SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
              ____________________________________________________

                                   FORM 10-KSB
(Mark One)

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004.

[_]     TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM

                          COMMISSION FILE NO. 000-27879

                           GATEWAY DISTRIBUTORS, LTD.
               (Exact name of issuer as specified in its charter)


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

3220 PEPPER LANE, SUITE 14, LAS VEGAS, NEVADA                         89120
  (Address of principal executive offices)                         (Zip Code)

       Registrant's telephone number, including area code:  (702) 317-2400

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
                                                               (Title of class)

     Indicate  by  check  mark  whether the registrant (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  twelve  months  (or  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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this  Form  10-KSB.

     State  issuer's  revenues  for  its  most  recent  fiscal year: $1,153,893.
     State the aggregate market value of the voting and non-voting common equity
held  by  non-affiliates  computed by reference to the price at which the common
equity  was last sold, or the average bid and asked price of such common equity,
as  of  March  29  ,  2005:  $ 239,000

     Indicate  the  number  of  shares  outstanding  of each of the registrant's
classes  of  common  stock  as  of  March  29,  2005:  30,980,590

     Documents  incorporated  by  reference:  None.

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


<PAGE>
                                TABLE OF CONTENTS
Item 1.     Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2.     Description of Property.. . . . . . . . . . . . . . . . . . . . .10
Item 3.     Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . . .10
Item 4.     Submission of Matters to a Vote of Security Holders.. . . . . . .13
Item 5.     Market for Common Equity and Related Stockholder Matters.. . . . 14
Item 6.     Management's Discussion and Analysis or Plan of Operation.. . . .17
Item 7.     Financial Statements.. . . . . . . . . . . . . . . . . . . . .  .30
Item 8.     Changes in and Disagreements With Accountants on Accounting and
            Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . .31
Item 8A.    Controls and Procedures. . . . . . . . . . . . . . . . . . . . . 31
Item 8B     Other Information. . . . . . . . . . . . . . . . . . . . . . . . 32
Item 9.     Directors, Executive Officers, Promoters and Control Persons;
            Compliance With Section 16(a) of the Exchange Act. . . . . . . . 32
Item 10.    Executive Compensation. . . . . . . . . . . . . . . . . . . . . .33
Item 11.    Security Ownership of Certain Beneficial Owners and Management and
            Related Stockholder Matters. . . . . . . . . . . . . . . . . . . 34
Item 12.    Certain Relationships and Related Transactions. . . . . . . . . .36
Item 13.    Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Item 14.    Principal Accountant Fees and Services. . . . . . . . . . . . . .37


<PAGE>
                                     PART I

ITEM 1.     BUSINESS.

COMPANY OVERVIEW

     We were originally incorporated in the State of Nevada on May 26, 1993.  We
market  and  distribute  different  nutritional  and/or  health  products.  The
products,  which  we sell are intended to provide nutritional supplementation to
the users; the products are not intended to diagnose, treat, cure or prevent any
disease.

     On  August  15,  2002, we acquired all equity interest in Los Cabos Freedom
Movement,  a  Wisconsin  LLC,  d/b/a  Grandma  Hammans Specialty Foods ("Grandma
Hammans")  for  $217,500.  We formed a wholly owned subsidiary, Grandma Hamman's
Specialty  Foods  ("Grandma  Hammans")  on  July  3,  2003  to run the wholesale
operations  of  the  Company.

     We formed a wholly owned subsidiary, The Right Solution Gateway, on January
7, 2003 to house the assets of TRSG Corporation and to run the retail operations
of  the  Company.

     On  April  30,  2004,  we formed a wholly owned subsidiary, Gateway Venture
Holdings,  Inc.  ("GVH")  to  house  our  hard  assets.

     Also  on  April  30,  2004, we formed a wholly owned subsidiary, Aspen Cove
Resort  Incorporated to run the operations of Aspen Cove Resort (formerly Beaver
Dam  Lodge)  located  near Panguitch Utah. The lodge had been purchased on April
15,  2004  and  is  owned  by  GVH.

     On May 30, 2004, an agreement was signed with Quality Distribution Services
of Nevada to create a new corporation, Quality Distribution Services of Arizona,
Inc  ("QDS").  QDS  was incorporated in Nevada on June 7, 2004 and is 51 percent
owned  by  us.  QDS  is  a wholesale beverage distributor in the Phoenix Arizona
area.

     On  November  30,  2004,  we  formed  a  wholly  owned  subsidiary, Gateway
Corporate  Administration, Inc ("GCA") which has not been utilized at this time.

     In  December, 2004 we moved our corporate office and ware house location to
3220  Pepper  Lane,  Las  Vegas,  Nevada  89120.

     On  December 21, 2004 we entered an Asset Purchase Agreement to purchase 51
percent  of  Los  Cabos  Beverage  then  owned  by Blaine Wendtland.  51 percent
interest  in Los Cabos Beverage and its assets were acquired in exchange for all
rights  to  Grandma  Hamman's  GHF product and the debt of $193,833 owing to Los
Cabos  Freedom  Movement  LLC and Ed Wendtland were assumed by Blaine Wendtland.
On  December  30,  2004,  we  formed  a  51  percent owned subsidiary, Los Cabos
Beverage  Inc  ("LCB")  to  handle  the  operations of the sale of private label
water.

CURRENT BUSINESS PLAN

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

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


                                        1
<PAGE>
     As  part  of our investigation of potential merger candidates, our officers
and  directors will meet personally with management and key personnel, may visit
and  inspect material facilities, obtain independent analysis or verification of
certain  information  provided, check references of management and key personnel
and take other reasonable investigative measures, to the extent of our financial
resources  and  management  expertise.  The manner in which we participate in an
opportunity  will  depend on the nature of the opportunity, the respective needs
and  desires  of  us  and  other parties, the management of the opportunity, our
relative  negotiation  strength  and  that  of  the  other  management.

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

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

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

REVERSE SPLITS

     During  the twelve months ended December 31, 2003, we implemented a reverse
stock  split  on  the  basis  of  one post-split share for every 3,000 pre-split
shares.  During  the twelve months ended December 31, 2004, we implemented three
reverse  stock splits as follows: one split on the basis of one post-split share
for  every  900 pre-split shares, one split on the basis of one post-split share
for  every  1,00  pre-split shares, and one split on the basis of one post-split
share for every 1,000 pre-split shares.  In March 2005, we implemented a reverse
split stock on the basis of one post-split share for every 500 pre-split shares.

     All  share  and  per  share  amounts  presented in our financial statements
which  are  part  of  this  Annual  Report  on  Form  10-KSB  have been restated
retroactively  to  reflect  the  reverse  splits  as if they had occurred on the
first day of the first period presented, or January 1, 2003.  However, all share
and  per  share  amounts  have  not  been  restated retroactively to reflect the
reverse  splits  in  the narrative portion of this Annual Report on Form 10-KSB.
Consequently,  the  retroactive  restatement  may  cause  some  apparent
inconsistencies  between  the  narrative  portion  of this Annual Report on Form
10-KSB  and our other filings with the Securities and Exchange Commission on one
hand,  and  the financial statements and accompanying notes forming part of this
Annual  Report  on  Form  10-KSB  on  the  other  hand.

KEY  PERSONNEL

     Our  future financial success depends to a large degree upon the efforts of
Messrs.  Bailey  and  Ternes,  our  officers  and directors.  Messrs. Bailey and
Ternes  have  played  major  roles  in  developing  and  executing  our business
strategy.  The loss of Messrs. Bailey and Ternes could have an adverse effect on
our  business  and  our  chances  for profitable operations.  While we intend to
employ  additional  management  and marketing personnel in order to minimize the
critical  dependency upon any one person, there can be no assurance that we will
be  successful  in  attracting  and  retaining the persons needed.  If we do not
succeed  in  retaining  and  motivating our current employees


                                        2
<PAGE>
and  attracting  new  high  quality  employees,  our business could be adversely
affected.  We  do  not  maintain  key man life insurance on the lives of Messrs.
Bailey and Ternes.

BUSINESS

     Gateway's  principal  subsidiary  is  The Right Solution Gateway. The Right
Solution  Gateway,  is  a  network  marketing  company  that  sells  whole  food
nutrition,  health  and  dietary  supplements  and skin care products throughout
North  America,  Russia,  Japan  and  Indonesia.  Gateway  believes that through
special  blends,  whole foods, such as grains and vegetables, can be combined to
help  produce  optimum  health.

     The  Right  Solution  Gateway's  products  are  marketed  through a network
marketing  system  within  the United States and wholesale personal import sales
outside  the  United  States.  Network  marketing  enables Gateway's independent
distributors in the United States to earn profits by selling Company products to
retail  consumers.  Distributors may also develop their own distributor downline
organizations  by sponsoring others to do business in any market where The Right
Solution  Gateway  operates,  entitling  the  sponsors  to  receive overrides or
commissions  (cash incentives, including royalties and bonuses) on product sales
within  their  downline  organizations.

     Management  believes that its network marketing system is ideally suited to
its  products,  which  emphasize  a  healthy  lifestyle,  because  sales of such
products  are  strengthened by ongoing personal contact between retail consumers
and  distributors,  most  of  whom  use  The  Right  Solution Gateway's products
themselves.  The  Right Solution Gateway's network marketing system appeals to a
broad  cross-section  of people throughout the world, particularly those seeking
to  supplement  family income, start a home-based business, or pursue employment
opportunities  other  than  conventional,  full-time  employment.

     Gateway  has  several  other  subsidiaries  with  the intention of having a
diversified  base  to  allow  revenue  from  a multitude of sources which should
enhance  Gateway's  ability  to  benefit  from  several  types  of  resources.

     Grandma  Hammans  sells  wholesale  nutritional  products,  Gateway Venture
Holdings,  Inc.  houses  most of the hard assets, Aspen Cove Resort Incorporated
operates  a  rural  lodge  providing  accommodations  for  sleeping, eating, and
fishing,  Quality  Distribution  Services  of  Arizona,  Inc.  is  a  beverage
distributor  and  Los  Cabos  Beverage,  Inc.  distributes  private label water.

OUR  FINANCIAL  RESULTS  MAY  BE  AFFECTED  BY  FACTORS  OUTSIDE  OF OUR CONTROL

     Our future operating results may vary significantly from quarter to quarter
due  to  a  variety  of  factors,  many  of  which are outside our control.  Our
anticipated  expense  levels  are  based,  in  part,  on our estimates of future
revenues and may vary from our projections.  We may be unable to adjust spending
rapidly  enough  to  compensate  for  any  unexpected  revenues  shortfall.
Accordingly,  any  significant  shortfall in revenues in relation to our planned
expenditures  would materially adversely affect our business, operating results,
and  financial  condition.

     We  cannot  predict  with  certainty  our  revenues  and operating results.
Further,  we  believe that period-to-period comparisons of our operating results
are  not  necessarily  a  meaningful  indication  of  future  performance.

CORPORATE OFFICES

     Our  executive  office  is  located  at 3220 Pepper Lane, Las Vegas, Nevada
89120.  The  telephone  number  to  call  for  information  is  (702)  317-2420.

CHANGES  IN  OUR  CAPITAL  STRUCTURE

     Effective  September 3, 2004, we implemented a 1-1,000 reverse split of our
authorized, issued and outstanding stock.  Effective October 4, 2004, we amended
our Articles of Incorporation to increase the number of our authorized preferred
shares  to  400,000,000  shares.


                                        3
<PAGE>
     Effective  on  June  28,  2004, we implemented a 1-900 reverse split of our
issued  and outstanding common stock.  Effective on June 28, 2004, we also filed
Articles of Amendment to our Articles of Incorporation increasing our authorized
common  shares  to 25,000,000,000 and our preferred shares to 200,000,000 shares
and  authorizing  our  board  of  directors

     On November 9, 2004, we filed a Certificate of Amendment to our Certificate
of  Designation  increasing the number of shares of our Series A Preferred Stock
from 200,000 shares to 100,000,000 shares.  The shares of our Series A Preferred
Stock  rank  senior to shares of our preferred and common shares.  Each share of
the  Series A Preferred Stock is entitled to 1,000 votes on any matter submitted
to  the holders of our common stock.  Each share of the Series A Preferred Stock
is  convertible  into  that number of common stock equal in fair market value to
$1.

     EFFECTIVE  DECEMBER  20, 2004, WE IMPLEMENTED A ONE FOR 1,000 REVERSE SPLIT
OF  OUR  ISSUED  AND OUTSTANDING  COMMON  STOCK.

     Effective  January  18,  2005,  we  designated  100,000,000  shares  of our
preferred  stock  as  the  Series B Preferred Stock.  Each share of the Series B
Preferred  Stock  is convertible into one share of the common stock.  The shares
of  the  Series  B  Preferred  Stock  do  not  have  voting  rights.

     Effective  March  28,  2005,  we  implemented  a 1-500 reverse split of our
issued  and  outstanding  common  stock.

EMPLOYEES

     We  have  14  full-time employees and three part-time employees as of March
28, 2005.  Our distributors, who are independent contractors, are not considered
to  be  our employees.  As we grow, we will need to attract an unknown number of
additional  qualified employees.  Although we have experienced no work stoppages
and  believe  our  relationships  with  our  employees  are  good,  we  could be
unsuccessful  in  attracting  and  retaining  the  persons  needed.  None of our
employees  are  currently  represented  by a labor union.  We expected to have a
ready  source  of  available  labor  to  support  our  growth.

     The  daughter  of  the  Chief  Executive  Officer  works  as  Marketing
Representative  (reassigned  in 2005 to non-managerial responsibilities) and the
son  of the Chief Operations Officer serves as Vice President of Operations with
additional  responsibilities  in  Information Technology.  Other children of the
officers  work  part  time  for  the  Company  in  non-managerial  positions.

MARKETS AND MARKETING

     The  Right  Solution Gateway's products are distributed primarily through a
network  marketing  system,  consisting of an extensive network of distributors.
Distributors  are  generally  independent  contractors  who  purchase  products
directly  from  The  Right  Solution  Gateway  for personal use or for resale to
consumers  within  the  United  States.  Distributors  may  elect  to  work on a
full-time  or  part-time  basis.  The  Right  Solution Gateway believes that its
network  marketing  system appeals to a broad cross-section of people worldwide,
particularly  those  seeking  to  supplement  family  income, start a home-based
business  or  pursue employment opportunities other than conventional, full-time
employment  and  that  a majority of its distributors work on a part-time basis.
The Right Solution Gateway believes that its network marketing system is ideally
suited  to  marketing  its  products  because  ongoing  personal contact between
consumers  and  distributors  strengthens  sales  of  such  products.

     Within  the  United States, distributors may earn profits by purchasing The
Right  Solution  Gateway's products at wholesale prices (which are discounted 40
percent  from  suggested retail prices) and selling The Right Solution Gateway's
products to customers at suggested retail prices.  All distributors, both inside
and  outside the United States, who sponsor new distributors and establish their
own downline organizations may earn commissions on product sales on their entire
downline.  There  is  no  limit  on  the  number of downline levels from which a
distributor  can  generate  commissions.


                                        4
<PAGE>
     To  become  a  distributor,  a  person  must  be  sponsored  by an existing
distributor, pay an annual fee (which is currently $15.00), and be placed into a
Tracking Center, which is a point from which The Right Solution Gateway "tracks"
the  sales  volume  of  the  distributor and the sales volume of a distributor's
downline organization. Each distributor has three legs in their organization and
commissions are based on volume requirements for these three legs. The strongest
performing  leg is the first leg, the second strongest is the second leg and all
other  legs  make  up  the  third  leg.  In  order to receive any commissions or
bonuses a distributor must make an initial purchase of $100 in personal purchase
volume.  To maintain qualification for any commissions or bonuses, a distributor
must  purchase  a minimum of $100 to $150 depending on total volume of The Right
Solution  Gateway's  products  every  month.  All  distributors  are  allowed to
participate  in  The  Right  Solution  Gateway's  growth  by  sponsoring  new
distributors.

     The  Right Solution Gateway computes the wholesale volumes purchased at the
close  of each business day during the month. Commissions are paid monthly based
on  the  qualifying  level.

     Additional  bonus  money  can be earned through the Right Start Program.  A
distributor  may  sign  up  for  an  "Autoship  Program"  which  helps  protect
distributors  from  losing  qualification  by  automatically  shipping  them  a
qualifying  order  monthly.  In  addition,  when  a distributor signs up for the
Autoship  Program,  the  distributor  becomes  qualified to receive a bonus (the
"Right  Start Bonus") for each new personally sponsored distributor.  The amount
of  the  Right  Start  Bonus  will  be 50 percent of the new distributor's first
order.

     The  Right  Solution Gateway maintains a computerized system for processing
distributor  orders  and  calculating distributor commission and bonus payments,
which  enables  it  to  remit  such  payments to distributors monthly. The Right
Solution  Gateway  believes  that  prompt  remittance  of commission is vital to
maintaining  a  motivated  network  of  distributors  and that its distributors'
loyalty  to  The  Right Solution Gateway has been enhanced by The Right Solution
Gateway's  history  of  consistently  making  commission and bonus payments on a
scheduled  basis.

     Internet.  The  Right  Solution  Gateway maintains a site on the World Wide
Web  at  "www.rightsolution.com."  The  Right  Solution Gateway has enhanced the
system  to  allow  on-line  ordering  and  volume  checks  by  the distributors.

     Marketing.  Each distributor is responsible for sales of The Right Solution
Gateway's  product within his or her downline. The Right Solution Gateway relies
on  word  of  mouth and testimonials from previous or existing customers for its
primary  advertising.  The Right Solution Gateway has developed sales materials,
which  have  been professionally prepared by a graphic designer and reviewed for
DSA  and  regulatory  compliance.  These  sales  materials  include  product
descriptions.  Sponsoring.  The  Right Solution Gateway has established a system
for  the  sponsoring  of  new  distributors. The Right Solution Gateway prepares
communication  and  educational training materials for distributors to assist in
the  sponsoring  of new distributors. The Right Solution Gateway also engages in
weekly  conference  calls with distributors and sends newsletter email blasts to
its  distributors.  Gateway has an established advisory board for assistance and
consultation  in  connection  with  sponsoring  matters.

     Sponsoring.  The  Right  Solution  Gateway has established a system for the
sponsoring  of  new  distributors.  The  Right  Solution  Gateway  prepares
communication  and  educational training materials for distributors to assist in
the  sponsoring  of new distributors. The Right Solution Gateway also engages in
weekly  conference  calls with distributors and sends newsletter email blasts to
its  distributors.  The Right Solution Gateway has an established advisory board
for  assistance  and  consultation  in  connection  with  sponsoring  matters.

     Product  Distribution.  Gateway's  products  are distributed to all markets
from  Gateway's  warehouse  located  in  Las  Vegas,  Nevada.

RISK  FACTORS

NEED  FOR  ONGOING  FINANCING.

     We  will  need  additional  capital  to  continue  our  operations and will
endeavor  to  raise  funds  through  the sale of equity shares and revenues from
operations.


                                        5
<PAGE>
     There can be no assurance that we will generate revenues from operations or
obtain  sufficient  capital  on  acceptable terms, if at all.  Failure to obtain
such capital or generate such operating revenues would have an adverse impact on
our  financial  position  and results of operations and ability to continue as a
going  concern.  Our  operating  and capital requirements during the next fiscal
year  and thereafter will vary based on a number of factors, including the level
of  sales  and marketing activities for our services and products.  There can be
no  assurance  that  additional  private  or public financing, including debt or
equity  financing,  will  be  available  as  needed,  or, if available, on terms
favorable  to  us.  Any  additional  equity  financing  may  be  dilutive  to
stockholders  and such additional equity securities may have rights, preferences
or  privileges  that  are  senior  to  those  of  our  existing  common  stock.

     Furthermore, debt financing, if available, will require payment of interest
and  may  involve  restrictive  covenants  that  could impose limitations on our
operating  flexibility.  Our  failure  to  successfully obtain additional future
funding  may  jeopardize  our  ability  to continue our business and operations.

     If  we  raise  additional  funds  by  issuing  equity  securities, existing
stockholders  may  experience  a dilution in their ownership.  In addition, as a
condition to giving additional funds to us, future investors may demand, and may
be  granted,  rights  superior  to  those  of  existing  stockholders.

BUSINESS  CONCENTRATION.

     While  we consider our relationships with our customers to be satisfactory,
given  the  concentration  of  our  sales  to a few key customers, our continued
relationships may be subject to the policies and practices of the customers.  We
continue  to  concentrate our efforts on expanding our customer base in order to
reduce  our  reliance  on  our  current  customers.

INFLATION.

     In  our  opinion,  inflation has not had a material effect on our financial
condition  or  results  of  our  operations.

TRENDS,  RISKS  AND  UNCERTAINTIES.

     We have sought to identify what we believe to be the most significant risks
to  our  business, but we cannot predict whether, or to what extent, any of such
risks  may be realized nor can we guarantee that we have identified all possible
risks  that  might  arise.  Investors should carefully consider all of such risk
factors  before  making an investment decision with respect to our common stock.

CAUTIONARY  FACTORS  THAT  MAY  AFFECT  FUTURE  RESULTS.

     We  provide the following cautionary discussion of risks, uncertainties and
possible  inaccurate  assumptions  relevant  to  our  business and our products.
These  are  factors  that  we  think  could  cause  our actual results to differ
materially from expected results.  Other factors besides those listed here could
adversely  affect  us.

POTENTIAL  FLUCTUATIONS  IN  QUARTERLY  OPERATING  RESULTS.

     Our  quarterly  operating results may fluctuate significantly in the future
as  a  result  of  a  variety of factors, most of which are outside our control,
including the demand for our services, seasonal trends in purchasing, the amount
and  timing of capital expenditures; price competition or pricing changes in the
industry;  technical  difficulties  or  system  downtime;  general  economic
conditions,  and  economic  conditions  specific to our industry.  Our quarterly
results  may  also  be  significantly  impacted  by the impact of the accounting
treatment  of  acquisitions,  financing  transactions  or  other  matters.
Particularly  at  our early stage of development, occurrences such as accounting
treatment can have a material impact on the results for any quarter.  Due to the
foregoing  factors,  among  others, it is likely that our operating results will
fall  below  our  expectations  or  those  of  investors in some future quarter.

LACK  OF  INDEPENDENT  DIRECTORS.


                                        6
<PAGE>
     We  cannot  guarantee  that  our board of directors will have a majority of
independent  directors  in  the  future.  In  the  absence  of  a  majority  of
independent  directors,  our  executive  officers,  could establish policies and
enter  into  transactions without independent review and approval thereof.  This
could  present  the  potential  for  a  conflict  of interest between us and our
stockholders  generally and the controlling officers, stockholders or directors.

LIMITATION  OF  LIABILITY  AND  INDEMNIFICATION  OF  OFFICERS  AND  DIRECTORS.

     Our  officers  and  directors  are required to exercise good faith and high
integrity  in  our  management  affairs.  Our articles of incorporation provide,
however,  that  our  officers  and  directors  shall  have  no  liability to our
stockholders  for  losses sustained or liabilities incurred which arise from any
transaction in their respective managerial capacities unless they violated their
duty of loyalty, did not act in good faith, engaged in intentional misconduct or
knowingly  violated  the law, approved an improper dividend or stock repurchase,
or  derived  an  improper benefit from the transaction.  Our articles and bylaws
also provide for the indemnification by us of the officers and directors against
any losses or liabilities they may incur as a result of the manner in which they
operate  our  business  or  conduct  the  internal  affairs,  provided  that  in
connection  with  these  activities  they act in good faith and in a manner that
they  reasonably  believe  to  be in, or not opposed to, our best interests, and
their  conduct  does  not  constitute  gross negligence, misconduct or breach of
fiduciary  obligations.

MANAGEMENT  OF  POTENTIAL  GROWTH.

     We may experience rapid growth which will place a significant strain on our
managerial,  operational,  and  financial systems resources.  To accommodate our
current  size  and  manage growth, we must continue to implement and improve our
financial strength and our operational systems, and expand, train and manage our
sales  and  distribution  base.  There  is  no guarantee that we will be able to
effectively  manage  the  expansion  of  our operations, or that our facilities,
systems,  procedures  or  controls  will  be  adequate  to  support our expanded
operations.  Our  inability to effectively manage our future growth would have a
material  adverse  effect  on  us.

WE  PAY  NO  DIVIDENDS.

     We  have  never  declared nor paid cash dividends on our capital stock.  We
currently  intend  to retain any earnings for funding growth however these plans
may  change  depending  upon  capital  raising  requirements.

QUANTITATIVE  AND  QUALITATIVE  DISCLOSURE  ABOUT  MARKET  RISK.

     We  believe  that  we  do  not  have  any  material exposure to interest or
commodity  risks.  Our  financial  results  are quantified in U.S. dollars and a
majority  of our obligations and expenditures with respect to our operations are
incurred  in  U.S.  dollars.  Although  we  do not believe we currently have any
materially  significant  market  risks relating to our operations resulting from
foreign  exchange  rates,  if  we  enter  into  financing  or  other  business
arrangements  denominated in currency other than the U.S. dollars, variations in
the  exchange rate may give rise to foreign exchange gains or losses that may be
significant.

