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, 2000.

   [   ] 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 [ ].

The issuer's total consolidated revenues for the year ended December 31, 2000,
were $4,337,157

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 April 6, 2001, the number of shares outstanding of the registrant's Common
Stock, $0.001 par value (the only class of voting stock), was 14,244544.

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                               TABLE OF CONTENTS

                                                                            PAGE

                                     PART I

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

Item 2.           Description of Property.....................................18

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.........................................19

Item 6.           Management's Discussion and Analysis or
                  Plan of Operation...........................................20

Item 7.           Financial Statements..... ..........................F-1 - F-19

Item 8.           Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure....................................23

                                    PART III


Item 9.           Directors and Executive Officers............................23

Item 10.          Executive Compensation......................................24

Item 11.          Security Ownership of Certain Beneficial Owners
                  and Management..............................................26

Item 12.          Certain Relationships and Related Transactions..............27

Item 13.          Exhibits, List and Reports on Form 8-K......................27

Signatures................................................................... 29





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                                     PART I

Item 1.  Description of Business.

Business Development.

As used herein the term "Company" refers to Gateway Distributors, Ltd., a Nevada
corporation, its subsidiaries and predecessors, unless the context indicates
otherwise. The Company was originally incorporated in the State of 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.

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The Company's stock was not trading 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.

As of December 9, 1999, the Company purchased certain assets of SuLin
International. The Company issued 250,000 shares of Common Stock pursuant to the
purchase agreement (the "Sulin Acquisition"). SuLin is a network marketing
company with the concept that whole food cleans and detoxifies the body. The
SuLin Acquisition purchase price consisted of cash payments calculated on the
basis of the Company's sales of inventory acquired in the SuLin Acquisition, the
name rights formulations of the products, and certain software owned by SuLin.
The company had several years of steady growth peaking with the annual sales of
over $2,400,000 by year-end 1999.

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 cost in excess of net
assets acquired, which is being amortized over 20 years.

As part of the July 1, 2000 acquisition of Dynamic Products, the Company
acquired the distributor base, formulas and Patents of LifeTime Solutions, Inc.
("LifeTime Solutions"). The company over the last 12 months has had revenues in
excess of $360,000. LifeTime Solutions is a Florida based company in the
business of network marketing of nutritional, health, and dietary supplements
and cleaning products.

On October 12, 2000,the Company entered into an Acquisition Agreement
("Agreement") with Professional Wrestling Alliance Corporation ("PWA"), a
Delaware Corporation wherein the Company agreed to sell the bulk of its assets
and its operating business, in exchange for shares of PWA stock equaling
approximately 85% of the issued and outstanding shares of PWA.

On January 10, 2001 the Corporation closed on the acquisition pursuant to the
Agreement dated October 12, 2000. Pursuant to the Agreement the Corporation
acquired from TRSG Corporation ("TRSG") (formerly Professional Wrestling
Alliance Corporation) 13,448,660 (post reverse-split) shares of TRSG's Common
Stock. TRSG became as a result of this transaction approximately 78% owned by
the Company.

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TRSG acquired all of the business and existing networking distribution
operations of The Right Solution from the Company. TRSG took control and is now
operating the business of the network marketing company "The Right Solution"
which was formerly operated by the Company. The business of the Company is
presently that of a holding company which operates through its subsidiary, TRSG
Corporation. The Company continues to sell nutritional, health, and dietary
supplements and products throughout North America and Japan through TRSG.

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, through its subsidiary TRSG, does business as "The Right Solution,"
a network marketing company that sells whole food nutrition, environmental
solutions, and health and dietary supplements throughout North America and
Japan. The Company believes that through special blends, whole foods, such as
grains and vegetables, can be combined to help produce optimum health.

The Company's products are marketed through a network marketing system within
the United States and wholesale personal import sales outside the United States.
Network marketing enables the Company's independent distributors in the United
States to earn profits by selling Company products to retail consumers.
Distributors may also develop their own distributor downline organizations by
sponsoring others to do business in any market where the 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.

In August of 1997 the company opened the Asian market in Japan. Japan has a
population of 130 million, with annual revenues of 37.5 billion generated in
network marketing. The companies' strength in the Japanese market stabilized the
down turn in the U.S. market.

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 year the Company discontinued of
the slow selling duplicated products and has made the decision to concentrate on

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its top selling products that focus on three things: 1) cleansing the body from
toxins; 2) feeding the body on a celllular level; and living ones dreams. With
more than 70% of the food that is consumed in the world being genetically
altered, management believes that the market for its whole food products will
continue to grow.

Mergers and Acquisitions. The Company's business plan for 2001 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.

In December 1999, the Company purchased certain assets of SuLin International.
SuLin is a network marketing company with the concept that whole food cleans and
detoxifies the body. SuLin International's start up was June of 1993. The
company had sales of over $2,400,000 at year-end 1999.

On July 1, 2000, the Company acquired the assets and operations of Dynamic
Products, Inc. ("Dynamic Products").  Dynamic Products is a multi-level
marketing company focusing on cleaning products.

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

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regulatory compliance and operations phases of the process. The lead-time and
costs associated with opening anticipated new markets may significantly exceed
those of entering new markets in the past due to greater regulatory barriers,
the necessity of adapting to entirely new regulatory systems, and problems
related to entering new markets with different cultural bases and political
systems from those encountered in the past. 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

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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.

