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 March 31, 2006

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

                         For the transition period from
                                       to
                             ----------   ----------

                           Commission File No. 0-6404


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


           Delaware                                             44-0651207
 ------------------------------                            --------------------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                           Identification Number)

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

                                 (713) 336-0844
                            -------------------------
                           (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
   -----   -----

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.
Yes      No  X
   -----   -----

As of May 1, 2006, the Issuer had 17,130,937 shares of its common stock
outstanding.

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

<PAGE>


                                  FORM 10-QSB

                                     Part I
                                     ------


Item  1.  Financial Statements
          --------------------
                                                                         Page
                                                                         ----
          Unaudited Consolidated Balance Sheet
              as of March 31, 2006                                         3

          Unaudited Consolidated Statements of Operations
              for the three months ended March 31, 2006
              and March 31, 2005                                           4

          Unaudited Consolidated Statements of Cash Flows
              for the three months ended March 31, 2006
              and March 31, 2005                                           5

          Notes to Unaudited Consolidated Financial Statements             6

                                        2

<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 2006
(Unaudited)



ASSETS
Current Assets
   Cash and cash equivalents ...................................   $  1,015,640
   Restricted cash .............................................         77,320
   Trade accounts receivable ...................................      1,134,544
   Inventories, at average cost ................................         44,936
   Prepaid expenses and other assets ...........................         74,714
                                                                   ------------
        Total current assets ...................................      2,347,154
                                                                   ------------

Property and Equipment, at cost
   Gas gathering, processing and transportation ................     10,100,320
   Office furniture and other equipment ........................        805,312
                                                                   ------------
                                                                     10,905,632
   Less accumulated depreciation and amortization ..............     (4,709,997)
                                                                   ------------
                                                                      6,195,635
Other Assets
   AET license, net of accumulated amortization of $185,783 ....        235,267
   Other .......................................................         49,940
                                                                   ------------
                                                                        285,207
        Total assets ...........................................   $  8,827,996
                                                                   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable ............................................   $    955,203
   Accrued expenses and other liabilities ......................        322,218
   Note payable ................................................         76,000
   Current maturities of long-term debt ........................        190,284
   Current maturities of capital lease .........................         12,801
                                                                   ------------
        Total current liabilities ..............................      1,556,506
                                                                   ------------

Future asset retirement obligations ............................        349,788
Long-term debt, less current maturities ........................        201,639
Long-term capital lease, less current maturities ...............         58,994
Minority interest payable ......................................        856,667

Commitments and contingencies ..................................           --

Stockholders' Equity
   Preferred stock - $1.00 par value; 10,000 shares authorized;
      no shares issued and outstanding .........................           --
   Common stock - $0.25 par value; 35,000,000 shares authorized;
      17,130,937 shares issued and outstanding .................      4,282,732
   Additional paid-in capital ..................................     16,139,144
   Accumulated deficit .........................................    (14,617,474)
                                                                   ------------
        Total stockholders' equity .............................      5,804,402
                                                                   ------------
        Total liabilities and stockholders' equity .............   $  8,827,996
                                                                   ============


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

                                       3

<PAGE>
<TABLE>
<CAPTION>


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



                                                                                   Three Months Ended March 31,
                                                                                       2006            2005
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
Operating revenues
    Sales of natural gas .......................................................   $  2,280,146    $  1,857,798
    Transportation of natural gas and liquids ..................................        424,516         213,191
    Treating and other .........................................................         39,708          37,366
                                                                                   ------------    ------------
                                                                                      2,744,370       2,108,355
                                                                                   ------------    ------------
Operating costs and expenses
    Cost of natural gas purchased ..............................................      1,914,071       1,514,091
    Operation and maintenance ..................................................        265,318         202,076
    Depreciation and amortization ..............................................        133,239         153,927
    Accretion expense ..........................................................          6,155           5,744
    General and administrative .................................................        381,716         326,005
                                                                                   ------------    ------------
                                                                                      2,700,499       2,201,843
                                                                                   ------------    ------------
Operating income (loss) ........................................................         43,871         (93,488)

