SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(MarkOne)
 [X]  Annual  report  under  Section  13 or  15(d)  of the  Securities
      Exchange Act of 1934 for the fiscal year ended December 31, 2002.

 [ ]  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.)

            3095 East Patrick Lane, Suite 1, Las Vegas, Nevada 89120
            --------------------------------------------------------
           (Address of principal executive office including Zip Code)

                                  702-938-9316
                                  ------------
                           (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, 2001,
were $2,395,910.

The aggregate  market value of the registrant's  common stock,  $0.001 par value
held by non-affiliates  was approximately  $257,968 based on the average closing
bid and asked prices for the Common Stock on April 11, 2002.

On April 8, 2002, the number of shares  outstanding of the  registrant's  Common
Stock, $0.001 par value (the only class of voting stock), was 38,312,044.



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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...........................................18

Item 4.           Submission of Matters to a Vote of Security-Holders.........18


                                     PART II


Item 5.           Market for Common Equity and Related Stockholder Matters....18

Item 6.           Management's Discussion and Analysis or Plan of Operation...19

Item 7.           Financial Statements................................F-1 - F-21

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....................................................................28







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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 would 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  did 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  wass not  trading  by
November 1, 1999, American Outback had the option to emand payment of $67,400 or

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any  portion  thereof,  on terms  to be  determined  by the  parties  by  mutual
agreement.  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 at 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

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Common  Stock.  As  a  result  of  this   transaction,   the  Company   acquired
approximately 78% of the outstanding shares of TRSG.

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 3095 East Patrick Lane,
Suite 1, Las Vegas, Nevada 89120 and its telephone number is (702) 938-9316.

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 Company's presence in Japan complimented the USA market
and created great future potential.

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

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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 slow
selling duplicated  products and has made the decision to concentrate on its top
selling products that focus on three things:  1) cleansing the body from toxins;
2) feeding the body on a cellular level; and 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.  On July 1, 2001 TRSG purchased A & A Medical
Supply Company and Apgood & Associates,  Inc.  located at 975 East Wood Oak Lane
(5400 South),  Salt Lake City, Utah, 84117. This gave the Company the ability to
have access to over 8,500 health  professionals and the opportunity to offer its
nutritional  line of products to the medical  profession.  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, lacking 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

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adequate  distributor support services and other Company systems are in place to
support the growth.  Although  the Company  intends to expand into new  markets,
there can be no assurance that the Company can open markets on a timely basis or
that such new markets will prove to be  profitable.  Significant  regulatory and
legal barriers must be overcome before marketing can begin in any new market. In
addition,  expansion  of the  Company's  operations  into new  markets  requires
substantial  working capital and capital  expenditures  associated with both the
regulatory  compliance and operations  phases of the process.  The lead-time and
costs associated with opening  anticipated 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 regional meetings throughout the United States.

Products and Services

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

The Company's products are:

Fulvic Factor - New product  coming in the first quarter of 2002.  Fulvic Factor
is made from the raw material shilajit  harvested from vertical cliff sides high
in the Himalayan  mountain range.  The Himalayan  mountains were formed from the
collision of the sub Asian and Indian  continents about 30-50 million years ago.
During the collision,  dense  vegetation,  literally  entire rain forests,  were
trapped  under  millions of tons of  pressure,  which  slowly  changed this lush
vegetation into a rich bioactive material, which is perhaps, the rarest nutrient
rich  substance  found on earth.  Ancient  in origin  and pure  beyond  measure,
shilajit has never been exposed to harmful fertilizer,  pesticide,  herbicide or
pollution.  For  centuries  it has been known as the  "Destroyer  of  Weakness",
Builder of Strength - a natural rejuvenator.  Ingredients:  Shilajit (50% Fulvic
Acid content), 5-HTP, and Alfalfa.

Current products

Body Gard with  Lactoferrin - a unique  formulation of Colostrum,  Echinacea and
Lactoferrin.   Lactoferrin  is  a  naturally   occurring  protein  derived  from
colostrum.  Lactoferrin is involved in iron metabolism,  an important  mechanism
used  by  animals  and  plants  to  moderate  growth  and  control   infections.
Lactoferrin has been shown to be effective at supporting lymphocytes,  the white
blood cells directly involved in the destruction of bacteria,  viruses and other
infectious agents. Body Gard is also fortified with pure colostrum, containing a
broad spectrum of immune factors presumed to provide natural  protection against
illness.  The  herb  Echinacea,  one  of the  most  exciting  therapeutic  herbs
available,  is  believed  to  boost  the  immune  system.  This  combination  of
ingredients  may build a stronger  defense  against  infection by signaling more
sophisticated  components  of the immune system to become  active.  (30 tablets)
Ingredients:  Lactoferrin,  Colostrum,  Echinacea,  Dibasic  Calcium  Phosphate,
Stearic Acid, Magnesium Silicate,  Croscarmellose Sodium, Magnesium Stearate and
Silicone Dioxide.

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Femme -- Transitions  happen at the blink of an eye. With  specially  formulated
herbal  products  such  as  Femme,  natural  transitions  are now  made  easier.
Approximately  50% of  all  women  are  affected  by  symptoms  of PMS or  other
menstrual  problems.  Fertility  and  menopausal  complaints  are also common in
today's society.  Femme addresses many of the discomforts associated with stress
and  hormonal  imbalance  with  its  all-natural  combination  of  high-quality,
concentrated  herbs.  Femme is a  concentrated  hormonal  balancer that combines
three of the most  widely  used  herbs in the world for relief  from  menstrual,
menopausal  and fertility  complaints.  This  powerful,  soothing tonic helps to
balance  hormonal  and  cyclical  patterns  without  the harsh  side  affects of
prescription  drugs. (2 oz. Bottle)
Ingredients:  Chaste Tree Extract  (berry),  Dong Quai Extract (root),  Wild Yam
Extract (root), Uva Ursi Extract (leaf), Hops Extract (flower), Valarian Extract
(root), Grain Alcohol.

Lifetonic - is a delightful tasting herbal tonic formulated with 30 all-natural,
unpasturized  herbs used by natural  healers  for  centuries  to help  energize,
balance and rebuild the entire body and nervous  system.  Low in sodium and rich
in active enzymes, potassium and many other vitamins and minerals,  Lifetonic is
the  ideal  nutritional  aide to any  weight  loss  program.  All it  takes is a
one-ounce serving (1-tablespoon) per day. (16 oz)
Ingredients:  Deionized  Water,  Glycerin,  Potassium  Citrate,  Ascorbic  Acid,
Clayton's Herbal Formula,  Sarsaparilla,  Motherwort, Alfalfa Leaves, Aloe Vera,
Celery Seed,  Damiana Leaves,  Garlic Powder,  Lo Han Gua, Saw Palmetto Berries,
Sheppard's Purse,  Echinacea,  Red Root, Chamomile Flowers, Kelp, Thyme, Burdock
Root, Anise Seed, Dandelion,  Peppermint Leaves,  Slippery Elm, Cascara Sagrada,
Fenugreek,   Passion  Flowers,  Chickweed,  Yellow  Dock,  Rosemary,   Licorice,
Horehound Root, Seneca Root, Gentian Root, Sodium Chlorophyllin,  with Potassium
Sorbate and Sodium Benzoate as preservatives.

