SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

     [X]  Annual report under Section 13 or 15(d) of the Securities Exchange Act
          of 1934 for the fiscal year ended December 31, 1999.

     [ ]  Transition  report  under  Section  13 or 15(d)  of the  Securities
          Exchange Act of 1934 for the transition period from ______ to ______ .

Commission file number: 000-27879
                       ----------

                           Gateway Distributors, Ltd.
                           --------------------------
        (Exact name of small business issuer as specified in its charter)



                  Nevada                                     65-0683539
                  ------                                     ----------
     (State or other jurisdiction of                      (I.R.S. Employer
      incorporation or organization)                     Identification No.)

                500 East Cheyenne Avenue, Las Vegas, Nevada 89030
            --------------------------------------------------------
           (Address of principal executive office including Zip Code)

                                  702-399-4328
                                  ------------
                           (Issuer's telephone number)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                             Yes X           No
                                ----           -----

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure  will 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 [X ].

The issuer's total  consolidated  revenues for the year ended December 31, 1999,
were $3,910,604

The aggregate  market value of the registrant's  Common Stock,  $0.001 par value
held by  non-affiliates  is not available  because the Company has no publically
traded market for its stock .

On December  31,  1999,  the number of shares  outstanding  of the  registrant's
Common Stock, $0.001 par value (the only class of voting stock), was 6,817,000.



<PAGE>



                                                 TABLE OF CONTENTS



                                                                            Page

                               PART I

Item 1.     Description of Business............................................2

Item 2.     Description of Property...........................................19

Item 3.     Legal Proceedings.................................................19

Item 4.     Submission of Matters to a Vote of Security-Holders...............19


                                     PART II


Item 5.     Market for Common Equity and Related Stockholder Matters..........20

Item 6.     Management's Discussion and Analysis or Plan of Operation.........22

Item 7.     Financial Statements..............................................26

Item 8.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure..............................................27

                                    PART III


Item 9.     Directors and Executive Officers..................................27

Item 10.    Executive Compensation............................................28

Item 11.    Security Ownership of Certain Beneficial Owners and Management....29

Item 12.    Certain Relationships and Related Transactions....................30

Item 13.    Exhibits, List and Reports on Form 8-K............................31

Signatures....................................................................31





                                        1

<PAGE>




                                     PART I

Item 1.  Description of Business.

Business Development.
--------------------

Gateway  Distributors,  Ltd.  ("Gateway" or the "Company") was  incorporated  in
Nevada on May 26, 1993. In March 1995,  the Company  purchased all of the assets
of The Right  Solution,  Inc.,  a  California  corporation,  which had filed for
protection  from its creditors  under Chapter 7 of the United States  Bankruptcy
Code. The acquisition of those assets was effected as part of the Company's long
term strategic plans.

On May 1, 1998, the Company  amended its Articles of  Incorporation  to increase
its  authorized  capital stock to 21,000,000  shares,  of which  20,000,000  was
designated as Common Stock,  and of which  1,000,000  shares were  designated as
Preferred Stock. Each share of Common Stock outstanding on the effective date of
the amendment  was  automatically  converted  into 40,000  shares.  The board of
directors is  authorized  to fix the number of shares of any series of Preferred
Stock, to determine the designation of any such series and to determine or alter
the  rights,   preferences,   privileges,   qualifications,   limitations,   and
restrictions  granted to or imposed upon any wholly unissued series of Preferred
Stock. No Preferred Stock has been issued. The amendment effectively  eliminated
the class of non-voting common stock.

On May 12, 1998, the Company  completed the  acquisition by merger of Hali Sales
Corp.,  a Delaware  corporation  ("Hali"),  with the  Company  as the  surviving
corporation.  Hali had limited  assets and  approximately  970  shareholders  of
record and was  acquired  by the Company in order to  increase  its  shareholder
base.  The Company issued one (1) share of its Common Stock in exchange for each
nine and eight hundred four one-thousandths  (9.804) shares of Hali common stock
issued and  outstanding on the effective date of the merger.  Hali had no active
operations at the time of the merger with the Company.

As  of  January  4,  1999,  the  Company   acquired  certain  assets  of  NuTech
International,  Inc.,  a Texas  corporation  ("NuTech")  in exchange  for 75,000
shares of the  Company's  Common Stock (the "NuTech  Acquisition").  NuTech is a
network  marketer that sells  nutritional,  health and dietary  supplements  and
products. In connection with the NuTech Acquisition, the Company agreed to cause
an increase in the number of  authorized  directors of the Company,  to take all
steps  necessary to nominate  Scott McKnight to be a director of the Company and
submit such nomination to the Company's  shareholders for approval. In addition,
the Company  agreed that it will engage  Aloe  Commodities  International,  Inc.
("ACI") as the exclusive manufacturer of certain product lines which the Company
purchased in the NuTech Acquisition.

As of April 1, 1999, the Company  acquired  certain assets of American  Outback,
Inc., an Oklahoma corporation ("American Outback") in exchange for 67,400 shares
of the Company's  Common Stock (the "American  Outback  Acquisition").  American
Outback  is a network  marketer  that  sells  nutritional,  health  and  dietary
supplements and products.  In connection with the American Outback  Acquisition,
the Company agreed that if, between April 1, 1999 and April 1, 2000, the average
market  price of the  Common  Stock  does not  exceed  $1.00  per  share for any
consecutive  ten (10) day period,  the Company must pay to American  Outback the
difference  of (a)  $67,400  and (b) the product of (i) the average of the daily
closing prices of the Common Stock during the ten trading days  preceding  April
1, 2000 and (ii) $67,400. In the event that the stock is not trading by November
1, 1999,  American  Outback  has the option to demand  payment of $67,400 or any
portion thereof,  on terms to be determined by the parties by mutual  agreement.
The Company's stock was not trading

                                        2

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by  November  1,  1999.  The  parties to the  agreement  have made no demand for
payment of the $67,400 as of the date of this filing.  Also in  connection  with
the American Outback Acquisition, the Company agreed to take all steps necessary
to appoint Jack Akers to the Company's  Medical  Advisory  Board.  Further,  the
Company  agreed to use Bush  Recipe(R) Emu Oil in all of the Company's  products
which  contain  Emu  oil  and  to  engage  American  Outback  as  the  exclusive
manufacturer of Bush Recipe(R) Emu Oil, subject to certain terms and conditions.
American  Outback  also  granted  to  the  Company  a  license  to  use  certain
trademarks.

As of September 21, 1999, the Company acquired  substantially  all of the assets
and  assumed  certain  liabilities  of  TeamUp  International,  Inc.,  a  Nevada
corporation  ("TeamUp")  pursuant  to an asset  purchase  agreement  dated as of
August 17, 1999 (the  "TeamUp  Acquisition").  The TeamUp  Acquisition  purchase
price consisted of (i) a stream of cash payments  calculated on the basis of the
Company's sales of inventory acquired in the TeamUp  Acquisition,  (ii) a stream
of cash payments calculated on the basis of the Company's  commissionable sales,
(iii)  650,000  shares  of the  Company's  Common  Stock,  and (iv) an option to
purchase  200,000  shares of the Company's  Common Stock at a price of $1.00 per
share.  The Company  agreed  that it would  repurchase  up to 100,000  shares of
Common Stock issued as  consideration  in the TeamUp  Acquisition  at a price of
$1.00 at any time after March 21, 2000. The Company also agreed that if it files
a  registration  statement  under the  Securities  Exchange  Act of 1934 for its
Common Stock with the Securities & Exchange  Commission  ("SEC") and the SEC has
not declared such  registration  statement  effective on or before September 21,
2001,  then the  Company  will pay  $250,000  to TeamUp,  or, if TeamUp has been
dissolved, to the stockholders of TeamUp, pro rated proportionately.

The Company's principal executive office is located at 500 East Cheyenne Avenue,
North Las Vegas, Nevada 89030 and its telephone number is (702) 399-4328.

Business of the Issuer.
----------------------

The Company,  doing  business as "The Right  Solution,"  is a network  marketing
company  that sells  nutritional,  health and dietary  supplements  and products
throughout North America and Japan.

The Company's  products are marketed through network marketing within the United
States and wholesale  personal  import sales outside the United States.  Network
marketing  enables the Company's  independent  distributors in the United States
(sometimes  referred  to herein as "Team  Members")  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 Company  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 Company's products themselves. The Company'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.





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Growth Strategy

The Company 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 Company
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.  During  the past two  years,  the  Company  has
introduced one hundred fifty (150) new products, bringing the total product line
to one hundred eighty one (181) by the close of 1999.

Mergers and Acquisitions.  The Company's  business plan for 1999 includes growth
through mergers and  acquisitions.  The Company  acquired  certain assets of two
companies,  NuTech and American Outback, which carry product lines using Emu Oil
and Aloe Vera as key ingredients.  In January, the NuTech Acquisition brought in
approximately  300  distributors  and $15,000 in monthly sales.  Included in the
purchase  were the rights to Aloe #9 for Japan and the United  States,  NuTech's
entire inventory and its distribution  system. The American Outback  Acquisition
brought  in  approximately  1,300  distributors,  450 of whom  were  on  monthly
autoship.  Monthly  sales  from this  transaction  are  averaging  approximately
$19,000.

In September  1999,  the Company  purchased  substantially  all of the assets of
TeamUp,  which assets included product lines such as Femme, Natural Immunity and
Trim Easy.  The TeamUp  Acquisition  has brought in  approximately  4,860 active
distributors,  140 of whom are on monthly  autoship.  The TeamUp  Acquisition is
expected to bring in approximately $200,000 in monthly sales.

These  acquisitions  expanded the  distributor  base,  increasing  monthly sales
volumes,  and  gave  the  Company  a broad  base of new  products  and  existing
inventory.  Throughout each of these  transitions,  the majority of distributors
and  customers  were  retained.  The  Company  intends to  continue  to look for
opportunities  to  merge  or  purchase   smaller   companies  that  have  active
distributors  and sales volumes,  but are struggling  with growth due to lack of
financing.  The Company's  strategy is to target  companies  that are in trouble
financially,  lack product  inventories,  but which have active distributors and
sales.  Potential companies must be compatible to the Company's marketing system
and must merge into the Company's compensation plan.

Expansion Into New Markets. The opening of new markets is an important component
of the Company's business strategy. In 1997, the Company commenced operations in
Japan on a personal import basis.  During 1999, Japan contributed  approximately
45% of the  Company's  total  sales.  The Company  believes  there are  numerous
additional  markets in which its network marketing system and products may prove
successful.  The Company  evaluates new markets based, in part, on the Company's
ability to create a distributor  base in the potential  markets.  In determining
when  and  where to open new  markets,  the  Company  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  the Company  intends to expand into new  markets,
there can be no assurance that the Company 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 the  Company'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

                                        4

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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. The
Company  is  informed  that the  lead-time  necessary  to open a new  market  is
generally up to one year, but may be more.

Enhancement  of Sales and  Motivational  Training.  The Company will continue to
seek  increased  sales  opportunities  through its network  marketing  system by
utilizing  extensive training and motivational  programs.  The Company will also
hold  extravaganzas  and other  large scale  events and  numerous  training  and
motivational  programs.  The Company has formed an alliance  with OMC,  Inc.,  a
Japanese corporation, to act as its communications/marketing firm for Asia. OMC,
Inc. currently performs work for companies such as Sony,  Panasonic,  and Honda.
In addition,  the Company will  continue to offer  extensive  training  programs
through   various   methods  of   communication,   including   Company-sponsored
conferences and seminars,  live  teleconferences,  prerecorded telephone message
services,  fax-on-demand  systems,  broadcast faxes, printed materials,  and the
Company's Internet web site, featuring on-line ordering and volume checks.

Products and Services

The  Company  markets  and  distributes   approximately  thirty  (30)  different
nutritional  and/or health  products.  The products  which the Company sells are
intended to provide  nutritional  supplementation  to the  products  users;  the
products are not intended to diagnose, treat, cure or prevent any disease.

The  Company's  core products can be divided into six  categories:  Health Pack,
Immune  Pack,  Heart  Pack,  Weight Loss Pack,  and  Specialized  Products.  The
following is a description  of some of the  Company's  primary  products  within
those six categories:

Health Pack

Armor  Gard(TM).  Armor Gard(TM) is a special  combination  of herbs,  vitamins,
minerals and other nutrients designed to strengthen the body with a focus on the
immune system. Armor Gard(TM) was created to combine micronutrients and specific
herbal ingredients together to offer added health support and enhance the body's
various functions.