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.

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.

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

Weight Loss Pack

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.

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.

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.

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.

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 to a clear and oderless form.


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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,
accumulated over years in 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.

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.

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.

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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, 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

                                        9

<PAGE>

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 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.

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

                                       10

<PAGE>

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."

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

                                       11

<PAGE>

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.

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

                                       12

<PAGE>

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 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.

                                       13

<PAGE>

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 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

                                       14

<PAGE>

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 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

                                       15

<PAGE>

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 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.

                                       16

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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
Company's operations to the extent practicable.

                                       17

<PAGE>

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, 2000, the Company had twenty full-time employees. 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, 2000, the monthly base
rent was $15,000. 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, 2000, no matters
were submitted by the Company to a vote of its shareholders.



                                       18

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                                     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 845,000 shares of the Company's Common Stock which are
subject to a stock option agreement.

There are currently $1,197,066 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 December 31, 2000, the Notes were, in the
aggregate, convertible into 1,120,000 shares of the Company's Common Stock.

There are currently 10,513,150 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 April 6, 2001, there were approximately 1,007 record holders of 14,244,544
shares 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.

The following is a list of all securities sold by the Company within the period
covered by this report, except for those previously reported on Form 10-QSB,
including, where applicable, the identity of the person who purchased the
securities, title of the securities, and the date sold.

         On December 21, 2000 the Company issued 75,000 shares of its Common
Stock to Nutech International, Inc. for the 1999 acquisition of the business of
Nutech International, Inc. pursuant to section 4(2) of the Securities Act of
1933 in an isolated private transaction by the Company which did not involve a
public offering. The Company made this offering based on the following factors:
(1) The issuance was an isolated private transaction by the Company which did
not involve a public offering, being made to a corporation for acquisition of
its business ; (2) there was only one offeree who was issued stock for its
business; (3) the offeree has not resold the stock but has continued to hold it
since the date of issue; (4) there were no subsequent or contemporaneous public
offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the sale of the stock took place
directly between the offeree and the Company.

                                       19

<PAGE>

On December 21, 2000 the Company issued a total of 650,000 shares of its Common
Stock to the following individuals for the 1999 acquisition of Team Up
International, Inc. pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering.


Name                                                            Number of Shares
Jim Menning                                                     32,500
Meilin Lau                                                      130,000
Bill Gions                                                      178,750
Alan Lau                                                        130,000
Leonard K. Olson                                                178,750

The Company made this offering based on the following factors: (1) The issuance
was an isolated private transaction by the Company which did not involve a
public offering, being made to five individuals for acquisition of a business ;
(2) there were only five offerees who were issued stock for their interest in
Team Up International, Inc.; (3) the offerees have not resold the stock but have
continued to hold it since the date of issue; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offerees and the Company.

On December 21, 2000 the Company issued a total of 250,000 shares of its Common
Stock to the following individuals for the January 2000 acquisition of Sulin
International, Inc. pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering.


Name                                                       Number of Shares
Steve Smith                                                130,000
Lil Shepherd                                               2,500
Brandon Smith                                              2,500
Charles Ung                                                62,500
Bradley Storks                                             3,750
Ken Wade                                                   37,500
Saundra Huff                                               7,500
Kari Weisner                                               3,750

The Company made this offering based on the following factors: (1) The issuance
was an isolated private transaction by the Company which did not involve a
public offering, being made to eight individuals for acquisition of a business;

                                       20

<PAGE>

(2) there were only eight offerees who were issued stock for their interest in
Sulin International, Inc.; (3) the offerees have not resold the stock but have
continued to hold it since the date of issue; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offerees and the Company.

On December 21, 2000 the Company issued a total of 160,750 shares of its Common
Stock to the following individuals for the July 2000 acquisition of Dynamic
Products, Inc. pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering.


Name                                                            Number of Shares
Joseph P. & Sophia Tidwell                                      25,000
William R. Fulk                                                 25,000
Joyce Hill Rev. Trust                                           12,500
Wesley F. Tidwell                                               12,500
Ellis G. Fleming                                                12,500
Tidwell Investment Club                                         12,500
Eddie Tidwell                                                   3,000
Martha Harbin                                                   1,250
Dario Zuljani                                                   5,000
Ginger Farrell Lucas                                            2,500
Allison Tidwell                                                 714
Cynthia T. & Joe Cooper                                         1,786
John M. Bearden                                                 10,750
Jane E. Simkins                                                 5,375
Janice Y. Dearth                                                5,375
Milan Krupa                                                     25,000

The Company made this offering based on the following factors: (1) The issuance
was an isolated private transaction by the Company which did not involve a
public offering, being made to ten individuals and entities for acquisition of a
business ; (2) there were only ten offerees who were issued stock for their
interest in Dynamic Products, Inc.; (3) the offerees have not resold the stock
but have continued to hold it since the date of issue; (4) there were no
subsequent or contemporaneous public offerings of the stock; (5) the stock was
not broken down into smaller denominations; and (6) the negotiations for the
sale of the stock took place directly between the offerees and the Company.