Master Formula - is scientifically  formulated with whole,  minimally processed,
organically grown amaranth,  brown rice, spirulina,  flaxseed, and millet. These
whole foods are  nutritionally  balanced  together,  without  protein  isolates,
making Master Formula one of the most  nutritionally  dense, mass produced whole
food  products in the world!  Special  herbs and natural  supplements  have been
added to feed  select  glands and organs  that are  constantly  under  attack by
today's polluted environment. Each 21-gram serving provides 72 calories. The fat
is from flax, and there is no hydroginization.  There is zero cholesterol.  Each
serving contains 3 grams of fiber. There are no added  preservatives,  starches,
sugars, colors, or protein isolates!  Master Formula powder is available in bulk
or encapsulated form. (Canister 1 lb. 5 oz. Capsules 180)
Ingredients:  Amaranth Powder (organic), Brown Rice Flour (organic),  Spirulina,
Flaxseed Meal (organic),  Millet Powder  (organic),  Chicory  Extract,  Lecithin
Powder,  Licorice Root Powder, Acerola Cherry Powder, Ascorbic Acid Powder (Vit.
C), Horsetail  Powder/Shavegrass  Herb Powder, Wheat Germ Powder, Papaya Powder,
Carrot Powder,  Broccoli Powder (freeze dried),  Lemon Extract,  Spinach Powder,
Pineapple Extract, Lactobacillus Acidophilus, Milk Thistle Extract Powder.

Master Formula Cleansing Bar - Also helpful for reducing detoxification symptoms
to the skin,  Master Formula  Cleansing Bar features a soothing and  stimulating
blend of  ingredients  that  promote  healing.  It  includes  Master  Formula in
vegetable  glycerin soap enhanced with safflower,  amaranth and peppermint oils.
(4.75 oz bar)
Ingredients:  Glycerin Soap, Master Formula Powder, Vegetable Glycerin, Amaranth
Oil, Peppermint Oil, Natural Color, and Natural Fragrance.

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Natural  Immunity - Strengthen your immune system naturally with the most potent
source of  Echinacea  available.  Echinacea  is one of the  world's  most highly
respected  herbs,  recognized  for its ability to protect  against  infection by
neutralizing hyaluronidase, the tissue-dissolving enzyme produced by many germs.
Natural Immunity is highly  concentrated,  using only  wildcrafted,  organically
grown herbs to stimulate and strengthen your immune system, support tissues from
assault  by  invading  microorganisms,  increase  T-Cell  production  and  fight
infection.  Turn to Natural  Immunity as an immune  booster when you are sick or
for maintenance to protect against future illnesses. You may never catch another
cold!  (2  oz.  Bottle)
Ingredients:  Echinacea  Angustifolia Root, Echinacea Purpurea Seeds and Flower,
Siberian Ginseng Root.

New Life Corrective "A" - This  stimulating  formula  provides quick relief from
constipation,  while cleansing and healing the entire  gastrointestinal  system.
Formula A  strengthens  the  colon  and  stimulates  peristalsis,  the  muscular
movement that moves fecal matter through the intestines. Includes a unique blend
of  Curacao  and Cape Aloe - two forms of aloe  regarded  for their  ability  to
strengthen and normalize peristalsis while supporting healthy bowel elimination.
New Life  Corrective  "A" also  contains  the  healing  herbs  Senna and Cascara
Sagrada,  both  rich  in  anthroquinones  and  proven  to help  normalize  bowel
function. (90 capsules)
Ingredients:  Each capsule contains a proprietary  blend (535mg.) of: Aloe Vera,
Cascara Sagrada, Senna Leaf, Barberry Root, Ginger Root, Garlic, Cayenne, Fennel
Seed, Sylox, Magnesium Stearate.

New Life  Detoxifier  "B" New Life  Formula B - aids in the removal of old waste
and fecal matter caused by diverticulosis.  Formula B contains flaxseeds,  (rich
in Omega-3 and Omega-6 fatty acids), Bentonite clay, (removes up to 40 times its
weight in fecal matter),  and fruit pectin (removes dangerous  materials such as
mercury,  cadmium,  lead  and  other  heavy  metals.)  Formula  B also  provides
activated Charcoal (absorbs fats, toxins and other harmful agents in the bowel),
and herbs that gently  lubricate  and promote  normal bowel  function.  (1/2 lb.
canister)
Ingredients:  Each scoop (7.09 gm) contains a proprietary  blend of: Apple Fruit
Pectin,  Bentonite Clay, Flax Seed, Slippery Elm Bark,  Marshmallow Root, Fennel
Seed, Activated Willow Charcoal, Licorice Root.

New Life Maintenance "C" - used on a daily basis, helps to naturally restore and
maintain  regularity.  Formula C is rich in fibers and gums  designed  to assure
soft, easy bowel movements for healthy elimination, It also provides maintenance
doses of Paratol, a proprietary  mineral complex that helps control parasite and
Candida  infestations.  (1 lb.  Canister)
Ingredients:  Each scoop (14.2 gm)  contains a  proprietary  blend of:  Psyllium
Seed/Husk,  Oat Bran, Rice Bran, Apple Pectin, Carob Bean, Peppermint Leaf, Guar
Gum, Licorice Root, Alfalfa Grass,  Barley Grass, Flax Seed, Ginger Root, Acacia
Gum,  Fig Fruit,  Papian,  Black Walnut Leaf,  Barberry  Root Bark,  Senna Leaf,
Garlic Bulb.

Penta  Concentrate  - In China,  Penta Tea,  known as Jaogulan or JGL,  has been
consumed as a vegetable and a tea for many  centuries.  No other single herb has
been  researched so thoroughly in China as Penta.  According to recent  studies,
Penta lowers cholesterol levels and may also have beneficial effects on vascular
walls.  Penta lowers blood  pressure,  protects the heart muscle from  ischemia,
strengthens the immunological functions of the body, and reduces blood clotting.
This `food enhanced' herb is safe for long-term, continuous use.
Ingredients: Gynostemma Pentaphyllum (Penta).