Body Balance. Body Balance contains potassium and over sixty (60) other minerals
in an ionic form. The ionic form is believed to increase the absorption  rate of
the minerals.  The product is designed to supplement  diet and provide  minerals
and trace  minerals  which are  believed to be  essential  to the human body but
absent in normal food supplies.

Buffered  Vitamin C.  Buffered  Vitamin C is a  corn-free,  purely beet  derived
ascorbic  acid,  designed  especially  for  allergic  individuals.  This product
contains Calcium,  Magnesium and Potassium whose carbonates and bicarbonates are
designed to cause a buffering  action to help  eliminate the stomach upset which
can occur from the acidity normally found in Vitamin C.

Fortress Plus(TM) Fortress Plus(TM) is a formulation of antioxidants,  vitamins,
minerals and herbal nutrients that are intended to help offset the potential for
premature aging. It is intended that the antioxidants  neutralize  unwanted free
radicals in the body.

Mineral Magic Ionic  Minerals.  Mineral Magic Ionic Minerals  contains CoQ10 and
over  sixty (60)  minerals  in an ionic  form.  The ionic  form is  believed  to
increase  the  absorption  rate of the  minerals.  The  product is  designed  to
supplement diet and provide minerals and trace minerals which are believed to be
essential to the human body but absent in normal food supplies.

                                        5

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Oxygen Plus.  Oxygen Plus is a formula of stabilized  oxygen  designed to purify
water. It is manufactured  from water,  sodium  chloride,  sodium  carbonate and
sodium sulfate.

RFV 29(TM) RFV 29(TM) is a combination of rain forest herbs. The ingredients are
twenty-nine  (29)  essential   vitamins  and  minerals  and  other   significant
botanicals, twelve (12) of which come from the Brazilian Rain Forest. RFV 29(TM)
is  designed to be a highly  absorbable  source of vitamins  and  minerals  with
generous amounts of micronutrients.

Vita-Greens.  Vita-Greens is an  all-natural  "super-green"  dietary  supplement
powder  designed  to  provide  vitamins,   minerals,  enzymes,  trace  minerals,
antioxidants and essential amino acids. This dehydrated  product provides plenty
of nutrients from their natural source for the body.

Immune Pack

Body Gard With  Lactoferrin.  Body Gard With  Lactoferrin  is a  combination  of
colostrum, echinacea and lactoferrin. Lactoferrin is a naturally occurring, iron
binding protein. It is the second most abundant protein in human colostrum,  the
first milk secreted at the termination of pregnancy.  It also is involved in the
metabolism and regulation of iron. Body Gard comes in tablet form.

Cytolog(TM)   Cytolog(TM)  is  a  liquid  colostral  derivative  which  contains
infopeptides.  Infopeptides  are chains of amino  acids found in the human body.
Persons who have used  Cytolog(TM)  report a return to wellness  from an adverse
health condition or a reduction in lapses in good health.

Myco-Enhance Mushrooms. Myco-Enhance Mushrooms is a combination of six different
medicinal mushrooms which are organically grown in a germ-free  environment plus
a high potency  Vitamin C. The mushrooms  produce  antiviral  and  antibacterial
compounds  to protect  themselves  against  invading  pathogens.  Here are a few
specific examples of the documented attributes of each mushroom:

o        Reishi:  In China,  preparations made from the reishi mushroom are used
         on a  daily  basis  to  promote  heath,  sound  sleep  and to  increase
         resistance to infections and heart disease.

o        Shiitake: In Japan,  preparations made from shiitake are used regularly
         to treat any illness  involving a depressed immune system.  Shiitake is
         also used to soothe bronchial  inflammation,  regulate incontinence and
         lower high cholesterol.

o        Cordyceps sinensis: This especially helpful for treating chronic cough,
         asthma,   and  other   respiratory   conditions   while  acting  as  an
         antibacterial agent.

o        Maitake:  This  mushroom has the ability to lower high blood  pressure,
         stabilize blood sugar in diabetics, and protect against liver damage.

o        Coriolus versicolor (also known as Trametes  versicolor):  In China, C.
         versicolor is used widely to treat  infection  and/or  inflammation  of
         urinary,  digestive,  and upper  respiratory  tracts,  as well as liver
         ailments that include chronic active hepatitis and hepatitis B.

o        Schizophyllum  commune: S. commune  is prescribed regularly in Japan to

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         treat cancer patients. In addition, it's  currently  being  studied  as
         a  treatment  for  chronic  fatigue syndrome and has shown  significant
         antibacterial  activity  useful  in  fighting  Staphylococcus   aureus,
         Escherichia  coli,  and  Klebsiella pneumoniae.

Heart Pack

Smart  Heart(TM).  The Smart  Heart(TM) Kit consists of a Smart  Heart(TM) Fiber
Drink, Smart Heart(TM) Herbal Tablets,  and a Smart Heart(TM) Metabolic Formula.
The Smart  Heart(TM)  Fiber Drink  contains  three (3) types of soluble  natural
fibers which provide  benefits to  cardiovascular  health.  The Smart  Heart(TM)
herbal Tablets provide  antidioxants and minerals associated with healthy hearts
and reduced risk of disease.  The tablets are  formulated in a base of Ayurvedic
herbs used in India to strengthen the heart and improve  circulation.  The Smart
Heart(TM)  Metabolic  Formula  contains folic acid,  Vitamin B12 and Vitamin B6,
demonstrated  in animal and human studies to reduce  homocysteine  production in
the blood.

Weight Loss Pack

Body Trim  1-2-3(TM).  Body Trim 1-2-3(TM) is a formulation of components  which
may be used individually for specific weight management purposes or together for
a complete program. Body Trim 1(TM) combines eight components, including calcium
pyruvate  and  chitosan,  which are  intended to increase  strength and training
intensity,  decrease  body fat,  enhance  weight loss,  increase lean body mass,
increase  body protein  uptake and bind fats and lipids before they are absorbed
through the digestive  system.  Body Trim 2(TM) is a weight  management  program
focused on increasing the metabolic rate of the user. Body Trim 3(TM) is a blend
of nineteen herbs with  detoxifying  properties  that are intended to facilitate
the cleansing of toxins.

The Lite  Solution(TM).  The Lite Solution(TM) is an herbal formula made up of a
formulation of herbs, and it is designed to make the body's metabolism work more
efficiently, increase energy levels and satisfy feelings of hunger.

Crystal Spring Counter Top Water Filtration  System.  The Crystal Spring Counter
Top Water  Filtration  System is a  filtration  system  designed to reduce lead,
chlorine and other organic  chemicals  and to provide  cleaner,  more  drinkable
water.

Crystal Spring Shower  Filtration  System.  The Crystal Spring Shower filtration
System is a filtration  system designed to reduce  chlorine,  enhance pH balance
and improve the water quality of shower water.

Specialized Products

Arthred(TM). Arthred(TM)is a patented, pre-digested collagen product designed to
nutritionally  encourage and support  healthy joint  function.  Arthred(TM)is  a
source of collagen developed in Germany.  Arthred(TM)comes  in a powder form and
is taken as a dietary supplement.

Calcium  Elenolate.  This product is derived from olive leaf extract. A compound
from the leaf, oleuropein, and its chemical agent, elenolic acid, is believed to
have antibacterial properties and is an antioxidant.

Cellution(TM)  Body  Toning  Cream.  Cellution  (TM)  Body  Toning  Cream  is  a
scientific  achievement in skin care which gives a silky,  supple  appearance to
problem areas, such as the thighs,  hips,  buttocks and upper arms.  Beneath the
human skin lies a layer of fatty  tissue.  This fat can be deposited in a manner
which causes a "dimpled"  appearance in the skin, known as cellulite.  Women are
more susceptible to fat being deposited in this manner than men.  Cellution (TM)
has been  clinically  tested as a contouring and body toning cream to aid in the
reduction of cellulite and to give the skin a more youthful  appearance.  It has
been found to be safe, effective and easy to use.

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Detox  Tea(TM).  Detox  Tea(TM)is  a blend  of  nineteen  herbs.  Users of Detox
Tea(TM)have reported increased energy, loss of fat and improved overall health.

DHA Omega-3 Fish Oil. DHA (or docosahexaeonic acid) is an Omega 3 fatty acid and
is prepared  from the oil of tuna.  Omega 3 fatty acids are  essential,  meaning
that the body cannot  manufacture  them from other fats,  and are  important for
maintaining the proper  function of cell  membranes,  particularly in the retina
and the brain.

Modified Citrus Pectin.  Modified Citrus Pectin is a form of pectin,  which is a
soluble component of plant fiber derived from citrus fruits. It is believed that
Modified  Citrus Pectin  improves the function of natural killer cells and other
immune  system  compounds,  and  that  it may act as an  "anti-adhesive  agent,"
preventing certain cell interactions.

Organic Germanium. Organic Germanuim is a mineral whose atomic structure readily
accepts and transmits electrons and may have the ability to stimulate electrical
impulses.  Organic  Germanium may promote better  circulation,  increased oxygen
flow, and utilization.

PR10(TM).  PR10(TM) is a formula in which  capsaicin (a natural  pain  relieving
analgesic) is blended with seven herbs to aid in analgesia and healing.  PR10 is
used to combat pain from arthritis, muscle spasm and inflammation.

ProzaPlex(TM)  ProzaPlex(TM)  is a product  designed  to  provide  those  herbal
ingredients  which are believed to most  effectively  support good emotional and
mental health. Its active ingredient is St. Johnswort, an herb which is reported
has being a safe and viable alternative to conventional antidepressant drugs.

Wild Yam  Lotion For Men.  Wild Yam  Lotion  For Men is a lotion  which has been
formulated with natural  ingredients to assist in the balance of hormones in the
male body.

Ymotion  -  The  Original  Wild  Yam  Cream.  Ymotion  is a  moisturizing  cream
containing  extract from the wild yam plant.  This extract  contains  diosgenin,
which is believed  to help  balance  the  hormonal  cycles in women and may be a
factor in the bone building process. The specific herbs contained in Ymotion may
also help relieve symptoms of premenstrual syndrome and menopause.

Additional Products - NuTech and American Outback

With the NuTech and  American  Outback  Acquisitions,  approximately  fifty (50)
additional products have been added which have product  formulations based on #9
Aloe Vera and Bush Recipe(R) Emu Oil.

#9 Aloe Vera. The Aloe Vera in the Company's  products is  organically  grown in
the rich volcanic soil of Costa Rica and is processed within  twenty-four  hours
of harvesting. The Company believes that, due to the state of the art processing
procedures used in the Aloe Vera-based  products which it sells,  the quality of
its Aloe Vera  products  are vastly  superior to those of other  sellers of Aloe
Vera-based products.

Bush Recipe(R) Emu Oil. Emu oil is easily absorbed and  transported  through the
fatty tissue of the skin,  making it an excellent  vehicle for delivering  other
therapeutic   substances   via   topical   application.   Furthermore,   it   is
noncomedogenic,  which means it doesn't clog pores.  Bush  Recipe(R)  Emu Oil is
non-diluted and contains all of its natural properties.  It is believed that the
natural form of emu oil is far superior to the  pharmaceutical  grade, which has
been processed so as to be clear and odorless.

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The product  formulations  based on these two  ingredients  include  nutritional
supplements, such as Nu-Aloe (an energy drink) and Super Anti-oxidant (a vitamin
tablet), skin care products targeting normal/dry and oily skin types,  including
Non-Surgical  Face Lift,  and  personal  care  products,  including  shampoo and
aromatherapy products.

Additional Products - TeamUp International

With the TeamUp Acquisition,  the Company added several new products,  including
Femme, Foundational Health Programs, Natural Immunity, Superfood and Trim Easy.

Femme.  Femme is a generic herbal tonic for women. It contains Dong Quai, Chaste
Tree,  Wild Yam and other  herbs.  Femme is  intended  to relieve  the  symptoms
particular to women's health, such as pre-menstrual syndrome and menopause.

Foundational  Health  Programs.  The TeamUp  Foundational  Health Programs are a
series of programs designed to improve general health.  There are three separate
programs,  one of which is designed to  strengthen  and make more  efficient the
user's  bowels.  The second is  designed  to remove old waste and fecal  matter,
years of accumulation from the bowel. The final program is designed to pass more
fiber to the diet for healthier bowel movements.

Natural  Immunity.  Natural  Immunity  is a formula  which  contains  Echinacea,
Siberian  Ginseng and a variety of  mushrooms.  It is designed to stimulate  the
immune system and promote general health.