                                       21

<PAGE>

On December 21, 2000 the Company issued 996,114 shares each of its Common Stock
to World Alliance Consulting Group, Inc, and Hudson Consulting Group, Inc., for
consulting services pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering. The Company made this offering based on the following factors: (1) The
issuance was an isolated private transaction by the Company which did not
involve a public offering, being made to two corporations for consulting
services ; (2) there were only two offerees who were issued stock for services;
(3) the offerees have not resold the stock but have continued to hold it since
the date of issue; (4) there were no subsequent or contemporaneous public
offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the sale of the stock took place
directly between the offerees and the Company.

On December 21, 2000 the Company issued 249,028 shares each of its Common Stock
to F. Briton McConkie, and Peter Kristensen., for services rendered to the
corporation, pursuant to section 4(2) of the Securities Act of 1933 in an
isolated private transaction by the Company which did not involve a public
offering. The Company made this offering based on the following factors: (1) The
issuance was an isolated private transaction by the Company which did not
involve a public offering, being made to two individuals for services ; (2)
there were only two offerees who were issued stock for services; (3) the
offerees have not resold the stock but have continued to hold it since the date
of issue; (4) there were no subsequent or contemporaneous public offerings of
the stock; (5) the stock was not broken down into smaller denominations; and (6)
the negotiations for the sale of the stock took place directly between the
offerees and the Company.

On December 21, 2000 the Company issued 4,180,000 shares each of its Common
Stock to Richard A. Bailey (3,475,000 shares), Florian Ternes (675,000 shares),
Lester Moore (15,000 shares), and Matt Swan (15,000 shares), for services as
officers and directors of the company, pursuant to section 4(2) of the
Securities Act of 1933 in an isolated private transaction by the Company which
did not involve a public offering. The Company made this offering based on the
following factors: (1) The issuance was an isolated private transaction by the
Company which did not involve a public offering, being made to four individuals
for services ; (2) there were only four offerees who were issued stock for
services; (3) the offerees have not resold the stock but have continued to hold
it since the date of issue; (4) there were no subsequent or contemporaneous
public offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the sale of the stock took place
directly between the offerees and the Company.

On December 21, 2000 the Company issued 32,000 shares of its Common Stock to
Earl McKenzie (12,000 shares), Doug Paanelley (10,000 shares), and Janet
Panelley., for cancellation of debt, pursuant to section 4(2) of the Securities
Act of 1933 in an isolated private transaction by the Company which did not
involve a public offering. The Company made this offering based on the following
factors: (1) The issuance was an isolated private transaction by the Company
which did not involve a public offering, being made to three individuals for
consulting services ; (2) there were only three offerees who were issued stock
for cancellation of debt; (3) the offerees have not resold the stock but have
continued to hold it since the date of issue; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offerees and the Company.


                                       22

<PAGE>

On December 21, 2000 the Company issued 195,000 shares each of its Common Stock
to Symetry, Inc.(25,000 shares), Charles Muchnick (10,000 shares), Winston
Lambert (100,000 shares), Gary Eby (10,000 shares), and Ivan Martin (50,000
shares), for cash at $1.00 per share, pursuant to section 4(2) of the Securities
Act of 1933 in an isolated private transaction by the Company which did not
involve a public offering. The Company made this offering based on the following
factors: (1) The issuance was an isolated private transaction by the Company
which did not involve a public offering, being made to four individuals and a
corporation for cash ; (2) there were only five offerees who were issued stock
for cash; (3) the offerees have not resold the stock but have continued to hold
it since the date of issue; (4) there were no subsequent or contemporaneous
public offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the sale of the stock took place
directly between the offerees and the Company.

On December 21, 2000 the Company issued 25,000 shares of its Common Stock to
Jeffrey Yarbourgh as consideration for loans and extensions of loans made to the
Company, pursuant to section 4(2) of the Securities Act of 1933 in an isolated
private transaction by the Company which did not involve a public offering. The
Company made this offering based on the following factors: (1) The issuance was
an isolated private transaction by the Company which did not involve a public
offering, being made to an individual for loans and extensions of loans made to
the Company ; (2) there was only one offeree who was issued stock for services;
(3) the offeree has not resold the stock but has continued to hold it since the
date of issue; (4) there were no subsequent or contemporaneous public offerings
of the stock; (5) the stock was not broken down into smaller denominations; and
(6) the negotiations for the sale of the stock took place directly between the
offeree and the Company.

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.


                                       23

<PAGE>

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, 2000 and 1999

Sales for the year ended December 31, 2000 increased 10.9% to $4,337,157, as
compared to sales of $3,910,604 in the year ended December 31, 1999. The
increase resulted from an increase in product lines offered by the Company.

Gross profit of $3,298,515 for the year ended December 31, 2000, was $301,247,
or 10% higher than the gross profit of $2,997,268 for the year ended December
31, 1999. As a percentage of sales, gross profit for 2000 as compared to the
same period in the prior year remained relatively constant, decreasing
approximately one-half of one percent from 76.6% to 76.05%. The decrease in
gross profit as a percentage of sales primarily resulted from an increase in
costs of goods sold. The increase in costs of goods sold reflects increased
shipping costs and higher prices.

Selling, general, and administrative expenses, as a percentage of sales, were
120.6% for 2000 as compared to 127.7% for the same period in 1999. These
expenses for the same periods increased 4.8% to $5,232,559 from $4,994,473 in
the year ending December 31, 1999. 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, and product research and
development.