     We  currently  have  no material long-term debt obligations.  We do not use
financial  instruments  for  trading  purposes  and  we  are  not a party to any
leverage  derivatives.

RISKS  RELATING  TO  OUR  BUSINESS

WE  ARE NOT LIKELY TO SUCCEED UNLESS WE CAN OVERCOME THE MANY OBSTACLES WE FACE.

     As  an  investor,  you  should  be  aware  of  the difficulties, delays and
expenses  we  encounter,  many  of  which  are  beyond  our  control,  including
unanticipated  market trends, employment costs, and administrative expenses.  We
cannot  assure  our  investors  that our proposed business plans as described in
this  report  will materialize or prove successful, or that we will ever be able
to  finalize  development of our products or services or operate profitably.  If
we  cannot  operate  profitably,  you  could  lose your entire investment.  As a
result of the nature of our business, initially we expect to sustain substantial
operating  expenses  without  generating  significant  revenues.


                                        7
<PAGE>
OUR  AUDITORS  HAVE  STATED  WE  MAY  NOT  BE  ABLE  TO  STAY  IN  BUSINESS.

     Our auditors have issued a going concern opinion, which means that there is
doubt  that  we  can  continue  as  an  ongoing business for the next 12 months.
Unless  we  can  raise  additional  capital,  we  may not be able to achieve our
objectives  and  may  have  to  suspend  or cease operations.  See "Management's
Discussion  and  Analysis  of  Financial  Condition  and Results of Operations."

OUR  ACQUISITION  STRATEGY  INVOLVES  A  NUMBER  OF  RISKS.

     We  intend  to  pursue  growth  through  the  opportunistic  acquisition of
companies  or  assets that will enable us to expand our service lines to provide
more  cost-effective  customer  solutions.  We  routinely  review  potential
acquisitions.  This  strategy  involves certain risks, including difficulties in
the  integration  of  operations  and systems, the diversion of our management's
attention  from other business concerns, and the potential loss of key employees
of  acquired  companies.  We  may  not  be  able to successfully acquire, and/or
integrate  acquired  businesses  into  our  operations.

RISKS  RELATING  TO  OUR  STOCK

WE  MAY  NEED  TO RAISE ADDITIONAL CAPITAL.  IF WE ARE UNABLE TO RAISE NECESSARY
ADDITIONAL CAPITAL, OUR BUSINESS MAY FAIL OR OUR OPERATING RESULTS AND OUR STOCK
PRICE  MAY  BE  MATERIALLY  ADVERSELY  AFFECTED.

     Due  to  the  lack  of  revenue  and  expenses,  we need to secure adequate
funding.  If  we  are  unable  to obtain adequate funding, we may not be able to
successfully  develop and market our products and services and our business will
most  likely  fail.  We  do  not  have commitments for additional financing.  To
secure  additional  financing,  we  may  need  to  borrow  money  or  sell  more
securities,  which  may  reduce  the value of our outstanding securities.  Under
these  circumstances,  we  may  be  unable  to  secure  additional  financing on
favorable  terms  or  at  all.

     Selling  additional  stock,  either privately or publicly, would dilute the
equity  interests of our stockholders.  If we borrow more money, we will have to
pay interest and may also have to agree to restrictions that limit our operating
flexibility.  If  we  are  unable  to  obtain adequate financing, we may have to
curtail  business  operations  which  would  have  a material negative effect on
operating  results  and  most  likely  result  in  a  lower  stock  price.

OUR  COMMON  STOCK HAS EXPERIENCED IN THE PAST, AND IS EXPECTED TO EXPERIENCE IN
THE  FUTURE,  SIGNIFICANT  PRICE  AND  VOLUME  VOLATILITY,  WHICH  SUBSTANTIALLY
INCREASES  THE RISK THAT YOU MAY NOT BE ABLE TO SELL YOUR SHARES AT OR ABOVE THE
PRICE  THAT  YOU  PAY  FOR  THE  SHARES.

     Because  of the limited trading market for our common stock, and because of
the possible price volatility, you may not be able to sell your shares of common
stock when you desire to do so.  During 2003 and 2004, our common stock was sold
and  purchased at prices that ranged from a high of $0.2 to a low of $0.0001 per
share.  The  inability  to  sell  your  shares in a rapidly declining market may
substantially increase your risk of loss because of such illiquidity because the
price  for  our  common  stock  may  suffer  greater  declines  due to its price
volatility.

     The  price  of  our common stock that will prevail in the market after this
offering  may  be higher or lower than the price you pay.  Certain factors, some
of  which  are  beyond  our control, that may cause our share price to fluctuate
significantly  include,  but  are  not  limited  to,  the  following:

-     Variations  in  our  quarterly  operating  results;

-     The  development  of  a  market  in general for our products and services;

-     Changes  in  market  valuations  of  similar  companies;

-     Announcement  by  us  or  our  competitors  of  significant  contracts,
      acquisitions,  strategic  partnerships,  joint  ventures  or  capital
      commitments;


                                        8
<PAGE>
-     Loss  of a major customer or failure to complete significant transactions;

-     Additions  or  departures  of  key  personnel;  and

-     Fluctuations  in  stock  market  price  and  volume.

     Additionally,  in  recent  years  the  stock market in general, and the OTC
Bulletin  Board  and  technology  stocks in particular, have experienced extreme
price  and volume fluctuations.  In some cases, these fluctuations are unrelated
or  disproportionate  to  the  operating  performance of the underlying company.
These  market and industry factors may materially and adversely affect our stock
price,  regardless  of  our  operating  performance.

     Over  the past few months, there have been periods of significant increases
in  trading  volume  of our common stock during which the price of our stock has
both increased and decreased.  The historical trading of our common stock is not
necessarily  an  indicator  of  how  it will trade in the future and our trading
price  as  of  the  date  of  this  report does not necessarily portend what the
trading  price  of  our  common  stock  might  be  in  the  future.

     In  the  past,  class  action  litigation  has  often  been brought against
companies  following  periods  of  volatility  in the market price of the common
stock  of  those companies.  If we become involved in this type of litigation in
the  future,  it  could  result in substantial costs and diversion of management
attention  and  resources,  which  could  have a further negative effect on your
investment  in  our  stock.

OUR  DIRECTORS  HAVE  THE RIGHT TO AUTHORIZE THE ISSUANCE OF PREFERRED STOCK AND
ADDITIONAL  SHARES  OF  OUR  COMMON  STOCK.

     Our  directors,  within  the  limitations and restrictions contained in our
articles  of  incorporation and without further action by our stockholders, have
the  authority  to  issue  shares of preferred stock from time to time in one or
more  series and to fix the number of shares and the relative rights, conversion
rights,  voting rights, and terms of redemption, liquidation preferences and any
other  preferences,  special  rights  and qualifications of any such series.  We
have  no intention of issuing preferred stock at the present time.  Any issuance
of  preferred  stock  could adversely affect the rights of holders of our common
stock.

     Should we issue additional shares of our common stock at a later time, each
investor's  ownership  interest  in  Gateway  Distributors,  Ltd.  would  be
proportionally  reduced.  No  investor will have any preemptive right to acquire
additional  shares  of  our  common  stock,  or  any  of  our  other securities.

IF  WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED
FROM  THE  OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO
SELL  OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN
THE  SECONDARY  MARKET.

     Companies  trading on the OTC Bulletin Board, such as Gateway Distributors,
Ltd.,  must be reporting issuers under Section 12 of the Securities Exchange Act
of  1934,  as amended (the "Exchange Act"), and must be current in their reports
under  Section  13,  in  order to maintain price quotation privileges on the OTC
Bulletin  Board.  If we fail to remain current on our reporting requirements, we
could be removed from the OTC Bulletin Board.  As a result, the market liquidity
for  our securities could be severely adversely affected by limiting the ability
of broker-dealers to sell our securities and the ability of stockholders to sell
their  securities  in  the  secondary  market.

OUR  COMMON  STOCK  IS  SUBJECT  TO  THE  "PENNY STOCK" RULES OF THE SEC AND THE
TRADING  MARKET  IN  OUR  SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR
STOCK  CUMBERSOME  AND  MAY  REDUCE  THE  VALUE  OF  AN INVESTMENT IN OUR STOCK.

     The  Securities  and  Exchange  Commission  has  adopted  Rule  15g-9 which
establishes  the definition of a "penny stock," for the purposes relevant to us,
as  any  equity security that has a market price of less than $5.00 per share or
with  an  exercise  price  of  less  than  $5.00  per  share, subject to certain
exceptions.  Inasmuch  as  that the current bid and ask price of common stock is
less  than $5.00 per share, our shares are classified as "penny stock" under the
rules  of  the SEC.  For any transaction involving a penny stock, unless exempt,
the  rules  require:


                                        9
<PAGE>
-     That  a  broker  or  dealer approve a person's account for transactions in
      penny  stocks;  and

-     The broker or dealer receives from the investor a written agreement to the
      transaction,  setting  forth  the  identity  and  quantity  of  the  penny
      stock to be purchased.

      In  order  to approve a person's account for transactions in penny stocks,
      the  broker  or  dealer  must:

-     Obtain  financial  information and investment experience objectives of the
      person;  and

-     Make  a reasonable determination that the transactions in penny stocks are
      suitable for  that  person  and  the  person  has sufficient knowledge and
      experience in  financial  matters to be capable of evaluating the risks of
      transactions in penny stocks.

     The broker or dealer must also deliver, prior to any transaction in a penny
stock,  a disclosure schedule prescribed by the Commission relating to the penny
stock  market,  which,  in  highlight  form:

-     Sets  forth  the  basis on which the broker or dealer made the suitability
      determination;  and

-     That  the  broker  or dealer received a signed, written agreement from the
      investor  prior  to  the  transaction.

     Generally,  brokers  may  be  less  willing  to  execute  transactions  in
securities  subject to the "penny stock" rules.  This may make it more difficult
for  investors  to dispose of our common stock and cause a decline in the market
value  of  our  stock.

     Disclosure also has to be made about the risks of investing in penny stocks
in  both  public  offerings  and  in secondary trading and about the commissions
payable  to  both  the  broker-dealer and the registered representative, current
quotations  for  the  securities  and  the  rights  and remedies available to an
investor  in  cases  of  fraud  in  penny  stock transactions.  Finally, monthly
statements  have  to  be  sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.

ITEM 2.     DESCRIPTION OF PROPERTY.

     Gateway  owns  approximately  3,500  square feet of office space, currently
being  remodeled to house the executive offices, information systems department,
human  resources  department, accounting department, order entry department, and
customer  service  department, and approximately 30,000 square feet of warehouse
space, also housing the warehouse department, in Las Vegas, Nevada.  The monthly
mortgage  payment  is  $13,376.

ITEM 3.     LEGAL PROCEEDINGS.

Suburban Capital Corporation v Gateway Distributors, Ltd., Case No. 03-CV-7559

     On  August  13,  2003, Suburban Capital Corporation filed a civil action in
the  Circuit  Court  of DuPage County, Illinois against Gateway Distributors and
two  of  its  officers, Richard Bailey and Florian Ternes. On December 15, 2003,
U.S.  District Judge Charles R. Norgle, Sr., granted Gateway's Notice of Removal
and  removed  the  case  to  the  United  States District Court for the Northern
District  of  Illinois.

     The  action  is styled Suburban Capital Corporation v Gateway Distributors,
Ltd.,  Rick  Bailey  and  Flo  Ternes,  and  Neptune  Communications,  Case  No.
03-CV-7559  (Norgle,  J.)  and as to Gateway, Richard Bailey and Florian Ternes:

     Suburban  Capital's  complaint alleges breach of contract and fraud claims.
Suburban  Capital  seeks  a  declaratory  judgement regarding the validity of an
alleged  advisor  agreement with Gateway, specific performance of that agreement
and  injunctive  relief,  including  temporary  restraining  order  as  well  as
preliminary  and  permanent  injunctions.  The complaint seeks $550,000 together
with  its  costs  of enforcement including reasonable attorney's fees as well as
punitive  damages  in  the  amount  of  $500,000.


                                       10
<PAGE>
     On  November  17,  2003,  Gateway  filed an answer and affirmative defenses
which asserted that the Plaintiff's claims are barred by the principles of undue
influence,  duress,  in  pari  delicto,  estoppel,  and  illegality.

     On  January  24, 2004, Judge Gottschall granted the Securities and Exchange
Commission's  motion  for  an  order appointing a receiver over Suburban Capital
Corporation  in  Securities  and  Exchange Commission v. Frank J. Custable, Jr.,
Sara  Wetzel,  Suburban  Capital  Corp.,  Francis  Scott  Widen,  Wasatch
Pharmaceutical,  Inc.,  David  Giles,  Gary  Heesch, Pacel Corp., David Calkins,
Gateway  Distributors, Ltd., Richard Bailey and ThermoElastic Technologies, Inc,
Case  No.  03-C-2182. The court-appointed Receiver, Mark Toljanic, controls this
claim.

     On  March  12,  2004 the Parties agreed to a Scheduling Order and commenced
discovery.

     On  January  10,  2005,  Gateway  filed a counterclaim against Suburban for
breach  of  a Stock Purchase Agreement dated November 27, 2002. Gateway's claims
include  breach  of  contract  and,  in  the alternative, unjust enrichment. The
counterclaim seeks a judgment from the court which orders Suburban to assume the
debts  and  obligations  - currently valued at more than $306,667 - contained in
the  November 27, 2002 Stock Purchase Agreement and additional monetary damages.

     The  parties  are scheduled to appear before Judge Norgle on April 13, 2005
for  a status hearing and our attorney s have been instructed to both vigorously
defend  the  claims  made  against  Gateway  and  prosecute  claims made against
Suburban.

Securities  and  Exchange  Commission  v  Frank  J.  Custable, Jr., Sara Wetzel,
Suburban  Capital Corp., Francis Scott Widen, Wasatch Pharmaceutical Inc., David
Giles,  Gary  Heesch,  Pacel  Corp.,  David Calkins, Gateway Distributors, Ltd.,
Richard  Bailey  and  ThermoElastic  Technologies,  Inc.,  Case  No.  03-C-2182

     On  March  28,  2003,  the Securities and Exchange Commission filed a civil
action in the United States District Court for the Northern District of Illinois
against  Gateway  and  Richard  Bailey.

     The  action  was  styled  Securities  and  Exchange  Commission  v Frank J.
Custable, Jr., Sara Wetzel, Suburban Capital Corp., Francis Scott Widen, Wasatch
Pharmaceutical  Inc.,  David  Giles,  Gary  Heesch,  Pacel Corp., David Calkins,
Gateway Distributors, Ltd., Richard Bailey and ThermoElastic Technologies, Inc.,
Case  No.  03-C-2182  (Gottschall,  J.)  and  as  to Gateway and Richard Bailey:

     On  March  28,  2003, the Commission obtained a Temporary Restraining Order
(TRO)  from  the  United  States  District  Court  for  the Northern District of
Illinois,  temporarily  restraining Frank J. Custable, Jr., of Glendale Heights,
Illinois,  Suburban  Capital  Corp.,  Sara  Wetzel,  of  Glenview, Illinois, and
Francis  Scott  Widen of Buffalo Grove, Illinois, from violating the anti-fraud,
registration  and  reporting provisions of the federal securities laws. Custable
is  a  recidivist  who,  in  1994,  was  permanently enjoined from violating the
anti-fraud  provisions  of  the  federal  securities  laws  as  part  of a prior
Commission  enforcement  action. As part of the TRO, the Court also ented orders
freezing  the  assets  of  Custable,  Suburban  Capital,  Wetzel  and  Widen  to
repatriate  assets,  temporarily  prohibiting Custable and Suburban Capital from
participating  in  penny  stock  offerings  and  from trading in any securities,
requiring  all  defendants  to  give  an  accounting  and  prohibiting  document
destruction.

     The  Commission's  Complaint  alleged  that  Custable  has  orchestrated an
ongoing  scheme  to  violate registration, antifraud and reporting violations of
the  federal  securities laws. The scheme, as alleged in the Complaint, began in
at  least  November 2001, has involved at least seven different penny stocks and
has  generated  at  least  $4.3  million  in  ill-gotten gains. According to the
Complaint,  Custable  fraudulently concealed his ownership interest in the seven
penny  stocks  by  having  Suburban  Capital,  Wetzel,  Widen  and various other
individuals  engage  in  a  host  of  securities transactions on his behalf. The
Complaint  further  alleged  that  Custable,  Wetzel  and  Suburban Capital have
obtained  stock  through fraudulent Form S-8 registrations (normally intended to
allow  distribution  of  securitite  to employees and consultants) and through a
scheme  to  counterfeit  nearly  half  of the outstanding stock in Blagman Media
International,  Inc.,  a  company  whose  stock  is guoted on the OTC Electronic
Bulletin  Board.  The  Complaint  alleged that Custable and the other defendants
illegally  dumped  massive quantities of the improperly registered shares on the
general  public.


                                       11
<PAGE>
     The  Commission's  Complaint also named as defendants four public companies
whose  stock  is  quoted  on  the  OTC Electronic Bulletin Board (Bulletin Board
Companies)  and  four  officers  of  the  Bulletin  Board  Companies.  The other
defendants  named in the Commission's Complaint are Thermo Elastic Technologies,
Inc.,  Wasatch Pharmaceutical, Inc., David Giles and Gary Heesch, who are two of
Wasatch's  officers,  Pacel  Corp.,  David  Calkins, who is an officer of Pacel,
Gateway  Distributors,  Ltd.,  and  Richard  Bailey,  an officer of Gateway. The
Complaint  also named Pine Services as a relief defendant. The Complaint alleged
that  Custable,  Suburban  Capital  and  Wetzel  violated  Section  17(a) of the
Securities  Act  of  1933  (Securities  Act) and Section 10(b) of the Securities
Exchange  Act  of  1934  (Exchange Act) and Rule 10b-5 thereunder. The Complaint
also  alleged that Custable violated Section 13(d) of the Exchange Act and Rules
13d-1  and  13d-2  thereunder by failing to report his ownership interest in the
penny  stocks  involved  in  his scheme. The Commission alleged in its Complaint
that Custable, Wetzel, Widen and Suburban Capital violated Section 5(a) and 5(c)
of the Securities Act. The Complaint also alleged that Wasatch, Heesch and Giles
violated  Sections  5(a), 5(c) and 17(a) of the Securities Act and Section 10(b)
of  the  Exchange Act and Rule 10b-5 thereunder, by engaging in several sham S-8
transactions  with  Custable  and  Suburban  Capital. The Complaint alleged that
ThermoElastic,  Gateway, Pacel, Bailey and Calkins violated Section 17(a) of the
Securities  Act  and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder
by  engaging  in fraudulent S-8 transactions with Custable and Suburban Capital.

     Apart from emergency relief, the Commission sought the entry of preliminary
and  permanent  injunctive  relief, disgorgement, civil penalties, a penny stock
bar  against  Custable,  Suburban Capital, Wetzel, Widen, Heesch, Giles, Calkins
and  Bailey  and an order barring Heesch, Giles, Calkins and Bailey from serving
as  an  officer  or  director  of  a  public  company.

     On  January 29, 2004, Judge Gottschall appointed a receiver, Mark Toljanic,
over  Suburban  Capital.  The  Receiver is vested with full and exclusive power,
duty and authority to administer and manage the business affairs, funds, assets,
and  any other property of Suburban Capital. In addition, the Receiver is chaged
with  identifying,  locating,  marshaling  and  safeguarding  all of the current
assets  of  Suburban  Capital as well as all assets in existence as of March 28,
2003  but  dissipated  thereafter.  The  Receiver  is  also to prepare discovery
responses  of  Suburban  Capital  and  take  whatever  actions  are necessary to
preserve  Suburban  Capital's  assets.

     On November 18, 2004, the Securities and Exchange Commission filed a Second
Amended  Complaint in the United States District Court for the Northern District
of  Illinois  against  Gateway and Richard Bailey. The Second Amended Complaint,
which  incorporates  all  of  the allegations in the March 28, 2003 civil action
referenced  above,  also  includes  new  allegations  as  to Gateway and Bailey.

     The  action  is  styled  Securities  and  Exchange  Commission  v  Frank J.
Custable, Jr., Sara Wetzel, Suburban Capital Corp., Francis Scott Widen, Wasatch
Pharmaceutical  Inc.,  David  Giles,  Gary  Heesch,  Pacel Corp., David Calkins,
Gateway  Distributors,  Ltd.,  Richard Bailey, ThermoElastic Technologies, Inc.,
Robert  Blagman,  Blagman Media International, Inc., and Brad Nordling, Case No.
03-C-2182  (Gottschall,  J.) and the additional allegations as to Richard Bailey
include  purported violations of Section 5(a) and (c) of the Securities Act. The
Securities and Exchange Commission seeks : entry of permanent injunctive relief,
disgorgement,  civil  penalties,  a  penny  stock bar against Custable, Suburban
Capital,  Wetzel,  Widen,  Heesch,  Giles  and  an  order barring Heesch, Giles,
Calkins  and  Bailey from serving as an officer or director of a public company.

     The  Commission  began  taking  numerous  depositions  in October 2004, and
Messrs. Bailey and Ternes are scheduled to be deposed in early May. Discovery is
scheduled  to  close  on  June  21,  2005.

     The  parties  are  scheduled to appear before Judge Gottschall on April 12,
2005  for  a  status  conference  and  the  attorneys  have  been  instructed to
vigorously  defend  the  claims  made  against  Gateway  and  Bailey.

Administrative  Subpoena  by  the  Bureau  of  Consumer Protection of the Nevada
Attorney  general's  Office

     In  or  about December, 2003, the Company was served with an administrative
subpoena  issued  by  the  Bureau  of Consumer Protection of the Nevada Attorney
General's  Office. The subpoena sought documents in furtherance of that Bureau's
investigation  whether the Company violated federal or state consumer protection
regulations  and statutes in connection with the sale of "Y-motion", a topically
applied  yam  cream  product.


                                       12
<PAGE>
     At  about  the same time, the Company was served in Nevada with a virtually
identical  subpoena  issued by the Consumer Protection Division of the Office of
the  Attorney  General  of  Maryland  seeking the same documents. As a matter of
prudence, the Company has taken the position that the subpoena from the Maryland
Attorney General's office is void for lack of jurisdiction; nevertheless, in the
spirit  of  cooperation and candor, the Company has copied the Maryland Attorney
General's  office  with  its  responses  to  the  Nevada subpoena as a courtesy.

     The  representative  of  the Maryland Attorney General's office purports to
speak  for  a compact of attorneys general in 32-states and to have authority to
negotiate  issues  arising  from  the  sale  of  "Y-motion"  in  those  states.

     This  matter  involves  the questions whether sale of "Y-motion" is illegal
per  se  because it is considered a drug; whether the Company made health claims
in  connection  with its sale in violation of federal and state regulations; and
whether the Company had involvement with a questionable marketing scheme through
which  other  vendors  have  sold  similar  yam  cream  products.

     The  Company  has  sold "Y-motion" in many of the states represented by the
attorneys  general  compact.

     The Company has responded to the Nevada subpoena and to follow-up inquiries
by  producing  responsive  documents  in  its  possession,  with courtesy copies
provided  to  the  Maryland  Attorney  General's  office.  The  Company has also
retained  the services of a consultant who is well versed in the compliance with
relevant  state  and  federal  regulations  to  advise  the  Company.

     The Company is negotiating with the representative of the attorneys general
compact  to settle possible legal claims associated with its sale of "Y-motion".
The  Company's position is that it has and will comply with all application laws
and  regulations  in  its  operations,  and  will  take any necessary corrective
measures.

     At  present,  the  representative  of  the  attorneys  general  compact has
proposed payment of penalties and costs $220,000, plus a program for restitution
of  the  purchase price of the product to consumers who apply for a rebate, plus
injunctive  relief  against  the  alleged  improper  practices  in the form of a
consent  decree.  The Company has countered with willingness to accept a consent
decree  and  with an offer to penalties, costs and restitution to consumers in a
combined  total  amount  not  to  exceed  $30,000.  Negotiations are continuing.

     If  the  matter  is  not  settled,  each attorney general in the compact of
32-attorney general who represents a state in which the Company sold "Y-motion",
could  bring  separate investigative/enforcement actions against the Company. We
are  unable  to  predict  whether  this  would  be the likely outcome if current
negotiations  fail,  however,  or  what  the  effect  of  several
investigation/enforcement  actions  in  different  states  might  be.

     No  enforcement  action  has been filed against the Company as of March 28,
2005  in  any  state  on  account  of  the  Company's  sales  of  "Y-motion".

