  902,299
                                                                                ------------
Total Current Liabilities                                                          5,196,320

Notes Payable, less current portion                                                2,342,667
Notes Payable to related parties, less current portion                               293,718
Net deferred tax liabilities                                                         840,228
                                                                                ------------
Total Liabilities                                                                  8,672,933
                                                                                ------------
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $0.001 par value; 10,000,000 shares
authorized; no shares issued and outstanding                                              --
Common stock, $0.001 par value; 100,000,000 shares
authorized; 41,653,288 shares issued and outstanding                                  41,653
Additional paid in capital                                                        16,531,651
Accumulated deficit                                                               (2,731,571)
                                                                                ------------
Total stockholders' equity                                                        13,841,733
                                                                                ------------
Total Liabilities and Stockholders' Equity                                      $ 22,514,666
                                                                                ============
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements


                                       3
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                       Three Months Ended
                                                 ------------------------------
                                                 December 31,      December 31,
                                                     2005              2004
                                                 ------------      ------------
                                                                    (Restated)
Net sales                                        $  5,765,995      $  2,120,167
Cost of sales                                       3,825,944         1,362,161
                                                 ------------      ------------

Gross Profit                                        1,940,051           758,006
                                                 ------------      ------------

Operating expenses:
Selling, general and administrative expenses        2,097,994           720,866
Amortization of intangibles                           115,077            48,546
                                                 ------------      ------------
  Total operating expenses                          2,213,071           769,412
                                                 ------------      ------------

       Loss from operations                          (273,020)          (11,406)

Interest Income                                           744                53
                                                 ------------      ------------

Loss before income taxes                             (272,276)          (11,353)

(Benefit) provision for income taxes                  (65,192)           16,671
                                                 ------------      ------------
Net loss                                         $   (207,084)     $    (28,024)
                                                 ============      ============

NET LOSS PER SHARE, Basic and diluted
Net loss per share                               $      (0.01)     $          --
                                                 ============      ============

Weighted average
number of common shares outstanding                40,797,853        34,451,937
                                                 ============      ============

The accompanying notes are an integral part of these condensed consolidated
financial statements


                                       4
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                -----------------------------
                                                                December 31,     December 31,
                                                                    2005             2004
                                                                ------------     ------------
Cash flows from operating activities:                                             (Restated)
<S>                                                             <C>              <C>
   Net loss                                                     $  (207,084)     $   (28,024)
   Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
      Depreciation and amortization                                 154,745            8,050
      Amortization of intangible assets                             115,077           48,546
       Imputed interest                                              14,455               --
       Bad debts expense                                             13,195           (6,400)
       Loss on disposal of property and equipment                    34,103               --
       Deferred tax benefit                                         (82,752)               _
      (Increase) decrease in assets:
         Accounts receivable                                        (83,821)         143,150
         Inventories                                               (831,809)        (618,948)
         Other accounts receivable                                       --           (3,000)
         Deposits and prepayments                                    31,171           (6,530)
      Increase (decrease) in liabilities:
         Accounts payable                                         1,392,553          477,498
         Accrued liabilities                                        (70,066)              --
         Customer deposits                                          (20,000)              --
         Income tax payable                                         (11,353)          15,871
                                                                -----------      -----------
Net cash provided by (used in)  operating activities                448,414           30,213
                                                                -----------      -----------

Cash flows from investing activities:
   Purchases of property and equipment                              (12,993)
   Net assets acquired in acquisition                                               (923,769)
                                                                -----------      -----------
      Net cash used from investing activities                       (12,993)        (923,769)
                                                                -----------      -----------

Cash flows from financing activities:
   Principal borrowings on notes payable                                 --          829,194
   Principal borrowings on notes payable to related parties                          398,805
   Payments on notes payable                                       (276,829)
   Payments on notes payable - related party                         (8,106)
                                                                -----------      -----------
      Net cash(used in) provided by financing activities           (284,935)       1,227,999
                                                                -----------      -----------

      Net Increase in cash & cash equivalents                       150,486          334,443
Cash & cash equivalents at beginning of period                      622,141          187,062
                                                                -----------      -----------
Cash & cash equivalents at end of period                        $   772,627      $   521,505
                                                                ===========      ===========

Supplemental disclosure of cash flow information
   Cash paid during the year for:
      Interest                                                  $    67,577      $    29,090
      Income taxes                                              $     1,600      $       800
</TABLE>

         The accompanying notes are an integral part of these condensed
                        consolidated financial statements


                                       5
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005
                                   (Unaudited)

Note 1 - Organization and Summary of Significant Accounting Principles

Nature of Business

      Gateway International Holdings, Inc. (the "Company") was originally
incorporated on September 24, 1997 under the laws of Nevada. The Company and its
subsidiaries are engaged in the following businesses:

1. Acquiring and selling new Computer Numerically Controlled machine tool
equipment.

2. Acquiring, refurbishing and selling pre-owned Computer Numerically Controlled
machine tool equipment.

3. Acquiring and selling small tools to the machine tool, automotive and medical
tool manufacturing industries.

4. Manufacturing precision metal component parts in the defense, automotive,
aerospace and medical industries.

Basis of Presentation

The interim condensed consolidated financial statements included herein have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America, have been omitted pursuant to such SEC rules and
regulations; nevertheless, the management of the Company believes that the
disclosures herein are adequate to make the information presented not
misleading. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2005. In the opinion of management, the condensed consolidated
financial statements included herein reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the condensed
consolidated financial position of the Company as of December 31, 2005 and the
results of operations and cash flows for the three-month periods ended December
31, 2005 and December 31, 2004. The results of operations for the interim
periods are not necessarily indicative of the results of operations for the full
year.

Principles of Consolidation

The consolidated financial statements include the accounts of Gateway
International Holdings, Inc., and its wholly owned subsidiaries; E.M. Tool
Company, Inc. d.b.a. Elite Machine Tool Company, Eran Engineering, Inc., All
American CNC Sales, Inc., Gledhill/Lyons, Inc., d.b.a. Accurate Technologies,
ESK, Inc., A Line Capital Corporation, Spacecraft Machine Products, Inc., and
Nu-Tech Industrial Sales, Inc. Inter-company accounts and transactions have been
eliminated in consolidation.

Concentrations of Credit Risks

At December 31, 2005, the Company maintained $582,876 of its cash in bank
deposit accounts which exceeded the federally insured limits. No losses have
been experienced related to such accounts. The Company believes it places its
cash with quality financial institutions and is not exposed to any significant
concentrations of credit risk on cash.

During the three months ended December 31, 2005 and 2004, the Company had sales
to six and four customers, which represented 41.3% and 85.69%of net sales,
respectively. At December 31, 2005, three customers accounted for 29.2% of
accounts receivable. If the relationship between the Company and these customers
was altered, the future results of operations and financial condition could be
significantly affected.


                                       6
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 1 - Organization and Summary of Significant Accounting Principles
(continued)

Use of Estimates in the Preparation of Financial Statements

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 and the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Significant estimates made by management are, among
others, valuation allowance on deferred tax assets, realization of inventories
and collectability of accounts receivable. Actual results could materially
differ from those estimates.

Inventories

Inventories, which consist of new and pre-owned machine tool equipment, raw
materials, and work in progress used in our manufacturing companies are stated
at the lower of cost or market with cost determined on a first-in first-out
basis. The Company regularly monitors inventory for excess or obsolete items and
makes any valuation corrections when such adjustments are determined.

Market value is based on management's forecast for sales of the Company's
products in the ensuing years. The industries in which the Company operates are
characterized by technological advancement and change. Should demand for the
Company's products prove to be significantly less than anticipated the ultimate
market value of the Company's inventories could be substantially less than the
amount shown on the accompanying condensed consolidated balance sheet.

Inventories consist of the following at December 31, 2005:

Machinery ready for sale                                              $  958,909
Finished goods                                                           377,696
Work in progress                                                         646,567
Parts                                                                    166,964
Raw materials                                                            102,261
                                                                      ----------
                                                                      $2,252,397
                                                                      ==========

Goodwill and Other Intangible Assets

The Company evaluates intangible assets and other long-lived assets for
impairment, at a minimum, on an annual basis and whenever events or changes in
circumstances indicate that the carrying value may not be recoverable from its
estimated future cash flows. Recoverability of intangible assets, other
long-lived assets and goodwill is measured by comparing their net book value to
the related projected undiscounted cash flows from these assets, considering a
number of factors including past operating results, budgets, economic
projections, market trends and product development cycles. If the net book value
of the asset exceeds the related undiscounted cash flows, the asset is
considered impaired, and a second test is performed to measure the amount of
impairment loss.


                                       7
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 1 - Organization and Summary of Significant Accounting Principles
(continued)

Revenue Recognition

The Company's revenue recognition policies are in compliance with Staff
Accounting Bulletin 104. Sales revenue is recognized at the date of shipment to
customers when; a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations of the Company
exist, and collectability is reasonably assured. Payments received before all of
the relevant criteria for revenue recognition are satisfied are recorded as
unearned revenue.

Basic and Diluted Earnings (loss) per Common Share

Basic earnings (Loss) per common share is computed by dividing income available
to common shareholders by the weighted-average number of common shares
outstanding during the period of computation. Diluted earnings per share is
computed similar to basic earnings per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. The Company's calculation of loss per share at
December 31, 2005 excludes 833,378 shares issued as security for a note
payable.(See Note 4)

Stock-based compensation

SFAS No. 123, "Accounting for Stock-Based Compensation," prescribes accounting
and reporting standards for all stock-based compensation plans, including
employee stock options, restricted stock, employee stock purchase plans and
stock appreciation rights. SFAS No. 123 requires compensation expense to be
recorded (i) using the new fair value method or (ii) using the existing
accounting rules prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB 25") and related
interpretations with pro-forma disclosure of what net income and earnings per
share would have been had the Company adopted the new fair value method. The
Company uses the intrinsic value method prescribed by APB 25 and has opted for
the disclosure provisions of SFAS No.123. During the three month periods ended
December 31, 2005 and 2004, no options to acquire common stock were issued by
the Company.

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS NO. 123 (R), "Share-Based Payment", an
Amendment of FASB Statement No. 123 ("FAS No 123R"). SFAS 123 (R) requires that
the cost of share-based payment transactions (including those with employees and
non-employees) be recognized in the financial statements. SFAS 123 (R) applies
to all share-based payment transactions in which an entity acquires goods or
services by issuing (or offering to issue) its shares, share options, or other
instruments (except for those held by an ESOP) or by incurring liabilities (1)
in amounts based (even in part) on the price of the entity's shares or other
equity instruments, or (2) that require (or may require) settlement by the
issuance of an entity's shares or other equity instruments. This statement is
effective (1) for public companies qualifying as SEC small business issuers, as
of the first interim period or fiscal year beginning after December 31, 2005, or
(2) for all other public companies, as of the first interim period or fiscal
year beginning after June 15, 2005, or (3) for all nonpublic entities, as of the
first fiscal year beginning after December 15, 2005. Management has adopted this
policy for the quarter ended March 31, 2006.


                                       8
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

In December 2004, the FASB issued SFAS Statement No. 153, "Exchanges of
Non-monetary Assets", an Amendment to APB Opinion No. 29, "Accounting for
Nonmonentary Transactions". SFAS 153 eliminates certain differences in the
guidance in APB 29 as compared to the guidance contained in standards issued by
the International Accounting Standards Board. The amendment to APB 29 eliminates
the fair value exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. Such an exchange has commercial substance
if the future cash flows of the entity are expected to change significantly as a
result of the exchange. SFAS 153 is effective for nonmonetary asset exchanges
occurring in periods beginning after June 15, 2005. Earlier application is
permitted for nonmonetary asset exchanges occurring in periods beginning after
December 16, 2004. The adoption of FASB No. 153 did not have a material impact
on the Company's financial statements.

In May 2005 the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections." This SFAS provides guidance on accounting for and reporting of
accounting changes and error corrections. The Company has evaluated the impact
of SFAS 154 and does not believe the impact will be significant to the Company's
overall results of operations or financial position.

Note 2 - Going Concern

The Company's condensed consolidated financial statements are prepared using
accounting principles generally accepted in the United States of America
applicable to a going concern that contemplates the realization of assets and
liquidation of liabilities in the normal course of business. For the three
months ended December 31, 2005, the Company had cash flow from operations of
approximately $448,000, and had working capital of $118,271, as of December 31,
2005. However, the Company incurred a loss of $207,084 for the three months
ended December 31, 2005 and had an accumulated deficit of $2,731,511as of
December 31, 2005. The loss incurred during the three months ended December
31,2005 included an aggregate of non-cash costs of $318,380 relating to
intangible amortization, depreciation, imputed interest and a loss on disposal
of equipment. Management believes that cash generated by operations will be
sufficient to meet the anticipated cash requirements for operations, working
capital and capital expenditures for the next twelve months through December 31,
2006. The Company also intends to raise new funds from another private offering
from private investors and institutional investors and to obtain a substantial
new credit facility with a bank. However, there can be no assurances that the
Company will ultimately be successful in its fundraising efforts.