Superfood.  Superfood is a vitamin  supplement  containing  Spirulina,  alfalfa,
wheat grass,  barley,  beets,  purple dulse seaweed and a nutritional yeast. The
ingredients  are organically  grown. It is designed to have a higher  absorption
rates than other vitamin and mineral supplements.

Trim Easy.  Trim Easy is a pure herbal product  containing Ma Huang,  Salix Alba
and kelp.  It is designed to accelerate  the rate at which the body  metabolizes
fat by means of thermogenesis.

Crystal Spring Counter Top Water Filtration  System.  The Crystal Spring Counter
Top Water  Filtration  System is a  filtration  system  designed to reduce lead,
chlorine and other organic  chemicals  and to provide  cleaner,  more  drinkable
water.

Crystal Spring Shower  Filtration  System.  The Crystal Spring Shower Filtration
System is a filtration  system designed to reduce  chlorine,  enhance pH balance
and improve the water quality of shower water.

Services

Product Return Policy for Retail  Customers.  The Company 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 Company.  Upon receipt of the container and a
copy of the  customer's  retail  sales  receipt  with their  name,  address  and
telephone  number,  the Company will  promptly  send a  replacement  to the Team
Member.  The Company does not make cash refunds.  The Company's  product  return
policy for retail customers has been approved by the Direct 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.


                                        9

<PAGE>



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 refund if they are in the original packaging, factory sealed and in
resalable  condition.  Shipping  expenses  are  not  eligible  for  refund.  The
Company'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 Company'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
Company 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 Company
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 Company 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
Company's  products at wholesale prices (which are discounted 50% from suggested
retail  prices) and selling the  Company'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 sponsored by an existing distributor,
pay an annual  fee (which is  currently  $7.95),  and be placed  into a Tracking
Center, which is a point from which the Company "tracks" the sales volume of the
distributor and the sales volume of a distributor's downline organization.  Only
two distributors  (one on the "left side" and one on the "right side") are first
level to a Tracking Center.  Thereafter,  personally sponsored  distributors are
placed in the downline on the  sponsor's  left or right side,  as decided by the
sponsor.  In order to receive any commissions or bonuses from a Tracking Center,
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 or a maximum of $200 of the Company's  products every
twenty-eight  (28) days.  All  distributors  are allowed to  participate  in the
Company's growth by sponsoring new distributors.

The Company  computes the wholesale  volumes  purchased by the  distributors  in
qualified  Tracking  Centers at the close of each business day during the 28-day
cycle.  Separate  volumes  are  maintained  for the left and right sides of each
Tracking  Center.  When the  volumes on the lowest side of the  Tracking  Center
reaches $700 (the first pay step),  a $100  commission  will be generated to the
distributor. When the volume on the lowest side accumulates to $2,200,

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<PAGE>



an additional  $250  commission will be paid. At a total volume of $3,700 on the
lowest side, an additional  $250  commission is generated.  When the lowest side
reaches  $5,500 (the last pay step in the cycle),  the final $250  commission is
paid. This is a cumulative total of $850.

Upon reaching the $5,500 dollar level (or "cash out"),  all of the volume on the
lowest  volume side will be flushed  and $5,500 will be flushed  from the strong
leg.  The  remaining  volume in the  strong  leg will not  exceed  $11,000.  The
commission  cycle then begins all over  again.  This cycle can be  completed  as
often as once per business day.  There is no time  restriction as to how long it
may take to complete this cycle.  As long as  qualification  is maintained,  the
accumulated volumes will be preserved. Product returns from the downline will be
debited against volume at the time the return is processed.

Distributors  may  qualify  for a $150  "leadership  bonus" each time one of the
distributor's  Tracking  Centers  completes a pay cycle (cashes out) on the same
day as any personally  sponsored  distributor  also completes a pay cycle.  This
bonus  applies  only  to  those   Tracking   Centers  of  personally   sponsored
distributors and is limited to $150 per day per sponsored distributor.

A  distributor  may  sign  up for an  "Autoship  Program"  which  helps  protect
distributors  from  losing  qualification  by  automatically   shipping  them  a
qualifying  order within their 28-day  cycle.  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 25% of the new  distributor's  first
order. A distributor within the Autoship Program is also qualified to receive an
additional Right Start Bonus when that personally sponsored distributor signs up
for the Autoship Program. The amount of the additional Right Start Bonus will be
25% of that distributor's first Autoship order, up to a maximum bonus of $75.

When any Tracking  Center  progresses  completely  through the commission  cycle
(cashes out) for the first time, the Company will  authorize the  distributor to
re-enter  the  downline  with  two new  Tracking  Centers  at the  distributor's
discretion which may be positioned  anywhere at the bottom of the  distributor's
downline. Re-entry may occur at any time. The qualification of multiple Tracking
Centers is $200 of personal  purchase  volume by the distributor per each 28-day
cycle.

The Company has also  established  the "Right Solution  Rewards  Program," which
offers an  increasing  amount of cash  bonuses and other  awards  based upon the
number of cycles a distributor completes.

The  following  table  sets  forth  the  approximate  number  of  the  Company's
distributors at the dates indicated:


                                                1999        1998        1997
                                                ----        ----        ----
Approximate Number of Total Distributors       34,623      30,624      20,484
Number of Distributors Ordering                 6,297       7,814      13,714

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


                                       11

<PAGE>



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

Marketing.  Each  distributor is responsible for sales of the Company's  product
within his or her downline. The Company relies on word of mouth and testimonials
from previous or existing customers for its primary advertising. The Company 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, written in both English and in Japanese.

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

Product Distribution. The Company's products are distributed to all markets from
the Company's warehouse located in North Las Vegas, Nevada.

Competition

The  Company  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  Company's  competitors  are
substantially larger and have available considerably greater financial resources
than the  Company.  The  Company's  ability to remain  competitive  depends,  in
significant   part,  on  the  Company's  success  in  sponsoring  and  retaining
distributors through an attractive  compensation plan and other incentives.  The
Company 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
Company's  programs  for  recruitment  and  retention  of  distributors  will be
successful.

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 Japan.  The market is highly sensitive
to the introduction of new products that may rapidly capture a significant share
of the market.  The Company expects to continue to face substantial  competition
in its efforts to successfully  capture a significant share of the market. There
are a number of companies that currently offer competing products, and it can be
expected  that  additional  competing  products  will  be  introduced  by  other
companies  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 Company's
existing  and  potential   competitors   have  greater   financial,   marketing,
distribution, and research capabilities than the Company. The performance of the
Company 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 Company  attempts to  differentiate  itself  from  competitors  by
adhering to its "mission statement" which reads as follows:

"The Right Solution will  distribute the finest  life-enhancing  products in the
world. Through effective leadership,  management and entrepreneurial  marketing,
we will provide an opportunity  to our Team Members,  customers and employees to
earn a fair profit on their investment of time and money."

                                       12

<PAGE>




Product Manufacturing and Development

The  Company  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,  the
Company's executives,  staffs,  consultants,  and outside parties. In advance of
introducing products into its markets, the Company consults its Medical Advisory
Board, comprised of Ken Kroll, M.D., FICS., Hiroshi Mitsuoka, M.D., Betty Kamen,
Ph.D., and Jack Akers,  M.D., Ph.D. for advice.  In addition,  local counsel and
other  representatives  retained by the Company  investigate product formulation
matters as they relate to regulatory compliance and other issues.

All of the Company's  products are provided by outside  companies.  NutriCology,
Inc.  ("NutriCology")  currently  manufactures  most  of the  Company's  powder,
tablet, and capsule products.  The agreement  provides,  among other things, the
ability for the Company to source and develop products with other manufacturers.
As a result of the NuTech  Acquisition,  the Company has agreed to engage ACI as
the exclusive  manufacturer of certain product lines which the Company purchased
in  the  NuTech  Acquisition.   Also,  as  a  result  of  the  American  Outback
Acquisition,  agreed to engage American Outback as the exclusive manufacturer of
Bush  Recipe(R) Emu Oil. The  Company's  ownership of product  formulations  and
trademarks for substantially all of the Company's nutritional products gives the
Company has the option to seek additional manufacturers,  including ACI, Gourmet
Mushrooms, Horizon Labs, Paragon Labs, Protein Research, and Traco Labs.

The Company'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 the  Company's  markets.  Beginning in 1998,  the Company has
significantly expanded its in-house product research and development and product
formulation staff,  which now consists of several employees of the Company,  its
Medical Advisory Board, and various consultants,  who are increasingly  involved
in such activities.

The Company owns the proprietary  rights to substantially  all of its health and
nutritional  supplements'  formulations  and trademarks.  The Company has formed
several  alliances with its  manufacturers to assure,  among other things,  that
products are organically  grown and that inventory  levels will remain constant.
However,  there can be no assurance that another  company will not replicate one
of the Company's products.

Insurance

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





                                       13

<PAGE>



Trademarks

The  Company  has  received  federal   trademark   registration  for  THE  RIGHT
SOLUTION(R).  The following products have trademark  applications pending: ARMOR
GARD(TM),  ARTHRED(TM), BODY TRIM 1-2-3(TM),  CELLUTION(TM),  CYTOLOG(TM), DETOX
TEA(TM), FORTRESS PLUS(TM), THE LITE SOLUTION(TM),  PR10(TM), PROZAPLEX(TM), RFV
29(TM), SMART HEART(TM), all Bush Recipe products and all Emu Oil products which
were purchased from American Outback, and all Aloe products which were purchased
from NuTech  International.  The Company  intends to continue to seek  trademark
protection  for a number  of the  products  and  brand  names  under  which  the
Company's  products are marketed,  where  applicable.  There can be no assurance
that such protection will be obtained. The Company will be required to rely upon
common law  concepts  of  confidentiality  and trade  secret laws to protect its
product formulations.  There can be no assurance that the foregoing will protect
the  formulations or provide  adequate  remedies for the Company in the event of
unauthorized use or disclosure of such formulations,  or that others will not be
able to independently  develop such formulations.  The Company intends to obtain
international  trademarks,  particularly  Japanese  trademarks,  as the  Company
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.  The Company  considers its trademarks and trade names to be an
important factor in its business.

The Company will be required to rely upon common law concepts of confidentiality
and trade  secret  laws to protect  its  product  formulations.  There can be no
assurance that the foregoing will protect the  formulations or provide  adequate
remedies for the Company in the event of unauthorized  use or disclosure of such
formulations,  or that others  will not be able to  independently  develop  such
formulations. Except for ARTHRED(TM), the Company's product formulations are not
protected by patents and are generally not patentable.

Government Regulation

The  Company  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 the Company's products, (ii) product claims and advertising (including direct
claims and  advertising  by the  Company as well as claims  and  advertising  by
distributors,  for  which  the  Company  may be  held  responsible),  (iii)  the
Company'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 the Company to
collect the taxes and maintain appropriate records.

Products.

The  formulation,  manufacturing,  packaging,  storing,  labeling,  advertising,
distribution and sale of the Company'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.
The Company'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 the
Company.  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

                                       14

<PAGE>



yet to be  promulgated,  but are expected to be  proposed.  The Company does not
anticipate that the promulgation of any GMP's for dietary supplements would have
a material impact on the Company.

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, the Company  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 the Company are  classified as dietary
supplements under the FFDCA. In addition, the adoption of new regulations in any
of  the  Company's  markets,  or  changes  in  the  interpretation  of  existing
regulations,  could have a material adverse effect on the Company.  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. The Company
was  required  to  revise a  substantial  number  of its  product  labels by the
effective  date.  The cost to the Company of such  revisions  was  approximately
$30,000. In addition, the Company is required to continue its ongoing program of
securing  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 the Company 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 the  Company'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 the  Company's
products  caused  them to fall within the scope of OTC  monographs,  the Company
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 the
Company  could do so  effectively,  or that any such changes would not adversely
affect sales and marketing of an affected product. The Company's  substantiation
program involves compiling and reviewing the scientific  literature pertinent to
the ingredients contained in the Company's products.

As a  marketer  of food and  dietary  supplements  and other  products  that are
ingested  by  consumers,  the Company 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

                                       15

<PAGE>



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.  The  Company  does not  market  either of its  products
containing Ma Huang (Trim Easy and Lite Solution)  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.

The Company is  reviewing  the  possible  impact of the FDA  proposal,  if it is
finalized in its current form, upon the Company's  continued marketing of either
of its products containing Ma Huang. In response to the proposal,  or to a final
regulation  which is substantially  similar to the proposal,  the Company may be
required to (i)  withdraw or  reformulate  its products  with reduced  ephedrine
levels,  or with a substitute  for Ma Huang,  (ii) re- label its  products  with
different  warnings or revised directions for use, and/or (iii) not make certain
statements,  possibly including weight loss, with respect to any of its products
containing Ma Huang. Even in the absence of an FDA final regulation, the Company
may elect to reformulate and/or re-label its products containing Ma Huang. While
the Company 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.