No income taxes are due or refundable for 2000 or 1999 because of the
application of unused net operating loss carryforwards of approximately
$5,715,000, the expiration dates of which begin in 2010 and end in 2020.

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
($5,202,607) at December 31, 2000 from ($2,702,584) at December 31, 1999. This
decrease was primarily attributable to increased selling, general and
administrative expenses incurred with the Company's expansion of the business.
Accounts receivable decreased from $58,918 at December 31, 1999 to $51,233 at
December 31, 2000. Inventory decreased from $360,441 on December 31, 1999 to
$205,711 at December 31, 2000. Total accounts payable increased from $1,208,360
at December 31, 1999 to $2,307,348 at December 31,2000. Accrued liabilities,
including interest and taxes, increased from $686,233 at December 31, 1999, to
$1,294,089 at December 31, 2000.


                                       24

<PAGE>

For fiscal year 2000, the Company's operations used cash flow of $144,623,
compared to $855,256 for the previous fiscal year. In 2000, cash used by
operating activities has primarily resulted from the Company's net loss in 2000.

The Company received cash from investing activities of $54,121 in 1999, as
compared to a negative cash flow of $81,689 in 2000. Cash received from
investing activities in 1999 was primarily due to acquisitions.

The Company generated $211,344 in cash flow from financing activities in 2000
and $799,017 in 1999.

Stockholders' deficit increased $1,744,254 to $4,290,410 in 2000.

Cash, cash equivalents and marketable securities totaled $17,593 at December 31,
1999 compared to $2,625 at December 31, 2000.

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
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.

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.


                                       25

<PAGE>

Events Subsequent to End of Fiscal Year

On October 12, 2000,the Company entered into an Agreement with PWA wherein the
Company agreed to sell the bulk of its assets and its operating business, in
exchange for shares of PWA stock equaling approximately 85% of the issued and
outstanding shares of PWA. The Agreement contemplated the transfer to PWA of the
Company's business and goodwill, which consisted of existing inventory and an
existing networking distribution business. The Agreement provided for PWA to
acquire all of the assets and network marketing business of the Company, which
business would then be operated by PWA. Following the signing of the October 12,
2000 Agreement, PWA changed its name to TRSG Corporation ("TRSG"). The closing
of the Agreement occurred on January 10, 2001. At that time, TRSG became a
majority owned subsidiary of the Company. (See Form 8-K filed January 12, 2001
and Form 8-K/A filed March 27, 2001).

Item 7.  Financial Statements

The following pages numbered F-1 through F-19 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, 2000



                                       27

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.


                                  - CONTENTS -



                                                                     PAGE NUMBER

Independent Auditors' Report                                                 F-1

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 & F-6

    Notes to Financial Statements                                     F-7 - F-19




                                       28

<PAGE>




                  (Letterhead of Perrin, Fordree & Company, PC)
                          901 Wilshire Drive, Suite 400
                              Tory, Michigan 48084

                          Independent Auditors' Report

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, 2000 and 1999, 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, 2000 and 1999, 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. As discussed in Note 10 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency, which raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note10. 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, PC

March 1, 2001

                                       F-1

<PAGE>




                           GATEWAY DISTRIBUTORS, LTD.
                                  BALANCE SHEET



                                     ASSETS

                                                                DECEMBER 31,
                                                         2000               1999


  CURRENT ASSETS:
     Cash and cash equivalents                  $        2,625     $      17,593
     Accounts receivable                                51,233            58,918
     Inventories                                       205,711           360,441
     Prepaid expenses and other                        127,675            25,811
                                                 -------------    --------------
                  Total current assets                 387,244           462,763

  PROPERTY AND EQUIPMENT:
     Leasehold improvements                             29,228            29,228
     Furniture and fixtures                             89,291            83,239
     Machinery and equipment                           292,140           308,720
     Transportation equipment                           17,171             4,201
                                                --------------   ---------------
                                                       427,830           425,388
     Less accumulated depreciation                    (269,861)        (298,419)
                                                 -------------     -------------
                                                       157,969           126,969

  OTHER ASSETS:
     Goodwill, net of accumulated amortization
        of $74,245 in 2000 and $20,351 in 1999.        927,787           853,081
     Other                                              35,410             9,347
                                                --------------   ---------------
                                                       963,197           862,428



                                                --------------    --------------
                                                   $ 1,508,410       $ 1,452,160
                                                ==============    ==============










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



                                       F-2

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                            BALANCE SHEET (Continued)
<TABLE>
<CAPTION>

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

                                                                                    DECEMBER 31,
                                                                              2000               1999
<S>                                                                      <C>               <C>


         CURRENT LIABILITIES:
            Current maturities of long-term debt                          $ 1,695,330       $ 1,270,754
            Deferred revenue                                                  293,084          -
            Accounts payable:
               Trade                                                        1,630,707           959,128
               Commissions                                                    676,641           249,232
            Accrued expenses:
               Payroll and employee benefits                                  244,267           115,717
               Payroll taxes                                                  419,850           206,019
               Interest                                                       457,800           256,977
               Other                                                          172,172           107,520
                                                                        -------------     -------------
                     Total current liabilities                              5,589,851         3,165,347

