<PAGE>

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

                                   FORM 10-QSB

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2000

      [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

                         For the transition period from
                             __________to __________

                           Commission File No. 1-4766


                           GATEWAY ENERGY CORPORATION
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


                  Delaware                                44-0651207
       -------------------------------      ------------------------------------
       (State or other jurisdiction of      (IRS Employer Identification Number)
       incorporation or organization)

                          500 Dallas Street, Suite 2615
                                Houston, TX 77002
                     (Address of principal executive offices)

         Issuer's telephone number: (713) 336-0844


         Check whether the issuer (1) has 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
   ---           ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         As of August 14, 2000, the Issuer had 15,312,208 shares of its common
stock outstanding.

Transitional Small Business Disclosure Format:  Yes          No        X
                                                   ---------   ---------------

<PAGE>

                                   FORM 10-QSB

                                     PART I


ITEM  1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                              Page
                   <S>                                                        <C>
                   Unaudited Consolidated Balance Sheet
                   as of June 30, 2000.                                         3

                   Unaudited Consolidated Statements of Operations for
                   the three months and six months ended June 30, 2000
                   and June 30, 1999.                                           4

                   Unaudited Consolidated Statements of Cash Flows for
                   the six months ended June 30, 2000
                   and June 30, 1999.                                           5

                   Notes to Consolidated Financial Statements                   6
</TABLE>



                                       2
<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(UNAUDITED)

<TABLE>
<CAPTION>

<S>                                                                             <C>
ASSETS
Current Assets
  Cash and cash equivalents................................................     $     62,942
  Certificates of deposit..................................................          691,387
  Trade accounts receivable................................................        1,017,637
  Inventories .............................................................           59,707
  Prepaid expenses and other assets .......................................          230,421
                                                                                ------------
         Total current assets..............................................        2,062,094
                                                                                ------------

Property and Equipment - at cost
  Gas gathering, processing and transportation.............................        8,773,646
  Equipment and office furniture...........................................          664,933
                                                                                ------------
                                                                                   9,438,579
  Less accumulated depreciation............................................        3,009,215
                                                                                ------------
                                                                                   6,429,364
                                                                                ------------
Other Assets
  Notes receivable.........................................................          119,751
  Equity investment in partnership.........................................          259,124
  Other....................................................................          265,658
                                                                                ------------
                                                                                     644,533
                                                                                ------------
                                                                                $  9,135,991
                                                                                ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Accounts payable.........................................................     $  1,054,530
  Current maturities of long-term debt.....................................          234,328
  Accrued expenses and other liabilities...................................           59,504
                                                                                ------------
         Total current liabilities.........................................        1,348,362
                                                                                ------------

Long-term Debt, less current maturities....................................          601,522
                                                                                ------------

Stockholders' Equity
  Preferred stock - $1.00 par value; 10,000 shares authorized; no shares
    issued and outstanding.................................................                -
  Common stock - $0.25 par value; 17,500,000 shares
    authorized; 15,312,208 shares issued and outstanding...................        3,828,050
  Additional paid-in capital...............................................       15,961,401
  Accumulated deficit......................................................      (12,603,344)
                                                                                ------------
                                                                                   7,186,107
                                                                                ------------
                                                                                $  9,135,991
                                                                                ============
</TABLE>

         The accompanying notes are an integral part of this statement.


                                       3
<PAGE>

GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED             SIX MONTHS ENDED
                                                              JUNE 30,                       JUNE 30,
                                                   ----------------------------    ----------------------------
                                                       2000            1999            2000            1999
                                                   ------------    ------------    ------------    ------------
<S>                                                <C>             <C>             <C>             <C>
Operating revenues
  Natural gas sales..............................  $  1,675,149    $  1,057,767    $  3,092,903    $  2,238,701
  Transportation and processing..................        94,797         312,724         197,275         668,133
  Other..........................................        21,293          41,250          44,845         101,579
                                                   ------------    ------------    ------------    ------------
                                                      1,791,239       1,411,741       3,335,023       3,008,413
Operating costs and expenses
  Cost of natural gas purchased..................     1,440,092         892,070       2,554,784       1,749,721
  Operation and maintenance......................       227,458         270,939         498,496         556,106
  Depreciation and amortization..................       171,231         194,621         342,537         395,523
  General and administrative.....................       423,742         624,554         871,244       1,114,136
                                                   ------------    ------------    ------------    ------------
                                                      2,262,523       1,982,184       4,267,061       3,815,486
                                                   ------------    ------------    ------------    ------------
Operating loss...................................      (471,284)       (570,443)       (932,038)       (807,073)