The Company has a matter outstanding that may inhibit its ability to raise
funds. The SEC has instituted proceedings pursuant to Section 12(J) of the
Securities Exchange Act of 1934 (the "1934 Act") and cease and desist
proceedings have been instituted pursuant to Section 21(C) of the 1934 Act
against our President, Chief Executive Officer and Director, Larry A. Consalvi.
The SEC seeks to suspend the registration of our securities for a period not
exceeding 12 months or revoke the registration of our securities pursuant to
Section 12 of the 1934 Act, and to cause us and Mr. Consalvi to cease and desist
from committing any violations of Section 13(a) of Rules 13a-1 and 13a-13 of the
1934 Act in the future. This Administrative Proceeding, File No. 3-11894, arose
from our failure to comply with our reporting obligations while our securities
were registered with the SEC in that we failed to file our annual reports on
Form 10-K for our fiscal years ended September 30, 2004 and 2003, and four
quarterly reports on Form 10-Q for the quarters ended March 31, 2003, June 30,
2003, December 31, 2003, and March 31, 2004, and that Mr. Consalvi, during his
tenure as our President, caused us to violate these reporting requirements. On
August 18, 2005, the Administrative Law Judge issued an Initial Decision and
ordered the revocation of each class of our securities pursuant to Section 12(j)
of the Securities Exchange Act of 1934. It was further ordered that our Chief
Executive Officer, President and Director, Larry A. Consalvi, cease and desist
from committing any violation or future violations of Section 13(a) of the
Exchange Act and Rules 13a-1 and 13a-13. The Company continues to vigorously
defend against this action. We have now filed all the delinquent 10-K's and
10-Q's referred to above. On September 7, 2005, we filed a petition with the
Commission for a review of the Initial Decision, and on September 12, 2005, the
Commission granted our petition for review pursuant to Rule 411 of the
Commission's Rules of Practice. We now await the final decision of the
Commission.


                                       9
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 3 - Property and Equipment

Property and equipment consists of the following at December 31, 2005:

                  Land and building                            $ 1,250,000
                  Machinery and equipment                        2,626,434
                  Furniture, fixtures and office equipment         159,691
                  Vehicles                                         115,543
                  Leasehold improvements                            60,247
                                                               -----------
                                                                 4,211,915
                  Less accumulated depreciation and
                        amortization                            (1,237,763)
                                                               -----------
                                                               $ 2,974,152
                                                               ===========

Depreciation expense recorded in the financial statements for the three months
ended December 31, 2005 and 2004 was $154,745 and $8,050, respectively.

Note 4 - Notes Payable

Notes payable consist of the following as of December 31, 2005:

<TABLE>
<S>                                                                                                <C>
Secured notes payable to a bank, collateralized by substantially all of the
assets and a mortgage on the land and building of the Company and guaranteed by
stockholders, payable in monthly installments totaling $29,250 including
interest of 8% per annum for a 60 month term, with a balloon payment due at
maturity in August 2008.                                                                           $1,677,561

Secured notes payable to various banks, secured by equipment and, in most cases, guaranteed
by a stockholder, payable in aggregate monthly installments of $36,070 including interest
ranging from 6% to 10.5% per annum for terms ranging from 36-60 months, the latest of which
matures in November 2009                                                                              767,600

Secured notes payable to financial institutions secured by automobiles with
monthly payments
of $1,617 including interest ranging up to 6.9% per annum, the latest of which matures in 2009         33,638

Two unsecured lines of credit payable to two banks for working capital requirements, due on
demand, interest only payments made monthly at an annual interest rate of prime plus 2%
(9.75% at December 31, 2005)                                                                          143,524

Two notes payable to two individuals in monthly installments of $15,000 per month each
including interest at 6% per annum for a 36 month term, maturing in June 2006, secured by
833,378 shares of the Company's common stock                                                          435,082

Two unsecured bank loans for working capital purposes due in October 2007 and June 2009
with interest of 7.5% and 6.75% per annum with monthly payments including interest totaling
$2,782                                                                                                 85,514
                                                                                                   ----------

Total notes payable                                                                                 3,142,919

Current portion of notes payable                                                                      800,252
                                                                                                   ----------
Long term portion of notes payable                                                                 $2,342,667
                                                                                                   ==========
</TABLE>


                                       10
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 5 - Notes Payable - Related Parties

Notes payable to related parties consist of the following as of December 31,
2005:

<TABLE>
<S>                                                                                                  <C>
Unsecured notes payable to a related party, a stockholder, for working capital requirements,
due on demand, non-interest bearing, with interest imputed at 6% per annum for financial
statement purposes                                                                                   $  706,200

Unsecured note payable to a related party, a stockholder, for working capital requirements,
due on demand, payable in monthly installments of $2,000 including interest at 6% per annum              63,577

Unsecured note payable to a related party, for working capital requirements, interest only
payments monthly at an annual interest rate of 7% per annum with monthly payments
including interest of $1,541                                                                              1,524

Unsecured note payable to a related party due December 31, 2009, with interest payable
monthly at 18% per annum                                                                                100,000

Note payable to a stockholder secured by the common shares of Spacecraft Machine
Products, Inc. payable in monthly installments of $3,667 per month, non-interest bearing,
including interest imputed at 6% per annum for financial statement purposes                             194,326

Unsecured note payable to a stockholder payable in monthly installments of $6,250 per month,
Non-interest bearing including interest imputed at 6% per annum for financial statement purposes         62,500

Valuation discount for imputed interest                                                                  67,890
                                                                                                     ----------

Total notes payable to related parties                                                                1,196,017

Current portion of notes payable                                                                        902,299
                                                                                                     ----------

Long term portion of notes payable to related parties                                                $  293,718
                                                                                                     ==========
</TABLE>

Interest expense on notes payable for the three months ended December 31, 2005
and 2004 was $82,032 and $29,090, respectively.


                                       11
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 6 - Business Segments

The Company's business segments were organized around four reportable segments
consisting of pre-owned equipment sales, new equipment sales, small tool sales
and precision metal manufacturing. The Company's segments consist of individual
companies managed separately with each manager reporting to the Board, with the
exception of precision metal manufacturing that has two companies individually
managed that make up that segment and report to the Board individually. "Other"
represents corporate functions.

Sales and operating profit are reflected net of inter-segment sales and profits.
Operating profit is comprised of net sales less operating expenses. Other
expenses include the impairment of goodwill and amortization of intangible
assets.

Income taxes are not allocated and reported by segment since they are excluded
from the measure of segment performance reviewed by management.

The accounting policies of the reportable segments are the same as those applied
to the condensed consolidated financial statements.

Profit and Loss and assets for each of the reportable segments, for the three
months ended December 31, 2005, was as follows:

<TABLE>
<CAPTION>
                           Pre-owned        New Equip      Small Tool        Precision
                          Equip Sales         Sales           Sales            Metal             Other          Total
<S>                       <C>              <C>             <C>              <C>                <C>           <C>
Revenue from external
   customers              $   860,420      $ 1,415,326     $ 1,060,386      $ 2,429,863              --      $ 5,765,995
Interest income                    --              386              --              358              --              744
Depreciation and
   amortization                   393           22,771          31,393          215,265              --          269,822
Interest expense               28,230              184           6,680           46,938              --           82,032
Segment profit (loss)        (280,673)         222,141         (65,642)         119,406        (202,314)        (207,084)
Segment assets                217,344        2,825,332       3,463,668       16,008,322              --       22,514,666
</TABLE>

Profit and Loss and assets for each of the reportable segments, for the three
months ended December 31, 2004, was as follows:

<TABLE>
<CAPTION>
                           Pre-owned        New Equip       Small Tool      Precision
                          Equip Sales         Sales           Sales           Metal           Total
<S>                       <C>              <C>             <C>             <C>             <C>
 Revenue from external
   customers              $   435,896      $   365,226     $        --     $ 1,319,045     $ 2,120,167
Depreciation and
   amortization                49,089            1,470              --           6,037          56,596
Capital expenditures               --               --              --              --              --
Interest expense                   --            1,133              --          50,591          51,724
Segment profit (loss)        (280,243)          70,131              --         182,088         (28,024)
Segment assets             11,620,578          156,978              --       4,250,601      16,028,157
</TABLE>


                                       12
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 7 - Acquisitions

On October 1, 2004, we completed our acquisition of All American CNC Sales, Inc.
("All American"). We acquired 100% of the voting equity interest and All
American is now a subsidiary of the Company. The results of All American from
October 1, 2004 have been included in our condensed consolidated financial
statements. All American distributes new machining tool equipment primarily in
the Orange County, California area.

On December 7, 2004, we completed our acquisitions of Gledhill/Lyons, inc.
d.b.a. Accurate Technologies ("Accurate"). We acquired 100% of the voting equity
interest and Accurate is now a subsidiary of the Company. The results of
Accurate from December 7, 2004 have been included in our condensed consolidated
financial statements. Accurate is a precision machine tool shop specializing in
the manufacture of parts in the defense, aerospace and automotive industries.

On December 23, 2004, we completed our acquisition of ESK, Inc. ("ESK"). We
acquired all the outstanding shares of ESK and ESK is now a wholly owned
subsidiary of the Company. ESK was the sold provider of assembly work to Eran
Engineering, Inc. ("Eran"). ESK was folded into Eran Engineering. As a result of
this, the goodwill of $207,241 that arose out of the acquisition of ESK has been
determined to be impaired and is reflected as an impairment loss in prior
periods. The results of ESK from December 23, 2004 have been included in the
results of operations of Eran and in our condensed consolidated financial
statements.

Pro-Forma Information:

The following schedule of unaudited combined pro-forma revenue, net income and
loss per share amounts reflected the consolidated results of Gateway
International Holdings assuming the transactions discussed above had been
completed at the beginning of the periods reported.

                                                                 For the
                                                          three months ended
                                                           December 31, 2004
                                                               (Restated)
      Revenue                                                 $ 2,823,296
      Net income (loss) for the period                           (268,281)
      Net income (loss) per share - Basic
        and diluted                                           $     (0.01)


                                       13
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 8 - Income Taxes

The (provision) benefit for income taxes is comprised of:

                                                    For the three months
                                                     ended December 31,
                                                     2005          2004
                                                   --------      --------
                                                                (Restated)
      Current federal                              $     --      $     --
      Current state                                  17,561        15,871
      Deferred federal                              (60,568)       37,674
      Deferred state                                (22,185)      (36,874)
                                                   --------      --------
      (Benefit) provision for income taxes         $(65,192)     $ 16,671
                                                   ========      ========

The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes.
The differences between the federal statutory tax rate of 34% and the effective
tax rates are primarily due to state income tax provisions, net operating loss
("NOL") carryforwards, deferred tax valuation allowance and permanent
differences as follows:

                                                        For the three months
                                                         ended December 31,
                                                          2005       2004
                                                          ----       ----
                                                                  (Restated)
      Statutory rate                                        34%        34%
      Increase (decrease) in taxes resulting from the
        following:
      State income taxes net of federal tax benefit          6%       147%
      Change in valuation allowances
      Permanent differences and other                      (64)%      (34)%
                                                          ----       ----
         Total                                             (24%)      147%
                                                          ====       ====

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying value of assets and liabilities for financial reporting
purposes and the amounts used for income tax purpose.


                                       14
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 8 - Income Taxes (continued)

Significant components of the Company's deferred tax assets and liabilities are
as follows:

<TABLE>
<CAPTION>
                                                                December 31,
                                                           2005             2004
                                                        -----------      -----------
                                                                          (Restated)
<S>                                                     <C>              <C>
      Noncurrent deferred tax assets:
         Capital loss-impairment of investment          $   336,300      $   336,300
         Net operating loss carryforwards                   491,834          577,413
         Depreciation                                        68,794          (29,697)
         Allowance for doubtful accounts                     49,909           15,637
         Other                                                5,427            5,396
                                                        -----------      -----------
                                                            952,264          905,049

         Valuation allowance                               (336,300)        (905,049)
                                                        -----------      -----------

      Net noncurrent deferred tax assets                    615,964               --
                                                        -----------      -----------

      Deferred tax liabilities:
         Noncurrent
            Intangible assets                           $(1,456,192)     $(1,272,713)
                                                        -----------      -----------
         Total noncurrent deferred tax liabilities       (1,456,192)      (1,272,713)
                                                        -----------      -----------

      Net noncurrent deferred tax asset (liability)     $  (840,228)     $(1,272,713)
                                                        ===========      ===========
</TABLE>

As of December 31, 2005, the Company has federal net operating loss
carryforwards of approximately $993,000 and $1,393,000 state net operating loss
carryforwards for tax purposes, which will be available to offset future taxable
income. If not used, these carryforwards will expire between 2013 and 2018. The
Company's income tax provision was computed based on the federal statutory rate
and the average state statutory rates, net of the related federal benefit.