         LONG-TERM DEBT                                                       208,888           549,160

         LONG-TERM ACCOUNTS PAYABLE                                             -               283,728
                                                                       --------------     -------------
                                                                            5,798,739         3,998,235

         STOCKHOLDERS' EQUITY (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 - 13,636,000
               and 6,817,000 shares                                            13,636             6,817
            Additional paid-in capital                                      1,823,338         1,423,615
            Accumulated deficit                                            (6,127,303)       (3,976,507)
                                                                         ------------       ------------
                                                                           (4,290,329)       (2,546,075)
                                                                         ------------       ------------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $ 1,508,410       $ 1,452,160
                                                                           ===========       ===========
</TABLE>

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





<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                             STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                             2000                1999
<S>                                                                      <C>                <C>

         SALES                                                            $ 4,337,157        $ 3,910,604

         COST OF SALES                                                      1,038,642            913,336
                                                                         ------------      -------------

         GROSS PROFIT                                                       3,298,515          2,997,268

         SELLING, GENERAL AND ADMINISTRATIVE
            EXPENSES                                                        5,232,559          4,994,473
                                                                         ------------       ------------


         OPERATING LOSS                                                    (1,934,044)       (1,997,205)

         OTHER INCOME (EXPENSE):
            Interest expense                                                 (277,980)         (191,017)
            Loss on disposal of fixed assets                                   (6,354)          (33,730)
            Other expenses                                                      -               (45,000)
            Other income                                                       67,582             93,457
                                                                       --------------     --------------
                                                                             (216,752)         (176,290)

         NET LOSS                                                          $(2,150,796)     $(2,173,495)
                                                                       ===============      ============


         BASIC LOSS PER SHARE                                         $         (0.22)  $         (0.37)
                                                                       ===============   ===============
</TABLE>



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



                                       F-3

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                  STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                     YEARS ENDED DECEMBER 31, 2000 AND 1999


<TABLE>
<CAPTION>
                                                                                 ADDITIONAL
                                                                     COMMON        PAID-IN                  ACCUMULATED
                                                  SHARES             STOCK         CAPITAL                     DEFICIT         TOTAL

<S>                                        <C>           <C>                   <C>                     <C>             <C>    <C>
                                               -----------         ---------    --------------          --------------- ------------
         Balance - December 31, 1998           5,001,000  $         5,001         $    323,569          $(1,803,012 )   $(1,474,442)

         Stock issued for cash                   288,000              288              229,712                -              230,000
         Stock issued for acquisitions         1,042,000             1042              846,365                -              847,407
         Stock issued for services               486,000              486               23,969                -               24,455
         Net loss                                  -                   -                    -            (2,173,495 )    (2,173,495)
                                          -------------  -------------------  -------------------      ------------     -----------

         Balance - December 31, 1999           6,817,000            6,817            1,423,615           (3,976,507 )    (2,546,075)

         Stock issued for cash                   226,000              226              126,816                -              127,042
         Stock issued for acquisitions           161,000              161              128,439                -              128,600
         Stock issued for services             6,432,000            6,432              144,468                -              150,900
         Net loss                                  -                   -                    -            (2,150,796 )    (2,150,796)
                                          --------------  ------------------  -------------------      ------------     ------------

         Balance  - December 31, 2000         13,636,000   $       13,636          $ 1,823,338          $(6,127,303 )   $(4,290,329)
                                           =============   ==============          ===========          ===========      ===========
</TABLE>

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



                                       F-4

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                             STATEMENT OF CASH FLOWS

                                                       YEAR ENDED DECEMBER 31,
                                                         2000              1999

  CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                       $(2,150,796)    $(2,173,495)
     Adjustments to reconcile net loss
        to net cash to operating activities:
           Depreciation and amortization               104,165            90,086
           Loss on disposal of fixed assets              6,354            33,730
           Stock issued for services                   118,900            24,455
           Allowance for inventory obsolescence        (64,000)          205,000
     Changes in operating assets and liabilities
         which increase(decrease) cash flow:
           Accounts receivable                           7,686           118,949
           Inventories                                 218,730           182,605
           Prepaid expenses                           (101,864)           24,197
           Accounts payable                           1,108,346          366,780
           Accrued expenses                             607,856          272,437
                                                 --------------     ------------
                                                      2,006,173        1,318,239
                                                 --------------     ------------
             Net cash to operating activities         (144,623)        (855,256)

  CASH FLOWS FROM INVESTING ACTIVITIES:
     Deposits refunded                                   3,997             5,727
     Deposits paid                                    (30,060)             -
     Purchase of property and equipment               (58,626)          (13,256)
     Cash received from sale of property                 3,000             -
     Cash received from acquisitions                     -                61,650
                                           -------------------    --------------

             Net cash from (to) investing
             activites                                (81,689)            54,121

  CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of stock                   127,042           230,000
     Proceeds from issuance of debt                    116,650           569,017
     Payments on lon                                   (32,348)            -
                                             ------------------     ------------

           Net cash from financing activities          211,344           799,017
                                                  -------------    -------------

  NET DECREASE IN CASH EQUIVALENTS                    (14,968)           (2,118)

  CASH AND CASH EQUIVALENTS:
     BALANCE - beginning of year                        17,593            19,711
                                                --------------    --------------