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Rose Tea - The kidneys  filter blood and remove toxins and metabolic  byproducts
from the body.  Every  minute of the day,  one-fourth  of your  blood  supply is
filtered  through the kidneys,  totaling over 3,400 quarts being  filtered every
twenty-four  hours!  Although small enough to fit in the palm of your hand, your
kidneys are composed of two million microscopic  filters called nephrons,  whose
job is to absorb,  needed nutrients and eliminate toxins from the body. Rose Tea
supports the natural  filtering  power of the kidneys.  This natural blend of 10
healing herbs, including Dandelion, Violet Leaves, Honeysuckle and Marigold, can
also help relieve body aches associated with detoxification symptoms.
Ingredients:  Dandelion  Leaf,  Violet  Leaf,  Cleavers,  Honey  Suckle  Flower,
Horsetail, Marigold, Nettles Leaf, Panax Ginseng, Rosehips Fruit, Sage Rubbed.

SuperFood  - is  literally  an  organic  garden  at  your  fingertips  -- a rich
combination  of whole foods  harvested  from some of the most  pristine  organic
farms in the world.  SuperFood  formula blends 12 of the most nutritious  fruits
and  vegetables on the planet into a nutritional  rainbow to form the foundation
of your health and  weight-loss  program.  SuperFood  provides  the vitamins and
minerals your body has been starving for. Wholesome for all ages, after just one
serving of  SuperFood  your body will  immediately  begin to feel more alive and
energetic  as it  replenishes  the  stores of  nutrients  that a steady  diet of
processed  foods  depletes.  Each serving  provides  protein,  vegetable  fiber,
vitamins, minerals, folic acid, amino acids and more. This is a 100% organically
grown ultra low fat formula. (382.7 gram Canister)
Ingredients: Spirulina Blue-Green Algae, Chlorella, Alfalfa Grass, Barley Grass,
Wheat Grass,  Purple Dulse Seaweed,  Beet Root,  Spinach Leaf, Rose Hips, Orange
Peel and Lemon Peel, in a base of NON- Active Saccharomces Cerevisae Nutritional
Yeast.

Trim Easy Plus - will help you  safely  lose  weight  without  making  any major
change in your current lifestyle.  Trim Easy Plus uses `natural  botanicals' and
`natural  activators' to promote healthy  weight-loss in an effective,  yet safe
manner.  The primary effect of these products is to accelerate the rate at which
your body metabolizes fat in a process is known as "thermogenesis". In this way,
Trim Easy Plus not only decreases  your  appetite,  but also allows your body to
burn fat at an accelerated rate. (225 capsules)

Vita-Greens - all-natural "super green food" is an organic blend of leafy greens
and sea vegetables formulated to increase energy and stamina,  while acting as a
powerful immune system builder in the fight against  sickness and disease.  This
breakthrough  formulation provides all the vitamins,  minerals,  enzymes,  trace
minerals,   antioxidants   and  essential  amino  acids  required  for  balanced
nutrition.  Vita-Greens works  synergistically  to promote the body's ability to
regulate  internal  cravings  while  enhancing  your  success  with the 40-30-30
system.  This  optimal,  all-organic  green drink  delivers the live enzymes and
whole foods your body requires to operate optimally! (8.80 oz.)
Ingredients:  Green organic gluten-free  grasses,  Organic wheat grass,  Organic
barley grass, Organic alfalfa grass, Organic oat grass juice, Blue-green and sea
algae,  Spirulina  (Organic  Hawaiian),   Chlorella   (cracked-cell),   Cabbage,
Broccoli,  Dandelion Greens,  Broccoli Sprouts,  FOS, Rice Bran Soluables,  Aloe
Vera, Atlantic Sea kelp, Sea Dulce, Sea Vegetable blend,  Containing Wakame, Sea
Lettuce, Grapestone, Sea Palm Fronds.

Ymotion - Supplemental progesterone has been shown to confer a host of benefits,
including balancing hormone levels, boosting immune function,  restoring libido,
increasing  bone density and reducing the risk for developing  osteoporosis  for
both men and women.  Ymotion provides  progesterone in combination with Wild Yam
Extract  and  select  natural  herbs.  These  all-natural  ingredients  have the
potential to help relieve symptoms of PMS and menopause, including irritability,
hot flashes, water retention, fatigue and mood swings. These ingredients have

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<PAGE>



also been  shown to help  protect  against  the  development  of breast  cancer,
fibrocysts  and   endometriosis,   while  supporting  thyroid  hormone  actions,
normalizing  blood  sugar  levels and helping  the body  utilize  stored fat for
energy production.  Ymotion contains no artificial  coloring or fragrances.  The
faint aroma and delicate peach coloring are due to the concentration of wild yam
extract.  The ingredients act  synergistically  to achieve metabolic balance and
are recognized as excellent skin moisturizers. (2 fl. oz.)
Ingredients: Wild Yam Extract in a skin moisturizing cream; specifically,  Water
(de-ionized),  Glyceryl Stearate (and) PEG-100 Stearate,  Wild Yam Extract, Aloe
Vera Gel, Glycerin,  Stearic Acid,  Safflower Oil, Almond Oil,  Triethanolamine,
Diazolidinyl Urea,  Carbomer,  Dimethicone,  Jojoba Oil, Avocado Oil, Tocopheryl
Acetate (Vitamin E), Chamomile Extract,  Burdock Root Extract, Black Cohosh Root
Extract, Siberian Ginseng Extract, Progesterone,  Methylparaben, Sodium EDTA and
Propylparaben.

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.

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

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<PAGE>



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 40% 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  $15.00),  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.  Each
distributor  has three legs in their  organization  and commissions are based on
volume  requirements  for these three legs. The strongest  performing leg is the
1st leg,  the  second  strongest  is the 2nd leg and all other  legs make up the
third leg. In order to receive any  commissions  or bonuses a  distributor  must
make an initial  purchase  of $100 in  personal  purchase  volume.  To  maintain
qualification  for any  commissions  or bonuses,  a distributor  must purchase a
minimum of $100 to $150  depending  on total  volume 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 at the close of each
business  day during  the  monthly.  Commissions  are paid  monthly  base on the
qualifying level.

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

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  monthly.  The Company  believes that prompt
remittance  of  commission  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 commission 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.

                                       10

<PAGE>



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, fax blast, and email blasts to its distributors.  The Company has an
established  advisory board for assistance and  consultation  in connection with
sponsoring matters.