Some of the products marketed by the Company 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 the Company'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 the
Company. While the Company 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  the  Company's  advertising  or other  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 the Company,  to increased  surveillance to
ensure compliance with the principles set forth in the guide.

Through its manuals,  seminars and other  training  materials and programs,  the
Company  attempts to educate its distributors as to the scope of permissible and
impermissible   activities  in  each  market.   The  Company  also  investigates
allegations of distributor  misconduct.  However, the Company's distributors are
independent

                                       16

<PAGE>



contractors,  and the  Company is not able to directly  monitor all  distributor
activities.  As a  consequence,  there can be no  assurance  that the  Company's
distributors will comply with applicable regulations. Misconduct by distributors
could have a material adverse effect on the Company in a particular market or in
general.

In markets  outside the United  States,  including  Japan,  prior to  commencing
operations  or  marketing  its  products,  the Company 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
the  Company's  products  for the market or may be  unavailable  with respect to
certain products or product ingredients. The Company must also comply with local
product labeling and packaging regulations that vary from country to country. To
date, the Company has retained legal counsel in Japan to provide  opinions as to
the Company's compliance laws and regulations.

The  Company 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 the Company's results
of operations and financial condition.

Network Marketing System.

The  Company'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, the Company 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,  the Company 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 the Company to comply
with these  regulations could have a material adverse effect on the Company in a
particular market or in general.

The  Company  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.  The Company  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 the Company's  marketing  system and that  described in the
Omnitrition case.  Further,  it is an ongoing part of the Company's  business to
monitor and respond to regulatory and legal  developments,  including those 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 the
Company's  network  marketing system could have a material adverse effect on the
Company.  Among other things,  such a determination could require the Company to
make modifications to its network marketing system, result in negative publicity
or

                                       17

<PAGE>



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 the Company,  could have a material adverse
effect on the Company.

Compliance Procedures.

As indicated above, the Company,  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 the Company in achieving and  maintaining  compliance with these
numerous laws and regulations,  the Company petitioned for membership in the DSA
in 1996.  The DSA is a  national  trade  association  of  direct  sellers  whose
commitment to ethical  business  practices and consumer  service has resulted in
its  self-regulating  Code of Ethics.  Membership  approval in this organization
takes  approximately  one  year  as the  DSA  evaluates  all of the  petitioning
company's manuals,  forms, products,  policies, and procedures for compliance to
existing and  forthcoming  laws and  regulations.  The Company was accepted as a
full-fledged  member of the DSA in December of 1997 and  continues to uphold the
guidelines set forth by the DSA.

In 1996, the Company 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,  the Company emphasizes that
distributors  are prohibited  from making  therapeutic  claims for the Company's
products.

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

In order to comply  with  regulations  that  apply to both the  Company  and its
distributors,  the Company  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 the Company's operations in
that  market.  The Company  devotes  substantial  resources  to  obtaining  such
licenses and approvals and bringing its  operations  into  compliance  with such
limitations.   The  Company  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 the Company's products and similar matters,
as required by applicable  regulations in each market. The Company,  however, is
unable to monitor its  supervisors and  distributors  effectively to ensure that
they refrain from  distributing  the Company's  products in countries  where the
Company  has  not  commenced  operations,   and  the  Company  does  not  devote
significant  resources  to  such  monitoring.  In the  event  that  the  Company
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 the Company 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 the Company is subject may be influenced by public  attention  directed
at the Company,  its products or its network marketing system, so that extensive
adverse  publicity  about the  Company,  its  products or its network  marketing
system may result in increased regulatory scrutiny.

It is an ongoing part of the  Company's  business to  anticipate  and respond to
such  new  and  changing  regulations  and  make  corresponding  changes  in the


                                       18

<PAGE>



Company's  operations  to the extent  practicable.  However,  while the  Company
devotes  considerable  resources to maintaining  its compliance  with regulatory
constraints  in each of its markets,  there can be no assurance that the Company
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 the
Company's  operations are not in full compliance.  Such assertions or the effect
of adverse  regulations  in one market  could  negatively  affect the Company 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 the Company in
a particular market or in general.  Furthermore,  depending upon the severity of
regulatory  changes  in a  particular  market and the  changes in the  Company's
operations that would be necessitated to maintain compliance, such changes could
result in the Company  experiencing a material reduction in sales in such market
or determining to exit such market altogether.  In such event, the Company 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 the Company's  business and
results of operations either in the short or long term.

Employees

As of  December  31,  1999,  the  Company  had thirty and  twenty-six  full-time
employees,   respectively.   These   numbers  do  not  include   the   Company's
distributors,  who are  independent  contractors  rather than  employees  of the
Company.  The Company  considers its employee  relationships to be satisfactory.
None of the Company's  employees is a member of any labor union, and the Company
has  never  experienced  any  business  interruption  as a result  of any  labor
disputes.

Item 2.  Description of Property.

The Company leases  approximately 8,000 square feet of office space, housing the
executive offices,  information systems department,  human resources department,
accounting department,  order entry department, and customer service department,
and  approximately  5,000  square  feet of  warehouse  space,  also  housing the
warehouse department, in North Las Vegas, Nevada, on a four acre parcel with the
ability for future  expansion.  The lease for such premises is a  month-to-month
lease with no specific  expiration  date. At December 31, 1999, the monthly base
rent was $15,000.  In Japan, a limited office space is rented in anticipation of
changing the  Company's  sales  status from  personal  import,  which houses the
general manager in Japan and a small office staff. The Company believes that its
current  facilities  are  satisfactory  for its present  needs,  and it does not
anticipate and need for additional space in the future.

Item 3.  Legal Proceedings.

There are no pending legal  proceedings  to which the Company or the property of
the  Company  are  subject.  In  addition,   no  proceedings  are  known  to  be
contemplated by a governmental  authority  against the Company or any officer or
director of the Company.

Item 4.  Submission of Matters to a Vote of Security Holders

During the last 3 months of the fiscal year ended  December 31, 1999, no matters
were submitted by the Company to a vote of its shareholders.


                                       19

<PAGE>



                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

Market for Common Equity.

There is currently no public market for the Company's Common Stock.

There are  currently  200,000  shares of the  Company's  Common  Stock which are
subject to a stock option agreement.

There are currently $1,187,431 in principal amount of 12% convertible notes (the
"Notes") issued and outstanding.  The Notes bear interest at the rate of 12% per
annum from and after the date of issuance.  The principal amount of and interest
on the Notes are  convertible  into shares of the Company's  Common Stock at any
time prior to the payment of the Notes at an initial  conversion  price of $0.80
per share.  The Company has the right to call the notes for  conversion,  at the
conversion  price of $0.80  per  share,  when the  average  of the bid and asked
prices  of the  Common  Stock  shall  have  exceeded  $1.00  per  share  for any
consecutive  ten (10) day period.  As of October 1, 1999, the Notes were, in the
aggregate, convertible into 1,484,289 shares of the Company's Common Stock.

There are currently 4,955,882 shares of Common Stock held by "affiliates" of the
Company,  as that term is defined  under  Rule 144 of the  Securities  Act.  The
Company  has not  agreed  to  register  any  sales of  Common  Stock  under  the
Securities Act of 1933.

 As of December 31, 1999, there were  approximately  1,024 record holders of the
Company's Common Stock.

The Company has not paid any cash  dividends  since its  inception  and does not
contemplate  paying dividends in the foreseeable  future. It is anticipated that
earnings, if any, will be retained for the operation of the Company's business.

Recent Sales of Unregistered Securities.

On May 12, 1998, the Company  completed the  acquisition by merger of Hali Sales
Corp.,  a Delaware  corporation  ("Hali"),  with the  Company  as the  surviving
corporation.  Hali had limited assets and  approximately  stockholders of record
and was  acquired  by the  Company in order to increase  its  stockholder  base.
Before the merger,  there were  4,000,000  shares of the Company's  common stock
issued and outstanding.  The Company issued  1,000,714shares of its Common Stock
in the merger,  one share of its Common  Stock in exchange for each 9.804 shares
of Hali common stock issued and outstanding on the effective date of the merger.
Hali had no active  operations  at the time of the merger with the Company.  The
shares of Common Stock issued to the stockholders of Hali in connection with the
merger were made in reliance on the  exemptions  from  registration  afforded by
Sections  3(b) of the  Securities  Act of 1933 (the "1933  Act") and Rule 504 of
Regulation D promulgated thereunder.

In May, 1998, the Company commenced a private placement within the United States
of 12% convertible  notes (the "Notes").  The Notes bear interest at the rate of
12% per annum and are due on the first day the  Company's  Common  Stock  trades
publicly. The Notes are convertible, at the option of the holder, into shares of
the Company's  Common Stock at an initial  conversion  price of $0.80 per share.


                                       20

<PAGE>


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 (10)  consecutive
days.  As of October 1, 1999,  the  Company  issued  $662,431 of Notes to United
States  investors.  Sales of the Notes to United States  investors  were made in
reliance on the  exemptions  from  registration  afforded by Section 3(b) of the
1933 Act and Rule 504 of Regulation D promulgated thereunder.

In May, 1998, the Company also commenced a private  placement outside the United
States of Notes.  As of October 1, 1999, the Company issued $525,000 of Notes to
investors  outside the United States.  Sales of the Notes investors  outside the
United States were made in reliance on the exemptions from registration afforded
by Regulation S promulgated under the 1933 Act.

As of January 4, 1999, the Company issued 75,000 shares of the Company's  Common
Stock in  connection  with the NuTech  Acquisition.  The  issuance of the NuTech
Acquisition  shares were made in reliance on the  exemptions  from  registration
afforded  by  Section  4(2)  of the  1933  Act  and  Rule  506 of  Regulation  D
promulgated thereunder.

In February,  1999,  the Company  issued 12,500  shares of the Company's  Common
Stock at a price of $0.80 per share to a private investor. The issuance of these
shares were made in reliance on the  exemptions  from  registration  afforded by
Section  3(b)  of the  1933  Act  and  Rule  504  of  Regulation  D  promulgated
thereunder, and also on Section 4(2) of the 1933 Act.

As of April 1, 1999,  the Company  issued 67,400 shares of the Company's  Common
Stock in connection with the American  Outback  Acquisition.  The Company agreed
that if,  between April 1, 1999 and April 1, 2000,  the average  market price of
the Common  Stock does not exceed $1.00 per share for any  consecutive  ten (10)
day period,  the  Company  must pay to American  Outback the  difference  of (a)
$67,400 and (b) the product of (i) the  average of the daily  closing  prices of
the Common Stock during the ten trading  days  preceding  April 1, 2000 and (ii)
$67,400.  In the event  that the  stock is not  trading  by  November  1,  1999,
American  Outback  has the option to demand  payment  of $67,400 or any  portion
thereof,  on terms to be  determined  by the  parties by mutual  agreement.  The
issuance of the American  Outback shares were made in reliance on the exemptions
from  registration  afforded by Section 3(b) of the  Securities  Act of 1933 and
Rule 504 of Regulation D promulgated thereunder.

In April,  1999, the Company issued 62,500 shares of the Company's  Common Stock
at a price of $0.80 per  share to a  private  investor.  The  issuance  of these
shares were made in reliance on the  exemptions  from  registration  afforded by
Section  3(b)  of the  1933  Act  and  Rule  506  of  Regulation  D  promulgated
thereunder, and also on Section 4(2) of the 1933 Act.

In May, 1999, the Company issued 25,000 shares of the Company's  Common Stock at
a price of $0.80 per share to a private  investor.  The issuance of these shares
were made in reliance on the exemptions  from  registration  afforded by Section
4(2) of the 1933 Act and Rule 506 of Regulation D promulgated thereunder.

In May, 1999, the Company issued 100,000 shares of the Company's Common Stock at
a price of $1.00 per share to a private  investor.  The issuance of these shares
were made in reliance on the exemptions from registration  afforded Section 4(2)
of the 1933 Act and Rule 506 of Regulation D promulgated thereunder.