            BALANCE - end of year               $        2,625     $      17,593
                                                ==============     =============

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



                                       F-5

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                       STATEMENT OF CASH FLOWS - CONTINUED


                             SUPPLEMENTAL DISCLOSURE

                                                       YEAR ENDED DECEMBER 31,
                                                  2000                    1999


   CASH PAID FOR INTEREST                       $  52,610              $  22,216
                                                 =========             =========

                    CASH PAID FOR TAXES         $       -              $    -
                                                ==========             =========



                   NON CASH INVESTING AND FINANCING ACTIVITIES



   STOCK  ISSUED FOR ACQUISITIONS               $128,600                $847,407
                                                ========                ========

   STOCK ISSUED FOR SERVICES                    $118,900               $  24,455
                                                ========               =========

   STOCK ISSUED FOR PROPERTY & EQUIPMENT       $  32,000          $        -
                                               =========          ==============





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



                                       F-6

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

              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, cleaning 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.

               Inventories

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

               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                               5 - 7 years





                                       F-7

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                               DECEMBER 31, 2000

         NOTE 1 -        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:

               Machinery and equipment                               3 - 5 years
               Transportation equipment                              5 - 7 years

               Depreciation and Amortization - continued

               Depreciation expense for the years ended December 31, 2000 and
               1999 was $50,271 and $63,853, respectively.

               Intangible Assets

               Goodwill represents the excess of the cost over the fair value of
               net assets acquired for business combinations acquired under the
               purchase method of accounting. Goodwill is being amortized over
               periods ranging from 5 to 20 years using the straight-line
               method. Amortization expense was $53,894 and $20,351 for the
               years ended December 31, 2000 and 1999, respectively.

               Fair Values of Financial Instruments

               The carrying amounts of the Company's cash, accounts receivable,
               accounts payable and accrued expenses approximate fair value
               because of the short maturity of these items.

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

               Advertising Costs.

               The Company conducts nondirect response advertising for which the
               costs are expensed when incurred. Total advertising costs of
               $15,677 and $15,570 were incurred for the years ended December
               31, 2000 and 1999, respectively.









                                       F-8

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                               DECEMBER 31, 2000



         NOTE 1 -         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

               Revenue Recognition

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

               Reclassifications

               Certain amounts in 1999 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.


         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



                                       F-9

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2000



         NOTE 2 -      BUSINESS COMBINATIONS - CONTINUED:

               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 $251,810 of costs
               in excess of net assets acquired, which are being amortized over
               20 years.

               On July 1, 2000, the Company acquired certain assets and
               operations of LifeTime Solutions, Limited, ("LifeTime") in
               exchange for 160,000 shares of Gateway Common Stock. LifeTime is
               a multi-level marketing company focusing on nutritional, health,
               dietary and cleaning 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 $128,600 of costs in excess of net assets
               acquired, which are being amortized over 20 years.





                                      F-10

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                   NOTES TO FINANCIAL STATEMENTS - CONTINUED
                               DECEMBER 31, 2000

                  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, NuTech and LifeTime, acquisitions on the
               financial statements was not significant and has been excluded
               from the pro forma presentation.


                                            YEAR ENDED DECEMBER 31,
                                            2000               1999
                                   -------------------    ---------------

            Net sales                      $ 4,337,157         $7,655,655
                                           ===========         ==========

            Net loss                       $(2,150,796)       $(2,412,939)
                                           ===========        ===========

            Loss per share:
               Basic                             (0.22)             (0.41)
                                      ================   ================

               Diluted                           (0.22)             (0.41)
                                      ================    ================


                        NOTE 3 - INVENTORIES:

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

                                                       DECEMBER 31,
                                                    2000        1999

         Product                                $189,964           $323,369
         Promotional and literature               15,747             37,072
                                              ----------         ----------

                                                $205,711           $360,441
                                                ========           ========

                                F-11

<PAGE>



                                      GATEWAY DISTRIBUTORS, LTD.
                               NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                           DECEMBER 31, 2000

                      NOTE 4 - LONG-TERM DEBT:

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

                                                                                     DECEMBER 31,
                                                                                 2000           1999
                                                                           -----------       ------------
<S>                                                                        <C>                <C>

               Convertible notes payable                                   $1,197,066         $1,121,500

               Notes payable - related parties, interest ranging from 6.5%        -
               10%, currently due,
               unsecured.                                                     362,501            427,898

               Notes payable - stockholders, payable in monthly installments
               ranging from $25 - $1,278, plus interest at 7% - 14%, due at
               various dates through 2006,
               unsecured.                                                     242,320            207,692

               Note payable - corporation, payable
               in monthly installments of $9,000, plus
               interest at 3%, currently due, unsecured.                       58,939             58,049

               Note payable, individual, all unpaid
               principal and interest at 10% is due
               on January 31, 2001, unsecured.                                 41,650              -

               Other                                                            1,742              4,775
                                                                       --------------     --------------


                                                                            1,904,218          1,819,914
               Less current portion                                         1,695,330          1,270,754
                                                                          -----------        -----------

               Long - term debt                                           $   208,888        $   549,160
                                                                          ===========        ===========
</TABLE>

                                      F-12

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2000

         NOTE 4 -        LONG-TERM DEBT- CONTINUED:

               Convertible notes payable are to individuals which bear interest
               at 12% per annum, principal and accrued interest due twelve
               months from the date of issuance. These notes are convertible at
               the option of the holder into shares of the Company's Common
               Stock, at an initial conversion price of $0.80 per share.
               Approximately $357,000 of accrued interest relating to these
               notes at December 31, 2000, is also convertible into the
               Company's Common Stock. At December 31, 2000 the approximate
               total of common shares available through conversion of the
               aforementioned debt is 1,943,000.