                                       15
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 9 - Commitments and Contingencies

Contingencies:

From time to time we are involved in legal proceedings relating to claims
arising out of operation in the normal course of business, as well as claims
arising from our status as an issuer of securities and/or a publicly reporting
company. Below is a summary of our existing, pending and known threatened
litigation as of the filing date of this filing:

Securities and Exchange Commission V Gateway International Holdings, Inc. and
Larry Consalvi

On June 28, 2002, we received a letter from the SEC requesting that we produce
documents related to our efforts to become a NASDAQ-listed company, including
press releases, mergers and/or acquisition documents, and agreement and/or
arrangements with third parties to promote our stock. Subsequently, on February
5, 2003, the SEC issued an Order Directing Private Investigation and Designating
Officers to Take Testimony to investigate, among other things, our connection to
the unsolicited emails, whether persons had acquired more than 5% of our common
stock without filing a Schedule 13D, whether officers, directors, and holders of
more than 10% of our common stock had failed to report the sale or purchase of
our securities with the SEC on Forms 3, 4 and /or 5, and our failure to file
annual reports certified by an independent accountant and to state further
material information in such reports. We were prevented from meeting our
periodic reporting obligations because Bechler Cams, Inc. refused to turn over
necessary financial information to us and our auditors to timely complete the
audits so that all required financial information could be included in these
periodic reports.

As a result, on October 16, 2003 we were advised by the Central Regional Office
of the SEC that it intended to recommend that the SEC institute enforcement
proceedings against us, and our President, Larry A. Consalvi in connection with
our inability to file timely quarterly reports for the periods ended March 31,
2003 and June 30, 2003 and our annual report for the fiscal year ended September
30, 2003. In addition, the Central Regional Office of the SEC recommended the
institution of enforcement proceedings against us for alleged antifraud
violations based on false and misleading statements contained in our Current
Report on Form 8-K, filed October 18, 2001 and information statements filed on
or about January 10, 2002, January 23, 2002, and January 25, 2002, which were
signed by our former president, Joe Thomas relating to Mr. Thomas' ownership of
our stock and his compliance with certain reporting requirements and for failing
to disclose payments made by an officer of E.M. Tool Company to us in connection
with a reverse merger. Upon recommendation by the Central Regional Office of the
SEC, the SEC subsequently issued an Order Instituting Proceedings, Making
Findings, and Imposing a Cease-And-Desist Order Pursuant to Section 21C of the
Securities Exchange Act of 1934 and Revoking Registration of Securities Pursuant
to Section 12 (j) of the Securities Exchange Act of 1934 (the "Order Instituting
Proceedings"). In the Order Instituting Proceedings, the SEC found that we
failed to comply with our reporting obligations while our securities were
registered with the SEC in that we failed to file our annual report on Form 10-K
for the fiscal year ended September 30, 2003, and four quarterly reports on Form
10-Q for the quarters ended March 31, 2003, June 30, 2003, December 31, 2003,
and March 31, 2004, and that Mr. Consalvi, during his tenure as our President,
caused us to violate these reporting requirements. In anticipation of the Order
Instituting Proceedings, we submitted an Offer of Settlement of Gateway
International Holdings, Inc. and Larry A. Consalvi (the "Settlement Offer"), in
which we consented to an entry of an Order by the SEC which revoked the
registration of our securities and Mr. Consalvi consented to a cease-and-desist
order requiring that he refrain from any future violations of Section 13(a) of
the Securities Exchange Act of 1934 and Rules 13 a F and 13a-13 thereunder. We
and Mr. Consalvi have subsequently withdrawn our consent following a
determination to bring us back into reporting compliance.


                                       16
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 9 - Commitments and Contingencies (continued)

In April 2005, the SEC instituted proceedings pursuant to Section 12 (j) of the
Securities Exchange Act of 1934 (the "2934 Act") and cease and desist
proceedings have been instituted pursuant to Section 21 (C) of the 1934 Act
against our President, Chief Executive Officer and Director, Larry A. Consalvi.
The SEC seeks to suspend the registration of our securities for a period not
exceeding 12 months or revoke the registration of our securities pursuant to
Section 12 of the 1934 Act, and to cause us and Mr. Consalvi to cease and desist
from committing any violations of Section 13(a) of Rules 13a-1 and 13a-13 of the
1934 Act in the future. This Administrative Proceeding, File No. 3-11894, arose
from our failure to comply with our reporting obligations while our securities
were registered with the SEC in that we failed to file our annual reports on
Form 10-K for our fiscal years ended September 30, 2004 and 2003, and four
quarterly reports on Form 10-Q for the quarters ended March 31, 2003, June 30,
2003, December 31, 2003, and March 31, 2004, and that Mr. Consalvi, during his
tenure as our President, caused us to violate these reporting requirements. On
August 18, 2005, the Administration Law Judge issued an Initial Decision and
ordered the revocation of each class of our securities pursuant to Section 12
(j) of the Securities Exchange Act of 1934 (the "Exchange Act"). It was further
ordered that our Chief Executive Officer, President and Director, Larry A.
Consalvi, cease and desist from committing any violation or future violations of
Section 13 (a) of the Exchange Act and Rules 13a-1 and 13a-13. We have now filed
all the delinquent 10 KSB's and 10-QSB's referred to above. On September 7,
2005, we filed a petition with the Commission for a review of the Initial
Decision, and on September 12, 2005, the Commission granted our petition for
review pursuant to Rule 411 of the Commission's Rules of Practice. We now await
the final decision of the Commission.

BTL Machine ("BTL") V Elite Machine Tool Company, Inc. ("Elite")

On January 4, 2005, a complaint was filed against our wholly-owned subsidiary,
Elite Machine Tool Company, Inc., in the matter entitled "BTL Machine v. Elite
Machine Tool Company, Inc." The complaint was filed in Case No. 05CC01842 in the
Superior Court of California, County of Orange, and alleges causes of action for
breach of contract and implied warranty related to BTL Machine's claim that it
received defective products from Elite Machine. BTL Machine seeks to recover
approximately $64,000 in damages. The management of Elite Machine has denied any
such liability for defective products and intends to vigorously defend the
action. Elite Machine has filed a cross-compliant against BTL Machine seeking to
recover approximately $5,000 in past due accounts receivable. This matter is
currently in the discovery phase and, as such, our counsel has advised us that
it is premature to attempt to estimate any potential outcome or loss at this
time.

The Duffy Law Firm V Gateway International Holdings, Inc et al

On December 8, 2004, a complaint was filed against us and some of our principals
by the Duffy Law Firm in the matter entitled "The Duffy Law Firm vs. Gledhill,
et al." The complaint was filed in Case No. 04CC11981 in the Superior Court of
California, County of Orange, and alleges causes of action for breach of
contract, open book account, quantum meruit, and declaratory relief related to
the plaintiff's claim for unpaid legal services. We have settled this matter
with the plaintiff and have agreed to make six monthly payments to plaintiff in
the amount of $10,000 per month. Any such liability has been reflected in our
Condensed Consolidated Financial Statements for the period ended December 31,
2005.


                                       17
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 9 - Commitments and Contingencies (continued)

Elite Machine versus Viking Products ("Viking")

We have retained counsel to represent our subsidiary, Elite Machine, and
commenced an action against Viking Products, Inc. ("Viking"). The dispute arose
as a result of Elite Machine's purchase of three Kitamura machines from Viking
on September 20, 2005 which Elite Machine later discovered had latent defects.
These defects were not disclosed by Viking prior to the parties entry into a
purchase agreement. In addition, Elite Machine agreed to take possession of
another machine from Viking and attempted to sell the machine on consignment.
This machine, likewise, had undisclosed, latent defects which, in the opinion of
Elite Machine's management, rendered the machine worthless. However, at the time
Elite Machine took possession of the machine, the anticipated value was
estimated to be $5,000. Accordingly, there is a possibility that Viking will
cross-complain against Elite Machine for the $5,000 deemed value of the machine.
Accordingly, we estimate the maximum potential liability to Elite machine to be
limited to $5,000. As of the filing of this report on Form 10-QSB, no complaint
for damages has yet been filed.

Nu-Tech versus MC2 Custom Alloys ("MC2")

We have retained counsel to represent our subsidiary, Nu-Tech, and commence an
action for the collection of outstanding receivables of approximately $75,000
due to Nu-Tech from MC2 Custom Alloys, Inc. ("MC2"). We have reserved this
amount as a doubtful debt on our Financial Statements. We are not aware of any
possible counterclaims against Nu-Tech by MC2. As of the filing date of this
report on Form 10-QSB, no complaint for damages has yet been filed.

Mouton versus Gateway

On August 12, 2005, a complaint was filed against our Company, in the matter
entitled Mouton v. Gateway International holdings, Inc. by our former Chief
Financial Officer. The complaint was filed in Case No. 05CC09234 in the Superior
Court of California, County of Orange, and alleges causes of action for
declaratory relief, conversion, claim and deliver, and constructive trust, and
seeks an order requiring that we replace 600,000 restricted shares of our common
stock that was issued to the plaintiff, but subsequently cancelled by us with
600,000 unrestricted shares of our common stock. We have filed a cross-complaint
alleging causes of action for breach of written contract, violation of Labor
Code ss.2865, declaratory relief, injunctive relief, misrepresentation, and
breach of duty of loyalty. The plaintiff served as our Chief Financial Officer
from December 2001 until his resignation in August 2002. Previous to this, the
plaintiff had been employed by the Company since 1988. This matter is currently
in the discovery phase and, as such, our counsel has advised us that it is
premature to attempt to estimate any potential outcome at this time.

Gateway versus Hunt Enterprises

On August 8, 2005, we filed a complaint against one of our vendors in the matter
entitled Gateway International Holdings, Inc. d.b.a. Elite Machine Tool Company
v. Hunt Enterprises. The complaint was filed in Case No. 05CC09063 in the
Superior Court of California, County of Orange, and alleges causes of action for
breach of contract and common counts. The dispute arose as a result of
defendant's failure to deliver equipment that we purchased pursuant to a
contract and for which we paid $20,000 in full payment of such equipment.
Although we anticipate a favorable ruling, this matter is currently in the
discovery phase and, as such, our counsel has advised us that it is premature to
attempt to estimate any potential outcome at this time.


                                       18
<PAGE>

              GATEWAY INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      Three Months Ended December 31, 2005

                                   (Unaudited)

Note 9 - Commitments and Contingencies (continued)

Carmichael versus Integrity Stock Transfer

On October 11, 2005, a complaint was filed against our Company in the matter
entitled Carmichael v. Integrity Stock Transfer, et al. The complaint was filed
in the Second Judicial District of the Court of Nevada as Case No CV05-023065
and alleges various causes of action including breach of contract, breach of
fiduciary duties, misrepresentation, and interference with contract, deceptive
trade practices, and violations of the federal RICO statutes. The complaint
alleges that the Company, our president and our stock transfer agent wrongfully
refused to register stock that the plaintiff contends he owns. The complaint
seeks unspecified compensatory and punitive damages in an amount exceeding
$10,000. On November 8, 2005, we removed the case to the United States District
Court for the District of Nevada. We and our president believe that the
complaint is without merit and we intend to vigorously defend against this
action. No assessment can be made of the likelihood of any particular outcome in
this case, which is still in its early stages.

Note 10- Restatement of the Three Months Ended December 31, 2004

Results previously reported for the three months ended December 31, 2004 have
been restated for an allocation of the purchase price of subsidiaries to other
assets, goodwill, and the amortization of other assets arising from the
valuation of the acquired entities after the filing of the 10QSB for the three
months ended December 31, 2005., as follows:

<TABLE>
<CAPTION>
                                          As Originally Filed   As Restated          Change
<S>                                           <C>              <C>               <C>
      Net Revenues                            $  2,129,371     $  2,120,167      $     (9,204)
      Net Income (loss) before taxes               253,485          (11,353)         (264,838)
      Net income (loss) after taxes                152,092          (28,024)         (180,116)
      Earnings (loss) per share               $       0.01     $      (0.00)     $      (0.01)

      Other assets                                      -0-       2,970,854         2,970,854
      Goodwill                                  10,325,166        8,484,152        (1,841,014)
      Total assets                              15,436,645       16,028,157           591,512

      Deferred tax liability                            -0-       1,272,714         1,272,714
      Total liabilities                          5,880,226        7,018,063         1,137,837
      Stockholders' equity                       9,556,419        9,010,094          (546,325)
      Total liabilities and stockholder's
         equity                                 15,436,645       16,028,157           591,512
</TABLE>

Note 11 - Subsequent Events

On March 30, 2006, the Company sold 183,668 shares of it's common stock for
proceeds of $110,201, or $0.60 per share.