Allergy  Research  Group/Nutricology  v  Gateway  Distributors,  Ltd.,  Case No.
A-487334

     Allergy  Research  Group/Nutricology v Gateway Distributors, Ltd., Case No.
A-487334, District Court of Clark County, Nevada.  This is an action against the
Company  on  an  unpaid  open account for goods and merchandise. The plaintiff's
Complaint  seeks  $168,070  from  the  Company.  The Company contests the amount
claimed and is making payments on the uncontested amount while negotiations with
the plaintiff continue. The litigation is in the discovery phase . No trial date
has  been  set  at this time.  We believe that our exposure on this claim ranges
between  $50,000  and  $80,000,  less  future  payments.

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

     On  October  4, 2004, our majority stockholders, acting by written consent,
voted  to:

     1.     Amend  our  articles  of  incorporation  to  increase  the number of
authorized  shares of our common stock from 25,000,000 to 25,000,000,000 shares;


                                       13
<PAGE>
     2.     Amend  our  articles  of  incorporation  to  increase  the number of
authorized shares of our preferred stock from 200,000,000 to 400,000,000 shares;

     3.     Grant discretionary authority to our board of directors to implement
a reverse stock split of our common stock on the basis of one post-consolidation
share for up to each 1,000 pre-consolidation shares to occur at some time within
12  months of the date of this information statement, with the exact time of the
reverse  split  to  be  determined  by  the  board  of  directors;

     4.     Approve  the  following  Gateway  Distributors,  Ltd.  Stock  Plans:

          (a)     Stock  Plan  for  the  Year  2003,  adopted  by  our directors
effective  April  8,  2003  with 2,000,000,000 shares of our common stock in the
aggregate  authorized  for  issuance  under  the  Plan;

          (b)     Employee  Stock  Incentive  Plan for the Year 2004, adopted by
our  directors  effective  January 8, 2004 with 900,000,000 shares of our common
stock  in  the  aggregate  authorized  for  issuance  under  the  Plan;

          (c)     Non-Employee Directors and Consultants Retainer Stock Plan for
the  Year  2004,  adopted  by  our  directors  effective  February 27, 2004 with
1,500,000,000  shares  of  our  common  stock  in  the  aggregate authorized for
issuance  under  the  Plan;

          (d)     Employee Stock Incentive Plan for the Year 2004 No. 2, adopted
by  our  directors  effective  March  17,  2004 with 2,000,000,000 shares of our
common  stock  in  the  aggregate  authorized  for  issuance  under  the  Plan;

          (e)     Employee Stock Incentive Plan for the Year 2004 No. 3, adopted
by  our  directors effective April 22, 2004, as amended on May 26, 2004 and June
16,  2004,  with  7,300,000,000  shares  of  our  common  stock in the aggregate
authorized  for  issuance  under  the  Plan;

          (f)     Non-Employee Directors and Consultants Retainer Stock Plan for
the  Year  2004  No.  2,  adopted  by our directors effective April 22, 2004, as
amended  on  May  26,  2004  and June 16, 2004, with 5,000,000,000 shares of our
common  stock  in  the  aggregate  authorized  for  issuance  under  the  Plan;

          (g)     Employee Stock Incentive Plan for the Year 2004 No. 4, adopted
by  our  directors  effective  August 24, 2004, with 8,000,000,000 shares of our
common  stock  in  the  aggregate  authorized  for  issuance  under  the  Plan;

          (h)     Non-Employee Directors and Consultants Retainer Stock Plan for
the  Year  2004  No.  3 adopted by our directors effective August 24, 2004, with
2,000,000,000  shares  of  our  common  stock  in  the  aggregate authorized for
issuance  under  the  Plan.

     Mr.  Richard  A.  Bailey,  our  president, founder, and a director, and Mr.
Florian  R.  Ternes,  our director and secretary, together had the power to vote
4,996,011,854  shares of our common stock, which number exceeded the majority of
the  issued  and  outstanding  shares  of  the  common stock on the record date.
Messrs.  Bailey  and  Ternes  voted  in  favor of the proposed amendments to our
articles  of incorporation, for the grant of authority to the Board of Directors
with  respect  to  the  reverse  split, and for the approval of the Stock Plans.

                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Prior  to  August of 2001, there was no public market for our Common Stock.
Our  stock  originally  traded under the symbol "GTWY.OB."  On December 6, 2002,
our  symbol  changed  from "GTWY.OB" to "GWYD.OB."  On June 28, 2004, our symbol
changed  from  "GWDL.OB"  to "GWAD.OB."  On September 3, 2004 our symbol changed
from  "GWAD.OB"  to  "GAWY.OB."  On  December  20, 2004, our symbol changed from
"GAWY.OB"  to


                                       14
<PAGE>
"GAWD.OB." As of March 28, 2005, the symbol was changed to "GWDB.OB". Trading in
the  common  stock  in the over-the-counter market has been limited and sporadic
and  the  quotations  set  forth  below are not necessarily indicative of actual
market  conditions.  Further,  these prices reflect inter-dealer prices, without
retail  mark-up, mark-down or commission, and may not necessarily reflect actual
transactions.

                       CALENDAR YEAR 2003      HIGH       LOW
                       First Quarter          0.0001     0.0001
                       Second Quarter          0.20       0.01
                       Third Quarter          0.035      0.0029
                       Fourth Quarter         0.0334     0.0011

                       CALENDAR YEAR 2004      HIGH       LOW
                       First Quarter          0.0049     0.0007
                       Second Quarter          0.07      0.0001
                       Third Quarter           0.34      0.0001
                       Fourth Quarter          0.07      0.0001

     We  currently  have 30,980,590 shares of our common stock outstanding.  Our
shares of common stock are held by approximately 19 stockholders of record.  The
number  of  record holders was determined from the records of our transfer agent
and  does not include beneficial owners of common stock whose shares are held in
the  names  of  various  security  brokers,  dealers,  and  registered  clearing
agencies.


                                       15
<PAGE>
RECENT  SALES  OF  UNREGISTERED  SECURITIES

     During  the  fiscal year ended December 31, 2005, we sold 24,005,003 common
shares  in  private  transactions  not  involving a public offering.  All of the
24,005,003  shares  bear  a  legend  restricting  their  disposition.

     On  December  21,  2004,  the Board of Directors authorized the issuance of
24,000,000  shares  (12,000,000  each) of restricted common stock to Rick Bailey
and  Flo Ternes in exchange for 24,000 shares of preferred A stock (value at one
preferred share to 1,000 common shares).  The Company issued the shares pursuant
to section 4(2) of the Securities Act of 1933 in an isolated private transaction
by  the  Company  which  did  not  involve  a  public  offering.

SECTION  15(G)  OF  THE  EXCHANGE  ACT

     The shares of our common stock are covered by Section 15(g) of the Exchange
Act,  and  Rules  15g-1  through  15g-6  promulgated  thereunder,  which  impose
additional sales practice requirements on broker-dealers who sell our securities
to  persons  other  than  established  customers  and  accredited  investors.

     Rule  15g-2  declares  unlawful  any  broker-dealer  transactions in "penny
stocks"  unless  the  broker-dealer  has  first  provided  to  the  customer  a
standardized  disclosure  document.

     Rule  15g-3 provides that it is unlawful for a broker-dealer to engage in a
"penny  stock"  transaction  unless  the  broker-dealer  first  discloses  and
subsequently  confirms  to  the customer the current quotation prices or similar
market  information  concerning  the  penny  stock  in  question.

     Rule  15g-4  prohibits  broker-dealers  from  completing  "penny  stock"
transactions  for  a  customer  unless  the broker-dealer first discloses to the
customer  the  amount of compensation or other remuneration received as a result
of  the  penny  stock  transaction.

     Rule  15g-5  requires  that  a  broker-dealer  executing  a  "penny  stock"
transaction,  other  than one exempt under Rule 15g-1, disclose to its customer,
at the time of or prior to the transaction, information about the sales person's
compensation.

     Our common stock may be subject to the foregoing rules.  The application of
the  "penny  stock"  rules  may  affect  our stockholders' ability to sell their
shares  because  some  broker-dealers may not be willing to make a market in our
common  stock  because  of  the  burdens  imposed upon them by the "penny stock"
rules.

     The  following  table  provides  information  about purchases by us and our
affiliated  purchasers  during  the  quarter  ended  December 31, 2004 of equity
securities  that  are  registered by us pursuant to Section 12 of the Securities
Exchange  Act  of  1934:


                                       16
<PAGE>
<TABLE>
<CAPTION>
                                    SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
                                                           (a)              (b)             (c)               (d)
                                                      --------------  ---------------  --------------  -----------------
                                                                                                            Maximum
                                                                                        Total number      number (or
                                                                                       of shares (or      approximate
                                                                                           units)      dollar value) of
                                                                                        purchased as      shares (or
                                                                                          part of       units) that may
                                                       Total number                       publicly          yet be
                                                      of shares (or    Average price     announced         purchased
                                                          units)         paid per        plans or      under the plans
Period                                                  purchased     share (or unit)     programs        or programs
----------------------------------------------------  --------------  ---------------  --------------  -----------------
<S>                                                   <C>             <C>              <C>             <C>
October 2004 . . . . . . . . . . . . . . . . . . . .             -0-              -0-             -0-                -0-
                                                      --------------  ---------------  --------------  -----------------
November 2004 . . . . . . . . . . . . . . . . . . .              -0-              -0-             -0-                -0-
December 2004 . . . . . . . . . . . . . . . . . . .              -0-              -0-             -0-                -0-
                                                      --------------  ---------------  --------------  -----------------
Total . . . . . . . . . . . . . . . . . . . . . . .              -0-              -0-             -0-                -0-
                                                      ==============  ===============  ==============  =================
</TABLE>


ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

FORWARD-LOOKING INFORMATION

     Much  of  the  discussion in this Item is "forward looking" as that term is
used  in  Section 27A of the Securities Act and Section 21E of the Exchange Act.
Actual  operations  and  results  may  materially  differ from present plans and
projections  due  to changes in economic conditions, new business opportunities,
changed  business  conditions, and other developments.  Other factors that could
cause  results  to  differ  materially  are  described  in  our filings with the
Securities  and  Exchange  Commission.

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

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

MANAGEMENT'S PLAN OF OPERATION

STRATEGY

     The  Right  Solution  Gateway  plans to continue capitalizing on its strong
operating  platform  and  intends  to  pursue a growth strategy comprised of the
following  four  principal  elements:

     Expansion  of  Product  Offerings and Development of New Product Lines. The
Right  Solution Gateway is committed to expanding its product line by developing
and  offering  new products and introducing existing products into markets where
they  are  not  currently  offered. The timely introduction of new, high quality
products  creates  sales  opportunities  for  distributors,  and  also serves to
generate  enthusiasm  among  distributors  and  provide  them  with  additional
promotional  opportunities  to  sell  other Company products. The Right Solution
Gateway  has  made  the decision to concentrate on its top selling products that
focus on three things: 1) cleansing the body from toxins; 2) feeding the body on
a cellular level; and 3) living ones dreams. With more than 70% of the food that
is consumed in the world being genetically altered, management believes that the
market  for  its  whole  food  products  will  continue  to  grow.


                                       17
<PAGE>
     Mergers  and Acquisitions.  Gateway's business plan includes growth through
mergers  and acquisitions. Gateway intends to continue to look for opportunities
to  merge  or purchase smaller companies that have active distributors and sales
volumes,  or  purchase  new  products  to  diversify our sales market. The Right
Solution  Gateway  has  two  strategies  for  growth. 1) The continuation of the
existing  strategy  to target companies that are in trouble financially, lacking
product  inventories,  but which have active distributors and sales. 2) Purchase
the rights to existing products that have either a recognized brand name or have
been  successfully  marketed in the past with continued need in the marketplace,
requiring  only  market  exposure  to  generate  new  sales.

     Expansion  Into  New Markets.  Gateway's business plan for 2005 is to focus
on  growth  in  the USA and placing less emphasis on international expansion. If
international  clients desire to purchase products on a wholesale basis, Gateway
will  gladly  provide  these  products.  Gateway  believes  there  are  numerous
additional markets in which its products may prove successful. Gateway evaluates
new markets based, in part, on Gateway's ability to create a distributor base in
the  potential markets or markets for the product wholesale. In determining when
and  where  to  open  new markets, Gateway will continue to seek to minimize the
impact  on  distributor  focus  in  existing markets and to ensure that adequate
distributor  support  services and other Company systems are in place to support
the growth. Although Gateway intends to expand into new markets, there can be no
assurance  that  Gateway  can  open  markets  on a timely basis or that such new
markets  will  prove to be profitable. Significant regulatory and legal barriers
must  be  overcome  before  marketing  can begin in any new market. In addition,
expansion  of Gateway's operations into new markets requires substantial working
capital  and capital expenditures associated with both the regulatory compliance
and  operations  phases  of the process. The lead-time and costs associated with
opening  anticipated  new markets may significantly exceed those of entering new
markets  in  the  past  due  to  greater  regulatory  barriers, the necessity of
adapting  to  entirely  new regulatory systems, and problems related to entering
new  markets  with  different  cultural  bases  and political systems from those
encountered  in  the  past.  Gateway is informed that the lead-time necessary to
open  a  new  market  is  generally  up  to  one  year,  but  may  be  more.

     Gateway  has  expanded into wholesale distribution services, in addition to
its  multi-level marketing retail sales. On May 20, 2004 Gateway entered into an
agreement  for  the  distribution  of  beverages  in the Phoenix Arizona area. A
Nevada  corporation,  Quality  Distribution Services of Arizona, Inc ("QDS") was
formed June 7, 2004 to handle the operations, with Gateway having 51% ownership.
In December of 2004 Gateway added sales of private label water through Los Cabos
Beverage,  also  at  51% ownership, while removing debt owed by Grandma Hamman's
and  its  principal  product  GHF,  by  an  asset  purchase  agreement.

     The  Company  has  a  51%  interest  in  Los Cabos, a corporation set up to
operate  as a water distribution facility.  The acquisition of its investment in
Los  Cabos  came  through  the  agreement  exchanging a formula owned by Grandma
Hammans,  a subsidiary of the Company, for the 51% interest in Los Cabos and the
assumption  and payoff of approximately $193,000 of debt Grandma Hammans assumed
from  buying the formulas initially.  Currently the Company is in the process of
evaluating  the  continued  operation  of  Los Cabos water distribution with the
object  to  decide  whether  or  not  to withdraw from the joint venture and any
future  financial  commitments.

     Management  has  determined  to  refocus  its  time,  energy, and financial
investments  into  its  core  business  going  forward  and believes that QDS of
Arizona  will  detract from that emphasis.  Therefore, the Company is evaluating
whether  to  sell  its  interests  in  QDS  of  Arizona.

     Enhancement  of  Sales  and Motivational Training. Gateway will continue to
seek  increased  sales  opportunities  through  its  network marketing system by
utilizing  extensive  training  and  motivational  programs.  The Right Solution
Gateway  will  also hold regional meetings throughout the United States. Gateway
has hired Jack Zufelt and other network marketing leaders in the industry to run
the training of the company. Our starting kits have training material along with
product which will allow the new distributor to get started quicker. The company
has  spent  a  significant  amount  of  money  and time on the internet website.
Managements  feel is that the support of the world wide web is a core competency
to  the success of its business, unlike ten years ago. In addition, Gateway will
continue  to  conduct  conferences,  seminars,  and  one  on  one  training.

     Gateway  has acquired the licensing rights to Jeunesse by Francois from the
Chelsea  Collection.  Jeunesse  by Francois is a seventy five year old skin care
formula  from  Romania  which was originally derived from the G-H-3 formula from
Dr.  Anna Aslan. Mr. Francois Vautour brought the formula to America and updated
the  product  based  upon  newer  technologies  in skin care. An infomercial was
produced  to  introduce  the new product without receiving


                                       18
<PAGE>
the  desired  marketing  response.  The  product is being offered in the network
marketing,  and plans for the future are to wholesale the product through retail
chains  under the G-H-3 lines. We hope to expand iour customer base and increase
our  sales.  Gateway,  through  the  licensing agreement it has with the Chelsea
Collection,  is  expecting  to open clinics offering G-H-3 Internal Rejuvenation
Therapy  within  the next year. Two thirds of The Chelsea Collection is owned by
the  officers  of  Gateway.  In  the  agreement  the  Company  has  with Chelsea
Collection,  the  Company will have the opportunity to acquire the same Francois
Vautour  skin care line from Chelsea Collection for virtually the same price and
terms as Chelsea Collection is buying it from Francois Vautour.

     Gateway  extended  its  agreement with PT. Mahakam Beta Farma in Indonesia.
They  are  purchasing  the  Body  Gard  product  and have it in their pharmacies
throughout  the  country.  PT. Mahakam Beta Farma  is working on approval by the
Indonesian  government  for  the  future  distribution  of  SuperFood.

     Gateway is expecting on track to receive its first shipment of product that
has  been  signatured  and  licensed  by  Pete Rose and affiliates and should be
available  for  sale  at  the  start  of  the  regular  baseball  season.

PRODUCTS

     The  Right  Solution  Gateway markets and distributes different nutritional
and/or health and skin care products. The nutritional/health products, which The
Right  Solution  Gateway  sells,  are  intended  to  provide  nutritional
supplementation  to the users; the products are not intended to diagnose, treat,
cure  or  prevent  any  disease.

     Top  Selling  Products  are:

-     Body  Gard  with  Lactoferrin

-     Femme

-     Fulvic  Factor

-     Lifetonic

-     LifeZymePlus

-     Master  Formula  (Powder  and  Capsules)

-     Natural  Immunity

-     New  Life  Corrective  A,  B  and  C

-     Superfood  (Powder  and  Capsules)

-     Vibrant  9  Skin  Care/Jeunesse  by  Francois  Products

SERVICES

     Product Return Policy for Retail Customers.  Services Product Return Policy
for Retail Customers. The Right Solution Gateway has a 100% money-back guarantee
on  all  of  its products for retail customers. It is the responsibility of each
Team  Member  to  refund  the  purchase  price  to any unsatisfied customer. The
customer's  request  must  be  made  within  30  days of the date of the product
purchase  to  be  valid.  If the product was used, the empty or partially filled
container  must  be  returned to The Right Solution Gateway. Upon receipt of the
container  and  a  copy  of the customer's retail sales receipt with their name,
address  and  telephone  number, The Right Solution Gateway will promptly send a
replacement  to  the  Team Member. The Right Solution Gateway does not make cash
refunds. The Right Solution Gateway's product return policy for retail customers
has  been  approved  by  the  Direct


                                       19
<PAGE>
Selling  Association  (the  "DSA"),  a  national  industry trade organization of
network  marketing  companies  whose  objective  is  to provide aid, support and
guidance to the network marketing industry.

     Product  Return Policy for Team Members.  A Team Member who is dissatisfied
with  a product may request a refund or credit within 30 days of the date of the
product's  purchase.  Full,  partially  full, and empty bottles are eligible for
refund.  However,  only  one  partially filled or empty container per individual
product  will  be honored. Unused products purchased during this same period are
eligible for a refund if they are in the original packaging, factory sealed, and
in resalable condition. Shipping expenses are not eligible for refund. The Right
Solution  Gateway's  product return policy for Team Members has been approved by
the  DSA.

     Product  Market.  The  nutritional  supplement  industry  is  growing  and
management  believes  it  is due primarily to heightened public awareness of the
positive effects of vitamins and other nutritional supplements. Many individuals
are  now  using  nutritional  supplements  as a means of preventive health care.
Retail  sales  of  nutritional  supplements  increased  from  approximately $3.5
billion  in  1991  to  approximately  $4.2  billion  in 1993, as reported by The
Overview  of  Nutritional  Supplement  Market  prepared  by  the  Council  for
Responsible  Nutrition.  Furthermore,  industry  trade  sources  estimated  that
worldwide  sales  of  nutritional supplements were $4.7 billion in 1994 and $5.3
billion  in  1995,  respectively.

DISTRIBUTION AND MARKETING

     The  Right  Solution Gateway's products are distributed primarily through a
network  marketing  system,  consisting of an extensive network of distributors.
Distributors  are  generally  independent  contractors  who  purchase  products
directly  from  network  marketing  companies.  The Right Solution Gateway calls
their distributors "Team Leaders". For this document they will be referred to as
distributors. The distributors purchase products from The Right Solution Gateway
for  personal  use  or  for  resale  to  consumers  within  the  United  States.
Distributors  may  elect  to  work  on a full-time or part-time basis. The Right
Solution  Gateway  believes that its network marketing system appeals to a broad
cross-section  of  people  worldwide,  particularly  those seeking to supplement
family  income,  start  a home-based business or pursue employment opportunities
other  than  conventional,  full-time  employment  and  that  a  majority of its
distributors work on a part-time basis. The Right Solution Gateway believes that
its network marketing system is ideally suited to marketing its products because
ongoing personal contact between consumers and distributors strengthens sales of
such  products.

     Within  the  United States, distributors may earn profits by purchasing The
Right  Solution Gateway's products at wholesale prices (which are discounted 40%
from  suggested retail prices) and selling The Right Solution Gateway's products
to  customers  at  suggested  retail  prices.  All distributors, both inside and
outside  the United States, who sponsor new distributors and establish their own
downline  organizations  may  earn  commissions on product sales on their entire
downline.  There  is  no  limit  on  the  number of downline levels from which a
distributor  can  generate  commissions.

     To  become  a  distributor,  a  person  must  be  enrolled  by  an existing
distributor,  pay  an  annual  fee  (which  is  currently  $15.00  or first time
enrollees  may  join  over  the world wide web at no cost), and be placed into a
Tracking Center, which is a point from which The Right Solution Gateway "tracks"
the  sales  volume  of  the  distributor and the sales volume of a distributor's
downline  organization.  Each  distributor  can  have  three  legs  in  their
organization and commissions are based on volume requirements of these legs. The
strongest performing leg is the 1st leg, the second strongest is the 2nd leg and
all  other  legs  make  up the third leg. In order to receive any commissions or
bonuses a distributor must make an initial purchase of $100 in personal purchase
volume.  To maintain qualification for any commissions or bonuses, a distributor
must  purchase  a minimum of $40 to $120 depending on total qualifying volume of
The  Right Solution Gateway's products every month. All distributors are allowed
to  participate  in  The  Right  Solution  Gateway's  growth  by  sponsoring new
distributors.

     Management  believes  that the more new enrollees use the internet, overall
costs  will  be  substantially  reduced.

     The  Right Solution Gateway computes the wholesale volumes purchased at the
close  of each business day during the month. Commissions are paid monthly based
on  the  qualifying  level.


                                       20
<PAGE>
     Additional  bonus  money  can be earned then paid weekly, through the Right
Start  Program.  A distributor may sign up for an "Autoship Program" which helps
protect  distributors from losing qualification by automatically shipping them a
qualifying  order  monthly.  In  addition,  when  a distributor signs up for the
Autoship  Program,  the  distributor  becomes  qualified to receive a bonus (the
"Right Start Bonus") for each new personally enrolled distributor. The amount of
the  Right  Start  Bonus  will  be  50%  of  the  new distributor's first order.

     The  Right  Solution Gateway maintains a computerized system for processing
distributor  orders  and  calculating distributor commission and bonus payments,
which  enables  it  to  remit  such payments to distributors. The Right Solution
Gateway  believes that prompt remittance of commission is vital to maintaining a
motivated  network  of  distributors  and  that its distributors' loyalty to The
Right Solution Gateway has been enhanced by The Right Solution Gateway's history
of  consistently  making  commission  and  bonus  payments on a scheduled basis.

     Internet.  The  Right  Solution  Gateway maintains a site on the World Wide
Web  at  "www.rightsolution.com."  The  Right  Solution Gateway has enhanced the
system  to  allow new distributor signups, on-line ordering and volume checks by
the  distributors.

     Marketing.  Each distributor is responsible for sales of The Right Solution
Gateway's  product within his or her downline. The Right Solution Gateway relies
on  word  of  mouth and testimonials from previous or existing customers for its
primary  advertising.  The Right Solution Gateway has developed sales materials,
which  have  been professionally prepared by a graphic designer and reviewed for
regulatory  compliance. These sales materials include product descriptions. Most
of  the  information  that  a distributor needs to do his or her business can be
found  on  the  website.

     Sponsoring.  The  Right  Solution  Gateway has established a system for the
enrolling of new distributors. The Right Solution Gateway prepares communication
and  educational  training materials for distributors to assist in the enrolling
of  new  distributors.  The  Right  Solution  Gateway  also  engages  in  weekly
conference  calls  with  distributors  and  sends newsletter email blasts to its
distributors.  The  Right Solution Gateway has an established advisory board for
assistance  and  consultation  in  connection  with  enrollment  matters.

     Product  Distribution.  Gateway's  products  are distributed to all markets
from  Gateway's  warehouse  located  in  Las  Vegas,  Nevada.