Product Distribution. The Company's products are distributed to all markets from
the Company's warehouse located in 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 other companies will introduce  additional  competing  products in
the future.  In addition,  there are a variety of channels of  distribution  for
nutritional  supplements  other than through network  marketing and distribution
systems,  including  direct  response  marketing,  specialty  retail  health and
nutrition stores, drug stores, and supermarkets.  Many of the 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

                                       11

<PAGE>



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., and FICS. , Betty Kamen, Ph.D., Dr. Michael
Hartman and Jack Akers,  M.D., Ph.D. for advice. In addition,  local counsel and
other  representatives  retained by the Company  investigate product formulation
matters as they relate to regulatory compliance and other issues.

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

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.   Since  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 our manufacturers,  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.

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 Company intends to continue to seek trademark protection for a
number of the  products and brand names under which the  Company's  products are
marketed, where applicable.  There can be no assurance that such protection will
be  obtained.  The Company  will be required to rely upon common law concepts of
confidentiality and trade secret laws to protect its product formulations. There
can be no assurance that the foregoing will protect the  formulations or provide
adequate remedies for the Company in the event of unauthorized use or disclosure
of such formulations,  or that others will not be able to independently  develop
such  formulations.  The  Company's  product  formulations  are not protected by
patents  and are  generally  not  patentable.  The  Company  intends  to  obtain
international  trademarks,  particularly  Japanese  trademarks,  as the  Company
enters foreign markets. Trademark registrations are either issued or pending

                                       12

<PAGE>

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.

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. 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

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<PAGE>



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 Trim Easy
Plus)  with any of these  claims.  On June 4,  1997,  the FDA  issued a proposed
regulation for dietary supplements containing ephedrine alkaloids.  The proposed
regulation  would prohibit  dietary  supplements  containing eight milligrams or
more of ephedrine  alkaloids per serving,  and would not permit such products to
contain any other stimulant,  diuretic,  or laxative  ingredients.  In addition,
labeling of  supplements  would be prohibited  from  suggesting or  recommending
conditions of use that would result in an intake of eight  milligrams or more of
ephedrine  alkaloids  within a six-hour  period,  or a total daily  intake of 24
milligrams  or more.  The FDA proposal  would also require a warning not to take
the product for more than seven days,  and would prohibit the  supplements  from
being  represented,  either  expressly  or  implicitly,  as being  suitable  for
long-term uses, such as for weight loss or body building.  Similarly, claims for
increased energy,  increased mental  concentration,  or enhanced well-being that
encourage  the  consumer  to take more of the  product  to  achieve  more of the
purported  effect would be required to be accompanied by a warning  stating that
taking  more than the  recommended  serving  may cause a heart  attack,  stroke,
seizure, or death.


                                       14

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The Company is  reviewing  the  possible  impact of the FDA  proposal,  if it is
finalized in its current form, it could have a material  adverse affect 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 a 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  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 with applicable 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,

                                       15

<PAGE>



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.

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

                                       16

<PAGE>



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.  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.

                                       17

<PAGE>



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, 2001,  the Company had fifteen  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 3,700 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  2,500  square  feet of  warehouse  space,  also  housing the
warehouse  department,  in Las  Vegas,  Nevada,  with  the  ability  for  future
expansion.  The  lease  for such  premises  is a month to  month  lease  with no
specific  expiration date. The monthly base rent is $8,340. The Company believes
that its current  facilities are satisfactory for its present needs, and it does
not anticipate any 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, 2001, no matters
were submitted by the Company to a vote of its shareholders


                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters

Prior to August of 2001,  there was no public  market for the  Company's  Common
Stock.  Since  August of 2001,  the  Company's  common  stock  has been,  and is
currently  quoted on the  Electronic  Bulletin  Board under the symbol,  "GTWY".
Trading in the common stock in the over-the-counter  market has been limited and
sporadic and the  quotations set forth below are not  necessarily  indicative of
actual market  conditions.  Further,  these prices reflect  inter-dealer  prices
without retail mark-up, mark-down, or commission, and may not necessarily

                                       18

<PAGE>



reflect  actual  transactions.  The high and low bid prices for the common stock
for each quarter since August of 2001 are as follows:


YEAR              QUARTER ENDED             HIGH                     LOW
2001              September 30              $1.50                    $0.40
                  December 31               $1.75                    $0.05
2002              March 31                  $0.09                    $0.01

As of April 8,  2002,  the  number  of  issued  and  outstanding  shares  of the
Company's common stock was 38,312,044,  and the approximate number of holders of
record of the  Company's  common stock was 1,001.  No cash  dividends  were paid
during the fiscal years ending December 31, 2001 and 2000.

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.

In November, 2001, the Company issued 66,500 shares of common stock for services
rendered to the  Company at $0.001 per share to the five  persons  listed  below
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 five persons who performed services for the Company; (2)
there  were only five  offerees  who were  issued  stock for  services;  (3) the
offerees did not resell 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 offerees
and the Company.


Name                                              Number of Shares Issued
Robert L. Jeffs                                   30,000
William C. Halls                                  15,000
Larry Krasney                                     20,000
Michael & Laurel Poffenroth                       1,500

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

                                       19

<PAGE>



to the Company.  The Company's  actual  results may differ  materially  from the
results  predicted by such  forward-looking  statements due to various  factors,
including, but not limited to, those risks and uncertainties which are discussed
below.

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

Results Of Operations

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

Years ending December 31, 2001 and 2000

Sales for the year ended December 31, 2001  decreased  $1,941,247 to $2,395,910,
from sales of  $4,337,157  in the year ended  December  31,  2000.  The decrease
resulted from a lack of inventory.

Gross profit of $1,566,395 for the year ended December 31, 2001, was $1,732,120,
or 52.5% lower than the gross profit of $3,298,515  for the year ended  December
31,  2000.  As a percentage  of sales,  gross profit for 2001 as compared to the
same  period in the prior year  decreased  approximately  10.67%  from 76.05% to
65.38%. 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
132.8%  for 2001 as  compared  to  120.6%  for the same  period  in 2000.  These
expenses for the same periods  decreased  39.2% to $3,181,024 from $5,232,559 in
the year ending  December  31,  2000.  The  decrease  resulted  from  efforts of
management to cut operating costs.

Liquidity and Capital Resources

The Company's  working capital needs and capital  expenditure  requirements have
decreased as a result of cost cutting  efforts of management.  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  2001,  the  Company's
working capital deficit increased by $546,465 (10.5%) to ($5,749,072)

                                       20

<PAGE>



at December 31, 2001 from  ($5,202,607)  at December 31, 2000. This increase was
primarily  attributable  to the  substantial  decrease  in sale  during the 2001
fiscal year. Accounts receivable  increased from $51,233 at December 31, 2000 to
$130,921 at December 31, 2001. Inventory increased from $205,711 on December 31,
2000 to $499,594 at December 31, 2001.  Total  accounts  payable  increased from
$2,307,348  at December  31, 2000 to  $2,967,680  at December  31,2001.  Accrued
liabilities, including interest and taxes, increased from $1,294,089 at December
31, 2000, to $1,539,627 at December 31, 2001.