                                       19
<PAGE>

       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements

The following presentation of Management's Discussion and Analysis should be
read in conjunction with the financial statements and notes thereto included in
Item 1 of this Quarterly Report on Form 10-QSB. Except for the historical
information contained herein, the discussion in this report contains certain
forward-looking statements that involve risks and uncertainties, such as
statements of our business plans, objectives, expectations and intentions as of
the date of this filing. This cautionary statement about reliance on
forward-looking statements should be taken into serious consideration with
respect to all forward-looking statements wherever they appear in this report,
notwithstanding that the "safe harbor" protections available to some publicly
reporting companies under applicable federal securities law do not apply to us
as an issuer of penny stocks. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risk and uncertainties, and that actual results may differ materially from those
contemplated by such forward-looking statements. Readers are urged to carefully
review and consider the various disclosures made by us in this Report as well as
in our other reports filed with the Securities and Exchange Commission.
Important factors currently known to Management could cause actual results to
differ materially from those in forward-looking statements. We undertake no
obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes in the future
operating results over time. We believe that our assumptions are based upon
reasonable data derived from and known about our business and operations. No
assurances are made that actual results of operations or the results of any
future activities will not differ materially from our assumptions.

General Overview

We are a public company whose common stock is quoted on the Pink Sheets under
the symbol "GWYI". Prior to December 11, 2001, we were engaged in the business
of catalogue retail gifts under the corporate name "Gourmet Gifts." Our
principal product then entailed the packaging, sale and delivery of seasonal
gourmet food and beverage items. However, due to difficulty in raising
additional working capital to execute the business plan, we ceased operations.
On December 11, 2001, we entered into a Plan of Reorganization and Merger (the
"Plan" or "Merger") with E.M. Tool Company, Inc., a California corporation doing
business as Elite Machine Tool Company ("Elite Machine") and principally engaged
in the acquisition, refurbishment, distribution and sales of pre-owned Computer
Numerically Controlled ("CNC") machine tools to manufacturing customers.
Immediately prior to the merger, we had 100,000,000 shares authorized and
3,384,000 shares issued and outstanding. Pursuant to the merger, all of the
21,262 outstanding shares of Elite Machine were exchanged for shares of our
common stock on a 1 to 637 basis or into 13,236,000 (net of 300,000 shares
subsequently cancelled thereafter) shares of our common stock for a total of
16,620,000 shares of common stock issued and outstanding. Immediately after the
merger, all then existing officers and directors of our Company resigned and the
management of Elite Machine were elected and appointed to such positions;
thereby effecting a change of control. Although Elite Machine became our
wholly-owned subsidiary following the transaction, because the transaction
resulted in a change of control, the transaction was recorded as a "reverse
merger" whereby Elite Machine was considered to be our accounting acquirer. We
simultaneously changed our name to Gateway International Holdings, Inc.
Thereafter, we began engaging in the acquisition, refurbishment, distribution
and sales of pre-owned CNC machine tools to manufacturing customers across the
United States of America.

As of May 19, 2006, we are a diversified holding company that operates through
our wholly-owned subsidiaries principally in the aerospace and defense markets.
We currently have 5 subsidiaries in operations including: Eran Engineering,
Inc., Elite Machine Tool Company, Inc., All American CNC Sales, Inc., Accurate
Technology, and Nu-Tech Industrial Sales, Inc. Our strategy has been to seek and
acquire profitable, cash flow positive companies that will complement and
diversify our existing portfolio of companies with a focus on potential
acquisitions in the aerospace, medical and defense markets.

We derive much of our sales revenue from services and components sold to the
aerospace industry. As a result of the terrorist attacks of September 11, 2001,
the aerospace industry has suffered a significant decline in operational
efficiency and financial condition and the overall effect of a prolonged
downturn in the commercial airline industry will be a potentially severe
reduction in demand for some aerospace products. The industry is showing signs
of emerging from the slump when Boeing received a large increase in commercial
orders this past year. The Company's involvement in providing products used to
improve security of our combat forces remains strong and is well budgeted by the
Government.


                                       20
<PAGE>

In addition, our business is directly affected by certain characteristics and
trends in the aerospace industry that affect our customers, such as (i)
fluctuations in the aerospace industry's business cycle, (ii) varying fuel and
labor costs, (iii) intense price competition and regulatory scrutiny, (iv)
certain trends, including a possible decrease in aviation activity, a decrease
in outsourcing by aircraft manufacturers or the failure of projected market
growth to materialize or continue, and (v) changes in military budgeting and
procurement for certain military aircraft. In the event that these
characteristics and trends adversely affect customers in the aerospace industry,
they would reduce the overall demand for our products and services, thereby
decreasing our sales and operating income.

The industries in which we operate and the markets that we serve tend to be
highly cyclical. The machine tool industry, in particular from 1998 to 2003,
experienced a significant decline in global demand. Cyclical weakness in the
industries we serve could lead to a reduced demand for our products.

Our competitors in the aerospace and defense machine tools industry consist of a
large fragmented group of companies, including certain business units or
affiliates of our customers. We believe that competition within the aerospace
and defense industry will increase substantially as a result of industry
consolidations and trends toward favoring greater outsourcing of components and
reducing the number of preferred suppliers. Certain of our competitors may have
a substantially greater financial, production and other resources and may have
(i) the ability to adapt more quickly to changes in customer requirements and
industry conditions or trends, (ii) stronger relationships with customers and
suppliers, and (iii) greater name recognition than us. There can be no assurance
that competitive pressures will not materially and adversely affect our
business, financial condition or results of operations.

Our products are sold primarily throughout the United States of America.
Although we perform periodic credit evaluations of our customers, we do not
obtain collateral with which to secure our accounts receivable. Accordingly, our
ability to collect receivables may be materially affected by economic
fluctuations in the geographic areas we serve. In addition, our management
periodically reviews accounts receivable and actively pursues all doubtful
accounts. Although we expect to collect all amounts due, actual collection may
differ materially from the reported amounts. Therefore, our management has
provided for an allowance for doubtful accounts in the amount of $110,000 as of
December 31, 2005 and $16,400 as of December 31, 2004. The increase in our
provision for doubtful accounts is due primarily to a large provision against
doubtful receivables at Nu-Tech.

During the three months ended December 31, 2005, sales to six customers
comprised approximately 41.3% of our net revenues, and in the three months ended
December 31, 2004, sales to four customers comprised approximately 85.69% of our
net revenues. At December 31, 2005, three customers account for approximately
29.2% of our accounts receivable. If our relationship with these customers is
adversely altered, our future results of operations and financial condition
could be materially adversely affected.

In addition to the risks identified above, the SEC has instituted proceedings
pursuant to Section 12 (J) of the Securities Exchange Act of 1934 (the "Exchange
Act") and cease and desist proceedings have been instituted pursuant to Section
21 (C) of the 1934 Act against our President, Chief Executive Officer and
Director, Larry A. Consalvi. The SEC seeks to suspend the registration of our
securities for a period not exceeding 12 months or revoke the registration of
our securities pursuant to Section 12 of the 1934 Act, and to cause us and Mr.
Consalvi to cease and desist from committing any violations of Section 13(a) of
Rules 13a-1 and 13a-13 of the 1934 Act in the future. This Administrative
Proceeding, File No. 3-11894, arose from our failure to comply with our
reporting obligations while our securities were registered with the SEC in that
we failed to file our annual reports on Form 10-KSB for our fiscal years ended
September 30, 2004 and 2003, and four quarterly reports on Form 10-QSB for the
quarters ended March 31, 2003, June 30, 2003, December 31, 2003, and March 31,
2004, and that Mr. Consalvi, during his tenure as our President, caused us to
violate these reporting requirements. On August 18, 2005, the Administration Law
Judge issued an Initial Decision and ordered the revocation of each class of our
securities pursuant to Section 12 (j) of the Exchange Act. It was further
ordered that our Chief Executive Officer, President and Director, Larry A.
Consalvi, cease and desist from committing any violation or future violations of
Section 13 (a) of the Exchange Act and Rules 13a-1 and 13a-13. On September 7,
2005, we filed a petition with the Commission for a review of the Initial
Decision, and on September 12, 2005, the Commission granted our petition for
review pursuant to Rule 411 of the Commission's Rules of Practice. We now await
the final decision of the Commission. If the registration of our securities is
either suspended or revoked, our stockholders will not be able to publicly sell
their securities unless and until, whatever the case may be, the period of
suspension is over or we are able to have a new registration statement declared
effective by the SEC, and there is no assurance that we would be able to
accomplish that, or that any private market for our securities can or will
develop.


                                       21
<PAGE>

Outlook

The following information summarizes management's outlook for calendar year
2006:

Our outlook for the coming year is positive. The Company continues to grow
internally with a sold, diversified customer base. The acquisitions made during
our 2004 and 2005 fiscal years strengthened the base of the Company. In this
year we look to leverage these purchases by improving the operations of the
subsidiary companies. Our strategies include:

      o     A more diversified sales strategy

      o     Implementation of an enterprise wide management system

      o     Improved quality standards at our manufacturing units

      o     Additional consolidation of like-business units to improve their
            cost structure and ability to serve customers

Implementation of systems and improved internal controls will enable us to
better implement our acquisition strategy as opportunities arise in the future.

CRITICAL ACCOUNTING POLICIES

Business Combinations

SFAS 141, "Business Combinations," which is effective for business combinations
initiated after June 30, 2001, eliminates the pooling of interest method of
accounting for business combinations and requires that all business combinations
occurring after July 1, 2001 are accounted for under the purchase method of
accounting.

Revenue Recognition

Our net sales consist of revenue from sales of products net of trade discounts
and allowances. We generally obtain oral or written purchase authorizations from
our customers for a specified amount of product at a specified price and
consider delivery to have occurred at the time of shipment. We recognize revenue
when evidence of an arrangement exists, contractual obligations have been
satisfied, title and risk of loss have been transferred to the customer, and
collection of the resulting receivable is reasonably assured.

Inventories

Inventories, which consist primarily of pre-owned machine tools, raw materials,
and related labor and overhead, are stated at the lower of cost or market with
cost determined on a specific identification basis. The Company regularly
monitors inventory for excess or obsolete items and makes valuation corrections
when such adjustments are known.

Net realizable value is based on management's forecast for sales of the
Company's products in the ensuing years. The industry in which the Company
operates is characterized by technological advancement and change. Should demand
for the Company's products prove to be significantly less than anticipated, the
ultimate realizable value of the Company's inventories could be substantially
less than the amount shown on the accompanying condensed consolidated balance
sheet.


                                       22
<PAGE>

Results of Operations for the Three Months Ended December 31, 2005 and 2004.

<TABLE>
<CAPTION>
                                                                 December 31, 2004
                                 December 31, 2005                   (Restated)
<S>                         <C>                 <C>          <C>                 <C>
Net Sales                   $5,765,995          100.00%      $2,120,167          100.00%
Cost of Sales                3,825,944           66.35        1,362,161           64.25
                            ----------      ----------       ----------      ----------

Gross Profits                1,940,051           33.65          758,006           35.75
                            ----------      ----------       ----------      ----------
Selling, General and
Administrative Expenses      2,213,071           38.38          769,412           36.29
                            ----------      ----------       ----------      ----------
Operating Expenses           2,213,071           38.38          769,412           36.29
                                                             ----------      ----------

(Loss) from Operations        (273,020)          (4.73)         (11,406)           (.54)
Interest Income                    744            0.01               53              --
                            ----------      ----------       ----------      ----------
Net loss before
   Income Taxes               (272,276)          (4.72)         (11,353)          (0.54)
(Benefit) provision for
Income Taxes                   (65,192)          (1.13)          16,671            0.79
                            ----------      ----------       ----------      ----------

Net Loss                    $ (207,084)          (3.59)      $  (28,024)          (1.33)
                            ==========      ==========       ==========      ==========
</TABLE>

Revenues

Net revenues for the three months ended December 31, 2005 were $5,765,995, an
increase of $3,645,828or 171.96%. Of the increase, $1,060,386 or 29.08% was due
to the acquisition of Nu-Tech Industrial Sales, Inc. (Nu-Tech) which was
completed on March 31, 2005. Of the remaining increase of $2,585,442the
following revenue segments increased:

      o     Pre owned equipment sales - $415,320increase, or 93.3% increase over
            the comparable period for 2004;

      o     New equipment sales - $1,050,100 increase, or 287.5% increase over
            the comparable period for 2004;

      o     Precision metal manufacturing - $1,120,022 increase, or 85.5%
            increase over the comparable period for 2004. This was principally
            due to the acquisition of Accurate Technology which was purchased as
            of December 7, 2004 and thus the revenues for the three months ended
            December 31, 2004 only included 24 days of revenues.

Generally, increases in revenues were a result of increasing product/service
demand, improvements in the US economy and expansion of our customer base.

Cost of Sales

Cost of Sales increased from $1,362,161 for the three months ended December 31,
2004 to $3,825,944 for the three months ended December 31, 2004, or a
$2,463,783or 180.87% increase. Of the increase, $841,326 is attributable to
Nu-Tech. Of the remaining increase of $1,622,457:

      o     $387,398is a result of pre owned equipment sales which resulted in
            an increase of 114.8%;

      o     $817,826 is a result of new equipment sales which resulted in an
            increase of 383.3%;

      o     $417,233 is a result of precision metal manufacturing which resulted
            in an increase of 51.4%.