Other income (expense)
  Interest income................................        14,946          19,613          30,068          40,875
  Interest expense...............................       (30,784)        (38,930)        (67,024)        (78,433)
  Equity in earnings of partnership..............        22,567          19,783          42,070          40,938
  Other income (expense), net....................       106,153           4,418         275,674           9,820
                                                   ------------    ------------    ------------    ------------
                                                        112,882           4,884         280,788          13,200
                                                   ------------    ------------    ------------    ------------

Loss before income taxes.........................      (358,402)       (565,559)       (651,250)       (793,873)
Income taxes.....................................             -               -               -               -
                                                   ------------    ------------    ------------    ------------
Net loss.........................................  $   (358,402)   $   (565,559)   $   (651,250)       (793,873)
                                                   ============    ============    ============    ============

Basic and diluted loss per share.................  $      (0.02)   $      (0.04)   $      (0.04)   $      (0.05)
                                                   ============    ============    ============    ============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       4
<PAGE>

GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                               SIX MONTHS ENDED JUNE 30,
                                                                             ----------------------------
                                                                                  2000           1999
                                                                             ------------    ------------
<S>                                                                          <C>             <C>
INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS
Cash flows from operating activities
  Net loss................................................................   $   (651,250)   $   (793,873)
  Adjustments to reconcile net loss to net cash (used in)
  provided by operating activities:
    Equity in undistributed earnings of partnerships......................          5,480         (20,382)
    Depreciation and amortization.........................................        342,537         395,523
    Gain on sale of properties............................................       (170,034)              -
    Non-cash expenses.....................................................         30,875          15,215
    Net change in cash and cash
      equivalents, resulting from changes in:
        Trade accounts receivable.........................................          5,855         387,381
        Inventories.......................................................           (391)          6,282
        Prepaid expenses and other current assets.........................        (93,779)        134,214
        Accounts payable..................................................        242,678         224,289
        Accrued expenses and other liabilities............................       (299,145)       (303,824)
                                                                             ------------    ------------
          Net cash (used in) provided by operating activities.............       (587,174)         44,825
                                                                             ------------    ------------

Cash flows from investing activities
  Capital expenditures....................................................       (140,007)       (203,682)
  Proceeds from sale of properties........................................        910,000               -
  Collections of notes receivable.........................................              -          49,412
  Decrease (increase) in certificates of deposit..........................        282,153         (28,675)
                                                                             ------------    ------------
          Net cash provided by (used in) investing activities.............      1,052,146        (182,945)
                                                                             ------------    ------------
Cash flows from financing activities
  Proceeds from borrowings................................................        200,000          91,000
  Payments on borrowings..................................................       (628,119)        (58,538)
                                                                             ------------    ------------
          Net cash (used in) provided by financing activities.............       (428,119)         32,462
                                                                             ------------    ------------
Net increase (decrease) in cash and cash equivalents......................        36,853         (105,658)
Cash and cash equivalents at beginning of period..........................        26,089          152,174
                                                                             ------------    ------------
Cash and cash equivalents at end of period................................   $     62,942    $     46,516
                                                                             ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       5
<PAGE>

GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         (1)      Principles of Consolidation and Nature of Business

         The consolidated financial statements include the accounts of
Gateway Energy Corporation and its wholly owned subsidiary companies, Gateway
Pipeline Company, Gateway Offshore Pipeline Company, Gateway Energy Marketing
Company, Fort Cobb Fuel Authority, L.L.C. and Gateway Processing Company,
plus a small amount of activity in one joint venture and one partnership.
Based on its ownership, the Company proportionally consolidates its joint
venture interest, and accounts for its partnership interest on the equity
method. All significant intercompany transactions have been eliminated in
consolidation.