COMPETITION

     The  Right  Solution  Gateway is subject to significant competition for the
recruitment  of  distributors  from  other  network  marketing  organizations,
including those that market nutritional, health and dietary supplements, as well
as  those,  which  market  other  types  of products. Some of The Right Solution
Gateway's  competitors  are substantially larger and have available considerably
greater  financial  resources than Gateway. The Right Solution Gateway's ability
to  remain  competitive  depends,  in  significant  part,  on The Right Solution
Gateway's  success in enrolling and retaining distributors through an attractive
compensation plan and other incentives. The Right Solution Gateway believes that
its  bonus  availability  program,  recognition  and  rewards program, and other
compensation  and  incentive  programs provide its distributors with significant
earning  potential.  However,  there can be no assurance that The Right Solution
Gateway's  programs  for  recruitment  and  retention  of  distributors  will be
successful.

     Our  multilevel marketing plan "Every One Wins" is designed to expedite the
possibility  of earning monthly incomes while the distributor builds a business,
where  most  companies  take months for their distributors to realize comparable
incomes.  The average person in this industry can start as a distributor for The
Right  Solution  Gateway  and  realize  incomes  rather  quickly.

     The  market  for  nutritional,  health,  and  dietary  supplements  is
characterized  by  extensive  competition,  frequent  new product introductions,
short product life cycles, rapid price declines, and eroding profit margins, and
changing  customer  preferences.  This  market  segment  includes  numerous
manufacturers,  distributors, marketers, retailers, and physicians that actively
compete for the business of consumers, both in the United States and Canada. The
market  is highly sensitive to the introduction of new products that may rapidly
capture a significant share of the market. The Right Solution Gateway expects to
continue  to face substantial competition in its efforts to successfully


                                       21
<PAGE>
capture  a significant share of the market. There are a number of companies that
currently  offer competing products, and it can be expected that other companies
will  introduce  additional competing products in the future. In addition, there
are a variety of channels of distribution for nutritional supplements other than
through  network  marketing  and distribution systems, including direct response
marketing,  specialty  retail  health  and  nutrition  stores,  drug stores, and
supermarkets.  Many  of  The  Right  Solution  Gateway's  existing and potential
competitors  have  greater  financial,  marketing,  distribution,  and  research
capabilities than Gateway. The performance of Gateway will depend on its ability
to  develop  and  market  new  products  that  can  gain customer acceptance and
loyalty,  as well as its ability to adapt its product offerings to meet changing
pricing  considerations  and  other  market  factors. The Right Solution Gateway
attempts  to  differentiate  itself from competitors by adhering to its "mission
statement" which reads as follows:

PRODUCT MANUFACTURING AND DEVELOPMENT

     Gateway  anticipates  continuing  to  expand  its  product line through the
development  of  new  products.  New  product ideas are derived from a number of
sources, including trade publications, scientific and health journals, Gateway's
executives,  staffs, consultants, and outside parties. In advance of introducing
products  into  its  markets,  Gateway  consults  its  Medical  Advisory  Board,
comprised  of  Dr.  Herbert  Pardell,  M.D.,  D.O.,  Betty Kamen, Ph.D., and Dr.
Michael Hartman for advice. In addition, local counsel and other representatives
are  retained  by  Gateway  to  investigate  product formulation matters as they
relate  to  regulatory  compliance  and  other  issues.

     The  Company  brought  on  a full time Compliance Officer in 2004 to assure
that  all  of  its  correspondence,  marketing  material,  and  website meet all
regulations  and  compliance  requirements.

     All  of  Gateway's  products are provided by outside companies. Gateway has
agreements  in  place  with  all  of  its  current  manufactures  that  assure
availability  for  it  anticipated  growth.  Gateway's  ownership  of  product
formulations  and  trademarks  for  substantially  all  of Gateway's nutritional
products  gives  Gateway  a  great  deal  of  protection  from  competition.

     Gateway's  ability  to enter new markets and sustain satisfactory levels of
sales  in  each  market  has  been  in  the past and is likely to continue to be
dependent  in  significant  part  upon  its  own  ability and the ability of its
manufacturers  to  develop  new  products  and reformulate existing products for
introduction  into  Gateway's  markets.  Since  1998,  Gateway has significantly
expanded  its  in-house product research and development and product formulation
staff,  which now consists of several employees of Gateway, its Medical Advisory
Board,  and our manufacturers, who are increasingly involved in such activities.

     Gateway  owns the proprietary rights to substantially all of its health and
nutritional supplements, formulations and trademarks. Gateway has formed several
alliances  with  its  manufacturers to assure, among other things, that products
are  organically  grown  and  that  inventory  levels  will  remain  constant.

INSURANCE

     Although  Gateway does not engage in the manufacture of any of the products
it  markets  and  sells,  Gateway  could be exposed to product liability claims.
Gateway  has  not  had  any  such  claims  to date. Although Gateway maintains a
limited  amount of liability insurance, each of Gateway's manufacturers provides
additional  insurance  of  at least two million dollars covering products, which
Gateway  sells.  There  can,  however,  be no assurance that Gateway will not be
subject  to  claims  in  the future or that available insurance coverage will be
adequate.  A  partially  or  completely  uninsured  claim  against  Gateway,  if
successful  and of sufficient magnitude, would have a material adverse effect on
Gateway.

TRADEMARKS

     Gateway  has  received  federal  trademark  registration  for  THE  RIGHT
SOLUTION(R).  Gateway  intends  to  continue  to seek trademark protection for a
number  of  the  products  and  brand  names  under which Gateway's products are
marketed,  where applicable. There can be no assurance that such protection will
be  obtained.  Gateway  will  be  required  to  rely upon common law concepts of
confidentiality and trade secret laws to protect its product


                                       22
<PAGE>
formulations.  There  can  be  no  assurance that the foregoing will protect the
formulations  or  provide  adequate  remedies  for  Gateway  in  the  event  of
unauthorized  use or disclosure of such formulations, or that others will not be
able  to independently develop such formulations. Gateway's product formulations
are  not  protected by patents and are generally not patentable. Gateway intends
to obtain international trademarks, particularly Japanese trademarks, as Gateway
enters  foreign markets. Trademark registrations are either issued or pending in
the United States Patent and Trademark Office and in comparable agencies in many
other  countries.  Gateway  considers  its  trademarks  and trade names to be an
important factor in its business.

GOVERNMENT REGULATION

     Gateway  is  subject  to  and  affected  by  extensive  laws,  governmental
regulations,  administrative  determinations,  court  decisions,  and  similar
constraints  (as  applicable, at the federal, state and local levels) including,
among  other  things,  regulations  pertaining  to  (I)  the  formulation,
manufacturing,  packaging, labeling, distribution, importation, sale and storage
of  Gateway's  products,  (ii)  product claims and advertising (including direct
claims  and  advertising  by  Gateway  as  well  as  claims  and  advertising by
distributors,  for  which  Gateway  may  be  held  responsible), (iii) Gateway's
network  marketing  system,  (iv)  transfer pricing and similar regulations that
affect the personal import laws, and (v) taxation of distributors, which in some
instances  may impose an obligation on Gateway to collect the taxes and maintain
appropriate  records.

PRODUCTS

     The  formulation, manufacturing, packaging, storing, labeling, advertising,
distribution, and sale of Gateway's products are subject to regulation by one or
more  governmental agencies, including the Food and Drug Administration ("FDA"),
the  Federal  Trade  Commission  ("FTC"), the Consumer Product Safety Commission
("CPSC"),  the  United  States  Department  of  Agriculture  ("USDA"),  the
Environmental  Protection  Agency  ("EPA") and the United States Postal Service.
Gateway's  activities  are  also regulated by various agencies of the states and
localities.  The FDA, in particular, regulates the formulation, manufacture, and
labeling of foods and dietary supplements, such as those distributed by Gateway.
FDA  regulations  require  manufacturers and distributors of certain products to
meet  relevant  good  manufacturing  practice  ("GMP")  regulations  for  the
preparation,  packing  and  storage  of  these  products.  GMP's  for  dietary
supplements have yet to be promulgated, but are expected to be proposed. Gateway
does  not  anticipate that the promulgation of any GMP's for dietary supplements
would  have  a  material  impact  on  Gateway.

     The  1994 Dietary Supplement Health and Education Act ("DSHEA") revised the
provisions  of  the Federal Food, Drug and Cosmetic Act ("FFDCA") concerning the
composition  and  labeling  of  dietary  supplements  and,  Gateway believes, is
generally  favorable to the dietary supplement industry. The legislation creates
a  new  statutory  class  of  "dietary  supplements."  This  new  class includes
vitamins,  minerals,  herbs, amino acids, and other dietary substances for human
use  to  supplement  the  diet,  and  the legislation grandfathers, with certain
limitations,  dietary  ingredients  that  were  on the market before October 15,
1994.  A  dietary  supplement which contains a new dietary ingredient (i.e., one
not on the market before October 15, 1994) will require evidence of a history of
use  or  other evidence of safety establishing that it is reasonably expected to
be  safe.  Manufacturers  of  dietary  supplements  that  make  certain types of
statements on dietary supplements, including certain product performance claims,
must  have  substantiation that such statements are truthful and not misleading.

     The  majority of the products marketed by Gateway are classified as dietary
supplements under the FFDCA. In addition, the adoption of new regulations in any
of  Gateway's markets, or changes in the interpretation of existing regulations,
could  have  a  material  adverse  effect on Gateway. In September 1997, the FDA
issued  regulations  governing  the labeling and marketing of dietary supplement
products. The regulations cover the following: (1) the identification of dietary
supplements  and their nutrition and ingredient labeling; (2) the terminology to
be  used  for  nutrient content claims, health content claims, and statements of
nutritional support; (3) labeling requirements for dietary supplements for which
"high  potency"  and  "antioxidant" claims are made; (4) notification procedures
for  statements  on  dietary  supplements;  and  (5)  pre-market  notification
requirements  for  new  dietary  ingredients  in  dietary  supplements.  The
notification  procedures  became  effective  in  November  1997,  while  the new
labeling  requirements  became  effective in March 1999. Gateway was required to
revise  a  substantial  number  of  its product labels by the effective date. In
addition,  Gateway  is  required  to  continue  its  ongoing program of securing


                                       23
<PAGE>
substantiation  of  its  product  performance claims and of notifying the FDA of
certain  types  of  performance  claims  made  for  its  products.

     In  addition,  in certain markets, including the United States, claims made
with  respect to dietary supplements or other products of Gateway may change the
regulatory status of the products. In the U.S., for example, it is possible that
the  FDA  could  take  the  position  that  claims made for certain of Gateway's
products  place  those  products  within  the scope of an FDA "over-the-counter"
("OTC")  drug  monograph.  OTC  monographs prescribe permissible ingredients and
appropriate  labeling  language,  and  require  the  marketer or supplier of the
products  to  register and file annual drug listing information with the FDA. In
the  event  that  the  FDA  asserted  that  product claims for some of Gateway's
products  caused  them to fall within the scope of OTC monographs, Gateway would
be required either to comply with the applicable monographs or change the claims
made  in  connection  with  the products. There can be no assurance that Gateway
could  do  so  effectively,  or that any such changes would not adversely affect
sales  and  marketing  of  an affected product. Gateway's substantiation program
involves  compiling  and  reviewing  the  scientific literature pertinent to the
ingredients  contained  in  Gateway's  products.

     As  a  marketer of food and dietary supplements and other products that are
ingested  by  consumers,  Gateway is subject to the risk that one or more of the
ingredients in its products may become the subject of adverse regulatory action.
For example, on April 10, 1996, the FDA issued a statement warning consumers not
to  purchase  or  ingest  dietary supplements containing ephedrine (found in the
ingredient  Ma  Huang)  that  are  claimed  to produce such effects as euphoria,
heightened  awareness, increased sexual sensations, or increased energy, because
these  products  pose  significant  adverse  health  risks, including dizziness,
headache,  gastrointestinal  distress,  irregular heartbeat, heart palpitations,
heart  attack,  strokes, seizures, psychosis, and death. Gateway does not market
either  of  its products containing Ma Huang (Trim Easy Trim Easy Plus) with any
of  these  claims.  On  June  4,  1997, the FDA issued a proposed regulation for
dietary  supplements  containing  ephedrine  alkaloids.  The proposed regulation
would  prohibit  dietary  supplements  containing  eight  milligrams  or more of
ephedrine  alkaloids  per serving, and would not permit such products to contain
any other stimulant, diuretic, or laxative ingredients. In addition, labeling of
supplements  would  be  prohibited from suggesting or recommending conditions of
use  that  would  result  in  an intake of eight milligrams or more of ephedrine
alkaloids  within a six-hour period, or a total daily intake of 24 milligrams or
more.  The FDA proposal would also require a warning not to take the product for
more than seven days, and would prohibit the supplements from being represented,
either  expressly  or  implicitly, as being suitable for long-term uses, such as
for  weight  loss  or  body  building.  Similarly,  claims for increased energy,
increased  mental  concentration,  or  enhanced  well-  being that encourage the
consumer  to  take  more  of the product to achieve more of the purported effect
would  be  required to be accompanied by a warning stating that taking more than
the  recommended  serving  may  cause a heart attack, stroke, seizure, or death.

     Gateway  has  discontinued  its  products  containing  Ma  Huang  with  the
restrictions  on  this  ingredient.  While  Gateway  believes  that its products
containing  Ma  Huang  could  be  reformulated  and  re-labeled, there can be no
assurance in that regard or that reformulation and/or re-labeling would not have
an  adverse  effect  on  sales  of  such  product.

     Gateway  has  also discontinued its product containing Natural Progesterone
with  the  restrictions  on  this  ingredient.  While  Gateway believes that its
product  containing  Natural  Progesterone could be reformulated and re-labeled,
there  can  be  no  assurance  in  that  regard  or  that  reformulation  and/or
re-labeling  would  not  have  an  adverse  effect  on  sales  of  such product.

     Some  of the products marketed by Gateway are considered conventional foods
and  are  currently  labeled as such. Both this category of products and dietary
supplements  are  subject  to the Nutrition Labeling and Education Act ("NLEA"),
and  regulations  promulgated  thereunder,  which  regulates  health  claims,
ingredient  labeling,  and nutrient content claims characterizing the level of a
nutrient  in  the  product.

     The FTC, which exercises jurisdiction over the advertising of all Gateway's
products,  has in the past several years; instituted enforcement actions against
several  dietary  supplement  companies  for false and misleading advertising of
certain products. These enforcement actions have resulted in consent decrees and
monetary  payments by the companies involved. In addition, the FTC has increased
its  scrutiny  of  the use of testimonials, such as those, which are utilized by
Gateway. While Gateway has not been the target of FTC enforcement action for the
advertising  of  its  products,  there can be no assurance that the FTC will not
question Gateway's advertising or other


                                       24
<PAGE>
operations  in  the  future. In November of 1998, the FTC issued a guide for the
dietary  supplement  industry,  describing how the FTC applies the law, which it
administers to dietary supplements advertisements. It is unclear whether the FTC
will  subject  such  advertisements,  including  those  of Gateway, to increased
surveillance to ensure compliance with the principles set forth in the guide

     The  Right  Solution Gateway's principal suppliers are American Nutritional
Corporation,  Best Formulations, Botanical Blessings, Filpak, Inc., Nutranomics,
Paragon Labs and Robinson Pharma. Lead times for product delivery range from 4 o
10  weeks.

     Gateway  has  the exclusive licensing agreement with The Chelsea Collection
for  Jeunesse  by  Francois  Products  as  well  as  G-H-3.

     Through  its  manuals, seminars, and other training materials and programs,
Gateway  attempts to educate its distributors as to the scope of permissible and
impermissible  activities  in each market. Gateway also investigates allegations
of  distributor  misconduct.  However,  Gateway's  distributors  are independent
contractors,  and  Gateway  is  not  able  to  directly  monitor all distributor
activities.  As  a  consequence,  there  can  be  no  assurance  that  Gateway's
distributors will comply with applicable regulations. Misconduct by distributors
could  have  a  material  adverse effect on Gateway in a particular market or in
general.

     In  markets outside the United States, including Japan, prior to commencing
operations  or  marketing  its  products,  Gateway  may  be  required  to obtain
approvals,  licenses,  or  certifications from a country's ministry of health or
comparable agency. Approvals or licensing may be conditioned on reformulation of
Gateway's  products for the market or may be unavailable with respect to certain
products  or  product  ingredients.  Gateway must also comply with local product
labeling and packaging regulations that vary from country to country.

     Gateway  is  unable  to predict the nature of any future laws, regulations,
interpretations,  or  applications,  nor  can  it predict what effect additional
governmental  regulations  or  administrative  orders,  when and if promulgated,
would  have  on  its  business  in  the future. They could, however, require the
reformulation  of  certain  products  not able to be reformulated, imposition of
additional record keeping requirements, expanded documentation of the properties
of  certain  products,  expanded or different labeling and additional scientific
substantiation  regarding  product ingredients, safety or usefulness. Any or all
such  requirements  could have a material adverse effect on Gateway's results of
operations  and  financial  condition.

NETWORK MARKETING SYSTEM

     Gateway's  network  marketing  system is subject to a number of federal and
state  regulations  administered  by  the  FTC  and  various  state  agencies.
Regulations applicable to network marketing organizations are generally directed
at  ensuring  that  product  sales  are  ultimately  made  to consumers and that
advancement  within  such  organizations be based on sales of the organizations'
products  rather than investments in the organizations or other non-retail sales
related  criteria.  For  instance,  in  certain  markets there are limits on the
extent  to  which  distributors  may  earn  commissions  on  sales  generated by
distributors that were not directly sponsored by the distributor. Where required
by  law, Gateway obtains regulatory approval of its network marketing system or,
where such approval is not required the favorable opinion of local counsel as to
regulatory compliance. However, Gateway remains subject to the risk that, in one
or  more  of  its  markets,  its  marketing  system  could be found not to be in
compliance  with applicable regulations. Failure by Gateway to comply with these
regulations  could  have  a  material  adverse effect on Gateway in a particular
market  or  in  general.

     Gateway  is  also  subject  to  the risk of private party challenges to the
legality of its network marketing system. For example, in Webster v. Omnitrition
International,  Inc.,  79  F.3d 776 (9th Cir. 1996), the "multi-level marketing"
program  of  Omnitrition International, Inc. ("Omnitrition") was challenged in a
class  action  by  certain Omnitrition distributors who alleged that Omnitrition
was  operating  an  illegal  "pyramid  scheme" in violation of federal and state
laws. Gateway believes that its network marketing system satisfies the standards
set  forth  in  the  Omnitrition case and other applicable statutes and case law
defining  a  legal  marketing system, in part based upon significant differences
between  Gateway's  marketing system and that described in the Omnitrition case.
Further,  it  is an ongoing part of Gateway's business to monitor and respond to
regulatory  and  legal  developments,  including  those


                                       25
<PAGE>
that  may  affect  its  network  marketing  system.  However,  the  regulatory
requirements  concerning  network-marketing systems do not include "bright line"
rules  and  are  inherently  fact-based.  An adverse judicial determination with
respect  to  Gateway's  network  marketing  system could have a material adverse
effect  on  Gateway.  Among  other  things,  such  a determination could require
Gateway  to  make  modifications  to  its  network  marketing  system, result in
negative publicity or have a negative impact on distributor morale. In addition,
adverse  rulings  by  courts  in  any  proceedings  challenging  the legality of
multi-level marketing systems, even in those not involving Gateway, could have a
material  adverse  effect  on  Gateway.

     The  Right  Solution Gateway has had correspondence with the State of South
Dakota  which  indicates  that the multilevel marketing program does not violate
any  portion  the  South Dakota Business Opportunity Act. The company is free to
offer  and  sell its business opportunity in South Dakota and is not required to
register with the state.

COMPLIANCE PROCEDURES

     As  indicated above, Gateway, its products and its network marketing system
are  subject,  both  directly  and  indirectly through distributors' conduct, to
numerous  federal,  state, and local laws and regulations in all its markets. In
order  to  assist  Gateway  in  achieving  and maintaining compliance with these
numerous  laws  and  regulations,  Gateway  has  hired a local Las Vegas firm to
handle  all  compliance issues. This firm has expertise in rules and regulations
governing  our  industry.

     In  1996,  Gateway began to institute formal regulatory compliance measures
by  developing a system to identify specific complaints against distributors and
to  remedy  any  violations  by  distributors  through  appropriate  sanctions,
including  warnings,  suspensions  and,  when  necessary,  terminations.  In its
manuals,  seminars and other training programs and materials, Gateway emphasizes
that  distributors  are  prohibited from making therapeutic claims for Gateway's
products.

     Gateway's  general  policy regarding acceptance of distributor applications
from  individuals  who do not reside in one of Gateway's markets is to refuse to
accept  such  individual's  distributor  application.

     In  order  to  comply  with  regulations that apply to both Gateway and its
distributors,  Gateway  conducts  considerable  research  into  the  applicable
regulatory  framework prior to entering any new market to identify all necessary
licenses  and  approvals  and  applicable limitations on Gateway's operations in
that  market.  Gateway  devotes substantial resources to obtaining such licenses
and approvals and bringing its operations into compliance with such limitations.
Gateway also researches laws applicable to distributor operations and revises or
alters  its  distributor  manuals  and  other training materials and programs to
provide  distributors  with  guidelines for operating a business, marketing, and
distributing  Gateway's  products and similar matters, as required by applicable
regulations  in  each  market.  Gateway,  however,  is  unable  to  monitor  its
supervisors  and  distributors  effectively  to  ensure  that  they refrain from
distributing  Gateway's  products  in  countries where Gateway has not commenced
operations,  and  Gateway  does  not  devote  significant  resources  to  such
monitoring.  In  the  event  that  Gateway  discovers distributor misconduct, it
imposes  disciplinary measures against the distributor ranging from probation to
expulsion.

     In  addition,  regulations  in existing and new markets are often ambiguous
and  subject  to  considerable  interpretive  and  enforcement discretion by the
responsible  regulators.  Moreover,  even  when Gateway believes that it and its
distributors  are  initially  in compliance with all applicable regulations, new
regulations  are  regularly  being  added  and  the  interpretation  of existing
regulations is subject to change. Further, the content and impact of regulations
to  which  Gateway  is subject may be influenced by public attention directed at
Gateway, its products or its network marketing system, so that extensive adverse
publicity about Gateway, its products or its network marketing system may result
in  increased  regulatory  scrutiny.

     It  is  an  ongoing part of Gateway's business to anticipate and respond to
such  new  and  changing regulations and make corresponding changes in Gateway's
operations  to  the  extent  practicable.  However,  while  Gateway  devotes
considerable resources to maintaining its compliance with regulatory constraints
in each of its markets, there can be no assurance that Gateway would be found to
be  in  full compliance with applicable regulations in all of its markets at any
given  time  or  that the regulatory authorities in one or more markets will not
assert, either retroactively or prospectively or both, that Gateway's operations
are  not  in  full  compliance.  Such  assertions  or  the


                                       26
<PAGE>
effect  of  adverse regulations in one market could negatively affect Gateway in
other  markets  as  well by causing increased regulatory scrutiny in those other
markets  or  as  a  result  of  the  negative publicity generated in those other
markets.  Such  assertions  could have a material adverse effect on Gateway in a
particular  market  or  in  general. Furthermore, depending upon the severity of
regulatory  changes  in  a  particular  market  and  the  changes  in  Gateway's
operations that would be necessitated to maintain compliance, such changes could
result  in  Gateway experiencing a material reduction in sales in such market or
determining to exit such market altogether. In such event, Gateway would attempt
to  devote  the  resources  previously devoted to such market to a new market or
markets  or  other  existing  markets,  but  there can be no assurance that such
transition would not have an adverse effect on Gateway's business and results of
operations either in the short or long term.

YEAR 2003 COSTS AND CHANGES IN FINANCIAL CONDITIONS

     Sales for the year ended December 31, 2004 increased $31,000 to $1,154,000,
from  sales  of $1,123,000 for the year ended December 31, 2003. The increase in
sales  was  a  result  of Quality Distribution Services (QDS) sales during 2004.

     Gross profit of $810,000 for the year ended December 31, 2004, was $20,000,
or  2.4% lower than the gross profit of $830,000 for the year ended December 31,
2003.  As  a  percentage of sales, gross profit for 2004 as compared to the same
period  in  the  prior  year  decreased  approximately  4%  from 74% to 70%. The
decrease  in  gross  profit  as a percentage of sales primarily resulted from an
increase  in  costs  of goods sold. The increase in costs of goods sold reflects
higher  prices  paid  for  certain  goods.

SALES, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling,  general,  and  administrative expenses, as a percentage of sales,
were  805%  for  2004 as compared to 211% for the same period in 2003.  Selling,
general,  and  administrative  expenses  for the period ended December 31, 2004,
increased  $6,933,000  ,  292%, to $9,305,000 from $2,372,000 in the year ending
December  31,  2003.  The  increase  in  these  expenses resulted primarily from
outside  consulting  paid  with  stock  to  certain  consultants hired to assist
Gateway  with acquiring additional operations, real estate, product research and
marketing  plans.