               The notes may be called for conversion when the average of the
               bid and asked prices of the Common Stock exceeds $1.00 per share
               for ten consecutive days. Although the notes issued will be
               "freely 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, 2000 the convertible notes issued during the year ended
               December 31, 1999 and prior have not been converted to Common
               Stock as the initial public offering has not transpired.

               Maturities of long-term debt are as follows:

               Year ending December 31:
                  2001                                    $1,695,330
                  2002                                        33,432
                  2003                                        33,432
                  2004                                        33,432
                  2005                                        33,432
                  Thereafter                                  75,160
                                                       -------------

                                                          $1,904,218


                                      F-13

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2000




         NOTE 5 -        EARNINGS PER SHARE:

               Earnings per share (EPS) for the years ended December 31, 2000
               and 1999 are computed as follows:

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

 December 31, 2000 -
    Loss from continuing
        operations             $(2,150,796)     9,700,057     $        (0.22)
                               ===========    ===========     ==============

 December 31, 1999 -
    Loss from continuing
       operations              $(2,173,495)     5,872,785     $        (0.37)
                               ===========    ===========     ==============

               For the years ended December 31, 2000 and 1999, options and
               convertible debt worth 1,765,887 and 1,510,658 shares of Common
               Stock, respectively, were not included in computing diluted EPS
               because their effects were antidilutive.


         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 when gross monthly sales
               reach $1,000,000. Vesting has not occurred as of December 31,
               2000. The exercise price for each option is $1.00 per share and
               there is 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:


                                      F-14

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2000



         NOTE 6 -     STOCK OPTIONS - CONTINUED:

                  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, vesting immediately. 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                          -    %

               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)
                                                         ===========







                                      F-15

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2000



         NOTE 6 -                    STOCK OPTIONS - CONTINUED:

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

Basic earnings per share

As reported                                  $         (0.37)
                                             ===============

Pro forma                                    $         (0.41)
                                             ===============

               The following table sets forth stock options granted, exercised
               and canceled during the year ended December 31, 1999. There was
               no activity for stock options for the year ended December, 31,
               2000.

1997





























                                      F-16

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2000


         NOTE 7 -      RELATED PARTY TRANSACTIONS:

               Amounts due to related parties included in accounts payable at
               December 31, 2000 and 1999 were $94,416 and $-0-, respectively.
               The Company also leases it's building from a related party (Note
               8) and has term debt (Note 4) with related parties.

         NOTE 8  -     OPERATING LEASES:

               Certain office equipment items 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,
               2000.

               Year ending December 31:
                  2001                                   $    5,207
                  2002                                        4,929
                  2003                                        1,458
                                                        -----------

               Total minimum payments                     $  11,594
                                                          =========

               The Company leases a building from a related party under an
               operating lease on a month-to-month basis. The monthly amount at
               December 31, 2000 is $15,000.

               Total rent expense charged to operations for the years ended
               December 31, 2000 and 1999, was $233,708 and $271,311,
               respectively.


         NOTE 9 -           INCOME TAXES:

               No provision was made for income taxes in 2000 and 1999 as a
               result of the net loss for each year and a net operating loss
               carryforward. A valuation reserve on the deferred tax assets has
               been recorded due to the current financial situation of the
               Company. As of December 31, 2000, the Company has available net
               operating loss carryforwards of approximately $5,715,000.
               Expiration dates on these carryforwards begin in 2010 and end in
2020.

               The components of deferred income taxes consisted of the
following:

                                                           DECEMBER 31,
                                                       2000           1999

  Current deferred taxes - gross assets:
     Gross assets                             $      62,700     $      6,600





                                      F-17

<PAGE>



                             GATEWAY DISTRIBUTORS, LTD.
                      NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                  DECEMBER 31, 2000



                 NOTE 9 - INCOME TAXES - CONTINUED:

Gross liabilities                                 -                    -
                                     ------------------ --------------------

   Net current deferred tax assets               62,700              6,600

   Noncurrent deferred taxes:
      Gross assets                            1,948,100          1,287,200
      Gross liabilities                          (1,500)                 -
                                          ------------- --------------------

   Net noncurrent deferred tax assets         1,946,600          1,287,200

   Valuation allowance                       (2,009,300)        (1,293,800)
                                           ------------        -----------

   Total deferred tax assets         $            -     $              -
                                     ================== ====================


The tax effects of cumulative temporary differences consisted of
the following:

                                                 DECEMBER 31,
                                            2000               1999

   Operating loss carryforwards         $1,943,300         $1,227,200
   Inventory reserves                       47,900              -
   Depreciation                              4,800             59,100
            Other                           13,300              7,500
                                      ------------     --------------

             Total                      $2,009,300         $1,293,800
                                        ==========         ==========


         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 three years, which has
               resulted in a severe working capital deficiency. This deficiency
               has contributed to inventory shortages and decreased sales,
               limited the ability of the Company to meet its current
               obligations and caused the Company to default on debt repayments.