For fiscal  year 2001,  the  Company's  operations  used cash flow of  $919,007,
compared  to  $144,623  for the  previous  fiscal  year.  In 2001,  cash used by
operating activities has primarily resulted from the Company's net loss in 2001.

The Company had a negative  cash flow from  investing  activities of $538,535 in
2001, as compared to a negative cash flow of $81,689 in 2000.

The Company  generated  $211,344 in cash flow from financing  activities in 2000
and $1,467,038 in 2001.

Stockholders' deficit increased $990,359 to $5,280688 in 2001.

Cash, cash equivalents and marketable securities totaled $12,121 at December 31,
2001 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

                                       21

<PAGE>



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.

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]































                                       22

<PAGE>


















                           GATEWAY DISTRIBUTORS, LTD.
                                    --------

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

                                DECEMBER 31, 2001














                                       F-1

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY


                                  - CONTENTS -


                                                                     PAGE NUMBER

Independent Auditors' Report        1

Consolidated Financial Statements:

         Balance Sheet     2

         Statement of Operations    3

         Statement of Changes in Stockholders' Deficit        4

         Statement of Cash Flows            5 & 6

         Notes to Financial Statements      7 - 17












                                       F-2

<PAGE>




                          Independent Auditors' Report


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


We  have  audited  the  accompanying   consolidated  balance  sheet  of  GATEWAY
DISTRIBUTORS,  LTD. AND  SUBSIDIARY  as of December  31, 2001 and 2000,  and the
related consolidated statements of operations,  changes in stockholders' deficit
and cash flows for the years then ended. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  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 consolidated  financial statements referred to above present
fairly,   in  all  material   respects,   the  financial   position  of  GATEWAY
DISTRIBUTORS, LTD. AND SUBSIDIARY at December 31, 2001 and 2000, and the results
of its operations,  changes in stockholders'  deficit and its cash flows for the
years then ended in conformity with accounting  principles generally accepted in
the United States of America.

The accompanying  consolidated  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 consolidated  financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.




PERRIN, FORDREE & COMPANY, P.C.
Troy, Michigan
April 10, 2002


                                       F-3

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET



                                     ASSETS

                                                               DECEMBER 31
                                                          2001             2000
 CURRENT ASSETS:
    Cash and cash equivalents                       $    12,121      $    2,625
    Accounts receivable                                 130,921          51,233
    Inventories                                         499,594         205,711
    Prepaid expenses and other                            -             127,675
                                                    -----------      ----------
        Total current assets                            642,636         387,244
 PROPERTY AND EQUIPMENT:
    Leasehold improvements                               29,228          29,228
    Furniture and fixtures                              150,438          89,291
    Machinery and equipment                              98,521          98,521
    Computer equipment and software                     225,968         193,619
    Transportation equipment                             43,447          17,171
                                                    -----------      ----------
                                                        547,602         427,830
    Less accumulated depreciation                     (332,687)       (269,861)
                                                    -----------      ----------
                                                        214,915         157,969
 OTHER ASSETS:
    Goodwill, net of accumulated amortization
       of $156,107 in 2001 and $74,245 in 2000.       1,245,925         927,787
    Other                                                54,172          35,410
                                                    -----------      ----------

                                                      1,300,097         963,197
                                                    -----------      ----------

                                                    $ 2,157,648      $1,508,410
                                                    ===========      ==========


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



                                       F-4

<PAGE>


                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

                                                          DECEMBER 31,
                                                    2001               2000
 CURRENT LIABILITIES:                            -----------       -----------
    Current maturities of long-term debt         $ 1,884,401       $ 1,695,330
    Deferred revenue                                       -           293,084
    Accounts payable:
       Trade                                       2,106,958         1,630,707
       Related party                                  69,751
       Commissions                                   790,971           676,641
    Accrued expenses:
       Payroll and employee benefits                 233,421           244,267
       Payroll taxes                                 421,658           419,850
       Interest                                      457,800                 -
       Other                                         239,839           172,172
                                                 -----------       -----------
        Total current liabilities                  6,391,708         5,589,851

 LONG-TERM DEBT                                       18,348           208,888


 MINORITY INTEREST                                 1,028,280                 -

 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 - 13,594,000
       and 13,636,000 shares                          13,594            13,636
    Additional paid-in capital                     1,781,880         1,823,338
    Accumulated deficit                          (7,076,162)       (6,127,303)
                                                 -----------       -----------

                                                 (5,280,688)       (4,290,329)
                                                 ------------      -----------

                                                 $ 2,157,648       $ 1,508,410
                                                 ===========       ===========




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



                                       F-5

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF OPERATIONS




                                                   YEAR ENDED DECEMBER 31,
                                                    2001              2000
                                               -------------      ------------
         SALES                                 $   2,395,910      $  4,337,157

         COST OF SALES                               829,515         1,038,642
                                               -------------      ------------

         GROSS PROFIT                              1,566,395         3,298,515

         SELLING, GENERAL AND ADMINISTRATIVE
            EXPENSES                               3,181,024         5,232,559
                                               -------------      ------------

         OPERATING LOSS                          (1,614,629)       (1,934,044)

         OTHER INCOME (EXPENSE):
            Interest expense                       (271,027)         (277,980)
            Loss on disposal of fixed assets               -           (6,354)
            Other income                             559,330            67,582
                                               -------------      ------------
                                                     288,303         (216,752)
                                               -------------      ------------
         NET LOSS BEFORE MINORITY INTEREST       (1,326,326)       (2,150,796)

         MINORITY INTEREST                         (377,467)                 -
                                               -------------      ------------
         NET LOSS                              $   (948,859)      $(2,150,796)
                                               =============      ============

         BASIC LOSS PER SHARE                  $       (.07)  $         (0.22)
                                               =============   ===============



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



                                       F-6

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
<TABLE>
<CAPTION>

                                                                    ADDITIONAL
                                                        COMMON       PAID-IN      ACCUMULATED
                                            SHARES      STOCK        CAPITAL        DEFICIT          TOTAL
                                         ----------   ---------    -----------   --------------  -------------
<S>                                     <C>          <C>          <C>           <C>             <C>

         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)

         Stock reacquired                  (42,000)        (42)       (41,458)                -       (41,500)
         Net loss                                 -          -               -        (948,859)      (948,859)
                                         ----------   ---------    -----------   --------------  -------------