         The accompanying consolidated financial statements have been
prepared by the Company, without audit. In the opinion of management, such
financial statements reflect all adjustments necessary for a fair
presentation of the financial position and results of operations in
accordance with generally accepted accounting principles. The financial
statements should be read in conjunction with the financial statements and
the Notes thereto included in the Company's Annual Report on Form 10-KSB for
the ten months ended December 31, 1999. Certain minor reclassifications to
the prior period statements have been made to conform with the June 30, 2000
presentation.

         The Company owns and operates natural gas gathering, transportation
and distribution systems and related facilities in Texas, Oklahoma and
Louisiana, and offshore in Texas and federal waters of the Gulf of Mexico.
The Company also operates a natural gas distribution company in Oklahoma.

         (2)      Earnings Per Share

         Basic earnings per share is computed by dividing net earnings or
loss by the weighted average number of common shares outstanding during the
period. Diluted earnings per share is computed by dividing net earnings or
loss by the weighted average number of shares outstanding, after giving
effect to potentially dilutive common share equivalents outstanding during
the period. Potentially dilutive common share equivalents are not included in
the computation of diluted earnings per share if they are anti-dilutive. For
the three-month and six-month periods ended June 30, 2000 and 1999, the
diluted loss per common share is the same as basic since the effect of
potentially dilutive common shares arising from outstanding stock options and
warrants was anti-dilutive.

         The weighted average number of common shares outstanding used in the
computation of basic and diluted earnings per share for the three-month
periods ended June 30, 2000 and 1999 and the six-month periods ended June 30,
2000 and 1999 were 15,312,208, 15,242,494, 15,312,208, and 15,242,494.

         (3)      Notes Payable

         The Company has an operating line of credit with a bank that
provides for maximum borrowings of $500,000 through June 2001. Interest is
payable monthly at 7.06% per

                                       7
<PAGE>

GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

annum and principal is due on demand, or if no demand is made, at maturity. The
line is collateralized by $500,000 of the Company's certificates of deposit.

         (4)      Long-term Debt

         Long-term debt June 30, 2000 consists of the following:

<TABLE>
<S>                                                                   <C>
                               Subordinated notes                     $     835,850
                               Less current maturities                      234,328
                                                                      -------------
                                                                      $     601,522
                                                                      =============
</TABLE>

(5)      Asset Exchange

         Effective May 1, 2000, the Company completed an asset exchange with
another company. The Company received 7.6 miles of six-inch pipeline that
runs from Galveston Block 227 in the Texas state waters of the Gulf of Mexico
to Galveston Island, in exchange for approximately 5 miles of three-inch
pipeline located onshore in the Texas City area plus $100,000 cash.

         The pipeline acquired in this exchange has a producing well
connected to it and provided the Company approximately $18,000 of additional
operating margin in the accompanying financial statements.

         (6)      Supplemental Disclosures of Cash Flow Information

         Cash paid during the periods is as follows:

<TABLE>
<CAPTION>
                                                                               Six Months Ended June 30,
                                                                         ---------------------------------------
                                                                               2000                1999
                                                                         ----------------      -----------------
<S>                                                                      <C>                   <C>
                                    Interest                                $      55,217        $   65,328
                                    Income and franchise taxes                     27,340            14,200
</TABLE>

                                       7
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                   RESULTS OF OPERATIONS.

         The following management's discussion and analysis contains trend
analysis and other forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in the forward-looking statements throughout
this document as a result of the risk factors set forth below in the section
entitled FACTORS AFFECTING FUTURE RESULTS and elsewhere in this document.

RESULTS OF OPERATIONS

GENERAL

         The Company evaluates each of its activities based on the operating
margin it produces. The Company defines operating margin as revenues, less
the cost of purchased gas and operating and maintenance expenses. Management
reviews and evaluates the operations of three main segments - Onshore
operations, Offshore operations and Fort Cobb operations. The Company
continues to actively pursue opportunities in all three segments.

THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO JUNE 30, 1999

TOTAL OPERATIONS

         The following table sets forth information for the three months ended
June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                         2000                 1999
                                                  -------------------   -----------------
<S>                                               <C>                   <C>
         Revenues...........................        $    1,791,239         $   1,411,741
         Operating margins..................               123,689               248,732
         Depreciation.......................               171,231               194,621
</TABLE>

         Operating margins for the three months ended June 30, 2000 decreased
$125,000 compared to the same period of the prior year. Onshore and Fort Cobb
Operations margins decreased $120,000 and $8,000, respectively, partially
offset by an increase in Offshore margins of $3,000. These segments are
discussed individually below in greater detail. In 2000 the Company continues
to focus on enhancing the profitability of its existing systems by reviewing
and renegotiating transportation agreements and purchase/sale contracts, when
appropriate, and controlling operating and maintenance costs.

                                       8
<PAGE>

ONSHORE OPERATIONS

         The following table sets forth information for the three months ended
June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                        2000                  1999
                                                  ------------------    -----------------
<S>                                               <C>                   <C>
         Revenues...........................        $  1,602,140             $1,226,141
         Operating margins..................             198,552                318,809
         Depreciation.......................              96,411                120,461
</TABLE>

         Operating margins for Onshore operations decreased in the second
quarter by $120,000 from the same period of the prior year. The main decrease
was due to the termination of a short-term contract for throughput volumes on
the Company's Leleux system in Louisiana. Talks continue with the producer to
restructure and regain some of the throughput volumes. Operating margins
related to properties sold effective January 1, 2000 accounted for $39,000 of
the decrease from the prior period.

OFFSHORE OPERATIONS

         The following table sets forth information for the three months
ended June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                        2000                   1999
                                                  ------------------     -----------------
<S>                                               <C>                    <C>
         Revenues...........................        $     62,219            $   99,027
         Operating margins..................               7,280                 4,165
         Depreciation.......................              33,346                32,661
</TABLE>

         Operating margins for Offshore operations increased in the second
quarter by $3,000 over the same period of the prior year. The increase was
primarily due to the $18,000 of additional operating margins from the
completion of the asset exchange described in Note 5 to the financial
statements plus a reduction in operating expenses of approximately $27,000,
partially offset by the impact of lower throughput volumes on one of the
offshore systems. The Company continues to actively pursue several other
opportunities offshore in the Gulf of Mexico.

FORT COBB OPERATIONS

         The following table sets forth information for the three months
ended June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                         2000                  1999
                                                   -----------------     -----------------
<S>                                                <C>                   <C>
         Revenues...........................         $    126,880           $    86,573
         Operating margins..................              (82,143)              (74,242)
         Depreciation.......................               41,474                41,499
</TABLE>

                                       9
<PAGE>

         Operating margins for Fort Cobb operations decreased in the second
quarter by $8,000 from the same period of the prior year primarily due to an
increase in operating expenses. Fort Cobb's business peaks in the third and
fourth quarters because a significant portion of its load comes from
supplying irrigation and crop-drying customers.

OPERATIONS SUPPORT

         The following table sets forth information for the three months
ended June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                  2000                 1999
                                                             ----------------     ----------------
<S>                                                          <C>                  <C>
         General and administrative...................         $    423,742         $    624,554
         Interest income..............................               14,946               19,613
         Interest expense.............................              (30,784)             (38,930)
         Equity in earnings of partnership............               22,567               19,783
         Other income (expense), net..................              106,153                4,418
</TABLE>

         General and administrative expenses for the quarter are 32% lower than
for the same period of last year, due primarily to lower legal and outside
professional fees.

         Interest income varies directly with the balance on deposit in the
Company's certificates of deposit and short-term money market accounts.

         Interest expense fluctuates directly with the amount of outstanding
long-term debt and the amount of borrowings under the Company's operating line
of credit with a bank.

         Other income for the quarter is comprised mainly of an adjustment to
legal fees recognized in prior periods.