LOSSES

     Gateway  had a net loss of $7,394,000 for the year ended December 31, 2004,
compared to a net loss of $1,723,000 in 2003. Gateway had a loss from operations
of  $8,495,000 in 2004 compared to a loss from operations of $1,542,000 in 2003.
Gateway's  substantial  increase  in  losses from operations and net losses were
attributable  to  a significant increase in payments to consultants both in cash
and  in  stock  for  services as reported in selling, general and administrative
expenses

LIQUIDITY AND CAPITAL RESOURCES

     Gateway=s  working  capital needs and capital expenditure requirements have
increased  as  a  result  of  increased  cost  associated  with  hiring  outside
consultants.  Required  working capital and capital expenditure requirements are
expected  to  be  met  from  cash  flows  from  operations,  potential  future
acquisitions,  borrowings,  and  the  sale  of Gateway=s equity securities.  For
fiscal  year  2004, Gateway=s working capital remained a negative (deficit) with
the  deficit  increasing  by $4,098,000, or 110% deficit increase to $358,000 at
December  31,  2003  from  ($3,740,000) at December 31, 2003.  This increase was
primarily  attributable  to  real  estate purchases, an Employee Stock Incentive
Program  and sale of equity securities and reduction in debt by vendors and note
holders.

     For  fiscal  year  2004,  Gateway's operations used cash flow of $4,479,000
compared  to  net  cash  used  of  $1,095,000  for  the previous fiscal year, an
increase  in  cash  used  of  $3,384,000.

     Gateway had a negative cash flow from investing activities of $4,802,000 in
2004,  as  compared  to  a  negative  cash  flow  of  $139,000  in  2003.


                                       27
<PAGE>
     Net  increase of term debt, Non-Employee Directors and Consultants Retainer
Stock  Plan  for  the  Year 2004 provided $9,155,000 in cash flow from financing
activities  in  2004  compared  to $1,397,000 in 2003 an increase of $7,758,000.

     Gateways stockholders equity (deficiency) improved $4,098,000 to a positive
stockholders  equity  of  $358,000  in  2004  from  a stockholders deficiency of
$3,740,000  in  2003.

     Cash,  cash  equivalents  and  marketable  securities  totaled  $37,000  at
December  31,  2004  compared  to  $163,000  at December 31, 2003, a decrease of
$126,000.

     Management anticipates that its expansion strategy will require significant
expenditures  for the investment in the Chelsea Collection, as well as increased
general  and  administrative  expenses primarily due to the hiring of additional
personnel and advertising expenses related to operations. These expenditures are
expected  to  be  funded  by  revenues  from  operations.  The Company continues
selling  equity  securities  to fund expansion activities.  Selling, general and
administrative  expenses  are also expected to increase in future periods due to
the  increased legal and accounting expenses incurred by the Company in order to
establish  and  maintain  its  reporting status with the Securities and Exchange
Commission.  In addition, the Company intends to pursue, as part of its business
strategy,  future  growth through acquisitions which may involve the expenditure
of  significant  funds.  Depending  upon  the  nature, size and timing of future
acquisitions,  the  Company  may be required to obtain additional debt or equity
financing  in  connection  with  such  future  acquisitions.  There  can  be  no
assurance,  however, that additional financing will be available to the Company,
when  and  if  needed,  on acceptable terms or at all.  Management believes that
future  cash  flow  from  operations and equity sales will be sufficient to fund
these  expenditures.

     Gateway  relied  heavily  on  the  issuance  of  its  common  stock  to pay
consultants and other professionals pursuant to Form S-8 registration statements
during  2003 and 2004. The result of such issuances was a massive dilution and a
precipitous  decline  in  the  price of Gateway's common stock resulting in five
reverse  stock  splits, one in the first half of 2003 for 3,000 to 1, one in the
second  quarter of 2004 for 900 to 1, one in the third quarter of 2004 for 1,000
to  1,  one  in  the  last  quarter  of 2004 for 1,000 to 1 and one in the first
quarter  of  2005  for 500 to 1. In 2003 an Employee Stock Incentive Plan (ESIP)
was  set up and through stock issues to the public, Gateway raised $1,889,000 in
2003  and  $6,907,000  in  2004  in  cash  to  provide  the  vehicle  to finance
activities.  Based  upon  Gateway's current financial situation and intention of
procuring and marketing new products, it is likely that Gateway may rely heavily
on  the issuance of its shares to pay consultants and other professionals during
2005.

CRITICAL  ACCOUNTING  POLICIES

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

STOCK-BASED  COMPENSATION

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


                                       28
<PAGE>
     We  elected to continue to account for stock-based compensation plans using
the  intrinsic  value-based  method  of  accounting  prescribed  by  APB No. 25,
"Accounting  for Stock Issued to Employees," and related interpretations.  Under
the provisions of APB No. 25, compensation expense is measured at the grant date
for  the  difference between the fair value of the stock and the exercise price.

RECENT  ACCOUNTING  PRONOUNCEMENTS

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

     Any  goodwill  impairment  loss  recognized as a result of the transitional
goodwill  impairment test will be recorded as a cumulative effect of a change in
accounting  principle no later than the end of fiscal year 2002. The adoption of
SFAS  No.  142  had no material impact on our consolidated financial statements.
SFAS  No.  143  establishes  accounting  standards  for  the  recognition  and
measurement  of  an  asset  retirement  obligation  and  its  associated  asset
retirement  cost.  It  also  provides  accounting guidance for legal obligations
associated  with  the  retirement of tangible long-lived assets. SFAS No. 143 is
effective  in  fiscal  years  beginning after June 15, 2002, with early adoption
permitted.  We  expect  that  the  provisions  of  SFAS  No. 143 will not have a
material impact on our consolidated results of operations and financial position
upon  adoption.  We  plan  to  adopt  SFAS  No.  143  effective January 1, 2003.

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

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

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

     In  October  2002,  the  FASB  issued  Statement  No. 147, "Acquisitions of
Certain  Financial  Institutions-an  amendment of FASB Statements No. 72 and 144
and  FASB  Interpretation  No.  9,"  which  removes  acquisitions  of  financial
institutions  from  the  scope  of  both  Statement  72 and Interpretation 9 and
requires  that those transactions be accounted for in accordance with Statements
No.  141,  Business  Combinations,  and  No.  142, Goodwill and Other Intangible
Assets.  In  addition,  this  Statement  amends SFAS No. 144, Accounting for the
Impairment  or  Disposal of Long-Lived Assets, to include in its scope long-term
customer-relationship  intangible  assets  of  financial  institutions  such  as
depositor  and  borrower-relationship  intangible  assets  and credit cardholder
intangible  assets.  The


                                       29
<PAGE>
requirements  relating  to  acquisitions of financial institutions are effective
for  acquisitions  for  which  the date of acquisition is on or after October 1,
2002.  The  provisions  related  to accounting for the impairment or disposal of
certain  long-term  customer-relationship  intangible  assets  are  effective on
October  1,  2002. The adoption of this statement did not have a material impact
to  our  financial  position  or results of operations as we have not engaged in
either of these activities.

     In  December  2002,  the  FASB  issued  Statement  No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure," which amends FASB Statement
No. 123, Accounting for Stock-Based Compensation, to provide alternative methods
of  transition  for  a  voluntary  change  to  the  fair  value  based method of
accounting  for  stock-based employee compensation.  In addition, this statement
amends  the  disclosure  requirements  of  Statement  123  to  require prominent
disclosures  in both annual and interim financial statements about the method of
accounting  for  stock-based  employee compensation and the effect of the method
used  on  reported  results.  The  transition  guidance  and  annual  disclosure
provisions of Statement 148 are effective for fiscal years ending after December
15,  2002,  with  earlier  application  permitted in certain circumstances.  The
interim  disclosure  provisions  are  effective for financial reports containing
financial statements for interim periods beginning after December 15, 2002.  The
adoption  of  this  statement  did  not  have a material impact on our financial
position  or  results of operations as we have not elected to change to the fair
value  based  method  of  accounting  for  stock-based  employee  compensation.

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

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

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

OFF-BALANCE  SHEET  ARRANGEMENTS

     We do not have any off-balance sheet arrangements.

ITEM 7.     FINANCIAl STATEMENTS.

     The financial statements and related notes are included as part of this
report as indexed in the appendix on page F-1 through F-17.


                                       30
<PAGE>
ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE.

     As  reported  in our Current Report on Form 8-K filed on February 18, 2004,
as  amended  on  Form  8-K/A,  filed on March 18, 2004, on February 18, 2004, we
terminated Sellers & Andersen, LLC as our principal accountants engaged to audit
our  financial  statements.  S&A  were  terminated, effective as of February 18,
2004,  because  they  were  not  registered  with  the Public Company Accounting
Oversight Board (PCAOB).  Madsen & Associates CPAS Inc., who are registered with
the  PCAOB,  were  appointed  in  their  place.

     Sellers  and  Andersen's  reports  on our financial statements for the year
ended  December  31,  2002 did not contain an adverse opinion or a disclaimer of
opinion,  and  were not qualified or modified as to uncertainty, audit scope, or
accounting  principles,  except  that Sellers and Andersen's report for the year
ended  December  31, 2002 raised substantial doubt about our ability to continue
as  a  going  concern.  Sellers and Andersen were not engaged as our independent
auditors  for  the  fiscal  year  ended  December  31,  2001.  Perrin, Fordree &
Company,  P.C. ("Perrin") served as our independent auditors for the fiscal year
ended  December  31,  2001.  On  Madsen  &  Associates November 13, 2002, Perrin
resigned  from the client-auditor relationship with us.  Form 8-K was duly filed
by  us on November 14, 2002 us to reflect a change in our certifying accountant.

     The  decision  to  change  accountants  was recommended and approved by our
Board  of  Directors.

     During  the  two most recent fiscal years and any subsequent interim period
through  February 18, 2004, there have not been any disagreements between us and
Sellers  and  Andersen  on  any  matter  of  accounting principles or practices,
financial  statement  disclosures,  or  auditing  scope  or  procedure,  which
disagreements,  if  not  resolved  to  the satisfaction of Sellers and Andersen,
would  have  caused  it  to  make  reference  to  the  subject  matter  of  the
disagreements  in  connection  with  its reports on the financial statements for
such  periods.

     On February 18, 2004, we engaged Madsen & Associates, CPAs Inc., ("Madsen")
certified  public  accountants,  as our independent accountants to report on our
balance  sheet  as  of December 31, 2004, and the related combined statements of
income,  stockholders'  equity  and  cash  flows  for  the year then ended.  The
decision  to  appoint  Madsen  was  approved  by  our  Board  of  Directors.

     During  our  two most recent fiscal years and any subsequent interim period
prior to the engagement of Madsen, neither we nor anyone on our behalf consulted
with  Madsen  regarding either (i) the application of accounting principles to a
specified  transaction,  either  contemplated  or proposed, or the type of audit
opinion  that  might  be  rendered  on Madsen's financial statements or (ii) any
matter  that was either the subject of a "disagreement" or a "reportable event,"
as  those  terms  are  defined  in  Regulation  S-K,  Items  304(a)(1)(iv)  and
304(a)(1)(v).

     We  provided  Sellers and Anderson with a copy of the disclosures contained
in  our  Current  Report  on Form 8-K, filed with the Commission on February 25,
2004,  and our Form 8-K/A, filed with the Commission on March 18, 2004.  Sellers
and  Anderson's  responses  were filed as an exhibit to our Form 8-K, filed with
the  Commission  on  February  25,  2004,  and  our  Form  8-K/A, filed with the
Commission  on  March  18,  2004.

ITEM 8A.     CONTROLS AND PROCEDURES.

     Disclosure  controls  and procedures are controls and other procedures that
are  designed  to  ensure that information required to be disclosed by us in the
reports  that  we  file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange  Commission's  rules  and  forms.  Disclosure  controls  and procedures
include,  without  limitation,  controls  and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange  Act  is  accumulated and communicated to our management, including our
principal  executive  and  financial  officers,  as  appropriate to allow timely
decisions  regarding  required  disclosure.

     Evaluation of disclosure and controls and procedures.  As of the end of the
period  covered  by  this  Annual  report, we conducted an evaluation, under the
supervision  and with the participation of our chief executive officer and chief
financial  officer,  of  our  disclosure  controls and procedures (as defined in
Rules  13a-15(e)  of  the  Exchange


                                       31
<PAGE>
Act).  Based on this evaluation, our chief executive officer and chief financial
officer  concluded  that our disclosure controls and procedures are effective 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 Securities and Exchange Commission rules
and forms.

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

ITEM 8B.     OTHER INFORMATION.

     None.

                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

     Our directors and executive officer are:

<TABLE>
<CAPTION>
      NAME         AGE                     POSITION                      POSITION HELD SINCE
-----------------  ---  -----------------------------------------------  -------------------
<S>                <C>  <C>                                              <C>
Richard A. Bailey   49  President, Chief Executive Officer and                   1993
                        Chairman of the Board of Directors
Florian R. Ternes   56  Director, Chief Operating Officer and Secretary          1995
</TABLE>

     Our  executive  officers  are  elected  annually by our board of directors.
There  are  no  family relationships among our directors and executive officers.

     Richard  A. Bailey has served as our Chairman, Chief Executive Officer, and
President  since  our  inception  in  May 1993.  In 1981, Mr. Bailey purchased a
small,  local  mobile  wash  company  in  North  Las Vegas, Nevada.  He expanded
operations  to include aviation services, growing our company from two employees
in  1981  to  in excess of three hundred by 1988.  He served as president of the
business  as  it grew to $7,000,000 a year in revenue, operating in twenty-seven
cities throughout the United States.  In 1990, Mr. Bailey became involved in the
network  marketing/direct selling business.  In 1997, Mr. Bailey elected to sell
the  aviation  company  to  International  Total Services in order to devote one
hundred percent of his time to Gateway.  Mr. Bailey will serve as director until
the  next  annual  shareholders  meeting.

     Florian  R.  Ternes has served as our Chief Operating Officer and Secretary
since  1995.  He  became  a director in 1999. He began his career in the airline
industry  and  became  City  Vice  President  of  Continental  Airlines, Denver,
Colorado  hub  in  1989,  where  he managed approximately 7,500 employees with a
budget  of $250 million.  His airline career involved running several large hubs
for  various  airlines which included the Northwest International Gateway in Los
Angeles,  the  Detroit Hub for Republic Airlines, the Denver Hub for Continental
Airlines.  In  1995,  he  left the airline industry to join Richard A. Bailey in
other  business opportunities.  As one of those ventures, he became president of
a  nutritional  company  generating  revenues  in  excess of $13,000,000 a year.
After  assisting  in  completing  its successful public offering, he resigned in
January  1998  to  join  Gateway  on  a  full-time  basis.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

     Richard  Bailey  has been named as a defendant in a civil injunctive action
filed on March 28, 2003, by the Securities and Exchange Commission in the United
States  District  Court  in  the Northern District of Illinois, Civil Action No.
03-C-2182.  The  action  alleges  that  the  named defendants were involved in a
scheme  to  violate the registration, anti-fraud and reporting violations of the
federal securities laws.  The complaint seeks injunctive relief as to Mr. Bailey
that  could prevent him from serving as an officer or a director for the Company
in  the  future, or other relief that could impact Mr. Bailey's ability to serve
the  Company.


                                       32
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Under  Section  16(a) of the Exchange Act, our directors and certain of our
officers,  and  persons  holding  more  than  10 percent of our common stock are
required  to file forms reporting their beneficial ownership of our common stock
and  subsequent  changes  in  that  ownership  with  the Securities and Exchange
Commission.  Such  persons  are  also  required to furnish us with copies of all
forms  so  filed.

     Based solely upon a review of copies of such forms filed on Forms 3, 4, and
5, we are aware of one person who during the year ended December 31, 2004, was a
director,  officer,  or beneficial owners of more than ten percent of our common
stock,  and  who  failed to file, on a timely basis, reports required by Section
16(a) of the Securities Exchange Act of 1934 during such fiscal year as follows:

     -     Florian R. Ternes.  Mr. Ternes was an officer and director during the
           year  2004.  Mr.  Ternes  failed to timely file a Form 4 for the year
           ended December 31, 2004.

CODE OF ETHICS

     We  have  adopted  a code of ethics that applies to our principal executive
officer,  principal  financial  officer,  principal  accounting  officer  or
controller,  or  persons  performing  similar  functions.  The code of ethics is
designed  to  deter  wrongdoing  and  to  promote:

-    Honest  and  ethical  conduct,  including the ethical handling of actual or
     apparent  conflicts  of  interest  between  personal  and  professional
     relationships;

-    Full,  fair, accurate, timely, and understandable disclosure in reports and
     documents  that  we  file  with, or submits to, the SEC and in other public
     communications  made  by  us;

-    Compliance  with  applicable  governmental  laws,  rules  and  regulations;

-    The  prompt  internal reporting of violations of the code to an appropriate
     person  or  persons  identified  in  the  code;  and

-    Accountability  for  adherence  to  the  code.

     A  copy  of  our  code  of  ethics  that applies to our principal executive
officer,  principal  financial  officer,  principal  accounting  officer  or
controller,  or  persons performing similar functions was filed as an exhibit to
our  Annual  report  for  the  year  ended  December  31,  2003,  filed with the
Commission on April 14, 2004. We have posted a copy of the code of ethics on our
website  at  http://www.rightsolution.com.
             ----------------------------

     We  will  provide to any person without charge, upon request, a copy of our
code  of ethics.  Any such request should be directed to our corporate secretary
at  3220  Pepper  Lane,  Las  Vegas,  Nevada  89120.

ITEM 10.     EXECUTIVE COMPENSATION.

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

SUMMARY  COMPENSATION  TABLE

     The  following  table  provides  certain summary information concerning the
compensation earned by the named executive officers (determined as of the end of
the  last  fiscal  year)  for  services  rendered  in  all capacities to Gateway
Distributors,  Ltd.  and  our  subsidiaries:


                                       33
<PAGE>
<TABLE>
<CAPTION>
                                ANNUAL COMPENSATION                  LONG TERM COMPENSATION
--------------------------------------------------------------------------------------------------------------
                                                                    AWARDS             PAYOUTS
                                                           -----------------------------------
                                                           RESTRICTED    SECURITIES
                                            OTHER ANNUAL      STOCK      UNDERLYING      LTIP      ALL OTHER
NAME AND PRINCIPAL         SALARY   BONUS   COMPENSATION    AWARD(S)    OPTIONS/SARS   PAYOUTS   COMPENSATION
POSITION            YEAR    ($)      ($)         ($)           ($)           (#)         ($)          ($)
------------------  ----  --------  ------  -------------  -----------  -------------  --------  -------------
<S>                 <C>   <C>       <C>     <C>            <C>          <C>            <C>       <C>
Richard A. Bailey   2002    84,000     -0-            -0-       20,000            -0-       -0-            -0-
                    2003   101,500     -0-            -0-        3,163            -0-       -0-            -0-
                    2004   216,000     -0-            -0-       16,571            -0-       -0-            -0-
Florian R. Ternes   2002    73,500     -0-            -0-       20,000            -0-       -0-            -0-
                    2003    89,500     -0-            -0-        3,163            -0-       -0-            -0-
                    2004   186,000     -0-            -0-       20,817            -0-       -0-            -0-

--------------------------------------------------------------------------------------------------------------
</TABLE>

     Gateway pays to our officers and directors their traveling expenses, hotel,
food,  car  allowance  and  $300  for  each  board  meeting.  Stock  options and
dividends  will  be  a  consideration  in  the future, based on profitability of
Gateway.

EMPLOYMENT  AGREEMENTS

     We entered into an employment agreement (the "Bailey Employment Agreement")
with  Richard A. Bailey, our president and chief executive officer, dated May 1,
1999.  The Bailey Employment Agreement provides termination of the employment at
the  will  of either us or Mr. Bailey.  The Bailey Employment Agreement provides
for  a  base  salary of $100,000 annually commencing May 1, 1999, which shall be
reviewed  periodically.  Such  review  did in 2003 result in an increase and the
car  allowance included in the May 1, 1999 agreement was implemented during 2003
for  Mr.  Bailey.  In  the event we are unable to pay the annual salary, we will
issue  to  Mr.  Bailey one share of our Common Stock for each dollar owed at the
end of our fiscal year.  In the event that Mr. Bailey's employment is terminated
as  a  result  of  (a)  his  retirement  under  our  retirement program, (b) his
disability  resulting  in absence from his duties to us on a full-time basis for
over one year, c) his death, (d) a material reduction in his responsibilities or
title, or (e) a reduction of his cash compensation by more than 10 percent below
the  highest  annual salary from time to time in effect, we are obligated to pay
to  Mr.  Bailey,  as severance and/or liquidated damages, an amount equal to one
and  one-half  times  his  highest annual earnings during his employment with us
each  year  for a period of five years.  Effective September 1, 2003, Mr. Bailey
agreed  to  a  salary  of  $144,000 annually with the remainder of the agreement
remaining  in  force.

     We entered into an employment agreement (the "Ternes Employment Agreement")
with  Florian R. Ternes, our Secretary and Chief Operating Officer, dated May 1,
1999.  The Ternes Employment Agreement provides termination of the employment at
the  will  of either us or Mr. Ternes.  The Ternes Employment Agreement provides
for  a  base  salary  of $85,000 annually commencing May 1, 1999, which shall be
reviewed  periodically.  Such  review did in 2003 result in an increase, and the
car  allowance included in the May 1, 1999 agreement was implemented during 2003
for  Mr.  Ternes.  In  the event we are unable to pay the annual salary, we will
issue  to  Mr.  Ternes one share of our Common Stock for each dollar owed at the
end  of  our fiscal year. In the event that Mr. Ternes' employment is terminated
as  a  result  of  (a)  his  retirement  under  our  retirement program, (b) his
disability  resulting  in absence from his duties to us on a full-time basis for
over  one  year, (c) his death, (d) a material reduction in his responsibilities
or  title,  or  (e) a reduction of his cash compensation by more than 10 percent
below the highest annual salary from time to time in effect, we are obligated to
pay  to  Mr.  Ternes, as severance and/or liquidated damages, an amount equal to
one and one-half times his highest annual earnings during his employment with us
each  year  for a period of five years.  Effective September 1, 2003, Mr. Ternes
agreed  to  a  salary  of  $132,000 annually with the remainder of the agreement
remaining  in  force.

CONFIDENTIALITY AGREEMENTS

     None.


                                       34
<PAGE>
ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
             RELATED STOCKHOLDER MATTERS.

EQUITY COMPENSATION PLAN INFORMATION

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

     The following table provides information as of the end of the most recently
completed  fiscal  year with respect to compensation plans (including individual
compensation  arrangements)  under which equity securities of the registrant are
authorized  for  issuance,  aggregated  as  follows:

-     All compensation plans previously approved by security holders; and

-     All compensation plans not previously approved by security holders.

<TABLE>
<CAPTION>
                                                                                               NUMBER OF SECURITIES REMAINING
                                 NUMBER OF SECURITIES TO BE                                     AVAILABLE FOR FUTURE ISSUANCE
                                  ISSUED UPON EXERCISE OF        WEIGHTED-AVERAGE EXERCISE        UNDER EQUITY COMPENSATION
                               OUTSTANDING OPTIONS, WARRANTS   PRICE OF OUTSTANDING OPTIONS,     PLANS (EXCLUDING SECURITIES
                                         AND RIGHTS                 WARRANTS AND RIGHTS           REFLECTED IN COLUMN (a))
PLAN CATEGORY                               (a)                             (b)                              (c)
-----------------------------  ------------------------------  ------------------------------  -------------------------------
<S>                            <C>                             <C>                             <C>
Equity compensation plans
approved by security holders           26,700,000,000 *                                                   8,290,400,000
Equity compensation plans not
approved by security holders                -0-                             N/A                               N/A
Total                                  26,700,000,000 *                       $                           8,290,400,000
</TABLE>

We  Currently  have  25,000,000,000  shares  of  our common stock authorized for
issuance  for  issuance.  The number of shares authorized for issuance under our
Equity  Compensation  Plans  is  larger  than  the  number of our common shares,
because  the  number of shares registered under our Equity Compensation Plans is
not  affected  by  a  change  in our capital structure, such as a reverse split.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of December 31, 2004, information
concerning ownership of our securities by:

-     Each  person  who  owns  beneficially  more  than  five  percent  of  the
      outstanding  shares  of  our  common  stock;

-     Each  person  who  owns  beneficially  outstanding shares of our preferred
      stock;

-     Each  director;

-     Each  named  executive  officer;  and

-     All  directors  and  officers  as  a  group.