         BALANCE - December 31, 2001     13,594,000   $  13,594    $ 1,781,880   $  (7,076,162)  $ (5,280,688)
                                         ==========   =========    ===========   ==============  =============

</TABLE>








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



                                       F-7

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS


                                                    YEAR ENDED DECEMBER 31,
                                                      2001           2000
CASH FLOWS FROM OPERATING ACTIVITIES:             ------------    ------------
   NET LOSS                                       $  (948,859)    $(2,150,796)
   Adjustments to reconcile net loss
      to net cash to operating activities:
      Depreciation and amortization                    144,688         104,165
      Loss on disposal of fixed assets                       -           6,354
      Stock issued for services                        242,361         118,900
      Stock issued for purchase of
        A & A Medical Supply                           282,639               -
      Allowance for inventory obsolescence              64,000        (64,000)
      Minority interest                              (377,467)               -
   Changes in operating assets and liabilities
        which increase (decrease) cash flow:
         Accounts receivable                          (79,687)           7,686
         Inventories                                 (357,883)         218,730
         Prepaid expenses                              127,675       (101,864)
         Accounts payable                               31,072       1,108,346
         Accrued expenses                             (47,546)         607,856
                                                  ------------    ------------
                                                        29,852       2,006,173
                                                  ------------    ------------
           Net cash to operating activities          (919,007)       (144,623)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Deposits refunded                                        -            3,997
   Deposits paid                                      (18,762)        (30,060)
   Purchase of property and equipment                (119,773)        (58,626)
   Cash received from sale of property                       -           3,000
   Cash paid for acquisitions                        (400,000)               -
                                                  ------------    ------------
      Net cash to investing activities               (535,535)        (81,689)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Reacquired stock                                   (41,500)               -
   Proceeds from issuance of stock                           -         127,042
   Proceeds from issuance of debt                       98,500         116,650
   Payments on long-term debt                         (99,969)        (32,348)
   Proceeds from minority interest                   1,510,007               -
                                                  ------------    ------------
     Net cash from financing activities              1,467,038         211,344
                                                  ------------    ------------
NET INCREASE (DECREASE) IN CASH EQUIVALENTS              9,496        (14,968)

CASH AND CASH EQUIVALENTS:

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



                                       F-8

<PAGE>


BALANCE - beginning of year                              2,625          17,593
                                                  ------------    ------------

BALANCE - end of year                             $     12,121    $      2,625
                                                  ============    ============




















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



                                       F-9

<PAGE>




                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
                CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED






                             SUPPLEMENTAL DISCLOSURE

                                                        YEAR ENDED DECEMBER 31,
                                                           2001           2000
                                                        ----------    ---------

         CASH PAID FOR INTEREST                         $    5,422    $  52,610
                                                        ==========    =========

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



                   NON CASH INVESTING AND FINANCING ACTIVITIES


         STOCK  ISSUED FOR ACQUISITIONS                 $        -    $ 128,600
                                                        ==========    =========

         STOCK ISSUED FOR SERVICES                      $  242,361    $ 118,900
                                                        ==========    =========

         STOCK ISSUED FOR PROPERTY & EQUIPMENT          $  282,639    $  32,000
                                                        ==========    =========











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



                                       F-10

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001



         NOTE 1 -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          This   summary  of   significant   accounting   policies   of  Gateway
          Distributors,  Ltd. and Subsidiary (Company) 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.

               Principles of Consolidation

               The accompanying  consolidated  financial  statements include the
               accounts  of  the  Company  and  its  majority-owned  subsidiary.
               Intercompany  transactions  and balances have been  eliminated in
               consolidation.

               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.


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



                                       F-11

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

         NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:

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

               Depreciation  expense for the years ended  December  31, 2001 and
               2000 was $62,826 and $50,271, respectively.

               Accounts Receivable

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

               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  $81,862  and $53,894 for the
               years ended December 31, 2001 and 2000, respectively.

               The  Financial  Accounting  Standards  Board has issued  FASB 142
               "Goodwill and Other Intangible Assets" effective for fiscal years
               beginning  after  December  15,  2001.  According  to this  FASB,
               goodwill  should not be amortized.  Instead it should be reviewed
               for  impairment  annually  and charged to earnings  only when its
               recorded  value exceeds its implied fair value.  The Company will
               implement this FASB in the year 2002. The effect on operations of
               the Company in 2002 is not determinable.

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



                                       F-12

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001



         NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:

               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
               $11,641 and $15,677 were  incurred  for the years ended  December
               31, 2001 and 2000, respectively.

               Revenue Recognition

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

               Reclassifications

               Certain amounts in 2000 have been  reclassified to conform to the
               current financial statement presentation.

               Use of Estimates

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






                                      F-13

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2001


         NOTE 2 -  BUSINESS COMBINATIONS:

               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.

               On January 11, 2001, the Company  obtained  13,448,660  shares of
               TRSG Corporation  ("TRSG") , a publicly held company, in exchange
               for  substantially  all  of  the  assets  and  operations  of the
               Company.  As of March 31, 2001,  this resulted in a 79% ownership
               in  TRSG  and  consolidation  of  the  TRSG  into  the  Company's
               financial statements.  All significant  intercompany balances and
               transactions have been eliminated.  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  $350,000 in costs in excess of net assets
               acquired, which are being amortized over 15 years.

               On July 1, 2001, the Company  acquired certain assets and assumed
               certain  liabilities  of A & A Medical Supply Co. in exchange for
               100,000  shares of stock and $50,000 in cash.  Operating  results
               have been included in the Company's  statement of operations from
               the date of acquisition.


         NOTE 3 -  INVENTORIES:

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

                                                          DECEMBER 31,
                                                      2001            2000
                                                 -----------      ----------
               Product                           $   493,724      $  189,964
               Promotional and literature              5,870          15,747
                                                 -----------      ----------

                                                 $   499,594      $  205,711
                                                 ===========      ==========





                                      F-14

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2001



         NOTE 4 -  LONG-TERM DEBT:

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

                                                                  DECEMBER 31,
                                                             2001           2000
                                                          -----------    -----------
<S>                                                      <C>            <C>

               Convertible notes payable                  $ 1,162,599    $ 1,197,066

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

               Notes payable - stockholders,
               payable in monthly installments
               ranging from $25 - $1,278, plus
               interest at 7% - 14%, due at
               various dates, unsecured.                      257,757        242,320

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

               Note payable, individual, all unpaid
               principal and interest at 10% is due
               on January 31, 2001, unsecured.                 36,650         41,650

               Note payable to GMAC secured by
               vehicle requiring monthly payments of $489
               including interest at 7.99%.                    22,561              -

               Other                                            1,742          1,742
                                                          -----------    -----------

                                                            1,902,749      1,904,218
               Less current portion                         1,884,401      1,695,330
                                                          -----------    -----------

               Long - term debt                           $    18,348    $   208,888
                                                          ===========    ===========

</TABLE>




                                      F-15

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2001
         NOTE 4 -  LONG-TERM DEBT- CONTINUED:

               Convertible notes payable are to individuals and bear interest at
               12% per  annum.  Principal  and  accrued  interest  is due twelve
               months from the date of issuance.  These notes are convertible at
               the  option of the holder  into  shares of the  Company's  common
               stock,  at  an  initial  conversion  price  of  $.80  per  share.
               Approximately  $502,000  of accrued  interest  relating  to these
               notes  at  December  31,  2001,  is  also  convertible  into  the
               Company's  common  stock.  At December  31, 2001 the  approximate
               total  of  common  shares  available  through  conversion  of the
               aforementioned debt is 2,080,000.