As of September 21, 1999,  the Company  issued  650,000  shares of the Company's
Common Stock in connection with the TeamUp Acquisition. The Company also granted
to TeamUp an option to purchase an  additional  200,000  shares of the Company's
Common Stock at a price of $1.00 per share. The Company agreed that it

                                       21

<PAGE>



would repurchase up to 100,000 shares of Common Stock issued as consideration in
the TeamUp Acquisition at a price of $1.00 at any time after March 21, 2000. The
Company  also  agreed  that  if it  files a  registration  statement  under  the
Securities  Exchange  Act of 1934 for its  Common  Stock with the  Securities  &
Exchange  Commission  ("SEC")  and the SEC has not  declared  such  registration
statement  effective on or before  September 21, 2001, then the Company will pay
$250,000 to TeamUp,  or, if TeamUp has been  dissolved,  to the  stockholders of
TeamUp,  pro rated  proportionately.  The  issuance of the TeamUp  International
shares were made in reliance on the  exemptions  from  registration  afforded by
Section  4(2)  of the  1933  Act  and  Rule  506  of  Regulation  D  promulgated
thereunder.

Item 6.  Management Discussion and Analysis and Results of Operation.

This "Management's Discussion and Analysis of Financial Condition and Results of
Operation"  should  be  read in  conjunction  with  the  Company's  audited  and
unaudited financial  statements,  the notes thereto and the other financial data
included  elsewhere  herein.  This section includes  forward-looking  statements
which  involve  risks  and  uncertainties  which are  based  upon the  Company's
beliefs,  as well as assumptions made by and information  currently available to
the Company. The Company's actual results may differ materially from the results
predicted by such forward-looking statements due to various factors,  including,
but not limited to, those risks and uncertainties which are discussed below.

Presentation  of  Retail  Sales.  Throughout  this  report,  "total  sales"  are
determined  as  the  gross  sales  amounts,  including  shipping  and  handling,
reflected on the Company's  invoices to its  distributors.  The Company does not
receive the amount  reported as "retail sales," and the Company does not monitor
the actual retail prices charged by the distributor for the Company's  products.
"Wholesale  sales"  represent the actual  purchase prices paid to the Company by
its distributors,  after giving effect to the distributor discount.  The Company
receives its wholesale  sales price in cash or through credit card payments upon
receipt of orders from  distributors.  The Company's  "gross profit" consists of
wholesale sales less "cost of goods sold,"  consisting of the prices paid by the
Company to its manufacturers for products.  Costs related to product  shipments,
foreign duties and tariffs and similar  expenses,  as well as  "commissions  and
bonuses," are accounted for as selling, general and administrative expenses. The
Company's  use of "total  sales"  in  reporting  financial  and  operating  data
reflects  the  fundamental  role of "total  sales" in the  Company's  accounting
systems,  internal  controls  and  operations,  including  the basis  upon which
distributor commissions and bonuses are paid.

Results Of Operations

The Company's  results of  operations  for the periods  described  below are not
necessarily indicative of results of operations for future periods, which depend
upon numerous factors including the Company's ability in the future to enter new
markets and introduce additional and new products into its markets.

Years ending December 31, 1999 and 1998.

Sales for the year ended December 31, 1999  decreased 1.8% to $3.91 million,  as
compared to sales of $3.98  million in the year ended  December  31,  1998.  The
decrease resulted from a lack of capital to fund inventory growth.

Gross  profit  of $2.99  million  for the year  ended  December  31,  1999,  was
$187,542,  or 5.9% lower  than the gross  profit of $3.18  million  for the year
ended  December 31, 1998.  As a  percentage  of sales,  gross profit for 1999 as
compared to the same period in the prior year decreased from 79.8% to 76.6%. The


                                       22

<PAGE>



decrease in gross profit as a percentage  of sales  primarily  resulted  from an
increase in costs of goods sold,  which  increased from 20.3% of retail sales in
1998 to 23.4% in 1999.  The increase in costs of goods sold  reflects  increased
shipping costs and higher prices.

Selling,  general and  administrative  expenses,  as a percentage of sales, were
127.7%  for 1999 as  compared  to  108.9%  for the same  period  in 1998.  These
expenses for the same periods  increased 13% to $4.99 million from $4.34 million
in the year ending  December 31, 1998.  The increase  resulted  from  forecasted
expansion  costs for opening the Japanese  market,  excessive  merchant  account
charges  attributable  to  opening  of  a  foreign  market,  excessive  overseas
communication costs,  excessive receivable debt, excessive labor associated with
Y2K compliance, and product research and development.

No  income  taxes  are  due or  refundable  for  1999  or  1998  because  of the
application of unused net operating  loss  carryforwards.  In 2010,  $106,500 of
unused  operating loss  carryforwards  expire,  while $286,900 and $1.16 million
expire in 2012 and 2018, respectively.

Liquidity and Capital Resources

The Company's  working capital needs and capital  expenditure  requirements have
increased as a result of the Company's  growth and  expansion,  particularly  in
Japan.   Increases  in  required   working   capital  and  capital   expenditure
requirements  are expected to be met from cash flow from  operations,  potential
future  acquisitions  and the sale of the Company's debt and equity  securities.
For fiscal  year 1999,  the  Company's  working  capital  position  worsened  to
($2,702,584)  at December 31, 1999 from  ($1,282,491) at December 31, 1998. This
decrease  was  primarily   attributable  to  increased   selling,   general  and
administrative  expenses incurred with the Company's  expansion of the business.
Accounts and other  receivables  decreased from $101,466 at December 31, 1998 to
$84,729 at December 31, 1999.  Inventory  increased from $222,525 to $277,730 at
December  31,  1998 and 1999,  respectively.  Accounts  payable  increased  from
$375,950  at  December  31,  1998  to  $862,976  at  December  31,1999.  Accrued
liabilities,  including interest and taxes,  increased from $265,647 to $659,561
at December 31, 1998 and 1999, respectively.

For fiscal  year 1999,  the  Company's  operations  used cash flow of  $855,256,
compared  to  $846,128  for the  previous  fiscal  year.  In 1999,  cash used by
operating activities has primarily resulted from the Company's net loss in 1999.

The Company  received  cash from  investing  activities  of $54,121 in 1999,  as
compared  to a  negative  cash  flow of  $67,927  in 1998.  Cash  received  from
investing  activities in 1999 was primarily due to  acquisitions  (see Note 2 to
Financial Statements).

The Company  generated  $799,017 in cash flow from financing  activities in 1999
and  $942,718 in 1998.  The  decrease  primarily  resulted  from the issuance of
$1,121,500 of 12%  convertible  notes.  The decrease in net cash from  financing
activities   was  offset  by  net  cash  outflows  to  operating  and  investing
activities.

Stockholders' deficit increased $1.07 million to $2.55 million in 1999.

Cash, cash equivalents and marketable securities totaled $19,711 at December 31,
1999 compared to $2,246 at December 31, 1998.

The Company has  recently  been  subjected  to material  price  increases by its
suppliers. The Company believes that it has the ability to respond to a portion

                                       23

<PAGE>



or possibly  all of any price  increases  by raising the price of its  products.
Purchases by the Company from its suppliers are generally made in U.S.  Dollars,
while  sales  to   distributors   are  generally   made  in  local   currencies.
Consequently,  strengthening of the U.S. Dollar versus the Japanese Yen can have
a negative impact on operating  margins and can generate  transaction  losses on
inter- company transactions.  During 1999, the Japanese Yen weakened against the
U.S. Dollar resulting in a foreign exchange loss of $12,872.

On January 4, 1999,  the Company  acquired  certain assets and the operations of
NuTech  International,  Inc. ("NuTech") in exchange for 75,000 shares of Gateway
common stock.  NuTech is a multi-level  marketing  company focusing on skin care
products.  The  transaction  was  accounted  for  under the  purchase  method of
accounting,  therefore,  the assets were recorded  based on their fair values at
the date of acquisition.  Operating  results have been included in the Company's
statement  of  operations  from the date of  acquisition.  The Company  recorded
$47,847 of costs in excess of net  assets  acquired,  which are being  amortized
over 5 years.

On April 1, 1999,  the Company  acquired  certain  assets and the  operations of
American  Outback,  Inc.  ("American  Outback") in exchange for 67,407 shares of
Gateway  common  stock.  American  Outback is a  multi-level  marketing  company
focusing on skin care  products.  The  transaction  was  accounted for under the
purchase  method of  accounting,  therefore,  the assets were recorded  based on
their  fair  values  at the date of  acquisition.  Operating  results  have been
included in the Company's  statement of operations from the date of acquisition.
The  transaction  did not result in any goodwill  being recorded as the purchase
price equaled the fair market value of assets obtained.

On August 31, 1999, the Company  acquired  certain  assets,  liabilities and the
operations  of TeamUp  International,  Inc.  ("TeamUp")  in exchange for 650,000
shares of Gateway  common stock.  In addition,  the Company issued 200,000 stock
options to certain  directors of TeamUp.  (See Note 6 to  Financial  Statements)
TeamUp is a  multi-level  marketing  company  focusing  on health  products  and
nutritional  supplements.  The  transaction was accounted for under the purchase
method of accounting,  therefore,  assets and liabilities were recorded based on
their  fair  values  at the date of  acquisition.  Operating  results  have been
included in the Company's  statement of operations from the date of acquisition.
The Company recorded  $573,775 of costs in excess of net assets acquired,  which
are being amortized over 20 years.

On December 13, 1999,  the Company  acquired  certain  assets,  liabilities  and
operations of Sulin International, Inc. ("Sulin") in exchange for 250,000 shares
of the Company's common stock. Sulin is a multi-level marketing company focusing
on health products.  The transaction was accounted for under the purchase method
of accounting,  therefore,  assets and  liabilities  were recorded on their fair
values at the date of acquisition.  Operating  results have been included in the
Company's  statement of  operations  from the date of  acquisition.  The Company
recorded  $292,612  of costs in excess of net assets  acquired,  which are being
amortized over 20 years.

In 1999, the Company  commenced a private  placement within the United States of
twelve percent (12%) convertible notes (the "Notes"). The Notes bear interest at
the rate of  twelve  percent  (12%)  per  annum and are due on the first day the
Company trades publicly. The Notes are convertible, at the option of the holder,
into shares of the Company's common stock, $0.001 par value ("Common Stock"), at
an  initial  conversion  price of $0.80 per  share.  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 (10) consecutive days.

At December  31,  1999,  the  Company  had  $58,049 of notes  payable to related
parties.  These notes  payable have no specific  term of repayment and have been
classified as long-term based upon the intent of management.

                                       24

<PAGE>





Management  anticipates  that its expansion  strategy  will require  significant
expenditures  for  furniture  and  equipment,  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  may also  sell  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 cash
flow from operations will be sufficient to fund these expenditures.

Going Concern

The Company's  auditors have expressed an opinion as to the Company's ability to
continue  as a going  concern.  The  Company's  ability to  continue  as a going
concern  is  subject to the  ability  of the  Company to obtain a profit  and/or
obtaining  the  necessary  funding from outside  sources.  Management's  plan to
address the  Company's  ability to continue as a going  concern,  includes:  (1)
obtaining  funding from the sale of the  Company's  securities;  (2)  increasing
sales,  and (3) obtaining loans and grants from various  financial  institutions
where possible.  Although management believes that it will be able to obtain the
necessary  funding to allow the  Company to remain a going  concern  through the
methods discussed above, there can be no assurances that such methods will prove
successful.

Events Subsequent to End of Fiscal Year

In June,  2000, the Company issued  3,350,000  shares to members of the Board of
Directors of the Company for past services. The shares were issued as follows:


                         Name                       Number of Shares
                  Richard A. Bailey                     3,300,000
                    Florian Ternes                       600,000

On July 1, 2000,  the  Company  acquired  the assets and  operations  of Dynamic
Products,  Inc.  ("Dynamic  Products") in exchange for 160,750 shares of Gateway
common stock (see exhibit  10.7).  Dynamic  Products is a multi-level  marketing
company focusing on cleaning  products.  The transaction was accounted for under
the purchase method of accounting,  therefore, the assets were recorded based on
their fair values at the date of acquisition.  The Company recorded  $128,600 of
costs in excess of net assets acquired, which are being amortized over 20 years.

On October 12, 2000, the Company entered into an agreement to sell a majority of
its assets and  operations  in  exchange  for 85% of the issued and  outstanding
shares of Professional Wrestling Alliance Corporation, a publicly traded company
(see exhibit 10.8).

                                       25

<PAGE>



Item 7.  Financial Statements

The  following  pages  numbered  F-1  through  F-18  contain  audited  financial
statements  and  accompanying  notes as  prepared by the  Company's  independent
auditors.




                      [THIS SPACE LEFT INTENTIONALLY BLANK]



                                       26

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.

                                    --------
                              FINANCIAL STATEMENTS
                                       AND
                          INDEPENDENT AUDITORS' REPORT
                                    ---------

                                DECEMBER 31, 1999




<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.