<TABLE>
<CAPTION>
                                                COMMON  SHARES  PREFERRED SHARES BENEFICIALLY
                                                --------------  -----------------------------
                                        BENEFICIALLY OWNED (2)  OWNED  (2)
                                        ----------------------  ------------------------
NAME OF BENEFICIAL OWNER (1)                 NUMBER    PERCENT     NUMBER       PERCENT
------------------------------------------  ---------  -------  -------------  ---------
<S>                                         <C>        <C>      <C>            <C>

Richard A. Bailey                              24,000     0.08    486,000 (3)   9.77 (3)
Florian Ternes                              7,024,010    22.67  4,486,000 (3)  90.22 (3)
                                            ---------  -------  -------------  ---------
All directors and executive officers as a
group (two persons)                         7,048,010    22.75  4,972,000 (3)    100 (3)
                                            =========  =======  =============  =========
</TABLE>

_______________
* Less than one percent.


                                       35
<PAGE>
(1)  Unless  otherwise  indicated, the address for each of these stockholders is
     c/o  Gateway  Distributors, Ltd, 3220 Pepper Lane, Las Vegas, Nevada 89120.
     Also,  unless otherwise indicated, each person named in the table above has
     the  sole  voting and investment power with respect to our shares of common
     stock  which  he  or  she  beneficially  owns.

(2)  Beneficial  ownership  is  determined  in  accordance with the rules of the
     Securities  and  Exchange  Commission.  As  of  the  date  of  this report,
     30,980,590  shares  of  our  common  stock  were issued and outstanding and
     4,972,000  shares  of  our  Series  A  preferred  stock  were  issued  and
     outstanding.

(3)  Series A Preferred Stock.

     There  are no arrangements, known to us, including any pledge by any person
of  our  securities, the operation of which may at a subsequent date result in a
change  in  control  of  Gateway  Distributors,  Ltd.

     There  are  no  arrangements  or  understandings  among members of both the
former  and the new control groups and their associates with respect to election
of  directors  or  other  matters.

ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     December  10,  2002,  our  board  of  Directors  authorized the issuance of
7,000,000  shares  of restricted common stock to Neptune Communications, Inc. In
conjunction  with  non-dilution  agreement  with  the Neptune dated December 10,
2002.  Florian  ternes,  one  of  our  officers  and  directors,  is  the  sole
shareholder,  officer  and  director of Neptune. Following the reverse splits of
our  common stock, the 7,000,000 shres of our common stock, the 7,000,000 shares
of our common stock Have been reduced to one share or our common stock.

ITEM 13. EXHIBITS.


<TABLE>
<CAPTION>
EXHIBIT
  NO.                                IDENTIFICATION OF EXHIBIT
  ---                                -------------------------
<S>          <C>
3.1**        Articles of Incorporation.
3.2**        Amended and Restated Articles of Incorporation.
3.3*         Articles of Amendment to the Articles of Incorporation, filed effective on June 28, 2004.
3.4*         Certificate of Change, filed effective on September 3, 2004
3.5*         Articles of Amendment to the Articles of Incorporation, filed effective on October 4, 2004.
3.6*         Certificate of Amendment to the Certificate of Designation for the Series A Preferred Stock, filed
             effective on November 9, 2004.
3.7*         Certificate of Designation for the Series B Preferred Stock, filed effective on January 18, 2005.
3.8**        Amended By-laws.
10.1**       Financial Advisor Agreement between Sabita Dhingra and Registrant, dated January 12, 2004
10.2**       Financial Advisor Agreement between Venna Kila and Registrant, dated January 12, 2004
10.3**       Financial Advisor Agreement between Patricia M. Spreitzer and Registrant, dated January 12, 2004
10.4**       Financial Advisor Agreement between Avi Sivan and Registrant, dated January 12, 2004
10.5**       Financial Advisor Agreement between Prem Ramchandani and Registrant, dated January 12, 2004
10.6**       Financial Advisor Agreement between Avraham Ovadia and Registrant, dated January 12, 2004
10.7**       Financial Advisor Agreement between Shai Bar-Lavi and Registrant, dated January 12, 2004
10.8**       Financial Advisor Agreement between Glen Bartolini and Registrant, dated January 12, 2004
10.9**       Financial Advisor Agreement between Athony Cassetta and Registrant, dated January 12, 2004
10.10**      Settlement Agreement between William Goins, Jr. and Registrant, dated December 2002
10.11**      Agreement between Suburban Capital Corporation and Registrant, dated January 14, 2003
10.12**      Proposed Consulting and Marketing Agreement between Sprout Investments and Registrant
10.13**      Consultant and Marketing Right Agreement between Mark Neuhaus and Registrant
10.14**      Asset Purchase Agreement between The Right Solution Gateway and Registrant, dated August 11, 2003
10.15**      Endorsement Agreement between Bruce Jenner and The Right Solution, dated November 1, 2003
10.16**      Master Distributorship Indonesia between Master Distributor Mahakam Beta Forma and The Right
             Solution, dated September 23, 2003


                                       36
<PAGE>
10.17**      Promissory Note of  Registrant to Los Cabos Freedom Movement, L.L.C., Lender, dated July 3, 2003
10.18**      Agreement between Tropical Beverage and Registrant, dated September 9, 2003
10.19**      Employment agreement between Blaine Wendtland and Registrant, dated July 7, 2003
10.20**      Promissory Note of Grandma Hamman's to Ed Wendtland, Lender, dated July 3, 2003
10.21**      Consulting Agreement between Jack M. Zufelt and The Right Solutions Gateway, dated July 17, 2003
10.22**      Consulting Agreement between Jack M. Zufelt and The Right Solutions Gateway, dated August 12, 2003
10.23**      Endorsement Agreement between Bruce Jenner and The Right Solution, dated November 1, 2003
10.24**      Consulting Agreement between Jack M. Zufelt and The Right Solutions Gateway, dated December 12,
             2003
10.25**      Consulting Agreement between Jack M. Zufelt and The Right Solutions Gateway, dated December 9,
             2003.
10.26**      Consulting Agreement dated October 27, 2004 by and between the Company and Anthony Munafo.
10.27**      Property Settlement Agreement dated September 29, 2004, by and among Gateway Venture Holdings, a
             Nevada Corporation and SAS Global, Inc., a Nevada Corporation.
10.28**      Consulting Agreement dated August 13, 2004 between the Company and WWD Trading International.
10.29**      Consulting Agreement between the Company and Tarun Mendiratta.
10.30**      Settlement Agreement between the Company, Herbally Yours, and Blaine Wendtland.
10.31*       Consulting Agreement between Jack M. Zufelt and The Right Solution Gateway, dated April 25, 2004.
10.32*       Purchase Agreement between The Chelsea Collection and Gateway Distributors, LTD., dated March 15,
             2004.
10.33*       Consulting Agreement between P2R and The Right Solution Gateway, dated April 15, 2004.
10.34*       Consulting Agreement between Douglas E. Ashman and Gateway Distributors, LTD.
10.35*       Final Asset Purchase Agreement between Los Cabos Beverage and Grandma Hammans, dated December
             20, 2004.
10.36*       Consulting Agreement between Edward Rus and Gateway Distributors, LTD.
10.37*       Consulting Agreement between Grazyna Wnuk and Gateway Distributors, LTD.
10.38*       Non-Disclosure Agreement International Vitamin Co., L.L.C.
10.39*       Agreement between Quality Distribution Services, Inc. and Gateway Distributors, LTD, dated May 20,
             2004.
10.40*       Consulting Agreement between Steven Frye and Gateway Distributors, LTD.
10.41*       Confidentiality Agreement by and between Bill Woo and Gateway Venture Holdings, Inc., dated August
             2, 2004.
10.42*       Consulting Agreement between Jack M. Zufelt and The Right Solutions Gateway, LTD., dated January
             10, 2005.
10.43*       Media Services Agreement between Chief Media, L.L.C. and The Right Solution, dated March 10, 2004.
14**         Code of Ethics
31.1 *       Certification of Richard A. Bailey, Chief Financial Officer and Chief Executive Officer of Gateway
             Distributors, Ltd., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley
             Act of 2002.
32.1 *       Certification of Richard A. Bailey, Chief Financial Officer and Chief Executive Officer of Gateway
             Distributors, Ltd., pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley
             Act of 2002.
</TABLE>

_________
** Previously Filed
* Filed Herewith

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

     Our Audit Committee has selected Madsen & Associates CPA's, Inc. ("Madsen")
as  its  independent  accountants  for  the current fiscal year and for the year
ended  December  31, 2004 and 2003. For the fiscal year ended December 31, 2003,
Sellers  &  Andersen,  LLC ("S&A") served as our independent accountants part of
the  year,  before  we  changed to Madsen, because Madsen is registered with the
PCAOB.  The  audit services provided by Madsen and S&A consist of examination of
financial  statements,  services  relative  to  filings  with  Securities  and


                                       37
<PAGE>
Exchange  Commission,  and consultation in regard to various accounting matters.
The  following  table  presents  the  total fees paid for professional audit and
non-audit  services  rendered  by  our independent auditors for the audit of our
annual  financial  statements for the years ended December 31, 2004 and December
31, 2003 and fees billed for other services rendered by our independent auditors
during those periods.


<TABLE>
<CAPTION>
                        Fiscal Year Ended   Fiscal Year Ended
                        December 31, 2004   December 31, 2003
                        -------------------------------------
<S>                     <C>                 <C>
Audit Fees (1)          $           55,750  $          34,000
Audit-Related Fees (2)                 N/A                N/A
Tax Fees (3)                           N/A                N/A
All Other Fees (4)                     N/A                N/A
Total                   $           55,750  $          34,000
</TABLE>

(1)  Audit  services  consist  of  audit  work  performed  in the preparation of
     financial  statements  for  the fiscal year and for the review of financial
     statements  included  in  Quarterly  Reports on Form 10-Q during the fiscal
     year,  as  well  as  work  that  generally only the independent auditor can
     reasonably  be  expected  to  provide,  including consents for registration
     statement  filings  and  responding  to  SEC  comment letters on annual and
     quarterly  filings.

(2)  Audit-related  services  consist of assurance and related services that are
     traditionally performed by the independent auditor, including due diligence
     related  to  mergers  and  acquisitions,  agreed upon procedures report and
     accounting  and  regulatory  consultations.

(3)  Tax services consist of all services performed by the independent auditor's
     tax  personnel,  except those services specifically related to the audit of
     the financial statements, and includes fees in the areas of tax compliance,
     tax  planning,  and  tax  advice.

(4)  Other  services  consist  of  those  services  not  captured  in  the other
     categories.

     Our  Board  has  determined  that  the services provided by our independent
auditors  and  the  fees  paid to them for such services has not compromised the
independence  of  our  independent  auditors.

     Consistent  with SEC policies regarding auditor independence, the Board has
responsibility  for  appointing, setting compensation and overseeing the work of
the  independent  auditor.  In recognition of this responsibility, the Board has
established a policy to pre-approve all audit and permissible non-audit services
provided  by  the  independent  auditor.  Prior to engagement of the independent
auditor for the next year's audit, management will submit a detailed description
of  the  audit and permissible non-audit services expected to be rendered during
that  year  or  each of four categories of services described above to the Board
for  approval.  In  addition,  management will also provide to the Board for its
approval  a  fee  proposal  for  the  services  proposed  to  be rendered by the
independent  auditor.  Prior  to  the engagement of the independent auditor, the
Board  will  approve  both  the  description  of audit and permissible non-audit
services  proposed  to be rendered by the independent auditor and the budget for
all  such services. The fees are budgeted and the Board requires the independent
auditor  and  management  to  report  actual fees versus the budget periodically
throughout  the  year  by  category  of  service.


                                       38
<PAGE>
     During  the  year,  circumstances may arise when it may become necessary to
engage  the  independent auditor for additional services not contemplated in the
original  per-approval.  In  those  instances,  the  Board  requires  separate
pre-approval  before engaging the independent auditor. To ensure prompt handling
of  unexpected  matters, the Board may delegate pre-approval authority to one or
more of its members. The member to whom such authority is delegated must report,
for  informational purposes only, any pre-approval decisions to the Board at its
next  scheduled  meeting.  The  four  categories  of  services  provided  by the
independent  auditor  are as defined in the footnotes to the fee table set forth
above.

                                   SIGNATURES

     In  accordance  with  Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Annual report to be signed
on  its  behalf  by  the  undersigned,  thereunto  duly  authorized.

                                  Gateway Distributors, Ltd.


Date: April 15, 2005.

                                  By /s/ Richard A. Bailey
                                     -------------------------------------------
                                     Richard A. Bailey,
                                     Chief Financial Officer and Chief Executive
                                     Officer

     Pursuant  to  the  requirements  of the Securities Exchange Act of 1934, as
amended,  this  Annual report has been signed by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

     Signature                           Title                         Date
     ---------                           -----                         ----
/s/ Richard A. Bailey      Chief Executive Officer, Director      April 15, 2005
---------------------         and Chief Financial Officer
Richard A. Bailey

Florian R. Ternes                    Secretary and                April 15, 2005
---------------------                  Director
Florian R. Ternes



                                       39
<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                       FINANCIAL STATEMENTS AND SCHEDULES


<PAGE>
                                     GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARIES
                                                                        ________

                                                            FINANCIAL STATEMENTS
                                                                        ________

                                                               DECEMBER 31, 2004


<PAGE>
                   GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARIES
                                    ________

                        CONSOLIDATED FINANCIAL STATEMENTS
                                    _________

                                December 31, 2004


<PAGE>
<TABLE>
<CAPTION>
                   GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARIES

                                  - CONTENTS -



                                                           PAGE NUMBER
                                                           -----------
<S>                                                        <C>
Report of Independent Registered Public Accounting Firm        F-1

Financial Statements:

    Balance Sheet                                              F-2

    Statement of Operations                                    F-4

    Statement of Changes in Stockholders' Equity (Deficiency)  F-5

    Statement of Cash Flows                                    F-6

    Notes to Financial Statements                              F-8
</TABLE>


<PAGE>
MADSEN & ASSOCIATES CPAS', INC.                             684 East Vine St  #3
-------------------------------
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS         Murray, Utah 84107
                                    Telephone 801-268-2632    Fax   801-262-3978


Board of Directors & Audit Committee
Gateway Distributors, Ltd., and Subsidiaries
Las Vegas, Nevada

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Gateway
Distributors,  Ltd.  and  Subsidiaries as of December 31, 2004 and 2003, and the
related  consolidated  statements  of operations, stockholders' equity, and cash
flows  for  the  years  then  ended.  These  financial  statements  are  the
responsibility  of the Company's management. Our responsibility is to express an
opinion  on  these  financial  statements  based  on  our  audits.

We  conducted  our  audits  in  accordance  with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits  to  obtain  reasonable  assurance  about  whether the
financial  statements  are  free  of  material  misstatement.  An audit includes
examining  on  a  test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  financial  statement presentation. We believe that our
audits  provide  a  reasonable  basis  for  our  opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  Gateway
Distributors,  Ltd.  and  Subsidiaries as of December 31, 2004 and 2003, and the
results  of  its consolidated operations and cash flows for the years then ended
in conformity with accounting principles generally accepted in the United States
of  America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue  as  a  going  concern. As disclosed in the consolidated
financial  statements  and  notes  to the consolidated financial statements, the
Company  will  need  additional  working capital for its planned activity and to
service  its  debt. This raises substantial doubt about the Company's ability to
continue  as  a  going  concern.  Management's plans regarding these matters are
described  in  the  notes  to  the  consolidated  financial  statements.  The
consolidated  financial  statements  do  not  include any adjustments that might
result  from  the  outcome  of  this  uncertainty.

/s/ Madsen & Associates CPAs, Inc.

March 28, 2005
Murray, Utah


<PAGE>
<TABLE>
<CAPTION>
                   GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                                     December 31,
                                                         2004
                                                    --------------
<S>                                                 <C>
                           ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                         $      37,159
  Accounts Receivable                                      45,634
  Receivable from Stock Sales                              23,639
  Inventories                                             494,199
  Property Held for Short Term Investment                 179,741
  Prepaids                                                 25,500
                                                    --------------
                              Total Current Assets  $     805,872
                                                    --------------

PROPERTY & EQUIPMENT
  Property and Equipment, at cost                       4,638,288
  (Less) accumulated depreciation and amortization       (371,915)
                                                    --------------
                        Total Property & Equipment  $   4,266,373
                                                    --------------

MINORITY INTEREST IN SUBSIDIARY                            72,364
                                                    --------------

OTHER ASSETS
  Product Development Awaiting Production                 418,223
  Goodwill, Trademarks & Formulas                         536,500
  Other Assets                                             32,829
                                                    --------------
                                Total Other Assets  $     987,552
                                                    --------------

Total Assets                                        $   6,132,161
                                                    ==============
</TABLE>

The accompanying notes are an integral part of the audited financial statements.


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                   GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET


                                         December 31,
                                             2004
                                         -------------
<S>                                      <C>
                  LIABILITIES

CURRENT LIABILITIES:
Current maturities of long-term debt        1,433,736
Accounts payable:
  Trade                                       715,494
  Commissions                                  13,847
Accrued expenses:
  Payroll and employee benefits               179,617
  Payroll taxes                               152,385
  Interest                                    424,364
  Other                                        34,830
                                         -------------
Total current liabilities                   2,954,273
                                         -------------

LONG-TERM DEBT                              2,820,033

                                         -------------
Total Liabilities                           5,774,306
                                         -------------

             STOCKHOLDERS' EQUITY

Preferred stock - $.001 par value
  Authorized - 200,000,000 shares
    Series A Preferred
      Authorized - 100,000,000 shares
      4,972,125 issued and outstanding          4,972
    No Series Designated Preferred
      Authorized - 300,000,000 shares
      Issued and outstanding - none
Common stock, - $.001 par value
  Authorized - 25,000,000,000 shares
  Issued and outstanding - 98,590                  99
  Additional paid-in capital               19,224,980
  Accumulated (deficit)                   (18,872,196)

                                         -------------
Net Stockholders' Equity                      357,855
                                         -------------

Total Liabilities & Equity                  6,132,161
                                         =============
</TABLE>

The accompanying notes are an integral part of the audited financial statements.


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                                GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                            Year Ended       Year Ended
                                                                           December 31,     December 31,
                                                                               2004             2003
                                                                         ----------------  ----------------
<S>                                                                      <C>               <C>
SALES                                                                    $     1,153,893   $     1,123,373

COST OF SALES                                                                    343,744           293,179
                                                                         ----------------  ----------------

GROSS PROFIT                                                                     810,149           830,194
                                                                         ----------------  ----------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
  Depreciation Expense                                                           265,668            12,045
  Professional Services Not Classified Elsewhere                               1,545,671           694,895
  Development of Jeunesse by Francois Product Line                               655,757                 0
  Product Development                                                          4,198,326
  All Other Selling, General and Administrative                                2,639,434         1,664,931
                                                                         ----------------  ----------------

TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                             9,304,856         2,371,871
                                                                         ----------------  ----------------

OTHER INCOME (EXPENSE):
  Loss on Sale of Equipment                                                       (1,774)                0
  Additional Loss Incurred on 12-31-01 Sale of Subsidiary                        (40,000)                0
  Loss on Formula in Exchange for 51% of Los Cabos and Debt Assumption           (31,144)                0
  Loss on Stock Investment                                                       (25,000)                0
  Loss on Auction Resale Items                                                   (13,228)                0
  Interest Expense                                                              (236,719)         (186,369)
  Forgiveness of Debt                                                          1,282,886                 0
  Other Income                                                                    93,243             4,583
                                                                         ----------------  ----------------

TOTAL OTHER INCOME (EXPENSE):                                                  1,028,264          (181,786)
                                                                         ----------------  ----------------

NET INCOME (LOSS) BEFORE MINORITY INTEREST                                    (7,466,443)       (1,723,463)

MINORITY INTEREST                                                                 72,364                 0
                                                                         ----------------  ----------------

NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAX                             (7,394,079)       (1,723,463)

PROVISION FOR INCOME TAX                                                               0                 0

                                                                         ----------------  ----------------
NET INCOME (LOSS)                                                            ($7,394,079)      ($1,723,463)
                                                                         ================  ================

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE                                   ($2,527.03)   ($1,723,463.00)
                                                                         ----------------  ----------------

BASIC & DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK                            2,926                 1
</TABLE>

The accompanying notes are an integral part of the audited financial statements.


                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                         GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES
                                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                      FOR THE PERIODS ENDED DECEMBER 31, 2004 AND 2003


                                                                                     Paid In
                                            Preferred Stock       Common Stock       Excess       Retained     Net Equity
                                          Par Value   $0.001    Par Value $0.001     of Par       Earnings    (Deficiency)
                                           Shares     Amount    Shares    Amount                  (Deficit)
                                          ---------  --------  --------  ---------  -----------  ------------  ------------
<S>                                       <C>        <C>       <C>       <C>        <C>          <C>           <C>
BALANCE - December 31, 2002                     125  $      1         0  $       0  $ 4,521,592  ($9,754,654)  ($5,233,061)
                                          =========  ========  ========  =========  ===========  ============  ============

Adjustment - Rounding Prior Stock Splits                              0          0            0                          0
Common Stock Issued:
  For Services - Restricted Stock                                     0          0        5,600                      5,600
  For Services - Unrestricted Stock                                   0          0      473,888                    473,888
  For Cash                                                            1          1    1,888,506                  1,888,507
  For Debt - Accounts Payable                                         0          0        2,022                      2,022
  For Debt - Note Payable - Suburban                                  0          0      273,781                    273,781

Note Payable - Suburban Paid Off
    Via Stock Sold In 2002 By Suburban                                0
    At a Value Greater In 2003 Than
    Was Estimated In 2002                                             0          0      500,000                    500,000

Renegotiation Acquisition Grandma
    Hammans Acquired 2002                                             0          0            0                          0

Preferred Stock Issued
  For Services - Restricted                 726,000       725                            71,875                     72,600

(Loss) for the Period                                                                             (1,723,463)   (1,723,463)

                                          ---------  --------  --------  ---------  -----------  ------------  ------------
BALANCE - December 31, 2003                 726,125       726         1          1    7,737,264  (11,478,117)   (3,740,126)

Common Stock Issued:
  For Services - Restricted Stock                                48,010         48       36,642                     36,690
  For Services - Unrestricted Stock                              15,673         16    4,729,272                  4,729,288
  For Debt - Unrestricted Stock                                       0          0       25,000                     25,000
  For Cash                                                       34,906         34    6,696,802                  6,696,836

Preferred Stock Issued
  For Services - Restricted Stock         4,246,000     4,246                                                        4,246


(Loss) for the Period                                                                             (7,394,079)   (7,394,079)

                                          ---------  --------  --------  ---------  -----------  ------------  ------------
Balance - December 31, 2004               4,972,125     4,972    98,590         99   19,224,980  (18,872,196)      357,855
                                          =========  ========  ========  =========  ===========  ============  ============
</TABLE>

The accompanying notes are an integral part of the audited financial statements.


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


                                                                             Year Ended      Year Ended
                                                                            December 31,    December 31,
                                                                                2004            2003
                                                                           --------------  --------------
<S>                                                                        <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)                                                                    (7,394,079)     (1,723,463)
Adjustments to reconcile net (loss)
    to net cash from (to) operating activities:
    Stock issued for Services                                                  4,770,224         552,088
    Stock issued for Debt                                                         25,000         275,803
    Depreciation & Amortization Prop & Equip                                     265,668          25,667
    Loss on Sale of Equipment                                                      1,774
    Minority Interest                                                            (72,364)
    Forgiveness of Debt                                                       (1,282,886)
    Loss on Formula in Exchange for 51% of Los Cabos and Debt Assumption          31,144
Changes in operating assets and liabilities which
  increase (decrease) cash flow:
    Accounts Receivable                                                          (40,829)         (1,234)
    Inventories                                                                 (292,974)        (73,648)
    Properties Held for Short Term Investment                                   (179,741)
    Prepaid Expenses and Other Current Assets                                    (25,500)
    Accounts Payable and Commissions                                             149,901        (237,977)
    Accrued Liabilities                                                         (434,467)         87,675

                                                                           --------------  --------------
Net cash provided (used) from operating activities                            (4,479,129)     (1,095,089)
                                                                           ==============  ==============

CASH FLOWS FROM INVESTING ACTIVITIES:
    Product Development Awaiting Production                                     (418,223)
    Capital (Outlays)/Disposals                                               (4,499,049)         (6,174)
    Purchase (Sale) of Trademarks                                                 98,852
    Renegotiation of Purchase of Grandma Hammans                                                (137,182)
    Other Assets                                                                  16,533           4,759

                                                                           --------------  --------------
Net cash provided (used) from investing activities                            (4,801,887)       (138,597)
                                                                           ==============  ==============

CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from Term Debt after Principal Payments                           2,297,242
Principle Payment on Debts (over) net proceeds Term Debt                               0        (307,300)
Stock Sales for Cash; Net                                                      6,857,743       1,703,961

                                                                           --------------  --------------
Net cash provided (used) from financing activities                             9,154,985       1,396,661
                                                                           ==============  ==============

NET INCREASE (DECREASE) IN CASH EQUIVALENTS                                     (126,031)        162,975

CASH AND CASH EQUIVALENTS - Beginning of Period                                  163,190             215

CASH AND CASH EQUIVALENTS - End of Period                                  $      37,159   $     163,190
</TABLE>

The accompanying notes are an integral part of the audited financial statements.