               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,  2001 the  convertible  notes  issued  during  the year ended
               December  31,  2001 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:
                  2002                               $1,884,401
                  2003                                    4,562
                  2004                                    4,941
                  2005                                    5,350
                  2006                                    3,495
                                                 --------------

                                                     $1,902,749

         NOTE 5 -    EARNINGS PER SHARE:

               Earnings  per share (EPS) for the years ended  December  31, 2001
               and 2000 are computed as follows:
<TABLE>
<CAPTION>

                                                                           PER-SHARE
                                                  LOSS        SHARES         AMOUNT
                                               ------------- ----------- ------------
<S>                                           <C>           <C>         <C>


               December 31, 2001
                  Loss from continuing
                      operations               $   (948,859)  13,594,000        (.07)
                                               =============             ============

               December 31, 2000 -
                  Loss from continuing
                      operations               $ (1,909,289)   9,700,057        (.22)
                                               =============             ============
</TABLE>





                                      F-16

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2001



         NOTE 5 -  EARNINGS PER SHARE - CONTINUED:

               For the years  ended  December  31,  2001 and 2000,  options  and
               convertible  debt worth 2,040,066 and 1,765,887  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,
               2001.  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:

                  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                              -    %





                                      F-17

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2001


         NOTE 6 -   STOCK OPTIONS: - CONTINUED:

               The following table sets forth stock options  granted,  exercised
               and canceled during the years ended December 31, 2001 and 2000.


                                                                  2001
                                                                       EXERCISE
                                                           NUMBER       PRICE
                                                       -----------   ----------
           Stock options outstanding at the                845,000   $     1.00
            beginning of the year

           Stock options granted                                 -            -
           Stock options exercised                               -            -
           Stock options canceled                                -            -
                                                       -----------   ----------
           Stock options outstanding at the end of the     845,000   $     1.00
                                                       ===========   ==========
           year


                                                                 2000
                                                                       EXERCISE
                                                           NUMBER       PRICE
                                                       -----------   ----------
           Stock options outstanding at the                845,000   $     1.00
            beginning of the year

           Stock options granted                                 -            -
           Stock options exercised                               -            -
           Stock options canceled                                -            -
                                                       -----------   ----------
           Stock options outstanding at the end of the     845,000   $     1.00
                                                       ===========   ==========
           year


           Weighted average fair value of options
           granted during 2000.                                     $      0.65
                                                                    ===========






                                      F-18

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2001

         NOTE 6 -   STOCK OPTIONS - CONTINUED:

               At December 31, 2001 all 845,000 options were  outstanding with a
               remaining weighted average contractual life of 4 years at a price
               of $1.00 per share.  200,000 of these shares were  exercisable at
               December 31, 2001.

         NOTE 7 -  RELATED PARTY TRANSACTIONS:

               Amounts due to related  parties  included in accounts  payable at
               December   31,   2001  and  2000  were   $69,751   and   $94,416,
               respectively.

         NOTE 8  - OPERATING LEASES:

               The Company leases its office and certain office  equipment items
               under  operating  leases  which expire at various  dates  through
               December 2004. The following is a schedule,  by years,  of future
               minimum rental payments  required under these operating leases as
               of December 31, 2001.

               Year ending December 31:
                  2002                                              $  87,509
                  2003                                                100,554
                  2004                                                 66,065
                                                                   ----------

               Total minimum payments                                $253,858
                                                                     ========

               The Company  leases a building and  furniture  under an operating
               lease on a month-to- month basis.  The monthly amount at December
               31, 2001 is $10,272.

               Total rent  expense  charged to  operations  for the years  ended
               December  31,  2001  and  2000,   was   $184,206  and   $233,708,
               respectively.


         NOTE 9 -  INCOME TAXES:

               No  provision  was  made for  income  taxes in 2001 and 2000 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, 2001,  the Company has available net
               operating  loss   carryforwards  of   approximately   $6,969,000.
               Expiration dates on these  carryforwards begin in 2010 and end in
               2021.





                                      F-19

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2001
         NOTE 9 -  INCOME TAXES - CONTINUED:
            The components of deferred income taxes consisted of the following:
<TABLE>
<CAPTION>

                                                                     DECEMBER 31,
                                                                   2001           2000
<S>                                                          <C>              <C>

                  Current deferred taxes - gross assets:
                     Gross assets                             $         -      $      62,700
                     Gross liabilities                           (13,900)                  -
                                                              -----------      -------------

                  Net current deferred tax assets                (13,900)             62,700

                  Noncurrent deferred taxes:
                     Gross assets                               2,369,000          1,948,100
                     Gross liabilities                            (5,200)            (1,500)
                                                              -----------      -------------

                  Net noncurrent deferred tax assets            2,363,800          1,946,600

                  Valuation allowance                         (2,377,700)        (2,009,300)
                                                              -----------       ------------

                  Total deferred tax assets                   $         -      $           -
                                                              ===========      =============
</TABLE>

               The tax effects of cumulative temporary differences consisted of
               the following:
<TABLE>
<CAPTION>

                                                                      DECEMBER 31,
                                                                   2001            2000
<S>                                                          <C>              <C>


                  Operating loss carryforwards                $ 2,369,000      $   1,943,300
                  Inventory reserves                                    -             47,900
                  Depreciation                                    (5,200)              4,800
                  Other                                            13,900             13,300
                                                              -----------      -------------
                       Total                                  $ 2,377,700      $   2,009,300
                                                              ===========      =============
</TABLE>


         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.


                                      F-20

<PAGE>



                    GATEWAY DISTRIBUTORS, LTD. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                DECEMBER 31, 2001




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

               The Company has signed a merger  agreement with a publicly traded
               company and plans to raise capital  through a public  offering of
               its stock in 2001 and 2002.  Management believes that the capital
               raised will enable the Company to repay its current  obligations,
               satisfy the current  outstanding  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.
