                                  - CONTENTS -









                                                                     PAGE NUMBER

Independent Auditors' Report.................................................F-2

Financial Statements:

    Balance Sheet............................................................F-2

    Statement of Operations..................................................F-3

    Statement of Changes in Stockholders' Deficit............................F-4

    Statement of Cash Flows..................................................F-5

    Notes to Financial Statements............................................F-7




                                       F-1

<PAGE>








                 [Letterhead of Perrin, Fordree & Company, P.C.]


To the Board of Directors
Gateway Distributors, Ltd.
North Las Vegas, Nevada


We have audited the accompanying balance sheet of GATEWAY DISTRIBUTORS,  LTD. as
of December 31, 1999 and 1998, and the related statements of operations, changes
in  stockholders'  deficit  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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the  financial  statements  referred to in the first  paragraph
present  fairly,  in all material  respects,  the financial  position of GATEWAY
DISTRIBUTORS,  LTD.  at  December  31,  1999 and 1998,  and the  results  of its
operations,  changes in  stockholders'  deficit and its cash flows for the years
then ended in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  Management's  plans  regarding  those
matters also are described in Note 10. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

PERRIN, FORDREE & COMPANY, P.C.

/s/ Perrin Fordree & Company

October 20, 2000









                                       F-2

<PAGE>




                           GATEWAY DISTRIBUTORS, LTD.
                                  BALANCE SHEET


                                     ASSETS

                                                               DECEMBER 31,
                                                           1999          1998
                                                           ----          ----
CURRENT ASSETS:
   Cash and cash equivalents                        $      17,593  $     19,711
   Accounts receivable                                     53,644        63,037
   Inventory                                              360,441       222,525
   Prepaid expenses and other                              31,085        38,429
                                                    -------------  ------------
               Total current assets                       462,763       343,702

PROPERTY AND EQUIPMENT, AT COST:
   Furniture and fixtures                                  83,239        20,599
   Computer equipment                                     206,713        81,496
   Leasehold improvements                                  29,228        29,228
   Office equipment                                       106,208        80,800
                                                    -------------  ------------
                                                          425,388       212,123
   Less accumulated depreciation and amortization        (298,419)      (88,361)
                                                    -------------  ------------
                                                          126,969       123,762

OTHER ASSETS:
   Goodwill, net of accumulated amortization
      of $20,351                                          893,883         -
   Other                                                    9,347        54,879
                                                    -------------  ------------
                                                          903,230        54,879
                                                    -------------  ------------

                                                    $   1,492,962  $    522,343
                                                    =============  ============

                                       F-3

<PAGE>



                      LIABILITIES AND STOCKHOLDERS' DEFICIT

                                                              DECEMBER 31,
                                                         1999             1998

CURRENT LIABILITIES:
   Checks drawn in excess of available bank
      balances                                      $    170,394   $     90,295
   Current portion of long-term debt                   1,270,754        875,000
   Accounts payable:
      Trade                                              862,796        375,950
      Commissions                                        201,842         19,301
   Accrued liabilities:
      Payroll and vacation pay                            89,045         30,701
      Interest                                           256,977         85,526
      Payroll taxes                                      265,378        149,420
      Other                                               48,161             -
                                                    ------------  --------------
               Total current liabilities               3,165,347      1,626,193

LONG-TERM DEBT                                           549,160        370,592

LONG-TERM ACCOUNTS PAYABLE                               324,530             -
                                                    ------------  --------------
                                                       4,039,037      1,996,785

STOCKHOLDERS' DEFICIT:
   Preferred stock - $.001 par value
      Authorized - 1,000,000 shares
      No shares issued and outstanding                    -                 -
   Common stock, - $.001 par value
      Authorized - 20,000,000 shares
      Issued and outstanding -
         6,817,000 at December 31,1999 and
         5,000,900 at December 31,1998.                    6,817          5,001
   Additional paid-in capital                          1,423,615        323,569
   Accumulated deficit                                (3,976,507)    (1,803,012)
                                                     -----------    ------------
         Total stockholders' deficit                  (2,546,075)    (1,474,442)
                                                     -----------    ------------
                                                     $ 1,492,962    $    522,343
                                                     ===========    ============

                                                        F-4

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                             STATEMENT OF OPERATIONS




                                                            DECEMBER 31,
                                                      1999              1998

SALES                                             $ 3,910,604       $ 3,988,364

COST OF SALES                                         913,336           803,554
                                              ---------------   ---------------

GROSS PROFIT                                        2,997,268         3,184,810


SELLING, GENERAL AND ADMINISTRATIVE
   EXPENSES                                         4,994,473         4,342,414
                                              ---------------   ---------------

LOSS FROM OPERATIONS                               (1,997,205)       (1,157,604)

OTHER INCOME (EXPENSE):
   Interest expense                                  (191,017)          (86,645)
   Loss on disposal of fixed assets                   (33,730)            -
   Other expenses                                     (45,000)            -
   Other income                                        93,457            45,000
                                              ---------------   ---------------

                                                     (176,290)          (41,645)
                                              ---------------   ---------------
NET LOSS                                          $(2,173,495)      $(1,199,249)
                                              ===============   ===============
BASIC LOSS PER SHARE                          $         (.370)      $     (.238)
                                              ===============   ===============
WEIGHTED AVERAGE NUMBER OF SHARES                   5,875,754         4,761,550
                                              ===============   ===============


                                       F-5

<PAGE>


<TABLE>

                                                   GATEWAY DISTRIBUTORS, LTD.
                                          STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                                             YEARS ENDED DECEMBER 31, 1999 AND 1998




<CAPTION>

                                                              ADDITIONAL
                                              COMMON            PAID-IN                 ACCUMULATED
                                               STOCK            CAPITAL                   DEFICIT            TOTAL
                                             ---------      --------------           ---------------     ------------
<S>                                   <C>                    <C>                      <C>              <C>
BALANCE - December 31, 1997               $     150,000       $      48,766            $   (483,763)    $   (284,997)

40,000 to 1 stock split                        (146,000)            146,000                   -                -

Merger with Hali Sales Corp.                      1,000               8,804                   -                9,804
Manager award                                         1                  (1)                  -                -
Net loss                                          -                    -                 (1,199,249)      (1,199,249)
                                         --------------      ---------------          --------------     ------------
BALANCE - December 31, 1998 as
   previously reported                            5,001             203,569              (1,683,012)      (1,474,442)

Prior-period adjustment - error in
   paid-in capital                                -                 120,000                (120,000)               -
                                         --------------      ---------------          --------------     ------------
BALANCE - December 31, 1998 as
   restated                                       5,001             323,569              (1,803,012)      (1,474,442)

Stock issued for cash                               288             229,712                   -              230,000
Stock issued for acquisitions                      1042             846,365                   -              847,407
Stock issued for services                           486              23,969                   -               24,455
Net loss                                          -                    -                 (2,173,495)      (2,173,495)
                                         --------------      ---------------          --------------     ------------
BALANCE - December 31, 1999               $       6,817         $ 1,423,615             $(3,976,507)     $(2,546,075)
                                         ==============      ===============          ==============     ============
</TABLE>

                                                               F-6

<PAGE>


<TABLE>

                           GATEWAY DISTRIBUTORS, LTD.
                             STATEMENT OF CASH FLOWS
<CAPTION>


                                                               YEAR ENDED DECEMBER 31,
                                                                1999             1998
<S>                                                       <C>                <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                 $(2,173,495)      $(1,199,249)
   Adjustments to reconcile net loss
      to net cash to operating activities:
         Depreciation and amortization                           90,086            44,053
         Loss on disposal of fixed assets                        33,730                 -
         Allowance for inventory reserve                        205,000                 -
   Changes in operating assets and liabilities:
      which increase (decrease) cash flow:
         Accounts receivable                                    118,949           (12,905)
         Inventories                                            182,605            55,205
         Prepaid                                                 24,197            38,429
         Accounts payable                                       391,235            41,292
         Accrued expenses                                       272,437           187,047
                                                          -------------     -------------
                                                              1,318,239           353,121
                                                           ------------     -------------
               Net cash to operating activities                (855,256)         (846,128)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Deposits refunded                                              5,727             -
   Purchase of property and equipment                           (13,256)          (79,125)
   Cash received from acquisitions                               61,650                -
                                                         --------------  ----------------
               Net cash from (to) investing activities           54,121           (79,125)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of stock                              230,000             -
   Proceeds from issuance of debt                               322,517            67,718
   Proceeds from convertible notes                              246,500           875,000
                                                          -------------     -------------
               Net cash from financing activities               799,017           942,718
                                                          -------------     -------------
NET INCREASE (DECREASE) IN CASH EQUIVALENTS                      (2,118)           17,465

CASH AND CASH EQUIVALENTS:
   BALANCE - beginning of year                                   19,711             2,246
                                                         --------------   ---------------
   BALANCE - end of year                                  $      17,593     $      19,711
                                                          =============     =============
</TABLE>



                                       F-7

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                       STATEMENT OF CASH FLOWS - CONTINUED






SUPPLEMENTAL DISCLOSURE

                                                    YEAR ENDED DECEMBER 31,
                                                     1999             1998


CASH PAID DURING YEAR FOR INTEREST              $   22,216        $  16,572
                                                  =========        =========


NON CASH INVESTING AND FINANCING ACTIVITIES

STOCK  ISSUED FOR ACQUISITIONS                  $  847,407        $       -
                                                   ========        =========

STOCK ISSUED FOR SERVICES                       $   24,455        $       -
                                                   ========        =========

STOCK ISSUED FOR MERGER WITH HALI SALES         $        -        $    9,804
                                                   ========        ===========



                                                        F-8

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999




NOTE 1 -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

This summary of significant accounting policies of Gateway Distributors, Ltd. is
presented to assist in understanding  the Company's  financial  statements.  The
financial  statements and notes are representations of the Company's  management
which is  responsible  for their  integrity and  objectivity.  These  accounting
policies  conform to  generally  accepted  accounting  principles  and have been
consistently applied in the preparation of the financial statements.

Business Activity

The Company is a  distributor  of vitamin and  nutritional  supplements,  health
foods, and skin care products mainly in the United States, Canada and Japan.

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.

 Accounts Receivable

The Company 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  is not  materially  different  from the results  that would have been
obtained had the allowance method been followed.

Inventories

Inventories, consisting primarily of nutritional supplements, are stated at cost
determined by the first-in, first- out (FIFO) method.

                                       F-9

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 1999


NOTE 1 -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:

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.

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.  Plant and  equipment  are  depreciated  over the following
estimated useful lives:

               Leasehold improvements                                  39 years
               Furniture and fixtures                                   7 years
               Office equipment                                         5 years
               Computer equipment                                   3 - 5 years

Depreciation  expense for the year ended  December 31, 1999 and 1998 was $63,853
and $40,131, respectively.

Revenue Recognition

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

Reclassifications

Certain  amounts  in 1998 have  been  reclassified  to  conform  to the  current
financial statement presentation.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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-10

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 1999

NOTE 2 -       BUSINESS COMBINATIONS:

On January 4, 1999,  the Company  acquired  certain assets and the operations of
NuTech  International,  Inc. ("NuTech") in exchange for 75,000 shares of Gateway
common stock.  NuTech is a multi-level  marketing  company focusing on skin care
products.  The  transaction  was  accounted  for  under the  purchase  method of
accounting,  therefore,  the assets were recorded  based on their fair values at
the date of acquisition.  Operating  results have been included in the Company's
statement  of  operations  from the date of  acquisition.  The Company  recorded
$47,847 of costs in excess of net  assets  acquired,  which are being  amortized
over 5 years.

On April 1, 1999,  the Company  acquired  certain  assets and the  operations of
American  Outback,  Inc.  ("American  Outback") in exchange for 67,407 shares of
Gateway  common  stock.  American  Outback is a  multi-level  marketing  company
focusing on skin care  products.  The  transaction  was  accounted for under the
purchase  method of  accounting,  therefore,  the assets were recorded  based on
their  fair  values  at the date of  acquisition.  Operating  results  have been
included in the Company's  statement of operations from the date of acquisition.
The  transaction  did not result in any goodwill  being recorded as the purchase
price equaled the fair market value of assets obtained.