               The Company has signed a merger agreement with a publicly traded
               company (Note 11) and plans to raise capital through a public
               offering of its stock in 2001. Management believes that the
               capital raised will enable the Company to repay its current
               obligations, satisfy the current outstanding





                                      F-18

<PAGE>



                           GATEWAY DISTRIBUTORS, LTD.
                    NOTES TO FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2000

         NOTE 10 -     CONSIDERATIONS AFFECTING THE COMPANY'S ABILITY TO
         CONTINUE AS A GOING CONCERN - CONTINUED

               debt and increase the inventory to acceptable operating
               conditions. Management also believes that these increased
               inventory levels will increase the revenue and profitability of
               the Company.

               In the event the Company is unable to raise sufficient operating
               capital from 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:

               On January 10, 2001, 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 publicly traded
               company, TRSG Corporation.






                                      F-19

<PAGE>



         Item 8.      Changes in and Disagreements with Accountants.

         There were no changes in accountants or disagreements between the
Company and its accountants.

<PAGE>
                                    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     45  Chairman of the Board of Directors, Chief Executive
                            Officer and President
  Florian R. Ternes     52  Director, Chief Operating Officer, Secretary
  Matthew H. Swan       42  Chief Financial Officer, Treasurer
  Earl McKenzie         57  Director

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

         Richard A. Bailey, 45, 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, 52, 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.







                                       27

<PAGE>



         Matthew H. Swan, 42, 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
         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.

         Earl McKenzie, 57, Mr. McKenzie has served as a member of the Board of
         Directors of the Company since January, 2000. He is currently the CEO
         and a Director of 2021 Interactive, and has served in that position
         since February of 1997. From 1966 to 1970 he was employed by IBM as a
         programer. In May of 1970 he joined EDS owned by Ross Perot as V.P. of
         Banking Division. He was responsible for retail banking and health
         care. He retired from EDS in December 1996.

         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 aware of four persons who during the fiscal
         year ended December 31, 2000 were directors, officers, or beneficial
         owners 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 transitional
         year as follows:

          Richard A.  Bailey - Mr.  Bailey was an officer  and  director  of the
          Company  during all of the year 2000. Mr. Bailey made no Section 16(a)
          compliance filings during the year ended December 31, 2000. Mr. Bailey
          further failed to timely file a Form 5 for the year ended December 31,
          2000.

          Florian R.  Ternes - Mr.  Ternes was an officer  and  director  of the
          Company  during all of the year 2000. Mr. Ternes made no Section 16(a)
          compliance filings during the year ended December 31, 2000. Mr. Ternes
          further failed to timely file a Form 5 for the year ended December 31,
          2000.

          Matthew  Swan - Mr. Swan was a director  of the Company  during all of
          the year 2000.  Mr.  Swan made no  Section  16(a)  compliance  filings
          during the year ended  December 31, 2000.  Mr. Swan further  failed to
          timely file a Form 5 for the year ended December 31, 2000.

          Earl  McKenzie - Mr.  McKenzie was appointed a director of the Company
          in  January,  2000.  Mr.  McKenzie  made no Section  16(a)  compliance
          filings during the year ended December 31, 2000. Mr. McKenzie  further
          failed to timely file a Form 5 for the year ended December 31, 2000.

         ITEM 10. EXECUTIVE COMPENSATION

         Item 10.  Executive Compensation.

         Except as noted in the table below, no compensation in excess of
         $100,000 was awarded to, earned by, or paid to any executive officer of
         the Company during 2000 and 1999. The following table and the
         accompanying notes provide a summary of compensation paid during the
         past two fiscal years concerning cash and noncash compensation paid or
         accrued by the Company's president.





                                       28

<PAGE>



         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
         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





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         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:





                                                    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 13th day of April, 2001.


         Gateway Distributors, Inc.



           (s) / Rick Bailey
--------------------------------------


         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   April 13, 2001
         ----------------------------
         Rick Bailey



           (s) / Florian Ternes      Director               April 13, 2001
         --------------------------
         Florian Ternes



         _(s) / Earl McKenzie____    Director               April 13, 2001
          -------------------
         Earl McKenzie















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                                                 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 ***  Asset  Purchase   Agreement   Dated  May  16,  2000  between   Gateway
     Distributors, Ltd. and Dynamic Products, Inc.

23   31 Consent of Auditor

         * 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 10-QSB filed March 20, 2001
         **** Incorporated by reference from Form 8-K filed October 23, 2000.




                                       33

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         Exhibit 23

                 (Letterhead of Perrin, Fordree and Company, PC)
                          901 Wilshire Drive, Suite 400
                              Troy, Michigan 48084


               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


         As Independent Public Accountants, we hereby consent to the
         incorporation by refernce in this registration statement of our report
         dated March 1, 2001, included in Gateway Distributors, Ltd. Form 10-KSB
         for the years December 31, 2000 and 1999, and all refernces to our Firm
         included in the registration Statement.


         PERRIN, FORDREE & COMPANY, PC


           (s) / Perrin, Fordree & Company, PC
       ------------------------------------------------
         April 12, 2001
         Troy, Michigan




                                       34

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