                                       23
<PAGE>

Gross Profit

Overall gross profit for the three months ended December 31, 2005 was 33.7%, a
decrease of 2.1 percentage points from a 35.8% gross margin for the three months
ended December 31, 2004. Gross margin dollars increased to $1,940,051for the
three months ended December 31, 2005 from $758,006 for the three months ended
December 31, 2004, or an increase of $1,182,045 or 155.9%. Of the increase in
gross margin dollars, approximately $1,230,000 was due to the increase in
revenues offset by approximately $33,000 due to lower gross margins during the
three months ended December 31, 2005 versus the three months ended December 31,
2004.

Selling, General and Administrative Expenses

Total operating expenses for the three months ended December 31, 2005 increased
to $2,212,972 from $792,046 for the three months ended December 31, 2004, or an
increase of $1,443,560, or 187.6%. Of the increase, $278,206, or 19.6% was due
to the acquisition of Nu-Tech. The major expense increases were depreciation,
$147,000 due to increases in our precision metal manufacturing operations,
payroll and related expenses of $612,000 of which $165,000 was attributable to
Nu-Tech and the remainder was due to increased personnel levels in each of our
business segments, and $114,000 due to professional services, $40,000 due to
legal services and $21,000 due to accounting services related to the Company's
SEC filings.

Income from Operations

The loss from operations increased from a loss of $11,353 for the three months
ended December 31, 2004 to a $272,276 loss for the three months ended December
31, 2005. The increase in the loss was primarily due to lower gross margins and
increased operating expenses, primarily expenses related to SEC related filings
and amortization of intangible assets.

Net loss after Income Tax Provision (Benefit)

The net loss for the three months ended December 31, 2005 was $207,084 versus a
net loss of $28,024 for the three months ended December 31, 2004, or an increase
loss of $179,060.

LIQUIDITY AND CAPITAL RESOURCES:

We have funded our business to date primarily from operations, the issuance of
debt, the issuance of common stock during 2005 in the amount of $785,000, and
the sale of assets for $560,000. As of December 31, 2005, the Company had
approximately $4,339,000 of total debt of which approximately $1,200,000 is due
to related parties, principally from the acquisition of companies, and
$3,139,000 is due to various banks and financial institutions.

The three months ended December 31, 2005 versus December 31, 2004

Net cash provided from operating activities for the three months ended December
31, 2005 amounted to $448,414, an increase of $466,746. The increase was
principally due to non cash expenses for depreciation of $155,000 and
amortization of intangible assets of $115,000, increases in accounts payable of
$1,396,000 offset by increases in inventories of $832,000.

Investing activities were $13,000 primarily due to capital asset additions
during the three months ended December 31, 2005.

Proceeds from financing activities for the three months ended December 31, 2005
was $(285,000) compared to $1,228,000 for the three months ended December 31,
2004. Payments on debt, principally to financial institutions, totaled $285,000
compared to no payments during the three months ended December 31, 2004.


                                       24
<PAGE>

Working capital during the three months ended December 31, 2005 decreased from
approximately $173,000 as of September 30, 2005 to $118,000 as of December 31,
2005. The decrease in working capital was primarily a result of the following:

      o     $84,000 increase in trade receivables

      o     $832,000 increase in inventories

      o     $1,393,000 increase in trade payables

      o     $90,000 decrease in accrued expenses and customer deposits.

Liquidity

Internal sources of liquidity

For the three months ended December 31, 2005 cash increased by approximately
$150,000 principally due to operations offset by capital asset purchases and
debt service payments. Our ending cash balance of $772,627 is believed to be
sufficient to provide us with the necessary capital to continue to fund
operations.

External sources of liquidity

We actively pursue all potential financing options as we look to secure
additional funds to both stabilize and grow our business operations. Our
management will review any financing options at their disposal and will judge
each potential source of funds on its individual merits. There can be no
assurance that we will be able to secure additional funds from debt or equity
financings or if such financing terms will be favorable, if at all.

Our management believes that inflation has not had a material effect on our
results of operations, and does not expect that it will in fiscal year 2006,
except for the rising prices for oil and gas which could have a materially
adverse impact on the world economy in general.

Going Concern

For the year three months ended December 31, 2005, the Company had cash flow
from operations of approximately $448,000, and had working capital of $118,271
as of December 31, 2005. However,the Company incurred a loss of $207,084 for the
three months ended December 31, 2005 and had an accumulated deficit of
$2,731,511 as of December 31, 2005. The loss incurred during the three months
ended December 31,2005 included an aggregate of non-cash costs of $318,380
relating to intangible amortization, depreciation, imputed interest and a loss
on disposal of equipment. Management believes that cash generated by operations
will be sufficient to meet the anticipated cash requirements for operations,
working capital and capital expenditures for the next twelve months through
December 31, 2006. The Company also intends to raise new funds from another
private offering from private investors and institutional investors and to
obtain a substantial new credit facility with a bank; however, there can be no
assurances that the Company will ultimately be successful in its fundraising
efforts.

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS NO. 123 (R), "Share-Based Payment", an
Amendment of FASB Statement No. 123 ("FAS No 123R"). SFAS 123 (R) requires that
the cost of share-based payment transactions (including those with employees and
non-employees) be recognized in the financial statements. SFAS 123 (R) applies
to all share-based payment transactions in which an entity acquires goods or
services by issuing (or offering to issue) its shares, share options, or other
instruments (except for those held by an ESOP) or by incurring liabilities (1)
in amounts based (even in part) on the price of the entity's shares or other
equity instruments, or (2) that require (or may require) settlement by the
issuance of an entity's shares or other equity instruments. This statement is
effective (1) for public companies qualifying as SEC small business issuers, as
of the first interim period or fiscal year beginning after December 31, 2005, or
(2) for all other public companies, as of the first interim period or fiscal
year beginning after June 15, 2005, or (3) for all nonpublic entities, as of the
first fiscal year beginning after December 15, 2005. Management has adopted this
policy for the quarter ended March 31, 2006.


                                       25
<PAGE>

In December 2004, the FASB issued SFAS Statement No. 153, "Exchanges of
Non-monetary Assets", an Amendment to APB Opinion No. 29, "Accounting for
Nonmonentary Transactions". SFAS 153 eliminates certain differences in the
guidance in APB 29 as compared to the guidance contained in standards issued by
the International Accounting Standards Board. The amendment to APB 29 eliminates
the fair value exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. Such an exchange has commercial substance
if the future cash flows of the entity are expected to change significantly as a
result of the exchange. SFAS 153 is effective for nonmonetary asset exchanges
occurring in periods beginning after June 15, 2005. Earlier application is
permitted for nonmonetary asset exchanges occurring in periods beginning after

In May 2005 the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections." This SFAS provides guidance on accounting for and reporting of
accounting changes and error corrections. The Company has evaluated the impact
of SFAS 154 and does not believe the impact will be significant to the Company's
overall results of operations or financial position.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our prospects are subject to certain uncertainties and risks. This Quarterly
Report on Form 10-QSB for the three months ended December 31, 2005, also
contains certain forward-looking statements within the meaning of the Federal
securities laws. Our future results may differ materially from our current
results, and our actual results could differ materially from those projected in
the forward-looking statements. Such differences may be the result of certain
risks, including but not limited to those risk factors set forth below, other
one-time events and other important factors previously disclosed or to be
disclosed from time to time in our other filings with the Securities and
Exchange Commission. The following risk factors should be considered carefully
in evaluating the Company and its business because these risks currently have a
significant impact or may have a significant impact in the future on our
business, operating results and financial condition. Prospective investors
should consider carefully the risk factors set out below.

Risks Related To Our Business.

The SEC has instituted administrative proceedings against us because we have
failed to meet our reporting requirements under the Securities Exchange Act of
1934.

The SEC has instituted proceedings pursuant to Section 12(J) of the Securities
Exchange Act of 1934 (the "Exchange Act") and cease and desist proceedings have
been instituted pursuant to Section 21(C) of the 1934 Act against our President
and Director, Lawrence A. Consalvi. The SEC seeks to revoke the registration of
our securities for a period not exceeding 12 months pursuant to Section 12 of
the Exchange Act, and to cause us and Mr. Consalvi to cease and desist from
committing any violations of Section 13(a) of Rules 13a-1 and 13a-13 of the 1934
Act in the future. The proceedings arose from our failure to continue to file
our required annual and quarterly reports with the SEC, as discussed in the
Explanatory Note at the beginning of, and elsewhere in, this Report. Although we
intend to vigorously defend against these actions and to bring all our
delinquent filings up to date, there can be no assurance that the SEC will not
pursue this action even after these filings have been made. If the registration
of our securities is revoked, our stockholders will not be able to publicly sell
our securities unless and until we are able to have a new registration statement
declared effective by the SEC, and there is no assurance that we would be able
to accomplish that, or that any private market for our securities can or will
develop.

Our business is dependent on, among other sectors, the aerospace and defense
industries and is therefore, susceptible to factors which affect that industry
such as acts of terrorism and general economic factors.

We derive much of our sales revenue from services and components sold to the
aerospace industry. As a result of the terrorist attacks of September 11, 2001,
the aerospace industry has suffered a significant decline in operational
efficiency and financial condition and the overall effect of a prolonged
downturn in the commercial airline industry will be a potentially severe
reduction in demand for our aerospace products. Additional acts of sabotage or
terrorism or adverse results to the U.S. in its military conflicts, such as the
current conflict in Iraq, would likely lead to even further reduced demand for
our products and services.


                                       26
<PAGE>

In addition, our business is directly affected by certain characteristics and
trends in the aerospace industry that affect our customers, such as (i)
fluctuations in the aerospace industry's business cycle, (ii) varying fuel and
labor costs, (iii) intense price competition and regulatory scrutiny, (iv)
certain trends, including a possible decrease in aviation activity, a decrease
in outsourcing by aircraft manufacturers or the failure of projected market
growth to materialize or continue, and (v) changes in military budgeting and
procurement for certain military aircraft. In the event that these
characteristics and trends adversely affect customers in the aerospace industry,
they would reduce the overall demand for our products and services, thereby
decreasing our sales and operating income.

We must comply with environmental laws, and any failure to do so could subject
us to claims or regulatory action.

Our facilities are subject to regulations concerning solid waste disposal,
hazardous materials generation, storage, use and disposal, air emissions, waste
water discharge, employee health and other environmental matters. A number of
the metals, chemicals and other materials used in and resulting from our
manufacturing processes are classified as hazardous substances and hazardous
wastes. If we do not meet the requirements of applicable environmental laws, we
could be liable for damages and for the costs of remedial actions. We could also
be subject to fines or other penalties, including revocation of permits needed
to conduct our business. Any permit revocation could require us to cease or
limit production at one or more of our facilities, which could damage our
business and financial performance. We have an ongoing program of monitoring and
addressing environmental matters, and from time to time in the ordinary course
of business we are required to address minor issues of noncompliance at our
operating sites. We are not aware of any historical contamination on our current
properties or involving neighboring activities that we believe could have a
material adverse effect on our results of operations or financial condition.

We do business in industries that are cyclical, which may result in weakness in
demand for our products.

Our products are sold in many industries, including machine tool, automotive and
aerospace, that are highly cyclical. The machine tool industry, in particular
from 1998 to 2003, experienced a significant decline in global demand. Cyclical
weakness in the industries we serve could lead to a reduced demand for our
products.

The industries in which we operate are characterized by intense competition, and
there can be no assurance that competitive pressures will not materially and
adversely affect our future business, financial condition or results of
operation.

Our competitors in the aerospace and defense machine tools industry consist of a
large fragmented group of companies, including certain business units or
affiliates of our customers. We believe that competition within the aerospace
and defense industry will increase substantially as a result of industry
consolidations and trends toward favoring greater outsourcing of components and
reducing the number of preferred suppliers. Certain of our competitors may have
substantially greater financial, production and other resources and may have (i)
the ability to adapt more quickly to changes in customer requirements and
industry conditions or trends, (ii) stronger relationships with customers and
suppliers, and (iii) greater name recognition than us. There can be no assurance
that competitive pressures will not materially and adversely affect our
business, financial condition or results of operation.

From time to time, we may need additional capital to meet the objectives of our
proposed business plan, and there is no assurance that we will be able to raise
such capital or that such financing will be on terms that are favorable or
acceptable to us.

We currently have limited operating capital and cash resources. As a result, we
may require substantial funding to meet the expenses of our anticipated business
expansion in the machine tooling industry. Such funding will be used to update
our current program offerings; expand and upgrade our machine tooling
capabilities; upgrade our facilities; invest in research and development; take
advantage of acquisition opportunities; stabilize and integrate acquisition
targets, if any; and meet additional working capital requirements. Our ability
to raise funding may be severely limited due to our limited assets and the
limited public market for our common stock. Our ability to obtain additional
funding will also be dependent upon our operating results and financial
condition. These factors may make the timing, amount, terms and conditions of
additional financing unattractive or impracticable for us. If we are unable to
raise more money, our growth could be impeded and our business could be
materially adversely affected.