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO JUNE 30, 1999

TOTAL OPERATIONS

         The following table sets forth information for the six months ended
June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                 2000                1999
                                                            ----------------    ----------------
<S>                                                         <C>                 <C>
         Revenues.....................................        $  3,335,023        $  3,008,413
         Operating margins............................             281,743             702,586
         Depreciation.................................             342,537             395,523
</TABLE>

         Operating margins for the six months ended June 30, 2000 decreased
by $421,000 compared to the same period of the prior year. Onshore operating
margins decreased $254,000, while Offshore and Fort Cobb operating margins
declined by $155,000 and $12,000, respectively. These segments are discussed
individually below in greater detail. In 2000 the Company continues to focus
on enhancing the profitability of its existing systems by reviewing and
renegotiating transportation agreements and purchase/sale contracts, when
appropriate, and controlling operating and maintenance costs.

                                       10
<PAGE>

ONSHORE OPERATIONS

         The following table sets forth information for the six months ended
June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                            2000                  1999
                                                      ------------------    -----------------
<S>                                                   <C>                   <C>
         Revenues................................       $  2,771,834           $ 2,332,557
         Operating margins.......................            391,743               645,400
         Depreciation............................            192,742               248,384
</TABLE>

         Operating margins for onshore operations decreased in the first half
of the year by $254,000 from the same period of the prior year. The main
decrease was due to the termination of a short-term contract for throughput
volumes on the Company's Leleux system in Louisiana. Talks continue with the
producer to restructure and regain some of the throughput volumes. Operating
margins related to properties sold effective January 1, 2000 accounted for
$67,000 of the decrease from the prior period.

OFFSHORE OPERATIONS

         The following table sets forth information for the six months ended
June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                            2000                    1999
                                                      ------------------    ---------------------
<S>                                                   <C>                   <C>
         Revenues................................       $    112,556           $   265,846
         Operating margins.......................            (69,163)               85,888
         Depreciation............................             66,100                65,322
</TABLE>

         Operating margins for Offshore operations decreased $155,000 in the
six months ended June 30, 2000 from the same period of the prior year. The
decrease was primarily due to the impact of lower throughput volumes on one
of the offshore systems and a first quarter 2000 non-recurring maintenance
expenditure totaling $62,000, partially offset by the $18,000 of additional
operating margins from the completion of the asset exchange described in Note
5 to the financial statements and second quarter reductions in other
operating costs. The Company continues to actively pursue several other
opportunities offshore in the Gulf of Mexico.

FORT COBB OPERATIONS

         The following table sets forth information for the six months ended
June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                            2000                    1999
                                                      ------------------    ---------------------
<S>                                                   <C>                   <C>
         Revenues................................       $    450,633           $   410,010
         Operating margins.......................            (40,837)              (28,702)
         Depreciation............................             83,695                81,817
</TABLE>


                                       11
<PAGE>

         Operating margins for Fort Cobb operations decreased in the first
half of the year by $12,000 from the same period of the prior year primarily
due to decreases in volumes delivered to local farmers for crop irrigation
fuel.

OPERATIONS SUPPORT

         The following table sets forth information for the six months ended
June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                              2000                 1999
                                                        -----------------    ------------------
<S>                                                     <C>                  <C>
         General and administrative...............        $    871,244         $  1,114,136
         Interest income..........................              30,068               40,875
         Interest expense.........................             (67,024)             (78,433)
         Equity in earnings of partnership........              42,070               40,938
         Other income (expense), net..............             275,674                9,820
</TABLE>

         General and administrative expenses for the six months ended June
30, 2000 declined by 22% compared to the same period of the prior year. The
decline was primarily due to lower legal and outside professional fees.

         Interest income varies directly with the balance on deposit in the
Company's certificates of deposit and short-term money market accounts.

         Interest expense fluctuates directly with the amount of outstanding
long-term debt and the amount of borrowings under the Company's operating
line of credit with a bank.

         Other income for the first six months of the year includes gain on
the sales of Catarina and Zwolle systems and an adjustment to legal fees
recognized in prior periods.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash used in operating activities totaled $587,000 for the six
months ended June 30, 2000, compared to $45,000 provided by operating
activities for the same period last year. Changes in current asset and
liability accounts accounted for $593,000 of the decrease between the periods.