                                      F-6
<PAGE>
<TABLE>
<CAPTION>
                      GATEWAY DISTRIBUTORS, LTD AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED


                                                            Year Ended    Year Ended
                                                           December 31,  December 31,
                                                               2004          2003
                                                           ------------  ------------
<S>                                                        <C>           <C>
SUPPLEMENTAL DISCLOSURE

CASH PAID FOR:
  Interest                                                      236,719        29,437
  Taxes                                                               0             0


NON CASH INVESTING AND FINANCING ACTIVITIES

STOCK ISSUED FOR:
  Services                                                    4,770,224       552,088
  Debt                                                           25,000       275,803

FORMULA EXCHANGED FOR DEBT PAYOFF
  Payoff of Grandma Hamman's debt in exchange for formula       193,833             0
</TABLE>

The accompanying notes are an integral part of the audited financial statements.


                                      F-7
<PAGE>
                           GATEWAY DISTRIBUTORS, LTD.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2004

NOTE 1  -      ORGANIZATION,  HISTORY  AND  BUSINESS  ACTIVITY:

               The  Company  incorporated  on  May  26th,  1993  as  a  Nevada
               corporation  under  the  name of Gateway Distributors, Ltd. ("the
               Company").

               The Company is a distributor of vitamin, nutritional supplements,
               whole  health  foods  and skin care products mainly in the United
               States  of  America  and  Canada,  with  some sales in Russia and
               Indonesia.  Many of the formulas used in the products the Company
               sells  and  distributes  are  made  from  its  own  formulas.

               On August 15th, 2002, the Company purchased all of the operations
               and  assets  including  formulas and trademark of Grandma Hammans
               Specialty Foods LLC. On June 4, 2003, the Company incorporated in
               Nevada  Grandma  Hammans  Specialty  Foods  ("GH")  and moved the
               operations,  assets and liabilities related to this purchase into
               GH.

               On  December 31, 2002, the Company sold its ownership interest in
               TRSG Corporation ("TRSG") previously a majority owned subsidiary.
               TRSG  is recognized in these consolidated financial statements to
               the  point  of  sale,  which  is  December  31,  2002.

               On  December  31,  2002, the Company bought all of the assets and
               assumed  a  significant  portion  of  the  debts  of  TRSG.  This
               transaction  is  reported  on  the  purchase method of accounting
               using  the  carrying value on the books of TRSG as the cost basis
               on  the  books  of  the  Company.

               On  January  7,  2003,  the  Company organized The Right Solution
               Gateway,  a  wholly  owned  subsidiary  ("TRS  Gateway").  All
               operations  of  the Company that were previously handled via TRSG
               were  transferred  into  TRS  Gateway.

               On  April  30,  2004,  Gateway  formed a wholly owned subsidiary,
               Gateway  Venture  Holdings, Inc. ("GVH") to house the hard assets
               of  Gateway.

               Also on April 30, 2004, Gateway formed a wholly owned subsidiary,
               Aspen  Cove  Resort Incorporated ("ACR") to run the operations of
               Aspen  Cove  Resort  (formerly  Beaver  Dam  Lodge)  located  in
               Panguitch  Utah.  The  lodge had been purchased on April 15, 2004
               and  resides  as  real  estate  under  GVH.

               On  May  30,  2004,  an  agreement  was  signed  with  Quality
               Distribution  Services  of  Nevada  to  create a new corporation,
               Quality  Distribution  Services  of Arizona, Inc ("QDS"). QDS was
               incorporated  in  Nevada  on  June  7,  2004  and is 51% owned by
               Gateway.  QDS is a wholesale beverage distributor in the Phoenix,
               Arizona  area.

               On  November  30, 2004, Gateway formed a wholly owned subsidiary,
               Gateway  Corporate Administration, Inc ("GCA") which has not been
               utilized  at  this  time.


                                      F-8
<PAGE>
               In  December,  2004  Gateway  moved  its  corporate  office  and
               warehouse  location to 3220 Pepper Lane, Las Vegas, Nevada 89120.

               On  December 21, 2004 entered an Asset Purchase Agreement for 51%
               of  Los  Cabos  Beverage  then  owned  by  Blaine  Wendtland
               ("Wendtland").  The  51%  interest  in Los Cabos Beverage and its
               assets  were  acquired  by the Company in exchange that Wendtland
               received  all  rights to Grandma Hamman's GHF product and assumed
               and  paid  off  the  debts of $193,833 Grandma Hamman owed to Los
               Cabos  Freedom  Movement LLC and to Ed Wendtland. On December 30,
               2004,  Gateway  formed a 51% owned subsidiary, Los Cabos Beverage
               Inc ("LCB") to handle the operations of the sale of private label
               water.  Operations  began  in  2005.


NOTE 2  -      SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES:

               (a)  -  PRINCIPLES  OF  CONSOLIDATION
               -------------------------------------

               The  accompanying  consolidated  financial statements include the
               accounts  of  the  Company  and its subsidiaries, Grandma Hammans
               since  August  15,  2002;  the  date  of  acquisition,  The Right
               Solution  Gateway  incorporated  January 7, 2003, Gateway Venture
               Holdings  incorporated  April  30,  2004,  Aspen  Cove  Resort
               incorporated  April  30,  2004,  Quality Distribution Services of
               Arizona  incorporated  June 7, 2004, and Los Cabos Beverage since
               December  21, 2004. All significant Intercompany transactions and
               balances  have  been  eliminated  in  consolidation.

               (b)  -  CASH  AND  CASH  EQUIVALENTS
               ------------------------------------

               For  purposes  of  the  statement of cash flows, cash equivalents
               include  cash  in  banks  and  all highly liquid investments with
               original  maturities  of  three  months  or  less.

               (c)  -  INVENTORIES
               -------------------

               Inventories,  consisting primarily of nutritional, health, beauty
               products,  and  beverages  are  stated  at  cost  computed by the
               first-in,  first-out  (FIFO)  method  of  accounting.

               (d)  -  PROPERTY  AND  EQUIPMENT
               --------------------------------

               Property and equipment are stated at cost. Major replacements and
               refurbishings are capitalized while replacements, maintenance and
               repairs which do not improve or extend the life of the respective
               assets  are  expensed.

               (e)  -  EARNINGS  (LOSS)  PER  SHARE
               ------------------------------------

               Basic  and  diluted  earnings  (loss) per share are computed on a
               weighted  average  of  shares  issued and outstanding through the
               year.  No  recognition  of  stock  options and warrants and other
               dilutive  stock  interests  are  recognized in the computation as
               there  are  net  operating  losses  and it would be antidilutive.


                                      F-9
<PAGE>
               (f)  -  INCOME  TAXES
               ---------------------

               The Company has adopted the provisions of statements of Financial
               Accounting  Standards  No.  109,  "Accounting  for Income Taxes,"
               which incorporates the use of the asset and liability approach of
               accounting  for  income  taxes.  The asset and liability approach
               requires  the  recognition of deferred tax assets and liabilities
               for  the  expected  future  consequences of temporary differences
               between the financial reporting basis and the income tax basis of
               assets  and  liabilities.

               (g)  -  DEPRECIATION  AND  AMORTIZATION
               ---------------------------------------

               The  Company  provides  for  depreciation  of property, plant and
               equipment  principally  by  use  of  declining  balance  and
               straight-line  methods for financial reporting purposes. Property
               and equipment are depreciated over the following estimated useful
               lives:

<TABLE>
<CAPTION>
<S>                                         <C>
               Property - Real Estate          39 years
               Leasehold improvements          39 years
               Furniture and fixtures       5 - 7 years
               Machinery and equipment      3 - 5 years
               Transportation equipment     5 - 7 years
</TABLE>

               Depreciation  expense  for  the years ended December 31, 2004 and
               2003  was  $265,668  and  $25,667,  respectively.

               (h)  -  RECEIVABLE  ESIP  STOCK  PLAN
               -------------------------------------

               Stock sales through the Employee Stock Incentive Plan (ESIP) sold
               at  year  end  are  reported as a receivable rather than negative
               equity  provided they are received within 60 days after year end.
               Funds  to  be  received  from  the  ESIP  Plan  were  reported as
               "Receivable  ESIP Stock Plan" as a current asset in the amount of
               $23,639.  These  are  for  stock issued by December 31, 2004, the
               sale  proceeds  of  which  were  received  by  the Company during
               January  2005.

               (i)  -  ACCOUNTS  RECEIVABLE
               ----------------------------

               Management  has  elected  to  record  bad  debts using the direct
               write-off  method.  Generally  accepted  accounting  principles
               require  that  the allowance method be used to reflect bad debts.
               However,  the effect of the use of the direct write-off method is
               not significantly different from the results that would have been
               obtained  had  the  allowance  method  been  followed.

               (j)  -COMPREHENSIVE  INCOME
               ---------------------------

               The  Company  has  adopted  SFAS  No. 130 Reporting Comprehensive
               Income.  The  Company  has  no reportable differences between net
               income  and  comprehensive  income,  therefore  a  statement  of
               comprehensive  income  has  not  been  presented.


                                      F-10
<PAGE>
               (k)  -  NET  (LOSS)  PER  SHARE  OF  COMMON  STOCK
               --------------------------------------------------

               The  basic  and diluted net income (loss) per common share in the
               accompanying  statements  of  operations  are  based upon the net
               income  (loss)  divided  by the weighted average number of shares
               outstanding  during the periods presented. Diluted net (loss) per
               common  share  is  the same as basic net (loss) per share because
               including  any  pending  shares to issued would be anti-dilutive.

               (l)  -  FAIR  VALUES  OF  FINANCIAL  INSTRUMENTS
               ------------------------------------------------

               The  carrying amounts of the Company's cash, accounts receivable,
               accounts  payable  and  accrued  expenses  approximate fair value
               because  of  the short maturity of these items. Term debt secured
               by  various  properties  have  interest  rates  attached  to them
               commensurate  with  the finance market at the time and management
               believes approximate fair values in the short as well as the long
               term.

               It is currently not practicable to estimate the fair value of the
               other  debt  obligations  because  these  note agreements contain
               unique  terms,  conditions, covenants and restrictions which were
               negotiated  at  arm's length with the Company's lenders, there is
               no  readily  determinable  similar instrument on which to base an
               estimate of fair value. Accordingly, no computation or adjustment
               to  fair  value  has  been  determined.

               (m)  -  ADVERTISING  COSTS.
               ---------------------------

               The Company conducts nondirect response advertising for which the
               costs  are  expensed  when  incurred.  Total advertising costs of
               $339,873  and $163,529 were incurred for the years ended December
               31,  2004  and  2003,  respectively.

               (n)  -  REVENUE  RECOGNITION
               ----------------------------

               Revenue  is  recognized  in  the period in which the products are
               shipped.

               (o)  -  RECLASSIFICATIONS
               -------------------------

               Certain amounts in 2003 have been reclassified and represented to
               conform  to  the  current  financial  statement  presentation.

               (p)  -  USE  OF  ESTIMATES
               --------------------------

               The  preparation  of  financial  statements  in  conformity  with
               accounting  principles  generally  accepted  in the United States
               requires management to make estimates and assumptions that affect
               the  reported amounts of assets and liabilities and 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. Actual results may differ from those
               estimates.


                                      F-11
<PAGE>
               (q)  -  CONCENTRATIONS
               ----------------------

               The  Company  reports  no  significant  concentrations.

               (r)  -  OTHER  RECENT  ACCOUNTING  PRONOUNCEMENTS
               -------------------------------------------------

               The  Company  does  not  expect that the adoption of other recent
               accounting  pronouncements  to  have  any  material impact on its
               financial  statements.

NOTE 3  -      ASSET PURCHASE OF GRANDMA HAMMANS AND SUBSEQUENT SALE OF FORMULA:

               On  August  15,  2002,  the  Company  purchased  all  the assets,
               tangible  and  intangible,  and  operations  of Los Cabos Freedom
               Movement, d.b.a. Grandma Hammans Specialty Foods, a Wisconsin LLC
               ("Los Cabos"). The Company organized a Nevada Corporation on June
               4,  2003 named Grandma Hammans Specialty Foods ("Grandma Hamman")
               and  moved all of the assets and operations coming from the asset
               purchase  from  Los Cabos into Grandma Hamman. The asset purchase
               was  reported  on  the purchase method of accounting and has been
               consolidated  with  the  Company.

               When  the  Company  purchased  the  assets  of  Grandma  Hamman's
               Specialty  Foods,  LLC on August 15, 2002, formulas and trademark
               were  recognized  at $48,314. On June 2, 2003, the Company signed
               an  agreement  renegotiating  the value of the asset purchase and
               the  method of payment. The net result is formulas and trademarks
               now  cost  $185,496,  or  a  $137,182  increase  over  2002.

               Also  as a condition of the renegotiation, the owner of Los Cabos
               relinquished his claim to 1,000,000 shares of stock as referenced
               in  the  original  purchase  agreement.  The  stock  had not been
               actually  issued even though it had been reported in the December
               31,  2002  financial statements as if it had. The unissued shares
               and  the  value of it was in question and had been compromised by
               the  passage  of  time and with reverse stock splits. The Company
               accepted  payment  of reasonable legal costs of a lawsuit between
               Los  Cabos  and  a  third  party  as  part  of the renegotiation.

               On  December  21,  2004  all  assets  and  liabilities of Grandma
               Hamman,  other than some minor residual receivables and payables,
               were  passed  to  Blaine  Wendtland as part of the asset purchase
               agreement  of  Los  Cabos Beverage, The net effect of selling the
               formulas  in  exchange  for all of the debt created a $31,144 net
               loss  which  has  been recognized in the statement of operations.
               Grandma  Hamman  is  presently  an  inactive  subsidiary  of  the
               Company.

NOTE 4  -      LICENSING / PURCHASE AGREEMENT WITH THE CHELSEA COLLECTION INC.

               The  Company  entered  into  a verbal agreement December 12, 2003
               with  The  Chelsea Collection Inc, a Nevada corporation ("Chelsea
               Collection")  which  was  finalized  on  March


                                      F-12
<PAGE>
               15, 2004 and later clarified on a few points May 4, 2004. Chelsea
               Collection  is a corporation owned equally by two officers of the
               Company  and  Francois  Vautour,  an unrelated third party of the
               Company.  Chelsea  Collection  in an agreement dated November 25,
               2003  acquired  among  other  things  from  Francois  Vautour and
               assigns,  except  for  Romania, all worldwide rights, trademarks,
               formulas and licenses of the Jeunesse by Fran ois Vautour and the
               GH3  skin  care  line.

               In  the  agreement  the  Company has with Chelsea Collection, the
               Company  will  have  the opportunity to acquire the same Francois
               Vautour  skin care line from Chelsea Collection for virtually the
               same  price  and  terms  as  Chelsea Collection is buying it from
               Francois  Vautour. The terms of the agreement involves a purchase
               price  of  $4,000,000.  Payment  are  computed based on15% of the
               gross  sales  less  cost  of  goods  sold  with  a minimum weekly
               payment.  The  minimum  weekly  payment  presently  is $7,500 and
               continues  at  $7,500  through November 2004 when it increases an
               additional  $2,500 per week, or $10,000 a week. Once the purchase
               price  is  paid,  then  a royalty of up to 15% of the gross sales
               less  cost  of  goods  sold  steps  into  place  and  continues
               thereafter.  The  cost outlays have been charged to the statement
               of  operations  as  a selling, general and administrative expense
               which  were  $655,757  for  2004.

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

               The  Company  is  responsible  for  all  product  research  and
               development  for current and future marketing as well as carrying
               inventory. A portion of the cost outlays have been charged to the
               balance  sheet  as  an  asset  under product development awaiting
               production  for  $230,573.

NOTE 5  -      ASSET  PURCHASE  OF  LOS  CABOS:

               As stated in the history of the Company, on December 21, 2004 the
               Company  entered an Asset Purchase Agreement for 51% of Los Cabos
               Beverage,  then  owned by Blaine Wendtland ("Wendtland"). The 51%
               interest  in  Los  Cabos Beverage and its assets were acquired by
               the  Company  in  exchange  that Wendtland received all rights to
               Grandma Hamman's GHF product and assumed and settled the debts of
               $193,833  that  Grandma Hamman owed to Los Cabos Freedom Movement
               LLC  and  to Ed Wendtland. On December 30, 2004, Gateway formed a
               51%  owned  subsidiary, Los Cabos Beverage, Inc ("LCB") to handle
               the  operations  of  the  sale of private label water. Operations
               began  in  2005.

               The  Company  recognizes no goodwill or other intangibles in this
               business  venture.  Management  of Los Cabos is handled by Blaine
               Wendtland.  The  Company invested no initial money for this joint
               venture,  but  it  does  provide  a  place  of  operation  in its
               warehouse  and  limited  funding  for  payroll and selected other
               expenses.  Operations  began  the  end  of  2004,  but  it had no
               operating  activity  during  the  remaining  days  of  2004.


                                      F-13
<PAGE>
NOTE 6  -      INVESTMENT IN QUALITY DISTRIBUTION SERVICES OF ARIZONA ("QDS"):

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

               The  Company  invested  $282,700  during 2004 and another $50,000
               through  March  28,  2005  to  assist  in  the development of the
               company.  The  other  party  to the joint venture has secured the
               warehouse  and  equipment  and has guaranteed payments of such as
               well  as  continue  providing  for  the  operations  of  QDS.

               The  consolidated  financial  statements  include  the  financial
               information  of  QDS for 2004, summarized in condensed form here,
               rounded  to  the  nearest  $1,000::

<TABLE>
<CAPTION>
Balance Sheet
<S>                                              <C>
  Current Assets                                 $ 141,000
  Minority Interest                                 72,000
                                                 ----------
  Net Assets                                     $ 213,000

  Current Liabilities                            $  54,000
  Investment by the Company                        283,000
  Accumulated (Deficit)                           (124,000)
                                                 ----------
Total Liabilities and Equity                     $ 213,000

Statement of Operation
----------------------
December 31, 2004
-----------------

  Sales                                          $ 224,000
  Cost of Sales                                   (128,000)
                                                 ----------
  Gross Profit                                      96,000
  Selling, General and Administrative Expenses     292,000
  Minority Interest                                 72,000
                                                 ----------
  Net (Loss)                                     $(124,000)
</TABLE>

               The  Investment by the Company reflected in the condensed Balance
               Sheet  above  is  eliminated in the consolidation of QDS into the
               consolidated  financial  statements.of  the  Company.

NOTE 7-        PURCHASE  OF  REAL  ESTATE  AND  TRANSPORTATION  EQUIPMENT:

               As  of  December 31, 2004, the Company has purchased various real
               estate  properties.  Some  of  these  properties  are  held  for
               investment  while  others are held and used by the Company in its
               operations.  The  Company  created  Gateway Venture Holdings, Inc


                                      F-14
<PAGE>
               ("Gateway  Ventures"), a wholly owned subsidiary, designed to own
               the  real  estate  properties  of  the  Company.

               On  or  about  April  15,  2004  the  Company acquired Aspen Cove
               Resort,  located  in  a pristine area of southwestern Utah. Aspen
               Cove  Resort was originally owned with a 50% interest held by the
               Company  and  a  50% interest held by a third party. On or around
               September  29,  2004  in  an  agreement with the third party, the
               Company  bought  out  the  interest  of  the  third  party in the
               properties  of  Aspen  Cove  Resort  in an exchange of properties
               owned at the time by the Company. The Company also currently owns
               100% of the commercial properties in the southeastern part of Las
               Vegas,  Nevada,  which  had  previously  been  owned  at  50%  as
               discussed  later  in  this  note.

               The  Company  created  Aspen Cove Inc. ("Resort"), a wholly owned
               subsidiary,  to  manage  the operations of Aspen Cove Resort. The
               Company  and a third party shared equally the operating losses of
               the Resort up to on or about September 29, 2004, when the Company
               took  over full ownership of the properties of Aspen Cove Resort,
               along  with  the  full  obligation  on  the  mortgage.

               The  Company had originally purchased a 50% ownership interest in
               the  commercial  property  the Company now uses as its office and
               warehouse  facilities,  which  is  3220  Pepper  Lane, Las Vegas,
               Nevada.  Like Aspen Cove Resort, the Company originally owned 50%
               interest  in  this  property  with a third party owning the other
               50%.  In  the  same  property exchange of Aspen Cove Resort, this
               commercial  property  also  became  the  full  ownership  of  the
               Company,  along  with  the  full  obligation  of  the  mortgage.

               The  Company has also purchased vehicles and other transportation
               equipment,  some of which are in conjunction with the purchase of
               some  of  the  real estate purchases and are held in ownership by
               Gateway  Ventures.

               On  September 29, 2004 the Company negotiated an exchange of real
               estate  whereby  the  Company  deeded over a real estate property
               held  for  short  term  investment  on  the  books  for a cost of
               $326,483, but with a fair market value of approximately $400,000,
               and one boat held as property and equipment valued at $66,348 for
               the 50% ownership of Aspen Cove Resort and the present office and
               warehouse  of  the  Company. As mentioned previously, the Company
               has  also  assumed  the  full  debt  obligation against these two
               properties.

               All  of  these  assets  are reported at cost. No gain or loss are
               recognized  on  property  exchanges  made  during  the  year.

               As  of  December  31,  2004  the  Company held the following real
               estate  properties  and  transportation  equipment:


                                      F-15
<PAGE>
<TABLE>
<CAPTION>
                                                                Debt
                                                    Cost        Owed
<S>                                              <C>         <C>
CURRENT ASSETS
    Property Held for Short Term Investment      $  179,741  $  219,000
    Estimated Fair Value - $350,000

PROPERTY & EQUIPMENT
    Aspen Cove Resort                             1,221,645     912,160
    Appraisal Pending - Estimated Fair Value is
    in Excess of Cost

    Offices and Warehouse of the Company          2,640,089   1,806,629
    Appraisal Value - $3,100,000

    All Other Real Estate                           370,236     123,000

    Vehicle & Other Transportation Equipment        190,297           0

    Total                                         4,602,008   3,060,789
</TABLE>


        The Company has no off-balance sheet arrangements.

NOTE 8  -      TERM  DEBT:

Term debt consisted of the following at December 31,2004:

Mortgage payable - $1,830,000 original loan payable
to an Individual, interest 6%, 30 year monthly
installments of $20,000 through May 2030, secured
by Aspen Cove Resort real estate properties                      912,160

Mortgage payable - $1,000,000 original loan payable
to a financial institution, interest 6.25%, 20 year monthly
installments of $13,376 through May 2020, secured by
the Company office and warehouse real estate property          1,806,629

Mortgages payable - $342,000 original loans payable
to a financial institution, interest 12%, 30 year monthly
installments of $3,514 through January 2030, secured by
the real estate in Clark county, Nevada                          342,000

Convertible notes payable                                      1,027,746

Notes payable - stockholders, payable in monthly
installments ranging from $25 to $1,278, plus interest
at 7% - 14%, due at various dates, unsecured                      46,760

Notes payable - related parties, no specific monthly
payables, interest from 0% to 10%, unsecured                     118,474
                                                             ------------


                                      F-16
<PAGE>
Total term debt                                                4,253,769

(Less) current portion                                        (1,433,736)
                                                             ------------

Long term portion                                            $ 2,820,033
                                                             ------------


               Convertible notes payable are to individuals and bear interest at
               12%  per  annum.  Principal  and  accrued  interest is due twelve
               months  from the date of issuance. These notes are convertible at
               the  option  of  the  holder  into shares of the Company's common
               stock,  at  an  initial  conversion  price  of  $.80  per  share.
               Approximately  $169,000  of  accrued  interest  relating to these
               notes  at  December  31,  2004,  is  also  convertible  into  the
               Company's  common  stock.  At  December  31, 2004 the approximate
               total  of  common  shares  available  through  conversion  of the
               aforementioned  debt  is  332,000,000.

               The  notes  may  be called for conversion when the average of the
               bid  and asked prices of the common stock exceeds $1.00 per share
               for  ten  consecutive  days.  Although  the  notes issued will be
               freely tradable under federal securities laws, there is currently
               only a small public market for the notes. As of December 31, 2004
               the  convertible  notes issued during the year ended December 31,
               2003  and  prior  have  not been converted to common stock as the
               initial  public  offering  has  not  transpired.

               Maturities  of  long-term  debt  are  as  follows:

<TABLE>
<CAPTION>
Year ending December 31:
<S>                       <C>
  2005                    $1,433,736
  2006                       255,815
  2007                       271,822
  2008                       288,836
  2009                       141,462
  2010 and thereafter      1,862,098
                          ----------

                          $4,253,769
                          ==========
</TABLE>


NOTE 9  -      INCOME  TAXES:

               No  provision  was  made  for  income taxes in 2004 and 2003 as a
               result  of  the  net  loss for each year and a net operating loss
               carryforward.  A  valuation reserve on the deferred tax assets of
               approximately  $2,300,000  offsets  deferred tax benefit of equal
               amount  as  no  assurance  can  be  given  it  can be used. As of
               December  31,  2004, the Company has available net operating loss
               carryforwards  of  in  excess of $10,000,000. Expiration dates on
               these  carryforwards  begin  in  2010  and  end  in  2023.