                                       27
<PAGE>

We may not be successful in our ability to identify and acquire suitable
acquisition candidates.

As part of our business strategy, we seek to acquire additional companies that
offer complementary products, technologies or services. The size of the
potential targets, timing, and success of our acquisition efforts and the
anticipated capital requirements to implement our strategy cannot be predicted.
The success of our acquisition strategy will depend largely on our ability to
identify suitable acquisition candidates and secure any necessary financing,
without diverting our management's attention from the operation of our business.
Competition for acquisition targets could also result in increased acquisition
prices and fewer businesses available for investment. In addition, the due
diligence materials we rely upon in making an acquisition may not be accurate or
complete.

Risks associated with acquisitions could result in increased costs and
production inefficiencies.

A key element of our growth strategy has been expansion through the acquisition
of complementary businesses involved in the aerospace and defense industries and
strategic acquisitions that would provide us with access to new industries. The
size of the potential targets, timing, and success of our acquisition efforts
and the anticipated capital requirements to implement our strategy cannot be
predicted. Although we evaluate acquisition opportunities from time to time,
there can be no assurance that we will be able to consummate acquisitions on
satisfactory terms, or at all, or that we will be successful in integrating any
such acquisitions into our operations. In addition, these acquisitions may be
accompanied by risks that are commonly encountered in an acquisition of a
business, any of which could seriously harm our business, including:

o     adverse effects on our reported operating results due to accounting
      charges associated with acquisitions;

o     failure of an acquired business to further our strategies;

o     failure of the acquired business to achieve expected results;

o     potential disputes with the sellers of acquired businesses;

o     failure to retain key clients or personnel of the acquired businesses;

o     increased expenses resulting from newly engaged personnel;

o     potential loss of key employees of the acquired businesses;

o     diversion of management's attention from other business concerns; or

o     difficulties related to the integration of acquired businesses with our
      business.

For all of the above reasons, our pursuit of an overall acquisition and
investment strategy or any individual acquisition or investment could seriously
harm our business.

We may be unsuccessful in retaining the management of the businesses we acquire,
and even if we do, there is no guarantee that existing management would in all
cases make the same judgments we would expect.

Our business strategy has focused upon the acquisition of complementary
businesses to maximize our growth and position in the industry. Inherent in our
approach is the resulting reliance on the current management team of the
subsidiary continuing to manage and guide the acquired company going forward.
Although we have been successful in retaining the current management of our
wholly-owned subsidiaries, there is no guarantee that we will be able to do so
in connection with our future acquisitions, nor that if retained, existing
management will in all cases make the same judgments we would expect or desire
of installed management had we put some in place.

Our customers may perceive a conflict of interest, and decide to purchase
equipment from our competitors.

In the past, we have sold products and equipment to many firms that are direct
competitors of our manufacturing subsidiaries. Existing customers may see this
as a conflict of interest and decide to purchase equipment from our competitors.
The loss of existing customers, especially our key customers, who perceive a
conflict of interest and decide to stop purchasing our products and services to
purchase those of our competitors, would have a materially adverse impact on our
operations and financial condition.

Our business is dependent on a concentrated customer base and the loss of our
key customers will have a materially adverse impact on our future results of
operations and financial condition.

During the three months ended December 31, 2005, our sales to six customers
represented 41.03% of net sales, and in the three months ended December 31, 2004
our sales to four customers represented approximately 85.69% of net sales. At
December 31, 2005, three of our customers accounted for approximately 29% of
accounts receivable and at December 31, 2004, two of our customers accounted for
approximately 54% of accounts receivable. The loss of any of these key customers
would have a materially adverse impact on our future results of operations and
financial condition.


                                       28
<PAGE>

We may not be able to compete successfully because of the number of our
competitors and expected numerous market entrants.

We anticipate that we will compete with many established companies offering
machine tooling and related services. Many of these companies have substantially
greater financial, marketing and technological resources, and greater access to
customers than us. Most of our competitors benefit from greater name recognition
and have substantially greater resources than we have. In addition, as the
machine tooling industry continues to expand, we expect competition to increase
and to see new entrants into the market. Our failure to effectively compete in
this industry would adversely affect our business. Additionally, the
announcement or introduction of new products or the implementation of effective
marketing strategies by our competitors may materially impact our business.

We are controlled by a limited number of persons whose actions could adversely
affect the market price of our common stock and impact the value of our
stockholders' investments.

A limited number of persons and their affiliates, including current and past
management, own approximately 68% of our outstanding voting stock (on a pro
forma, fully diluted basis, after giving effect to the above-mentioned
acquisitions). Accordingly, these stockholders, if acting together, would be
able to control virtually all matters requiring approval by stockholders,
including the election of directors and the approval of mergers or other
business combinations. These actions could adversely affect the market price of
our common stock and impact the value of our stockholders' investments.

We may be unable to retain our senior management and other key personnel.

Our future success depends, in significant part, upon the continuing service and
performance of our senior management and other key personnel. We do not maintain
key-person life insurance on senior management or any of our key personnel. If
we lose the services of any of these individuals, including, but not limited to,
Lawrence A. Consalvi, Joseph T.W. Gledhill, and Lloyd R. Leavitt, III, our
ability to effectively deliver services to our clients and manage our business
effectively could be materially impaired. In addition, our wholly-owned
subsidiaries do not maintain key-person life insurance on their respective
senior management or any of their key personnel, and the loss of any of these
individuals may negatively impact such subsidiaries' ability to service their
respective clients and manage their business as well.

An economic weakness in the capital goods market and/or a tightening of credit
by the banking industry may result in a reduction in sales of our products.

Many of our customers depend on long term financing from a financial institution
to purchase our equipment. Economic weakness in the capital goods market and/or
a tightening of credit in the banking industry may result in reduced sales and
accordingly affect our operations and financial condition.

Disputes may arise among us and the businesses we acquire subsequent to the
acquisition which may result in a disruption to our business operations and
adversely impact our ability to meet our reporting requirements under the
federal securities laws.

Subsequent to the acquisition of Nelson Engineering, Inc. and Bechler Cams,
Inc., a dispute arose among our management and the former shareholders of these
businesses, some of whom became our directors pursuant to the respective
acquisition agreements. Such disputes ultimately resulted in the rescission of
these acquisitions, and in the case of Bechler Cams, Inc., our inability to meet
our filing requirements under the federal securities laws. There can be no
assurance that disputes may not arise in the future among us and the
shareholders of companies we may seek to acquire which would also have a similar
negative impact on our business.

If we cannot develop technological improvements to our products through
continued research and engineering, our financial results may be adversely
affected.

In order to maintain our position in the market, we need to continue to invest
in research and engineering to improve our products and technologies and
introduce new products and technologies. If we are unable to make such
investment, if our research and development does not lead to new and/or improved
products or technologies, or if we experience delays in the development or
market acceptance of new and/or improved products, our financial results may be
adversely affected.


                                       29
<PAGE>

Risks Related To Our Industry

We operate in highly competitive industries, many of which are currently subject
to intense price competition, and if we are unable to compete successfully our
results of operations could fail to improve or could deteriorate.

Many of the industries in which we operate are highly competitive. Our products
may not compete successfully with those of our competitors. The markets for
machine tools and related products are highly competitive and include a number
of North American, European and Asian competitors. Principal competitive factors
in the machine tool industry are: price, product features, technology,
performance, reliability, quality, delivery and customer service.

We are currently experiencing increased price competition as a result of the
general economic downturn, which has resulted in a sharp downward trend in
pricing. In certain cases, we have lost business to competitors who offered
prices lower than ours. In addition, certain of our competitors have built up
large excess inventories and therefore may continue to offer their products at
prices lower than ours until such inventories are reduced. In addition, some of
our competitors may have greater financial resources and less debt than we do
which may place us at a competitive disadvantage in the future. These
competitors may be better able to withstand and respond to changes in conditions
within our industry, such as the dramatic reduction in demand and pricing levels
we experienced subsequent to the terrorist attacks of September 11, 2001.

If we fail to keep pace with the rapid industry changes or to effectively manage
the introduction of new products and services, our business and reputation could
be adversely impacted.

The markets in which we compete are characterized by rapid technological change,
frequent new product introductions and evolving industry standards. Customer
preferences are difficult to predict and there is no assurance that our products
and services will receive customer acceptance. If we fail to keep pace with
rapid industry changes or to effectively manage the introduction of new products
and services, our business and reputation could be adversely impacted.

There is significant competition in our industry for highly skilled employees
and our failure to attract and retain technical personnel would adversely affect
our business.

We may not be able to successfully attract or retain highly skilled employees.
We have not yet hired several key members of our anticipated management team,
whom we believe will be necessary for our business success. A high level of
employee mobility characterizes the machine tooling industries, and the market
for highly qualified individuals in engineering and computer applications. This
competition means there are fewer highly qualified employees available to hire
and the costs of hiring and retaining these individuals are high. Even if we are
able to hire these individuals, we may be unable to retain them. Additionally,
there is increasing pressure to provide employees with stock options and other
equity interests, which may dilute our earnings per share. If we are unable to
hire or retain qualified employees, our business would be adversely impacted.

Risks Related To Our Stock

Our stock price is volatile and there is a limited market for our shares.

The stock markets generally have experienced, and will probably continue to
experience, extreme price and volume fluctuations that have affected the market
price of the shares of many small capital companies. These fluctuations have
often been unrelated to the operating results of such companies. Factors that
may affect the volatility of our stock price include the following:

o     our success, or lack of success, in developing and marketing our products
      and services;

o     the announcement of new products, services, or technological innovations
      by us or our competitors;

o     quarterly fluctuations of our operating results;


                                       30
<PAGE>

o     changes in revenue or earning estimates by the investment community; and

o     competition.

In addition, broad market fluctuations, as well as general economic and
political conditions, may decrease the market price of our common stock in any
market that develops. Based on the factors described above, recent trends should
not be considered reliable indicators of our future stock prices or financial
results. Additionally, there is a limited market for our common stock on the
Pink Sheets and we cannot assure you that such a market will continue to develop
or be maintained.

You should not expect the payment of dividends by us.

We do not expect to pay dividends on our common stock in the foreseeable future.
Although in May 2005 our management declared and paid a dividend of $0.005 on
our common stock, future dividends, if any, will depend upon our earnings.
Investors who require cash dividends from their investments should not purchase
our common stock.

You may experience significant dilution.

We anticipate that we will need to raise significant capital to fund our
business. In addition, we anticipate that we may issue a significant number of
shares or the rights to acquire shares as a part of our strategy. In either
event, current shareholders may experience significant dilution and our earnings
per share may decrease.

Fluctuations in our quarterly operating results may cause our stock price to
decline and limit our shareholders' ability to sell our common stock in the
public markets.

Our operating results and the operating results of businesses that we may
acquire in the future may fluctuate significantly due to a variety of factors,
many of which are outside of our control. Our operating results may in some
future quarter fall below the expectations of securities analysts and investors.
In this event, the trading price of our common stock could decline
significantly. In addition to the risks disclosed elsewhere in this Report,
factors outside of our control, which may cause our quarterly operating results
to fluctuate may include:

o     fluctuations in the general economic condition;

o     demand for our products;

o     fluctuation in the capital budgets of our customers; and

o     development of superior products and services by our competitors.

In addition, factors within our control, such as our ability to deliver
equipment in a timely fashion, may cause our operating results to fluctuate in
the future.

The factors listed above may affect both our quarter-to-quarter operating
results as well as our long-term success. Given the potential fluctuation in our
operating results, you should not rely on quarter-to-quarter comparisons of our
results of operations as an indication of our future performance or to determine
any trend in our performance. Fluctuations in our quarterly operating results
could cause the market price and demand for our common stock to fluctuate
substantially, which may limit your ability to sell our common stock on the
public markets.

If persons engage in short sales of our common stock, including sales of shares
to be issued upon exercise of warrants and options, the price of our common
stock may decline.

Selling short is a technique used by a stockholder to take advantage of an
anticipated decline in the price of a security. A significant number of short
sales or a large volume of other sales within a relatively short period of time
can create downward pressure on the market price of a security. Further sales of
common stock issued upon exercise of our warrants and options could cause even
greater declines in the price of our common stock due to the number of
additional shares available in the market, which could encourage short sales
that could further undermine the value of our common stock. You could,
therefore, experience a decline in the value of your investment as a result of
short sales of our common stock.


                                       31
<PAGE>

Our common stock is subject to penny stock regulation, which may affect its
liquidity.