Other income (expense)
    Interest income ............................................................          6,751             305
    Interest expense ...........................................................        (11,715)        (25,452)
    Other income, net ..........................................................          2,025          10,666
    Minority interest ..........................................................        (13,847)           --
                                                                                   ------------    ------------
                                                                                        (16,786)        (14,481)
                                                                                   ------------    ------------
Income (loss) from continuing operations before income taxes and
    discontinued operations ....................................................         27,085        (107,969)
Income tax expense .............................................................           --              --
                                                                                   ------------    ------------
Income (loss) from continuing operations .......................................         27,085        (107,969)

Discontinued operations, net of taxes
    Income from discontinued operations, net of taxes ..........................           --           129,159
                                                                                   ------------    ------------
Net income......................................................................   $     27,085    $     21,190
                                                                                   ============    ============

Basic and diluted income (loss) per share
    Continuing operations ......................................................   $       --      $      (0.01)
    Discontinued operations ....................................................           --              0.01
                                                                                   ------------    ------------
    Net income .................................................................   $       --      $       --
                                                                                   ============    ============

Weighted average number of common shares outstanding:
    Basic ......................................................................     17,130,937      16,432,232
    Diluted ....................................................................     17,143,906      16,432,232


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

                                                        4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


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


                                                                             Three Months Ended March 31,
                                                                                 2006           2005
                                                                              -----------    -----------
<S>                                                                           <C>            <C>
Cash flows from operating activities - continuing operations
Continuing operations:
   Net income (loss) from continuing operations ...........................   $    27,085    $  (107,969)
   Adjustments to reconcile net income (loss) from continuing operations to
   net cash provided by operating activities:
      Depreciation and amortization .......................................       133,239        153,927
      Minority interest ...................................................        13,847           --
      Accretion expense ...................................................         6,155          5,744
      Amortization of debt issue costs ....................................         2,471           --
      Net gain on sale of property ........................................        (1,504)          --
      Change in operating assets and liabilities:
         Trade accounts receivable ........................................       325,715         12,763
         Inventories, at average cost .....................................        (2,638)        (2,345)
         Prepaid expenses and other assets ................................       (40,511)        26,813
         Accounts payable .................................................      (281,340)        85,128
         Accrued expenses and other liabilities ...........................        46,252         18,424
                                                                              -----------    -----------
              Net cash provided by operating activities ...................       228,771        192,485
                                                                              -----------    -----------

Cash flows from investing activities - continuing operations
      Capital expenditures ................................................       (10,400)       (14,762)
      Proceeds from sale of property ......................................         2,200           --
      Other assets ........................................................          --              864
                                                                              -----------    -----------
              Net cash used in investing activities .......................        (8,200)       (13,898)
                                                                              -----------    -----------

Cash flows from financing activities - continuing operations
      Payments on borrowings ..............................................       (51,150)       (50,024)
      Proceeds from exercise of stock options .............................          --           13,683
      Restricted cash for letter of credit, net ...........................          (779)          --
      Distributions to minority partner ...................................       (18,807)          --
                                                                              -----------    -----------
              Net cash used in financing activities .......................       (70,736)       (36,341)
                                                                              -----------    -----------

Net increase in cash and cash equivalents from continuing operations ......       149,835        142,246

Discontinued operations:
   Net cash provided by discontinued operating activities .................          --          140,035
   Net cash provided by discontinued investing activities .................          --             --
   Net cash used in discontinued financing activities .....................          --         (295,173)
                                                                              -----------    -----------

Net decrease in cash and cash equivalents from discontinued operations ....          --         (155,138)

Cash and cash equivalents at beginning of period ..........................       865,805        176,292
                                                                              -----------    -----------
Cash and cash equivalents at end of period ................................   $ 1,015,640    $   163,400
                                                                              ===========    ===========