On August 31, 1999, the Company  acquired  certain  assets,  liabilities and the
operations  of TeamUp  International,  Inc.  ("TeamUp")  in exchange for 650,000
shares of Gateway  common stock.  In addition,  the Company issued 200,000 stock
options to certain  directors  of TeamUp.  (See Note 6) TeamUp is a  multi-level
marketing company focusing on health products and nutritional  supplements.  The
transaction   was  accounted  for  under  the  purchase  method  of  accounting,
therefore,  assets and  liabilities  were recorded based on their fair values at
the date of acquisition.  Operating  results have been included in the Company's
statement  of  operations  from the date of  acquisition.  The Company  recorded
$573,775 of costs in excess of net assets  acquired,  which are being  amortized
over 20 years.

On December 13, 1999,  the Company  acquired  certain  assets,  liabilities  and
operations of Sulin International, Inc. ("Sulin") in exchange for 250,000 shares
of Gateway common stock.  Sulin is a multi-level  marketing  company focusing on
health products.  The transaction was accounted for under the purchase method of
accounting, therefore, assets and liabilities were recorded on their fair values
at the  date  of  acquisition.  Operating  results  have  been  included  in the
Company's  statement of  operations  from the date of  acquisition.  The Company
recorded  $292,612  of costs in excess of net assets  acquired,  which are being
amortized over 20 years.

                                      F-11

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 1999





NOTE 2 -       BUSINESS COMBINATIONS - CONTINUED:

The following  unaudited  proforma results of operations are presented as if the
acquisitions  of TeamUp and Sulin had been made at the  beginning of the periods
presented.  The effect of the American  Outback and NuTech  acquisitions  on the
financial  statements  were not  significant and have been excluded from the pro
forma presentation.

                                                       YEAR ENDED DECEMBER 31,
                                                       1999             1998
                                                  --------------   -------------

                  Net sales                         $ 7,655,655      $ 9,135,871
                                                    ============      ==========

                  Net loss                           (2,412,939)     (1,407,570)
                                                   =============      ==========

                  Loss per share:
                     Basic                                 (.41)           (.24)
                                                   =============      ==========

                     Diluted                               (.41)           (.24)
                                                   =============      ==========


NOTE 3 -       INVENTORIES:

Inventories, net of valuation reserves, consisted of the following:

                                                             DECEMBER 31,
                                                         1999           1998

               Product                               $  323,369      $  191,290
               Promotional and literature                37,072          34,235
                                                      ----------      ----------

                                                     $  360,441      $  225,525
                                                      ==========      ==========

                                      F-12

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 1999




NOTE 4 -       LONG-TERM DEBT:

Long -term debt consisted of the following :
<TABLE>


                                                                      DECEMBER 31,
                                                                 1999            1998
<S>                                                         <C>            <C>

       Convertible notes payable                             $ 1,121,500    $   875,000

       Note payable - stockholders, interest
       ranging from 6.5% - 10%, no
       repayment terms stated,
       unsecured.                                                427,898        362,501

       Note  payable-stockholders, payable in monthly
       installments ranging  from $25 - $1,278,  plus
       interest  at 7% - 14%,  due at
       various dates through 2003, unsecured.                    207,692          8,091

       Note payable - corporation, payable in monthly
       installments of $9,000, plus interest at 3%, due
       March 20, 2000, unsecured                                  58,049          -

       Capital leases, payable in monthly installments
       ranging from $130 - $180, including interest at
       15.6% to 26.6%, maturing at various dates
       through 2003, secured by equipment.                         4,775           -
                                                           -------------    -----------

                                                               1,819,914      1,245,592
       Less: current portion                                   1,270,754        875,000
                                                             -----------    -----------

       Long - term debt                                      $   549,160    $   370,592
                                                             ===========    ===========
</TABLE>





                                      F-13

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 1999



NOTE 4 -       LONG-TERM DEBT- CONTINUED:

Convertible  notes  payable are to  individuals  which bear  interest at 12% per
annum,  due 12 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 $0.80 per  share.  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  tradeable"  under  federal  securities  laws,  there is currently no
public market for the notes or the Company's common stock.  Although the Company
intends to pursue the  establishment  of a regular  public market for the common
stock under the Securities  Exchange Act of 1934, there can be no assurance that
a public market for the common stock will  develop.  As of December 31, 1999 the
convertible  notes issued during the year ended  December 31, 1998 have not been
converted to common stock as the initial public offering has not transpired.

Maturities of long-term debt are as follows:

               Year ending December 31:
                  2001                          $ 1,270,754
                  2002                              475,517
                  2003                               73,643
                                               ------------

                                                $ 1,819,914


NOTE 5 -       EARNINGS PER SHARE:

Earnings  per share  (EPS) for the years  ended  December  31, 1999 and 1998 are
computed as follows:


                                                                    PER-SHARE
                                         INCOME        SHARES         AMOUNT
                                     -------------     ---------   ------------

          December 31, 1998 -
             Loss from continuing
                 operations           $(1,199,249)     5,038,000  $       (.238)
                                      ===========    ===========  =============

          December 31, 1999
             Loss from continuing
                operations            $(2,173,495)     5,872,785  $       (.370)
                                      ===========    ===========  =============

For the years  ending  December  31,  1999 and 1998,  options on  2,355,658  and
1,093,750 shares of common stock,  respectively,  were not included in computing
diluted EPS because their effects were anti-dilutive.


                                      F-14

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 1999




NOTE 6 -       STOCK OPTIONS:

In 1999, the Company adopted a fixed director stock - based  compensation  plan.
Under this Plan,  the  Company  granted  options  for  645,000  shares of stock.
Vesting will take place when gross monthly sales reach $1,000,000 per month. The
exercise price for each option is $1.00 per share and have no stated  expiration
date.

The fair value of each  option  granted is  estimated  using the  minimum  value
method. The following assumptions were used in estimating fair value:

                  Assumption                                          Fixed Plan

                  Dividend yield                                           -   %
                  Risk-free interest rate                                  6.63%
                  Expected life                                          7 years
                  Expected volatility                                      -   %

Pursuant to the  purchase of TeamUp  International,  Inc.  (Note 2), the Company
granted 200,000 stock options to certain  stockholders  of TeamUp.  The exercise
price of these options is $1.00 per share and the stockholders may exercise less
than the full amount of the options.  The options  expire in five years from the
date of the purchase agreement, which is August 31, 2005.

The fair value of each  option  granted is  estimated  using the  minimum  value
method. The following assumptions were used in estimating fair value:

                  Assumption                                          Fixed Plan

                  Dividend yield                                          -    %
                  Risk-free interest rate                                  6.16%
                  Expected life                                          5 years
                  Expected volatility                                     -    %


                                      F-15

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 1999




NOTE 6 -       STOCK OPTIONS - CONTINUED:

The  Company  applies APB Opinion 25 in  accounting  for its stock  compensation
plans.  Accordingly,  no compensation  has been recognized for the Plan in 1999.
Had cost been  determined  on the basis of fair value  pursuant to SFAS No. 123,
net income and basic earnings per share would have been reduced as follows:

                  Net loss                                             1999
                  --------                                     ----------------

                  As reported                                       $(2,173,495)
                                                                    ===========

                  Pro forma                                         $(2,720,745)
                                                                    ===========

                  Basic earnings per share

                  As reported                                   $         (.403)
                                                                ===============

                  Pro forma                                     $         (.446)
                                                                ===============

The  following  table sets forth stock options  granted,  exercised and canceled
during the years ended December 31, 1999:



                                                                      EXERCISE
                                                       NUMBER           PRICE

Stock options outstanding at the                              -       $        -
 beginning of the year
Stock options granted                                   845,000             1.00
Stock options exercised                                       -                -
Stock options canceled                                    -                -
                                                     ----------      -----------
Stock options outstanding at the end of the year
                                                        845,000      $      1.00
                                                     ==========      ===========
       Weighted average fair value of options
       granted during 1999.                               $0.65
                                                     ==========




                                      F-16

<PAGE>





                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 1999



NOTE 6 -       STOCK OPTIONS - CONTINUED:

At December 31, 1999 all 845,000 options were  outstanding  and  non-exercisable
with a remaining life of 6.5 years at a price of $1.00 per share.


NOTE 7 -       OPERATING LEASES:

Certain automotive equipment,  office equipment and real estate are leased under
operating  leases which  expire at various  dates  through  December  2003.  The
following is a schedule,  by years, of future minimum rental  payments  required
under these operating leases as of December 31, 1999.

               Year ending December 31:
                  2000                                              $  28,802
                  2001                                                 13,321
                  2002                                                  4,929
                  2003                                                  1,458
                                                                  -----------
               Total minimum payments                               $  48,510
                                                                    =========

The  Company  leases a building  under an  operating  lease on a  month-to-month
basis. The monthly amount at December 31, 1999 is $15,000.

Total rent expense  charged to operations  for the years ended December 31, 1999
and 1998, was $271,311 and $207,398,  respectively,  which includes  charges for
month-to-month leases expected to continue.


NOTE 8 -       INCOME TAXES:

No income taxes are due or refundable for 1999 or 1998 as the Company has unused
net operating loss carryforwards.  Deferred tax asset calculations have not been
made as it is  unknown if the  deferred  tax asset  will be  utilized  in future
periods.  Net operating  losses available for use in future years will expire as
follows:
                                                             UNUSED OPERATING
               YEAR OF EXPIRATION                            LOSS CARRYFORWARDS

                  2010                                         $   106,500
                  2012                                             286,900
                  2018                                           1,159,000
                  2019                                           2,715,919

                                      F-17

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 1999


NOTE 9 -       PRIOR PERIOD ADJUSTMENTS

The accompanying  financial statements for 1998 have been restated to correct an
error in  paid-in  capital  and  retained  earnings  related  to the Hali  Sales
Corporation merger in 1998. The error had no effect on income in 1998.


NOTE 10 -      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 two  years,  which  has  resulted  in a severe  working
capital  deficiency.  This deficiency has contributed to inventory shortages and
limited the ability of the Company to meet its current obligations.

The Company has signed a merger  agreement  with a public  company (Note 11) and
plans to raise capital  through a public offering of its stock in early 2001. As
of the date of the financial statements, the Company is seeking financing from a
private investor for capital to continue operations until the public offering is
completed.

In the event the Company is unable to raise  sufficient  operating  capital from
private investors prior to the public offering,  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.

NOTE 11 -      SUBSEQUENT EVENTS:

The  Company  issued  80,000  shares in March,  2000 to  private  investors  for
$80,000.  In June,  2000, the Company issued 3,350,000 shares to certain members
of the Board of Directors.

On July 1, 2000,  the  Company  acquired  the assets and  operations  of Dynamic
Products,  Inc.  ("Dynamic  Products") in exchange for 160,750 shares of Gateway
common stock.  Dynamic Products is a multi-level  marketing  company focusing on
cleaning  products.  The transaction was accounted for under the purchase method
of accounting, therefore, the assets were recorded based on their fair values at
the date of acquisition. The Company recorded $128,600 of costs in excess of net
assets acquired, which are being amortized over 20 years.

On October 12, 2000, the Company entered into an agreement to sell a majority of
its assets and  operations  in  exchange  for 85% of the issued and  outstanding
shares of a public company.

                                      F-18

<PAGE>



Item 8.        Changes in and Disagreements with Accountants.

In January 1999, the Company engaged Perrin,  Fordree & Company, P.C., Certified
Public Accountants, as the Company's accountants.

                                    PART III

Item 9.        Directors, Executive Officers, Promoters and Control Persons.

Directors and Executive Officers.
--------------------------------

The directors and executive officers of the Company are as follows:


Name                  Age    Position
Richard A. Bailey      43    Chairman of the Board of Directors, Chief Executive
                             Officer and President
Florian R. Ternes      50    Director, Chief Operating Officer, Secretary
Matthew H. Swan        40    Chief Financial Officer, Treasurer
Lester W. B. Moore     57    Director
Scott McKnight         58    Director

All directors serve a term of one year or until their  successors have been duly
elected and qualified.

Richard A. Bailey,  43, has served as Chairman,  Chief  Executive  Officer,  and
President  of the Company  since its May 1993  inception.  In 1981,  Mr.  Bailey
purchased a small,  local  mobile wash  company in North Las Vegas,  Nevada.  He
expanded  operations to include aviation services,  growing the 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 the Company.

Florian R. Ternes,  50, has served as Chief  Operating  Officer and Secretary of
the Company 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 doing in excess of $13,000,000 a year.  After  assisting in
completing its successful  public offering,  he resigned in January 1998 to join
the Company on a full-time basis.

Matthew H. Swan, 40, has served as Chief  Financial  Officer and Treasurer since
1995. From 1985 through 1990, he was an accountant  with Deloitte & Touche,  and
he worked for Peat Marwick from 1984 through

                                       27

<PAGE>



1995. In 1990, Mr. Swan started his own Certified  Public  Accounting  firm. Mr.
Swan spent two years  living in Japan and  received  his  bachelor of science in
accounting from Idaho State in 1984.