Our common stock is subject to regulations of the Securities and Exchange
Commission (the "Commission") relating to the market for penny stocks. A Penny
Stock, as defined by the Penny Stock Reform Act, is any equity security not
traded on a national securities exchange or quoted on the NASDAQ National or
Small Cap Market that has a market price of less than $5.00 per share. The penny
stock regulations generally require that a disclosure schedule explaining the
penny stock market and the risks associated therewith be delivered to purchasers
of penny stocks and impose various sales price requirements on broker-dealers
who sell penny stocks to persons other than established customers and accredited
investors. The broker-dealer must make a suitable determination for each
purchaser and receive the purchaser's written agreement prior to the sale. In
addition, the broker-dealer must make certain mandated disclosures, including
the actual sale or purchase price and actual bid offer quotations, as well as
the compensation to be received by the broker-dealer and certain associated
persons. The regulations applicable to penny stocks may severely affect the
market liquidity for our common stock and could limit your ability to sell your
securities in the secondary market.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive and
Financial Officers, the effectiveness of our disclosure controls and procedures
as of the end of the period covered by the Annual Report on Form 10-KSB,
September 30, 2005 and by this Quarterly Report on Form 10-QSB,December 31,
2005. Based on these evaluations, our Chief Executive and Financial Officers
have concluded that our disclosure controls and procedures (as defined in Rules
13a - 15 (e) and 15d-15 (e) under the Securities Exchange Act of 1934 (the
Exchange Act) are ineffective to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms. We are developing a plan to ensure that all information
will be recorded, processed, summarized and reported on a timely basis. This
plan is dependent, in part, upon reallocation of responsibilities among various
personnel, possibly hiring additional personnel and additional funding. It
should also be noted that the design of any system of controls is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions, regardless of how remote.

Internal Control Over Financial Reporting

In addition, our management evaluated, with the participation of our Chief
Executive and Financial Officers, the effectiveness of our internal control over
financial reporting as of the end of the period covered by the Annual Report on
Form 10-KSB, September 30, 2005 and by this Quarterly Report on Form
10-QSB,December 31, 2005. Based on this assessment, our management concluded
that our internal control over financial reporting was not effective as of
September 30, 2005 and December 31, 2005 due to the existence of material
weaknesses as of those dates. A material weakness is a control deficiency, or a
combination of control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. Based upon this assessment,
management determined we had the following material financial reporting and
control weaknesses: insufficient monitoring controls to determine the adequacy
of our internal control over financial reporting and related policies and
procedures; lack of competent financial management personnel with appropriate
accounting knowledge and training; insufficient controls over our period-end
financial close and reporting processes; ineffective controls over inventory and
related cost of sales accounts; ineffective controls over the accounting for
acquisition, valuation and disclosure of the goodwill and intangible asset
accounts and the related amortization and impairment expense accounts;
ineffective controls over the accounting for income taxes, including income
taxes payable, deferred income tax assets and liabilities and the related income
tax provision; insufficient controls over our record retention policies;
ineffective controls over the completeness and accuracy of revenue and sales cut
off; and ineffective controls over reporting and segregation of intercompany
transactions.


                                       32
<PAGE>

We are developing a plan to ensure that all information will be recorded,
processed, summarized and reported on a timely basis, and we have taken the
following steps to address the above-referenced material weaknesses in our
internal control over financial reporting:

1.    we have engaged independent tax consultants to manage all tax matters on
      our behalf;

2.    we have engaged valuation experts who not only valued the acquisitions of
      our wholly-owned subsidiaries referenced elsewhere in this Report, but
      will value any future acquisitions on our behalf;

3.    we have reviewed and are currently planning to purchase a new accounting
      system that will be used by all our wholly-owned subsidiaries;

4.    we have commenced efforts to locate and retain a new Chief Financial
      Officer who is more familiar and conversant with SEC reporting issues; and

5.    we have adopted new period end close and reporting procedures.

The remainder of the plan is dependent, in part, upon hiring additional
accounting personnel, increased management oversight of accounting and reporting
functions, re-design of accounting systems, reallocation of responsibilities
among various personnel, possibly hiring additional personnel and additional
funding. It should also be noted that the design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how remote.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time we are involved in legal proceedings relating to claims
arising out of operations in the normal course of business, as well as claims
arising from our status as an issuer of securities and/or publicly reporting
company. Below is a brief summary of our existing, pending and known threatened
litigation as of the date of this report:

      o     In April 2005, the SEC instituted proceedings pursuant to Section 12
            (J) of the Securities Exchange Act of 1934 (the "1934 Act") and
            cease and desist proceedings have been instituted pursuant to
            Section 21 (C) of the 1934 Act against our President, Chief
            Executive Officer and Director, Larry A. Consalvi. The SEC seeks to
            suspend the registration of our securities for a period not
            exceeding 12 months or revoke the registration of our securities
            pursuant to section 12 of the 1934 Act, and to cause us and Mr.
            Consalvi to cease and desist from committing any violation of
            Section 13 (A) OF Rules 13a-1 and 13a-13 of the 1934 Act in the
            future. This Administrative Proceeding, file No. 3-11894, arose from
            our failure to comply with our reporting obligations while our
            securities were registered with the SEC in that we failed to file
            our annual reports on Form 10-K for our fiscal years ended September
            30, 2004 and 2003, and four quarterly reports on Form 10-Q for the
            quarters ended March 31, 2003, June 20, 2003, December 31,2003, and
            March 31, 2004, and that Mr. Consalvi, during his tenure as our
            President, caused us to violate these reporting requirements. On
            August 18, 2005, the Administrative Law Judge issued an Initial
            Decision and ordered the revocation of each class of our securities
            pursuant to Section 12 (j) of the Securities Exchange Act of 1934
            (the "Exchange Act"). It was further ordered that our Chief
            Executive Officer, President and Director, Larry A. Consalvi, cease
            and desist from committing any violation or future violations of
            Section 13 (a) of the Exchange Act and Rules 13a-1 and 13a-13. On
            September 7, 2005, we filed a petition with the Commission for a
            review of the Initial Decision, and on September 12, 2005, the
            Commission granted our petition with the Commission for a review of
            the Initial Decision, and on September 12, 2005, the Commission
            granted our petition for review pursuant to Rule 411 of the
            Commission's Rules of Practice. We now await the final decision of
            the Commission.

      o     On January 4, 2005, a complaint was filed against our wholly-owned
            subsidiary, Elite Machine Tool Company, Inc., in the matter entitled
            "BTL Machine v. Elite Machine Tool Company, Inc." The complaint was
            filed in Case No. 05CC01842 in the Superior Court of California,
            County of Orange, and alleges causes of action for breach of
            contract and implied warranty related to BTL Machine's claim that it
            received defective products from Elite Machine. BTL Machine seeks to
            recover approximately $64,000 in damages. The management of Elite
            Machine has denied any such liability for defective products and
            intends to vigorously defend the action. Elite machine has filed a
            cross-complaint against BTL Machine seeking to recover approximately
            $5,000 in past due accounts receivable. The parties are currently
            under discussions to settle this matter and, as such, our counsel
            has advised us that it is premature to attempt to estimate any
            potential outcome or loss at this time.


                                       33
<PAGE>

      o     On December 8, 2004, a complaint was filed against us and some of
            our principals by the Duffy Law Firm in the matter entitled "The
            Duffy Law Firm vs. Gledhill, et al." The complaint was filed in Case
            No. 04CC11981 in the Superior Court of California, County of Orange,
            and alleges causes of action for breach of contract, open book
            account, quantum meruit, and declaratory relief related to the
            plaintiff's claim for unpaid legal services. We have settled this
            matter with the plaintiff and have agreed to make six monthly
            payments to plaintiff in the amount of $10,000 per month. Any such
            liability has been reflected in our Condensed Consolidated Financial
            Statements for the period ended December 31, 2005.

      o     On June 28, 2002, we received a letter from the SEC requesting that
            we produce documents related to our efforts to become a
            NASDAQ-listed company, including press releases, mergers and/or
            acquisition documents, and agreement and/or arrangements with third
            parties to promote our stock. Subsequently, on February 5, 2003, the
            SEC issued an Order Directing Private Investigation and Designating
            Officers to Take Testimony to investigate, among other things, our
            connection to the unsolicited emails, whether persons had acquired
            more than 5% of our common stock without filing a Schedule 13D,
            whether officers, directors, and holders of more than 10% of our
            common stock had failed to report the sale or purchase of our
            securities with the SEC on Forms 3, 4 and /or 5, and our failure to
            file annual reports certified by an independent accountant and to
            state further material information in such reports. We were
            prevented from meeting our periodic reporting obligations because
            Bechler Cams, Inc. refused to turn over necessary financial
            information to us and our auditors to timely complete the audits so
            that all required financial information could be included in these
            periodic reports.

            As a result, on October 16, 2003 we were advised by the Central
            Regional Office of the SEC that it intended to recommend that the
            SEC institute enforcement proceedings against us, and our President,
            Larry A. Consalvi in connection with our inability to file timely
            quarterly reports for the periods ended March 31, 2003 and June 30,
            2003 and our annual report for the fiscal year ended September 30,
            2003. In addition, the Central Regional Office of the SEC
            recommended the institution of enforcement proceedings against us
            for alleged antifraud violations based on false and misleading
            statements contained in our Current Report on Form 8-K, filed
            October 18, 2001 and information statements filed on or about
            January 10, 2002, January 23, 2002, and January 25, 2002, which were
            signed by our former president, Joe Thomas relating to Mr. Thomas'
            ownership of our stock and his compliance with certain reporting
            requirements and for failing to disclose payments made by an officer
            of E.M. Tool Company to us in connection with a reverse merger. Upon
            recommendation by the Central Regional Office of the SEC, the SEC
            subsequently issued an Order Instituting Proceedings, Making
            Findings, and Imposing a Cease-And-Desist Order Pursuant to Section
            21C of the Securities Exchange Act of 1934 ("Exchange Act") and
            Revoking Registration of Securities Pursuant to Section 12 (j) of
            the Exchange Act (the "Order Instituting Proceedings"). In the Order
            Instituting Proceedings, the SEC found that we failed to comply with
            our reporting obligations while our securities were registered with
            the SEC in that we failed to file our annual report on Form 10-KSB
            for the fiscal year ended September 30, 2003, and four quarterly
            reports on Form 10-QSB for the quarters ended March 31, 2003, June
            30, 2003, December 31, 2003, and March 31, 2004, and that Mr.
            Consalvi, during his tenure as our President, caused us to violate
            these reporting requirements. In anticipation of the Order
            Instituting Proceedings, we submitted an Offer of Settlement of
            Gateway International Holdings, Inc. and Larry A. Consalvi (the
            "Settlement Offer"), in which we consented to an entry of an Order
            by the SEC which revoked the registration of our securities and Mr.
            Consalvi consented to a cease-and-desist order requiring that he
            refrain from any future violations of Section 13(a) of the Exchange
            Act and Rules 13 a F and 13a-13 thereunder. We and Mr. Consalvi have
            subsequently withdrawn our consent following a determination to
            bring us back into reporting compliance.

      o     We have retained counsel to represent our subsidiary, Elite Machine,
            and commenced an action against Viking Products, Inc. ("Viking").
            The dispute arose as a result of Elite Machine's purchase of three
            Kitamura machines from Viking on September 20, 2005, which Elite
            Machine later discovered had latent defects. These defects were not
            disclosed by Viking prior to the parties' entry into a purchase
            agreement. In addition, Elite Machine agreed to take possession of
            another machine from Viking and attempted to sell the machine on
            consignment. This machine, likewise, had undisclosed, latent defects
            which, in the opinion of Elite Machine's management, rendered the
            machine worthless. However, at the time Elite Machine took
            possession of the machine, the anticipated value was estimated to be
            $5,000. Accordingly, there is a possibility that Viking will
            cross-complain against Elite Machine for the $5,000 deemed value of
            the machine. Accordingly, we estimate the maximum potential
            liability to Elite machine to be limited to $5,000. As of the filing
            of this report on Form 10-QSB, no complaint for damages has yet been
            filed.