Supplemental Disclosures of Cash Flow Information:
      Cash paid for interest ..............................................   $    10,547    $    64,806
                                                                              ===========    ===========


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

                                                     5
</TABLE>

<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)

(1)       Nature of Business

          Gateway Energy Corporation (the "Company," or "Gateway"), a Delaware
corporation, was incorporated in 1960 and entered its current business in 1992.
The Company's common stock is traded in the over-the-counter market on the Pink
Sheets under the symbol GNRG.PK. Gateway conducts all of its business through
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. Gateway-ADAC Pipeline, L.L.C.
which is majority owned (67%) by Gateway Pipeline Company, was formed in
September 2005. Access to the Company's annual report on Form 10-KSB, quarterly
reports on Form 10-QSB, the Company's Code of Ethics, and current reports on
Form 8-K is available at the Company's website, www.gatewayenergy.com.

          In the following discussion, "Mcf" refers to thousand cubic feet of
natural gas; "Tcf" refers to trillion cubic feet of natural gas; "Bbl" refers to
barrel of liquid hydrocarbons of approximately 42 U.S. gallons; "Btu" refers to
British thermal unit, a common measure of the energy content of natural gas;
"MMBtu" refers to one million British thermal units. "Mcfe" refers to thousand
cubic feet equivalent. Liquid hydrocarbons are converted to Mcf equivalents
using the ratio of 1.0 barrel of liquid hydrocarbons to 6.0 Mcf of natural gas.

(2)       Summary of Significant Accounting Policies

          A summary of the significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows. Certain reclassifications have been made to the prior period statements
to be consistent with the current presentation.

Principles of Consolidation

          The Company consolidates the financial statements of its majority
owned and wholly owned subsidiaries which includes 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, and
Gateway-ADAC Pipeline, L.L.C., of which the Company has a 67% ownership. The
portion not owned by the Company is recorded as minority interest. All
significant intercompany transactions have been eliminated in consolidation. The
financial statements for all periods presented have been adjusted to give effect
to the disposition of the Madisonville pipeline facilities as a discontinued
operation. The corresponding notes to the financial statements, where
appropriate, have been adjusted to correspond to this presentation.

          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 U.S. generally
accepted accounting principles. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with U.S.
generally accepted accounting principles have been omitted pursuant to rules and
regulations of the Securities and Exchange Commission. 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 year
ended December 31, 2005.

Revenue Recognition Policy

          Revenues from the sales of natural gas are generated under
back-to-back purchase and sales contracts. Revenues from the sales of natural
gas are recognized at the redelivery point, which is the point at which title to
the natural gas transfers to the purchaser. Transportation revenues are
generated under contracts which have a stated fee per unit of production (Mcf,
MMBtu, or Bbl) gathered or transported. Transportation revenues onshore are
recognized at the redelivery point, which is the point at which another party
takes physical custody of the natural gas or liquid hydrocarbons. Transportation
revenues offshore are recognized at the Company's receipt point.

Property and Equipment

          Property and equipment is stated at cost, plus capitalized interest
costs on major projects during their construction period. Additions and
improvements that add to the productive capacity or extend the useful life of an
asset are capitalized. Expenditures for maintenance and repairs are charged to
expense as incurred. For the year ended March 31, 2006, property and equipment

                                       6

<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
March 31, 2006
(Unaudited)


included $100,000 of equipment financed under a capital lease, net of $9,167 of
accumulated amortization. Depreciation and amortization is provided using the
straight-line method over estimated useful lives ranging from 6 to 30 years for
pipeline systems, gas plant and processing equipment, and from 2 to 10 years for
office furniture and other equipment. Upon disposition or retirement of pipeline
components or gas plant components, any gain or loss is charged or credited to
accumulated depreciation. When entire pipeline systems, gas plants or other
property and equipment are retired or sold, any resulting gain or loss is
credited to or charged against operations.

          For the three months ended March 31, 2006 and 2005, depreciation
expense was $126,062 and $153,927, respectively.