Lester W. B. Moore,  57, has served as a Director of the Company since  December
1996.  He has served as President of the  Polynesian  Cultural  Center in Hawaii
since 1991,  where he has received  numerous  awards for his marketing and sales
efforts.  Before his tenure with the Polynesian  Cultural Center,  he had been a
senior  executive  officer of various  companies  from 1973 through 1991 and, in
that  same  time-span,  has  served  on the  board  of a  number  of  successful
companies,  including  Angela  Marie's  Food  Company,  which  did in  excess of
$75,000,000.

Scott McKnight, 58, became a Director of the Company in 1999, in connection with
the NuTech  Acquisition.  Before  joining  the  Company,  Mr.  McKnight  was the
President and Chief Executive Officer of NuTech International, Inc. Mr. McKnight
is also the President and Chief Executive Officer of Aloe  Commodities,  Inc., a
leading  aloe  manufacturer  which  supplies  the  Company  with its  aloe-based
products.  He is also the  founder  and  President  of the Aloe  Association  of
America.

Compliance with Section 16(a) of the Exchange Act

Based  solely upon a review of Forms 3, 4 and 5 furnished  to the  Company,  the
Company is not aware of any person who at any time  during the fiscal year ended
December 31, 1999 was a director,  officer, or beneficial owner of more than ten
percent of the Common Stock of the Company,  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.

ITEM 10. EXECUTIVE COMPENSATION

Item 10.         Executive Compensation.
<TABLE>

                                              SUMMARY COMPENSATION TABLE
<CAPTION>

                                          Annual Compensation                               Long Term Compensation
                                                                                   Awards                          Payouts
                                                                                        Securities
                                                                        Restricted      Underlying
                                                        Other Annual       Stock         Options                          All Other
   Name and Principal              Salary     Bonus     Compensation     Award(s)          SARs         LTIP payouts    Compensation
        Position           Year      ($)       ($)           ($)            ($)            (#)              ($)               ($)
<S>                      <C>      <C>        <C>         <C>            <C>              <C>             <C>              <C>
Richard A. Bailey,         1999      76,250         -          -             -                -                -                -
President and Chief        1998      76,250         -          -             -                -                -                -
Executive Officer
Florian R. Ternes,         1999      22,000         -          -             -                -                -                -
Secretary and Chief        1998      22,000         -          -             -                -                -                -
Financial Officer
Matthew H. Swan,           1999           -         -          -             -                -                -                -
Treasurer, Chief Financial 1998           -         -      1,000             -                -                -                -
Officer
</TABLE>

As of the date  hereof,  the  Company  has not  granted  stock  options or stock
appreciation rights to any executive officer or director of the Company.

Compensation of Directors.
-------------------------

The Company maintains  directors/officers insurance in the amount of $1,000,000.
The  Company  pays  traveling  expenses,  hotel,  food,  and $300 for each board
meeting. Stock options and dividends will be a

                                       28

<PAGE>



consideration in the future, based on profitability of the company.

Employment Contracts.
--------------------

The  Company  entered  into an  employment  agreement  (the  "Bailey  Employment
Agreement") with Richard A. Bailey,  its President and Chief Executive  Officer,
dated May 1, 1999. The Bailey Employment  Agreement provides  termination of the
employment  at the  will  of  either  Mr.  Bailey  or the  Company.  The  Bailey
Employment  Agreement provides for a base salary of $100,000 annually commencing
May 1, 1999, which shall be reviewed periodically.  Such review may result in an
increase  or bonuses for Mr.  Bailey.  In the event the Company is unable to pay
the annual salary,  the Company will issue to Mr. Bailey one share of its Common
Stock for each dollar owed at the end of the Company's fiscal year. In the event
that Mr.  Bailey's  employment is  terminated as a result of (a) his  retirement
under the Company's  retirement program, (b) his disability resulting in absence
from his duties to the Company 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% below the highest  annual
salary  from time to time in  effect,  the  Company is  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 the
Company each year for a period of five years.

The  Company  entered  into an  employment  agreement  (the  "Ternes  Employment
Agreement") with Florian R. Ternes,  its Secretary and Chief Operating  Officer,
dated May 1, 1999. The Ternes Employment  Agreement provides  termination of the
employment  at the  will  of  either  Mr.  Ternes  or the  Company.  The  Ternes
Employment  Agreement provides for a base salary of $85,000 annually  commencing
May 1, 1999, which shall be reviewed periodically.  Such review may result in an
increase  or bonuses for Mr.  Ternes.  In the event the Company is unable to pay
the annual salary,  the Company will issue to Mr. Ternes one share of its Common
Stock for each dollar owed at the end of the Company's fiscal year. In the event
that Mr.  Ternes'  employment is  terminated  as a result of (a) his  retirement
under the Company's  retirement program, (b) his disability resulting in absence
from his duties to the Company 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% below the highest  annual
salary  from time to time in  effect,  the  Company is  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 the
Company each year for a period of five years.

Item 11.       Security Ownership of Certain Beneficial Owners and Management.

The following  table sets forth  certain  information  regarding the  beneficial
ownership of the Company's common stock,  $.001 par value ("Common Stock") as of
December  31,  1999,  (i) by each  person who is known by the  Company to be the
beneficial  owner  of more  than  5% of its  Common  Stock;  (ii) by each of the
Company's  directors and officers;  and (iii) by all of the Company's  directors
and officers as a group:





                      [THIS SPACE INTENTIONALLY LEFT BLANK]




                                       29

<PAGE>



<TABLE>
<CAPTION>

     Title of Class            Name and Address of Beneficial             Nature of Ownership           Amount of         Percent
                                           Owner                                                        Ownership        Of Class
<S>                          <C>                                      <C>                             <C>               <C>

      Common Stock                   Richard A. Bailey                  Chairman of the Board of        2,080,000         34.41%
   ($0.001 par value)            500 East Cheyenne Avenue,             Directors, Chief Executive
                               North Las Vegas, Nevada 89030             Officer and President

      Common Stock                   Florian R. Ternes                 Director, Chief Operating         430,882           7.13%
   ($0.001 par value)            500 East Cheyenne Avenue,                 Officer, Secretary
                               North Las Vegas, Nevada 89030

      Common Stock                      Matthew Swan                    Chief Financial Officer,         200,000           3.31%
   ($0.001 par value)            500 East Cheyenne Avenue,                     Treasurer
                               North Las Vegas, Nevada 89030

      Common Stock                      Lester Moore                            Director                 760,000          12.57%
   ($0.001 par value)            500 East Cheyenne Avenue,
                               North Las Vegas, Nevada 89030

      Common Stock                     Scott McKnight                           Director                 75,0001           1.24%
   ($0.001 par value)            500 East Cheyenne Avenue,
                               North Las Vegas, Nevada 89030

      Common Stock                   Jeffrey Yarbrough                                                   760,000          12.57%
   ($0.001 par value)            500 East Cheyenne Avenue,
                               North Las Vegas, Nevada 89030

      Common Stock                    Troy D. Wiseman                                                    369,1782          6.11%
   ($0.001 par value)       1901 North Roselle Road Suite 1030,
                                 Schaumburg, Illinois 60195

      Common Stock               TeamUp International, Inc.                                              650,000          10.75%
   ($0.001 par value)           6700 South Paradise, Suite C
                                     Las Vegas, NV 89119

      Common Stock        All officers and directors as a group (5                                      3,545,882         58.66%
   ($0.001 par value)                   individuals)
</TABLE>

Item 12.  Certain Relationships and Related Transactions.

On June 25, 1996, the Company issued a $81,600 note to Jeffrey L.  Yarbrough,  a
stockholder of the Company. The note currently bears interest at the rate of six
and  one-half  percent  (6.5%)  per  annum.  The  note has no  specific  term of
repayment  and has  been  classified  as  long-term  based  upon the  intent  of
management. Mr. Yarbrough continued to loan additional amounts to the Company on
the same terms and  conditions  from June 25, 1996  through  June 30,  1999.  On
September 30, 1999, the note,  including accrued interest in 1998 at 6.5% and in
1997 at 7%, had an outstanding balance of $337,290.

--------
(1) NuTech International, Inc., which Mr. McKnight controls, owns these shares.

(2) The following  entities,  which are  controlled by Mr.  Wiseman,  hold these
shares: Invest Linc Capital Corp.

                                       30

<PAGE>



On May 30, 1998,  the Company  issued a $120,967 note to Richard A. Bailey,  the
Chief Executive  Officer and President of the Company.  The note currently bears
interest at the rate of six and one-half  percent (6.5%) per annum. The note has
no specific  term of repayment and has been  classified as long-term  based upon
the intent of  management.  On September 30, 1999, the note,  including  accrued
interest at 6.5%, had an outstanding balance of $120,967.

Florian R. Ternes, Chief Operating Officer and Secretary of the Company, was the
President of NutriCology,  Inc.  ("NutriCology") until January 1998. NutriCology
is  one  of  the  Company's   major   suppliers,   providing  the  Company  with
approximately thirty percent of its inventory.

In connection with the NuTech Acquisition,  the Company has agreed to engage ACI
as the  exclusive  manufacturer  of  certain  product  lines  which the  Company
purchased in the NuTech  Acquisition,  providing the Company with  approximately
ten percent of its inventory.  Scott McKnight, a director of the Company, is the
principal shareholder of ACI.

In  connection  with the American  Outback  Acquisition,  the Company  agreed to
require of its suppliers of emu oil that such suppliers  engage American Outback
as the exclusive producer of Bush Recipe(R) Emu Oil. Jack Akers, a member of the
Company's Medical Advisory Board, is the sole shareholder of American Outback.

The Company believes that all of the  transactions  entered into by it were fair
and  reasonable,  and  intends  that  all  future  transactions,  if  any,  with
affiliates  will be on terms no less  favorable  than  could  be  obtained  from
unaffiliated parties.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits.  Exhibits  required to be attached by Item 601 of  Regulation  S-B are
listed in the Index to Exhibits beginning on page 33 of this Form 10-KSB,  which
are incorporated herein by reference.


Reports on Form 8-K.  The  Company  filed no reports on Form 8-K during the last
quarter of 1999, the period covered by this report.

                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 14th day of February, 2001.


Gateway Distributors, Inc.


/s/ Rick Bailey
 -----------------------------
Rick Bailey, President and Chief Executive Officer




                                       31

<PAGE>



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


Signature                     Title                         Date


 /s/ Rick Bailey              Chief Executive Officer
----------------              and Director                  February 14, 2001
Rick Bailey



/s/ Scott McKnight            Director                      February 14, 2001
----------------



/s/ Florian R. Ternes
----------------              Director                      February 14, 2001













                                       32

<PAGE>


                                Index to Exhibits

Exhibit     Page         Description

2.1           *     Agreement and Plan of Merger as of April 10, 1998

2.2           *     Asset Purchase Agreement by and among Gateway  Distributors,
                    Ltd.,  NuTech  International,  Inc. and the  Stockholders of
                    NuTech International, Inc., dated as of January 4, 1999.

2.3           *     Asset Purchase Agreement by and among Gateway  Distributors,
                    Ltd. American Outback, Inc. and the Stockholders of American
                    Outback, Inc. dated as of April 1, 1999.

2.4           *     Asset Purchase Agreement by and among Gateway  Distributors,
                    Ltd.  TeamUp  International,  Inc. and the  Stockholders  of
                    TeamUp International, Inc., dated as of August 17, 1999.

3.1           *     Amended  and  Restated  Articles  of  Incorporation  of  the
                    Company.

3.2           *     Bylaws of the Company, as amended.

4.1           *     Specimen Common Stock Certificate

4.2           *     Specimen 12% Convertible Note

10.1          *     Employment Agreement - Richard A. Bailey

10.2          *     Employment Agreement - Florian R. Ternes

10.3          **    NuTech International, Inc. Acquisition Agreement

10.4          **    American Outback, Inc. Acquisition Agreement

10.5          **    Team Up International, Inc. Acquisition Agreement

10.6          34    Dynamic Products, Inc. Acquisition Agreement

10.7          ***   Professional Wrestling Alliance Corporation Letter of Intent

23            40   Consent of Auditor

27            41   Financial Data Schedule

*   Incorporated  by reference  from Form  10-SB/A  filed  December 15, 1999.
**  Incorporated   by  reference  from  Form  10-SB  filed  October  29,  1999.
*** Incorporated by reference from Form 8-K filed October 23, 2000.

                                       33