                                      F-21

<PAGE>



         Item 8.  Changes in and Disagreements with Accountants.

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

                                    PART III

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

         Directors and Executive Officers.

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


         Name                        Age             Position
         Richard A. Bailey            46             Chairman of the Board of
                                                     Directors, Chief Executive
                                                     Officer and President
         Florian R. Ternes            53             Director, Chief Operating
                                                     Officer, Secretary
         Earl McKenzie                58             Director

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

          Richard  A.  Bailey,  46,  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,  53, 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 ompleting its successful





                                      23

<PAGE>



          public offering,  he resigned in January 1998 to join the Company on a
          full- time basis.

          Earl McKenzie, 58, 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 three  persons who during the fiscal
          year ended December 31, 2001 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 2001. Mr. Bailey made no Section 16(a)
          compliance filings during the year ended December 31, 2001. Mr. Bailey
          further failed to timely file a Form 5 for the year ended December 31,
          2001.

          Florian R.  Ternes - Mr.  Ternes was an officer  and  director  of the
          Company  during all of the year 2001. Mr. Ternes made no Section 16(a)
          compliance filings during the year ended December 31, 2001. Mr. Ternes
          further failed to timely file a Form 5 for the year ended December 31,
          2001.

          Earl  McKenzie - Mr.  McKenzie was appointed a director of the Company
          in  January,  2001.  Mr.  McKenzie  made no Section  16(a)  compliance
          filings during the year ended December 31, 2001. Mr. McKenzie  further
          failed to timely file a Form 5 for the year ended December 31, 2001.

         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.

                           SUMMARY COMPENSATION TABLE





                                      24

<PAGE>



<TABLE>
<CAPTION>

                               Annual Compensation                            Long Term Compensation
                                                                      Awards                          Payouts
                                                 Other        Restricted    Securities
                                                 Annual         Stock       Underlying                All Other
                                               Compensation    Award(s)      Option       LTIP        Compensation
 Name and Principal    Year   Salary    Bonus                                 SARs       payouts
<S>                   <C>    <C>       <C>    <C>           <C>            <C>          <C>          <C>

      Position                 ($)                ($)            ($)          (#)          ($)           ($)
 Richard A. Bailey,    2001   60,000     -         -              -             -           -             -
 President and Chief   2000   115,500    -         -              -             -           -             -
 Executive Officer     1999   76,250     -         -              -             -           -             -
--------------------   ----  --------   -----  ------------   ----------    ----------   -------      ------------
</TABLE>

          As of the date hereof,  the Company has not granted  stock  options or
          stock appreciation  rights to any executive officer or director of the
          Company.  Salaries  owed  Richard R. Bailey and Florian R. Ternes have
          not been paid and have been deferred for payment in year 2002 or later
          in the form of stock and / or cash  based on the  Company's  financial
          position. Both parties agreed to delay the payment.

         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





                                       25

<PAGE>



          earnings during his employment with the Company each year for a period
          of five  years.  Mr.  Bailey  agreed to reduce  his  salary to $60,000
          annually  once TRSG places him on their  payroll with the remainder of
          the agreement remaining in force.

          The  Company  entered  into  an  employment   agreement  (the  "Ternes
          Employment Agreement") with Florian R. Ternes, its Secretary and Chief
          Operating Officer,  dated May 1, 1999. The Ternes Employment Agreement
          provides  termination  of the  employment  at the will of  either  Mr.
          Ternes or the Company.  The Ternes Employment Agreement provides for a
          base salary of $85,000 annually commencing May 1, 1999, which shall be
          reviewed  periodically.  Such  review  may  result in an  increase  or
          bonuses for Mr. Ternes.  In the event the Company is unable to pay the
          annual  salary,  the Company will issue to Mr. Ternes one share of its
          Common Stock for each dollar owed at the end of the  Company's  fiscal
          year.  In the event that Mr.  Ternes'  employment  is  terminated as a
          result of (a) his retirement under the Company's  retirement  program,
          (b) his disability resulting in absence from his duties to the Company
          on a full-time basis for over one year, (c) his death,  (d) a material
          reduction in his  responsibilities or title, or (e) a reduction of his
          cash  compensation  by more than 10% below the highest  annual  salary
          from time to time in effect,  the Company is  obligated  to pay to Mr.
          Ternes, as severance and/or liquidated damages, an amount equal to one
          and one-half times his highest annual  earnings  during his employment
          with the  Company  each year for a period of five  years.  Florian  R.
          Ternes  agreed to reduce his salary  for  Gateway to $36,000  annually
          once  TRSG  places  him on their  payroll  with the  remainder  of his
          agreement staying in force.

         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,  2000,  (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:

<TABLE>
<S>                  <C>                                  <C>                    <C>            <C>

  Title of Class       Name and Address of Beneficial       Nature of Ownership    Amount of     Percent
                                   Owner                                           Ownership     Of Class
   Common Stock              Richard A. Bailey                    Direct           20,631,961    53.85%
  ($0.001 par value)   3095 East Patrick Lane, Suite 1,
                          Las Vegas, Nevada 89120
   Common Stock              Florian R. Ternes                    Direct           8,951,961     23.37%
  ($0.001 par value)   3095 East Patrick Lane, Suite 1,
                                 Las Vegas, Nevada 89120
</TABLE>






                                       26

<PAGE>


<TABLE>
<S>                       <C>                                  <C>              <C>               <C>

   Common Stock                    Earl McKenzie                 Direct           12,000           less than
  ($0.001 par value)       3095 East Patrick Lane, Suite 1,                                         1%
                              Las Vegas, Nevada 89120
   Common Stock            All officers and directors as a       Direct           29,595,922       77.25%
  ($0.001 par value)           group (4 individuals)
</TABLE>

         Item 12.  Certain Relationships and Related Transactions.

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

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

         ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

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

          Reports on Form 8-K.  The Company  filed no reports on Form 8-K during
          the quarter ended December 31, 2001.









                                      27

<PAGE>



                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
         registrant caused this report to be signed on its behalf by the
         undersigned, thereunto duly authorized, this 15th day of April, 2002.


         Gateway Distributors, Inc.



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



         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 15, 2001
    -----------------
    Rick Bailey



       /s/ Florian Ternes            Director                     April 15, 2001
    --------------------
    Florian Ternes



       /s/ Earl McKenzie             Director                     April 15, 2001
    --------------------
    Earl McKenzie











                                      28

<PAGE>


         Index to Exhibits
         Exhibit                    Page             Description


         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.

         * 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.








                                      29

<PAGE>