                                      F-17
<PAGE>
NOTE 10  -     EQUITY:

               (a)  -  REVERSE  STOCK  SPLITS
               ------------------------------

               On  April  16, 2003,Gateway effected a 1 for 900 reverse-split of
               its  common  stock. On June 28, 2004,Gateway effected a 1 for 900
               reverse-split  of  its common stock. On September 3, 2004,Gateway
               effected  a  1  for  1,000  reverse-split of its common stock. On
               December 20, 2004,Gateway effected a 1 for 1,000 reverse-split of
               its  common  stock. The financial statements have reflected these
               reverse  stock  splits  retroactive  to  inception.

               On  March  28, 2005 Gateway effected a 1 for 500 reverse split of
               its  common  stock.  The financial statements have reflected this
               reverse  stock  split  retroactive  to  inception.

               (b)  -  STOCK  ISSUED  FOR  SERVICES  PROVIDED
               ----------------------------------------------

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

               Since  2003, the Company has filed with the Security and Exchange
               Commission  ("SEC") forms S-8 notifying of Non-Employee Directors
               and Consultants Retainer Stock Plans ("RSP") and its increases in
               stock  approved  to  issue  under  such  plans.

               During  the  years  2004  and  2003,  the  total number of shares
               approved  to  issue  in these plans were 8,500,000,000 (8 billion
               500  million)  and  1,000,000,000 (1 billion) respectively. Stock
               issued to consultants through the plan is not affected by reverse
               splits  until  it  has been sold. The remaining unissued stock at
               any time remains unchanged despite what happens to the stock once
               it  is  issued. i.e., stock reverse splits, dividends, etc. As of
               December  31,  2004  and  2003,  the remaining shares approved to
               issue  under  the  RSP  plans  are  1,756,200,000 and 990,448,916
               respectively.

               During  2004  and  2003,  the  Company  issued  6,196,680,046 and
               9,551,084  shares  respectively out of the ESIP plan before stock
               splits.  The number of shares after stock splits is recognized on
               the  statement  of  stockholders  equity.

               (c)  -  STOCK  ISSUED  FOR  DEBT  -  ACCOUNTS  PAYABLE
               ------------------------------------------------------

               From  time  to  time  a  creditor has agreed to exchange debt for
               stock in the agreed amount. During 2004 and 2003, 0 and 0 shares,
               after  all  reverse  stock  splits  are  taken into account, were
               issued  for  a  total value of accounts payable debt relief of $0
               and  $2,022  respectively.

               (d)  -  CONSULTING SERVICES SECURED BY STOCK IN 2002 AND PAID OFF
               -----------------------------------------------------------------
               IN 2003
               -------

               On  November 27, 2002, the Company entered into an agreement with
               Suburban  Capital  Corporation  ("Suburban") and its assigns. The
               terms  of  the  agreement  call  for  Suburban  to


                                      F-18
<PAGE>
               perform  consulting  services for the Company, the value of which
               is  not  to  exceed $1,500,000. It is computed based on the stock
               issued to Suburban and what sale proceeds Suburban receives. Once
               Suburban has received $1,500,000 in proceeds from stock sales, or
               on  or  about  April  15,  2003, which ever comes first, then the
               Company  has  no  further obligation to issue Suburban additional
               stock.

               On  January  14,  2003,  this  agreement  was modified. Among the
               modifications  is  a  change  in the amount owed to Suburban. The
               amount was changed to $550,000. However, Suburban has not made an
               adequate  and proper accounting to the Company as to the proceeds
               Suburban has received nor the stock Suburban still had on hand as
               of  December  31, 2002. It is management's best estimate that the
               maximum amount owed to Suburban at December 31, 2002, is $500,000
               out  of the $550,000 and the Company reported such as of December
               31,  2002.

               In  2003,  Management  has  received  third  party  information
               identifying  Suburban  has  received  all  or  most  all  of  the
               $550,000.  Management  has  taken  the  position  that all of the
               $550,000  has  been  received  by  Suburban  and  that no further
               obligation  of  stock  issuances  is  due Suburban. The remaining
               $500,000  of  debt  due Suburban as of December 31, 2003 has been
               recognized as paid off in stock sold for and proceeds received by
               Suburban  greater  than was estimated in 2002. This difference is
               recognized  in 2003 in the consolidated statement of stockholders
               equity.

               The  same  agreement also paid off $273,781 in notes payable owed
               to  Suburban  in  exchange  for  0  shares of common stock, after
               reverse  stock splits, and Suburban's release of stock it held as
               security.  However,  the  stock Suburban held as security has not
               been  released by Suburban and returned to the Company and to the
               officer  who  pledged his own stock in the Company as security on
               the  loan.

               (e)  -  NOTES  CONVERTIBLE  INTO  STOCK
               ---------------------------------------

               There  are $1,027,746 of convertible notes payable as of December
               31,  2004.

               Convertible notes payable are to individuals and bear interest at
               12%  per  annum.  Principal  and  accrued  interest is due twelve
               months  from the date of issuance. These notes are convertible at
               the  option  of  the  holder  into shares of the Company's common
               stock,  at  an  initial  conversion  price  of  $.80  per  share.
               Approximately  $169,000  of  accrued  interest  relating to these
               notes  at  December  31,  2004,  is  also  convertible  into  the
               Company's  common  stock.  At  December 31, 2004, the approximate
               total  of  common  shares  available  through  conversion  of the
               aforementioned  debt  is  332,000,000  freely  tradable stock. In
               addition  refer  to  the  Note  on  Term  Debt.

               The  notes  may  be called for conversion when the average of the
               bid  and asked prices of the common stock exceeds $1.00 per share
               for  ten  consecutive  days.

               During  2004,  under  a  separate agreement management negotiated
               $25,000  of  notes  to  be  converted  to  stock,  while  $0 were
               converted  in  2003.


                                      F-19
<PAGE>
               (f)  -  STOCK  OPTIONS
               ----------------------

               There are stock options granted before 2002. Because of the stock
               splits  management  is  of the opinion the stock options in place
               are  of  no measurable value and are anticipating terminating the
               existing  stock option plan. Therefore, in computing earnings per
               share  all  stock  options  have  been  ignored

               (g)  -  STOCK  ISSUED  FOR  ASSET  PURCHASE
               -------------------------------------------

               In  2002,  The  Company  acquired  the  assets of Grandma Hammans
               Specialty  Foods, LLC. Payment included 0 shares of Company stock
               (1,000,000  shares  before the reverse stock splits). In 2003 the
               agreement  to  acquire  Grandma  Hammans  was renegotiated and no
               stock  will  be  involved  in  the  acquisition.  The  financial
               statements  recognize  the  issue of the stock as of December 31,
               2002  and  the  return  of  the  stock  as  of December 31, 2003.

               (h)  -  EMPLOYEE  STOCK  INCENTIVE  PLAN  ("ESIP")
               --------------------------------------------------

               Since  2003, the Company has filed with the Security and Exchange
               Commission  ("SEC")  forms  S-8  notifying  of  Employee  Stock
               Incentive  Plans  ("ESIP") and its increases in stock approved to
               issue  under  such  plans.

               During  the  years  2004  and  2003,  the  total number of shares
               approved to issue in these plans were 18,200,000,000 (18 billion,
               200  million)  and  1,000,000,000 (1 billion) respectively. Stock
               issued  to  employees through the plan is not affected by reverse
               splits  until  it  has been sold. The remaining unissued stock at
               any time remains unchanged despite what happens to the stock once
               it  is  issued. i.e., stock reverse splits, dividends, etc. As of
               December  31,  2004  and  2003,  the remaining shares approved to
               issue  under  the  ESIP  plans  are 6,534,400,000 and 447,745,400
               respectively.

               During  2004  and  2003,  the  Company  issued 13,680,245,400 and
               552,254,600 shares respectively out of the ESIP plan before stock
               splits.  The number of shares after stock splits is recognized on
               the  statement  of  stockholders  equity.  The total net proceeds
               received  from  these  stock  issued  during  2004  and  2003 are
               $6,857,743and  $1,703,961  respectively.

               (i)  -  OTHER  STOCK  ISSUED  FOR  SERVICES  PROVIDED
               -----------------------------------------------------

               During 2004 and 2003, the Company issued to officers 48,010 and 0
               shares  of  restricted  common stock, after reverse stock splits,
               respectively.  Restricted  stock is not marketable. Consequently,
               no  value  can  be  determined  for this restricted stock issued.
               However  a nominal amount of $33,142 and $5,600 has been assigned
               as  the  value  for  this  non-marketable  stock  issued.

               During  2004  and  2003, the Company issued to officers 4,246,000
               and  726,000  shares  of restricted preferred stock respectively.
               Restricted stock is not marketable. Consequently, no value can be
               determined  for  this  restricted  stock  issued.  However  a


                                      F-20
<PAGE>
               nominal  amount  of 4,246 and $726 has been assigned as the value
               for  this  non-marketable  stock  issued. Preferred stock was not
               effected  by  the  reverse  stock  splits.

               (j)  -  RESTRICTED  STOCK  ISSUED  TO  CONSULTANTS
               --------------------------------------------------

               During  2004,  the  Company  issued  0  restricted  shares, after
               reverse  stock  splits,  to  a  consultant for services rendered.
               Restricted  stock  has  no  measurable value. However, $3,500 was
               assigned as a value for this stock. No other restricted stock was
               issued  this  year.

NOTE 11  -     RELATED  PARTY  TRANSACTIONS  NOT  DISCLOSED  ELSEWHERE:

               From  time  to  time,  Officers and directors will advance to the
               Company  or  receive  advances  from  the Company. Amounts due to
               related  parties  are  included  in notes payable of $118,474 and
               $115,174  for  December  31, 2004 and 2003 respectively (Refer to
               Note  on  Term  Debt).  No  amounts are due from related parties.

               During 2004 and 2003, the daughter of the Chief Executive Officer
               works  as  Marketing  Representative  (reassigned  in  2005  to
               non-managerial  responsibilities)  and  the  son  of  the  Chief
               Operations  Officer  serves  as Vice President of Operations with
               additional  responsibilities  in  Information  Technology.  Other
               children  of  the  officers  work  part  time  for the Company in
               non-managerial  positions.


NOTE 12  -     OPERATING  LEASES:

               The Company leases certain office equipment items under operating
               leases which expire during 2006. Future equipment rental payments
               are:

<TABLE>
<CAPTION>
Year ending December 31:
<S>                       <C>
2005                       3,012
2006                       1,506
                          ------
Total payments            $4,518
                          ======
</TABLE>

               The  Company  rented  a building under an expired operating lease
               through early December, 2004 until the Company moved into its own
               building.

               Total  rent  expense  charged  to  operations for the years ended
               December 31, 2004 and 2003, was $82,002 and $96,172 respectively.

NOTE 13  -     FOREGIVENESS  OF  DEBT:

               The  Company  has  recognized  $1,282,886 in debt forgiveness for
               2004.Those debts are for accounts that have remained unpaid, some
               of  which  the  Company  is unsure of what they represent as they
               pertain  to  unpaid  debts relating to business combinations that
               took effect before the year 2000. The Company is not aware of any
               efforts  to  collect  for  well  over  three


                                      F-21
<PAGE>
               years. This adjustment is after leaving the liability of $400,000
               in  the  event  creditors may present themselves at a later date.


NOTE 14  -     SEARCH  FOR  AND DEVELOPMENT OF PRODUCTS, PRODUCT LINES AND JOINT
--------------------------------------------------------------------------------
               VENTURES:
               ---------

               During  2003  and  continuing  through  2004 the Company acquired
               sizeable  capital  investments.  Management  in  an effort to use
               wisely  and prudently the funds received looked at many different
               alternatives  to  invest  cash  received.

               Among  those  investments  includes the down payments made on the
               building  the  Company  now has its office and warehouse. It also
               invested  in  Aspen  Cove  Resort  where  it anticipated it would
               suffer  losses  through 2004 and 2005 as it would attempt to turn
               around  an  operation  and  facility  in a location thought to be
               highly  developable  and  productive.  In  addition,  the Company
               invested  in  selected  pieces of real estate in the Clark County
               Nevada  area  where  rapid  appraisal  increases  were  being
               experienced.

               The  Company  also looked into several product and line ventures.
               Two  product  lines  that  the  Company  has  chosen  to  invest
               significantly in are the Jeunesse by Francois beauty products now
               being  offered  primarily  through  multi-level marketing and the
               Pete Rose product line which is now developed awaiting marketing.
               Other  product development searches after sufficient time, energy
               and  investment  were  set  aside  as  not feasible at this time.

               The Company also invested in joint ventures dealing with beverage
               distribution  in  Arizona  as well as expanding marketing for the
               multi-level  marketing  area  of  the  Company.

               As  of  December  31,  2004  the  Company has invested in various
               projects, as listed above. Some of these projects the Company has
               determined  are  worth pursuing and are expected to be profitable
               while  others  the  Company  has  determined  to set aside and to
               pursue  no further. Many of these projects involved finders' fees
               and other consulting fees that were paid with free trading common
               stock  of the Company. This common stock is issued by the Company
               under  its Non-Employee, Directors and Consultants Retainer Stock
               Plan  ("Plan").

               As discussed in a prior footnote, the stock issued under the Plan
               is  unrestricted  and  is issued as "S-8" stock as defined by the
               Securities  and Exchange Commission ("SEC"), and has been charged
               to  operations.

               The  most  significant  projects the Company has invested in this
               year  through  December  31,  2004  are:


                                      F-22
<PAGE>
<TABLE>
<CAPTION>
                                            Product Developed       Expensed as Part of
                                           Awaiting Production   General & Administrative
                                            (All Paid in Cash)    (Paid in Cash & Stock)
                                           --------------------  -------------------------
<S>                                        <C>                   <C>
Jeuness by Francois - initial development               230,573                    655,757
costs

Finders Fees for real estate transactions                                           83,700

IGIA Product                                                                       691,200

Pete Rose Product Line                                  187,650                  1,530,238

Zufelt Marketing Strategies                                                         42,840

Distributor Recruitment                                                            338,922

All other projects - future or abandoned                                         1,415,131

                                           --------------------  -------------------------

             Total                                      418,223                  4,757,788
                                           --------------------  -------------------------
</TABLE>

               When  the  costs  capitalized  here are put into production, then
               they  will  be  reclassified  to inventory and such costs will be
               amortized  using  the  unit-of-production  of  accounting.

NOTE 15 -      CONSIDERATIONS  AFFECTING  THE COMPANY'S ABILITY TO CONTINUE AS A
               GOING CONCERN:

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

               The  Company  has  reassessed  its  operating  commitments and is
               taking  steps to stop funding certain phases of its operations in
               an  order to conserve as well as to preserve its working capital.

               In 2003, the Company implemented and still uses an Employee Stock
               Incentive  Plan  ("ESIP").  During  2003 through March 2005 stock
               sales  provided  cash  to  the  company.  Cash  received  was
               approximately  $1,700,000  for  2003,  $6,900,000  for  2004  and
               $200,000  through  March 28, 2005 for a total received to date of
               $8,800,000.


                                      F-23
<PAGE>
NOTE 16  -     LITIGATION,  COMMITMENTS  AND  CONTINGENCIES:

               LITIGATION:
               -----------

               SUBURBAN  CAPITAL  VS  GATEWAY:

               On  August  13,  2003, Suburban Capital Corporation filed a civil
               action  in  the  Circuit Court of DuPage County, Illinois against
               Gateway  Distributors and two of its officers, Richard Bailey and
               Florian Ternes. On December 15, 2003, U.S. District Judge Charles
               R.  Norgle,  Sr., granted Gateway's Notice of Removal and removed
               the  case  to  the  United States District Court for the Northern
               District  of  Illinois.

               The  action  is  styled  Suburban  Capital  Corporation v Gateway
                                        ----------------------------------------
               Distributors,  Ltd.,  Rick  Bailey  and  Flo  Ternes, and Neptune
               -----------------------------------------------------------------
               Communications,  Case  No.  03-CV-7559  (Norgle,  J.)  and  as to
               --------------
               Gateway,  Richard  Bailey  and  Florian  Ternes:

               Suburban Capital's complaint alleges breach of contract and fraud
               claims.  Suburban  Capital seeks a declaratory judgment regarding
               the  validity  of  an  alleged  advisor  agreement  with Gateway,
               specific  performance  of  that  agreement and injunctive relief,
               including  temporary restraining order as well as preliminary and
               permanent injunctions. The complaint seeks $550,000 together with
               its  costs of enforcement including reasonable attorney's fees as
               well  as  punitive  damages  in  the  amount  of  $500,000.

               On  November  17,  2003,  Gateway filed an answer and affirmative
               defenses which asserted that the Plaintiff's claims are barred by
               the  principles  of  undue  influence,  duress,  in pari delicto,
               estoppel,  and  illegality.

               On  January 24, 2004, Judge Gottschall granted the Securities and
               Exchange  Commission's  motion for an order appointing a receiver
               over  Suburban  Capital  Corporation  in  Securities and Exchange
                     -----------------------------------------------------------
               Commission  v.  Frank  J.  Custable,  Jr.,  Sara Wetzel, Suburban
               -----------------------------------------------------------------
               Capital Corp., Francis Scott Widen, Wasatch Pharmaceutical, Inc.,
               -----------------------------------------------------------------
               David  Giles,  Gary  Heesch,  Pacel Corp., David Calkins, Gateway
               -----------------------------------------------------------------
               Distributors,  Ltd.,  Richard  Bailey  and  ThermoElastic
               -----------------------------------------------------------------
               Technologies,  Inc,  Case  No.  03-C-2182.  The  court-appointed
               -------------------
               Receiver,  Mark  Toljanic,  controls  this  claim.

               On  March  12,  2004 the Parties agreed to a Scheduling Order and
               commenced  discovery.

               On  January  10,  2005,  Gateway  filed  a  counterclaim  against
               Suburban  for breach of a Stock Purchase Agreement dated November
               27, 2002. Gateway's claims include breach of contract and, in the
               alternative, unjust enrichment. The counterclaim seeks a judgment
               from  the  court  which  orders  Suburban to assume the debts and
               obligations - currently valued at more than $306,667 as contained
               in  the  November  27,  2002  Stock  Purchase  Agreement.

               The  parties are scheduled to appear before Judge Norgle on April
               13,  2005  for  a  status  hearing  and  the  attorneys have been
               instructed  to  both  vigorously  defend  the  claims


                                      F-24
<PAGE>
               made  against Gateway and Bailey and to prosecute the claims made
               against  Suburban.

               At  this  juncture,  legal  counsel is unable to predict what the
               possible  outcome  of these matters will be. Management has taken
               the  position  that this is an ongoing legal matter and has opted
               to  expense the costs of defending the Company and its officer as
               it  occurs as well as any subsequent cost for penalties and fines
               if  the Company should lose its defense or make a settlement. The
               Company therefore has not recognized any contingent liability for
               this  legal  matter.

               SECURITIES  AND EXCHANGE COMMISSION PROPOSED DISCIPLINARY ACTION:

               In  conjunction  with  the  lawsuit activity described above with
               Suburban  Capital, the Security Exchange Commission ("SEC") filed
               charges against Suburban Capital and related parties. Included in
               the  claims  are  claims  charged  against  Gateway Distributors,
               Ltd.("Gateway")  and  Richard  Bailey  ("Bailey"),  CEO  of  the
               Company.  On  November  18,  2004,  the  SEC  filed an additional
               complaint  in  the  United States District Court for the Northern
               District  of  Illinois  (Case  #  03-C-2182)  against Gateway and
               Bailey which incorporates all of the allegations in the March 28,
               2003  civil  action  referenced  above.

               The  SEC seeks an order barring Bailey from serving as an officer
               or director of a public company. Bailey and Florian Ternes COO of
               the  Company  have  given  prior  depositions  relating  to these
               matters  and  depositions  will  continue  until  discovery  is
               scheduled  to  close  on  June  21,  2005.

               At  this  juncture,  legal  counsel is unable to predict what the
               possible  outcome  of these matters will be. Management has taken
               the  position  that this is an ongoing legal matter and has opted
               to  expense the costs of defending the Company and its officer as
               it  occurs as well as any subsequent cost for penalties and fines
               if  the Company should lose its defense or make a settlement. The
               Company  therefore  has  not recognized any contingent liability.

               HUDSON  CONSULTING  VS  GATEWAY:

               Hudson  Consulting  performed  consulting  services  for a former
               subsidiary  of  Gateway  (TRSG,  Inc.).  On December 31, 2002 the
               Company  disposed  of  this  subsidiary  and  accepted  selected
               liabilities of such company, Hudson Consulting ("Hudson") not one
               of  them.  Hudson  filed a lawsuit in a Utah District Court which
               has  been  overturned  because  it  should have been filed in the
               Federal  Court.  Legal opinion believes that there may ultimately
               be some liability on the part of the Company, but is mitigated by
               and large by faulty filing of the lawsuit by Hudson and the costs
               associated  with  it  by  the  Company.

               Management  has  determined  not  to  recognize  any  contingent
               liability  relative  to this lawsuit because it has concluded the
               Company  is  not  responsible  in  this  matter.


                                      F-25
<PAGE>
               OTHER  PENDING  LEGAL  MATTERS

               In the normal course of business the Company experienced a change
               in accepted product sold to the public by the Bureaus of Consumer
               Protection of Nevada and Maryland over the selling of "Y-motion".
               Negotiations  are  still  in  process, the proposed penalties and
               costs  associated  with  this  matter  could  range  from  $0  to
               $220,000.  No  enforcement  action  has  been  filed  against the
               Company  to  date.

               Presently  a  creditor  of  the Company, Allergy Research group /
               Nutricology  filed  in the District Court of Clark County, Nevada
               an action against the Company on an unpaid open account for goods
               and  merchandise,  Case  No. A-487334, in the amount of $168,000.
               The  Company contests the amount claimed and is making payment on
               the  uncontested  amount  while  negotiations  with the plaintiff
               continue.  The litigation is in the discovery phase with no trial
               date  set  at this time. Management believes the exposure on this
               claim  ranges  between $50,000 and $80,000, less future payments.

               The  Company  has  recognized  an  obligation  in  the  financial
               statements  of  approximately  $90,000, which is recognized as an
               accounts  payable  to  cover  the potential liability exposure of
               these  other  pending  legal  matters.

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

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

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

               A  total of $75,000 was paid in 2003 and $626,042 in 2004, all of
               which  has  been  expensed.  Monthly  outgoes to the project will
               continue  at  around  $50,000  per  month  at the present rate of
               expenditures.  Management anticipates the marketing program being
               developed  should  launch  in  2005.

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


                                      F-26
<PAGE>
               CONTINGINCIES:
               --------------

               The  Company  has  no errors or omissions insurance for Directors
               and  Officers.  The  Company  is  currently  looking  into  this.

               On  December  31,  2002,  the  Company  acquired  all  assets and
               selected  liabilities  of  TRSG  Corporation  ("TRSG"). Under the
               terms of the agreement, TRSG chooses which creditors it continues
               to  owe  and all others are passed to the Company. This agreement
               has  not  been  agreed  upon  by the creditors of TRSG. There are
               ongoing  legal  matters  going  on  with TRSG that may or may not
               implicate  the  Company.

               In  July  of  2001,  the  Company's subsidiary, TRSG acquired the
               business  of  A and A Medical ("A&A"), located in Salt Lake City,
               Utah.  In  February  2002, TRSG sold the business to an unrelated
               party. The transactions dealing with the activity of A&A for 2002
               have  not  been  audited  and  was determined not to be auditable
               because  it  is out of business and records are unattainable. The
               net  amount  received  and  dispersed  has  been  reported in the
               statement  of  operations  as  part  of  selling,  general  and
               administrative  expense.  Matters dealing with this issue may not
               have  been  completely  resolved,  that may or may not affect the
               Company.

               Management  is unable to estimate the possible loss exposure, but
               believes  the ultimate outcome to be minimal for the Company, and
               has  therefore  not  recognized any contingent liability on these
               matters.

               OTHER:
               ------

               During  2003 and 2004, Management is continuing negotiations with
               the Internal Revenue Service ("IRS") to settle back payroll taxes
               due  and  anticipates  a  settlement  by  year-end.

NOTE  17  -    SUBSEQUENT  EVENTS:

               The  Company  made a reverse stock split effective March 28, 2005
               wherein  500  shares of old stock were exchanged for one share of
               new  stock.  This  reverse  stock  split  is  recognized in these
               financial  statements  retroactive  to  inception.


                                      F-27
<PAGE>