                                       34
<PAGE>

      o     We have retained counsel to represent our subsidiary, Nu-Tech, and
            commence an action for the collection of outstanding receivables of
            approximately $75,000 due to Nu-Tech from MC2 Custom Alloys, Inc.
            ("MC2"). We have reserved this amount as a doubtful debt on our
            Financial Statements. We are not aware of any possible counterclaims
            against Nu-Tech by MC2. As of the filing date of this report on Form
            10-QSB, no complaint for damages has yet been filed.

      o     On August 8, 2005, we filed a complaint against one of our vendors
            in the matter entitled Gateway International Holdings, Inc. d.b.a.
            Elite Machine Tool Company v. Hunt Enterprises. The complaint was
            filed in Case No. 05CC09063 in the Superior Court of California,
            County of Orange, and alleges causes of action for breach of
            contract and common counts. The dispute arose as a result of
            defendant's failure to deliver equipment that we purchased pursuant
            to a contract and for which we paid $20,000 in full payment of such
            equipment. Although we anticipate a favorable ruling, this matter is
            currently in the discovery phase and, as such, our counsel has
            advised us that it is premature to attempt to estimate any potential
            outcome at this time.

      o     On August 12, 2005, a complaint was filed against our Company, in
            the matter entitled Mouton v. Gateway International holdings, Inc.
            by our former Chief Financial Officer. The complaint was filed in
            Case No. 05CC09234 in the Superior Court of California, County of
            Orange, and alleges causes of action for declaratory relief,
            conversion, claim and deliver, and constructive trust, and seeks an
            order requiring that we replace 600,000 restricted shares of our
            common stock that was issued to the plaintiff, but subsequently
            cancelled by us with 600,000 unrestricted shares of our common
            stock. We have filed a cross-complaint alleging causes of action for
            breach of written contract, violation of Labor Code ss.2865,
            declaratory relief, injunctive relief, misrepresentation, and breach
            of duty of loyalty. The plaintiff served as our Chief Financial
            Officer from December 2001 until his resignation in August 2002.
            Previous to this, the plaintiff had been employed by the Company
            since 1988. This matter is currently in the discovery phase and, as
            such, our counsel has advised us that it is premature to attempt to
            estimate any potential outcome at this time.

      o     On October 11, 2005, a complaint was filed against our Company in
            the matter entitled Carmichael v. Integrity Stock Transfer, et al.
            The complaint was filed in the Second Judicial District of the Court
            of Nevada as Case No CV05-023065 and alleges various causes of
            action including breach of contract, breach of fiduciary duties,
            misrepresentation, and interference with contract, deceptive trade
            practices, and violations of the federal RICO statutes. The
            complaint alleges that the Company, our president and our stock
            transfer agent wrongfully refused to register stock that the
            plaintiff contends he owns. The complaint seeks unspecified
            compensatory and punitive damages in an amount exceeding $10,000. On
            November 8, 2005, we removed the case to the United States District
            Court for the District of Nevada. We and our president believe that
            the complaint is without merit and we intend to vigorously defend
            against this action. No assessment can be made of the likelihood of
            any particular outcome in this case, which is still in its early
            stages.


                                       35
<PAGE>

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

Item 8.01 Other Events

(b) Item 401(g) of Regulation S-B

During our fiscal quarter covered by this Quarterly Report on Form 10-QSB, there
have not been any material changes to the procedures by which our security
holders may recommend nominees to our Board of Directors.

ITEM 6. OTHER EXHIBITS

Exhibit
Number                                 Description
-------                                -----------

2.1(5)      Agreement and Plan of Reorganization dated December 11, 2001, by and
            between Gourmet Gifts, Inc., E.M. Tool Company, Inc. and the
            shareholders of E.M. Tool Company, Inc.

2.2(6)      Agreement and Plan of Reorganization dated March 31, 2002 by and
            between Gateway International Holdings, Inc., GWIH Acquisition
            Corp., Bechler Cams, Inc. and the shareholders of Bechler Cams, Inc.

2.3(8)      Agreement and Plan of Reorganization dated April 26, 2002 by and
            between Gateway International Holdings, Inc., GWIH Acquisition
            Corp., Nelson Engineering, Inc. and the shareholders of Nelson
            Engineering, Inc.

2.4(8)      First Amendment to the Agreement and Plan of Reorganization dated
            October 4, 2002 by and between Gateway International Holdings, Inc.,
            GWIH Acquisition Corp., Nelson Engineering, Inc. and the
            shareholders of Nelson Engineering, Inc.

2.5(8)      First Amendment to the Agreement and Plan of Reorganization dated
            October 4, 2002 by and between Gateway International Holdings, Inc.,
            GWIH Acquisition Corp., Bechler Cams, Inc. and the shareholders of
            Bechler Cams, Inc.

2.6(10)     Agreement for Purchase and Sale and Escrow Instructions between
            Gateway International Holdings, Inc. and R&H Investments dated June
            30, 2003.

2.7(10)     Stock Purchase Agreement between Gateway International Holdings,
            Inc. and Hans B. Thallmayer and Alice Thallmayer dated June 17,
            2003.

3.1(1)(2)   Articles of Incorporation of Gourmet Gifts, Inc., a Nevada
            corporation, filed on September 24, 1997.


                                       36
<PAGE>

3.2(1)(2)   Bylaws of Gourmet Gifts, Inc., a Nevada corporation.

3.3(11)     Amended Articles of Incorporation of Gourmet Gifts, Inc.

4.1(1)(2)   Specimen Common Stock Certificate.

10.1(3)     Promissory Note dated August 10, 2000 between Gourmet Gifts, Inc.
            and Kim Farran.

10.2(4)     Promissory Note dated December 11, 2000 between Gourmet Gifts, Inc.
            and Stanley K. Stilwell.

10.3(11)    Lease dated July 1, 2002 between IPERS Brea/Golden State Business
            Parks, Inc. and Nu-Tech Industrial Sales, Inc.

10.4(11)    Promissory Note dated January 1, 2003 issued by Gateway
            International Holdings, Inc. to Joseph T.W. Gledhill

10.5(11)    Mutual Rescission of Contracts and Releases of Claims dated May 15,
            2003 by and among Gateway International Holdings, Inc., E.M. Tool
            Company, Inc. (doing business as Elite Machine Tool Company, Inc.),
            Lawrence Consalvi, Joseph T.W. Gledhill, Nelson Engineering, Inc.,
            Don Nelson and Rich Lund

10.6(11)    Promissory Note dated June 30, 2003 issued by Financial Federal
            Credit, Inc. to Gateway International Holdings, Inc. and E.M. Tool
            Company, Inc.

10.7(11)    Promissory Note dated September 1, 2003 issued by Gateway
            International Holdings, Inc. to Joseph T.W. Gledhill

10.8(11)    Mutual Rescission of Contracts, Settlement Agreement and Release of
            Claims dated November 20, 2003 by and among Gateway International
            Holdings, Inc., E.M. Tool Company, Inc., Lawrence Consalvi and
            Joseph T.W. Gledhill, Bechler Cams, Inc., Daniel Lennert and Laura
            Stearman

10.9(11)    Promissory Note dated January 1, 2004 issued by Gateway
            International Holdings, Inc. to Joseph T.W. Gledhill

10.10(11)   Letter Agreement dated April 8, 2004 between Gateway International
            Holdings, Inc. and Nelson Engineering, Inc.

10.11(11)   Standard Industrial/Commercial Multi-Tenant Lease dated August 20,
            2004 between Lawrence A. Consalvi individually doing business as
            Elite Machine Tool Company and SG&H Partners L.P.

10.12(11)   Addendum to Standard Industrial/Commercial Multi-Tenant Lease dated
            August 20, 2004 between Elite Machine Tool Company and SG&H Partners
            L.P.

10.13(11)   Share Exchange Agreement dated September 28, 2004 between Gateway
            International Holdings, Inc., All American CNC Sales, Inc. and the
            shareholders of All American CNC Sales, Inc.

10.14(11)   Employment Agreement dated September 28, 2004 between All American
            CNC Sales, Inc. and Tim Consalvi

10.15(11)   Share Exchange Agreement dated December 7, 2004 between Gateway
            International Holdings, Inc., Gledhill/Lyons, Inc. (doing business
            as Accurate Technologies) and the shareholders of Accurate
            Technologies.

10.16(11)   Employment Agreement dated December 7, 2004 between Gledhill/Lyons,
            Inc., d/b/a Accurate Technologies, Inc. and David Lyons.

10.17(11)   Employment Agreement dated December 7, 2004 between Gledhill/Lyons,
            Inc., d/b/a Accurate Technologies, Inc. and William Gledhill


                                       37
<PAGE>

10.18(11)   Share Exchange Agreement dated December 23, 2004 between Gateway
            International Holdings, Inc., ESK, Inc., and the shareholders of
            ESK, Inc.

10.19(11)   Share Exchange Agreement effective January 31, 2005 between Gateway
            International Holdings, Inc., Spacecraft Machine Products, Inc.,
            Lloyd R. Leavitt, III and the Leavitt Family Trust

10.20(11)   Secured Promissory Note effective January 31, 2005 issued by Gateway
            International Holdings, Inc. to the Leavitt Family Trust

10.21(11)   Employment Agreement effective January 31, 2005 between Spacecraft
            Machine Products, Inc. and Lloyd R. Leavitt

10.22(11)   Stock Pledge Agreement effective January 31, 2005 between Gateway
            International Holdings, Inc. and Lloyd R. Leavitt

10.23(11)   Share Exchange Agreement dated March 31, 2005 between Gateway
            International Holdings, Inc., Nu-Tech Industrial Sales, Inc. and the
            shareholders of Nu-Tech Industrial Sales, Inc.

10.24(11)   Promissory Note dated October 1, 2002 issued by Gateway
            International Holdings, Inc. to Elite Machine Tool Company, Inc.

10.25(11)   Promissory Note dated September 5, 2002 issued by Financial Federal
            Credit, Inc. to Larry A. Consalvi, d/b/a/ Elite Machine Tool
            Company, Inc. and E.M. Tool Company, Inc.

14.1(11)    Code of Ethics for Gateway International Holdings, Inc.

16.1(3)     Letter of Albright, Persing & Associates, Ltd. dated January 9,
            2001.

16.2(5)     Letter of David E. Coffey, CPA, dated February 3, 2001.

16.3(11)    Letter of Squar Milner Reehl and Williamson, LLP dated June 14,
            2005.

31.1*       Certification of Chief Executive Officer Pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.

31.2*       Certification of Chief Financial Officer Pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.

32.1*       Certification of Chief Executive Officer Pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002.

32.2*       Certification of Chief Financial Officer Pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002.

99.1(7)     Certification of Chief Executive Officer and Chief Financial Officer
            Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
            906 of the Sarbanes-Oxley Act of 2002.

99.2(9)     Unaudited Pro Forma Combined Balance Sheet for Gateway as of
            September 30, 2002.

99.3(9)     Financial Statements for Nelson Engineering, Inc. as of September
            30, 2002.

99.4(9)     Financial Statements for Bechler Cams, Inc. as of September 30,
            2002.

99.5*       Press release dated November 8, 2004 regarding the unaudited
            financial results for 2004.


                                       38
<PAGE>

            *     Filed herewith.

            (1)   Filed on May 10, 1999 as an exhibit to Gateway's registration
                  statement on Form 10-SB and incorporated herein by reference.

            (2)   File on June 8, 1999 as an exhibit to Gateway's amended
                  registration statement on Form 10-SB and incorporated herein
                  by reference.

            (3)   Filed on January 12, 2001 as an exhibit to Gateway's annual
                  report on Form 10-KSB for the fiscal year ended September 30,
                  2000 and incorporated herein by reference.

            (4)   Filed on February 14, 2001 as an exhibit to Gateway's
                  quarterly report on Form 10-QSB for the fiscal quarter ended
                  December 31, 2000 and incorporated herein by reference.

            (5)   Filed on February 7, 2002 as an exhibit to Gateway's report on
                  Form 8-K dated February 5, 2002 and incorporated herein by
                  reference.

            (6)   Filed on May 20, 2002 as an exhibit to Gateway's quarterly
                  report on Form 10-QSB for the fiscal quarter ended March 31,
                  2002 and incorporated herein by reference.

            (7)   Filed on August 19, 2002 as an exhibit to Gateway's quarterly
                  report on Form 10-QSB for the fiscal quarter ended June 30,
                  2002 and incorporated herein by reference.

            (8)   Filed on November 7, 2002 as an exhibit to Gateway's report on
                  Form 8-K dated October 23, 2002 and incorporated herein by
                  reference.

            (9)   Filed on January 13, 2003 as an exhibit to Gateway's amended
                  report on Form 8-K dated October 23, 2002 and incorporated
                  herein by reference.

            (10)  Filed on August 8, 2003 as an exhibit to Gateway's report on
                  Form 8-K dated July 24, 2003 and incorporated herein by
                  reference.

            (11)  Filed on June 16, 2005 as an exhibit to Gateway's annual
                  report on Form 10-KSB for the fiscal year ended September 30,
                  2003 and for the fiscal year ended September 30, 2004 and
                  incorporated herein by reference.


                                       39
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

GATEWAY INTERNATIONAL HOLDINGS, INC.


By:  /s/ Lawrence A. Consalvi
     -----------------------------------
     Lawrence A. Consalvi
     President, Chief Executive Officer and Director
     Date:  May 22, 2006

In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.


By:  /s/ Lawrence A. Consalvi
     -----------------------------------
     Lawrence A. Consalvi
     President, Chief Executive Officer and Director
     Director
     Date:  May 22, 2006


By:  /s/Jitu Banker
     -----------------------------------
    Jitu Banker
    Chief Financial Officer and Secretary
    Date:  May 22, 2006


By:  /s/ Lloyd R. Leavitt, III
     -----------------------------------
     Lloyd R. Leavitt, III
     Chief Operating Officer and Director
     Date:  May 22, 2006


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