         The Company has cash and cash equivalents and certificates of
deposit totaling $754,000 at June 30, 2000. The Company's operating line of
credit agreement with a bank provides for maximum borrowings of $500,000,
through June 2001, and is collateralized with a certificate of deposit for
the same amount. There were no borrowings outstanding as of June 30, 2000.
The Company's long-term debt to total capitalization was approximately 7%,
which should provide opportunity for the Company to utilize conventional
long-term financing to fund acquisitions or construction projects.

         Absent acquisitions or significant development projects, the Company
will continue to fund its operations through internally generated funds and
available cash and the certificates of deposit. The Company believes its cash
flows from operations and available cash and certificates of deposit will be
sufficient to fund its ongoing operations for the foreseeable future. Any
significant property acquisitions or development projects will require
outside project financing.

                                       12
<PAGE>

         During the second quarter of 2000, the Company filed an Application for
General Rate Increase with the Oklahoma Corporation Commission (the
"Commission") on behalf of Fort Cobb. Fort Cobb is entitled under the Commission
rules and guidelines to earn additional annual revenues to cover the costs of
service and to provide a reasonable return on the assets employed to serve its
customers. Under Oklahoma law, the Commission has complete discretion over the
amount and timing of any rate increase granted. If any rate increase is granted,
the Company expects that it would not be effective before December 2000.

FACTORS AFFECTING FUTURE RESULTS

         The Company's strategies for enhancing stockholder value include, among
other things: (i) focusing on gathering, processing, transporting and marketing
of natural gas; (ii) expanding the Company's asset base in core geographic
areas; (iii) developing a niche that will create demand for our services, and;
(iv) acquiring or constructing properties in one or more new core areas.

         The Company must provide services to its customers, primarily
producers, at competitive prices. Therefore, in order to be successful the
Company must contain its costs in line with industry competitors. The Company's
access to reasonably priced long-term capital will have a significant effect on
its ability to acquire additional properties to increase operating margins
sufficiently to cover its fixed overhead costs. The Company believes that its
low debt, available cash reserves and experienced operating management will
allow the Company to access capital and find properties which can provide
attractive returns. However, there can be no assurance that the Company will be
successful in this endeavor.

         The Company's ability to generate long-term value for the common
stockholder is dependent upon the enhancement of its core assets and the
successful acquisition of additional midstream assets. There are many companies
participating in the midstream segment of the natural gas industry, many with
resources greater than the Company. Greater competition for profitable
operations can increase prices and make it more difficult to acquire assets at
reasonable multiples of cash flow. The Company believes that it will be able to
compete in this environment and will be able to find attractive investments
which compliment its existing properties; however, it is not possible to predict
competition or the effect this will have on the Company's operations.

         The Company's operations are also significantly affected by factors
which are outside the control of the Company. Gas gathering and processing is
dependent on throughput volume. Throughput on the Company's systems is
significantly dependent on natural gas production which is affected by natural
gas prices as prices affect the willingness of producers to invest the required
capital to obtain geological and geophysical information, drill development or
exploratory wells, and to rework or maximize production on existing wells.
Natural gas prices are at levels which should provide adequate incentive to
producers; however, there is no assurance that such prices will remain at
current levels, and that producers will continue to react positively to the
current prices.

         The Company's revenues, particularly from its retail operations, are
also affected by weather. Much of the retail demand is for crop irrigation and
drying. Heavy precipitation in the spring and summer growing season and hot, dry
weather in the fall can significantly reduce demand for natural gas in the
Company's retail service areas.


                                       13
<PAGE>

                                     PART II

ITEM 1.           LEGAL PROCEEDINGS

                  None


ITEM 2.           CHANGES IN SECURITIES

                  None

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES

                  None

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

                  None

ITEM 5.           OTHER INFORMATION

                  None


ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K.

                  a)  Exhibits:

                          27       Financial Data Schedule.

                  b)  Reports on Form 8-K:

                      None


                                       14
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                              GATEWAY ENERGY CORPORATION

                                     /s/ Michael T. Fadden
                              ------------------------------------------
                              President and Chief Executive Officer


                                     /s/ Scott D. Heflin
                              ------------------------------------------
                              Chief Financial Officer and Treasurer



      August 14, 2000
---------------------------
(Date)


                                       15