          Property, plant and equipment and identifiable intangible assets are
reviewed for impairment, in accordance with Financial Accounting Standards Board
("FASB") Statement No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. If the sum of the expected
discounted cash flows is less than the carrying value of the related asset or
group of assets, a loss is recognized for the difference between the fair value
and carrying value of the asset or group of assets. There have been no
impairments of long-lived assets required during the three months ended March
31, 2006.

          The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 143 "Accounting for Asset Retirement Obligations"(discussed below)
during the year ended December 31, 2003, and accordingly provides for the future
asset retirement obligations related to the Shipwreck offshore production
platform because, eventually, law or regulation will require its abandonment.
The present value of the estimated future asset retirement obligation, as of the
date of acquisition, was capitalized to gas gathering, processing and
transportation equipment. The present value of the estimated future asset
retirement obligation, as of the balance sheet date, is presented as a
noncurrent liability. Until the platform is ultimately sold or retired, the
Company will recognize (i) depreciation expense on the additional capitalized
costs; (ii) accretion expense as the present value of the future asset
retirement obligation increases with the passage of time, and; (iii) the impact,
if any, of changes in estimates of the liability. The following table sets forth
a reconciliation of the beginning and ending aggregate carrying amount of asset
retirement obligations for the three months ended March 31, 2006 and 2005:

                                     Three Months Ended
                                          March 31,
                                     -------------------
                                       2006       2005
                                     --------   --------
                 Beginning balance   $343,633   $320,657
                 Accretion              6,155      5,744
                                     --------   --------
                 Ending balance      $349,788   $326,401
                                     --------   --------


Cash Equivalents

          For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with original maturities
of three months or less to be cash equivalents.

Restricted Cash

          Restricted cash is related to the collateral for the Letter of Credit
to secure the note payable due Michael Fadden, the former Chief Executive
Officer of the Company.

Income Taxes

          The Company has no current tax provision for the three months ended
March 31, 2006 because the Company has utilized existing net operating loss
carryforwards and has concluded that the tax benefits related to remaining net
operating loss carryforwards may not be realized in future periods and are
therefore fully reserved in the accompanying financial statements. The Company
has no current tax provision for the three months ended March 31, 2005 because
the Company used net operating loss carry-forwards to offset pretax financial
income. Deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been included in the financial
statements or income tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial

                                       7

<PAGE>
<TABLE>
<CAPTION>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
March 31, 2006
(Unaudited)


statement and tax bases of assets and liabilities as measured by the enacted tax
rates expected to apply when these differences reverse. Deferred tax assets are
reduced by a valuation allowance when it is more likely than not that they will
not be realized. The deferred tax provision is the result of changes in deferred
tax assets and liabilities.


Earnings Per Share

          Basic earnings per share is computed by dividing net income or loss by
the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed by dividing net income 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 months ended March 21, 2005 the diluted loss per common share is the same
as basic loss per share since the effect of 25,614 potentially dilutive common
shares arising from outstanding stock options and warrants was anti-dilutive.
Earnings per common share were compauted as follows:

                                                                 Three Months
                                                                Ended March 31,
                                                        --------------------------------
                                                            2006                  2005
                                                        -----------          -----------
          <S>                                           <C>                  <C>
          Weighted average number of common shares       17,130,937           16,432,232
            outstanding
          Effect of dilutive securities                      12,969                 --
                                                        -----------          -----------
          Weighted average dilutive common shares
            outstanding                                  17,143,906           16,432,232
                                                        ===========          ===========

          Income (loss) from continuing operations      $    27,085          $  (107,969)
          Income from discontinued operations, net
            of taxes                                           -                 129,159
                                                        -----------          -----------
          Net income                                    $    27,085          $    21,190
                                                        ===========          ===========

          Basic and diluted earnings per common
            share:
            Continuing operations                       $      -             $     (0.01)
            Discontinued operations                            -                    0.01
                                                        -----------          -----------
            Net income                                  $      -             $       -
                                                        ===========          ===========


Use of Estimates

          The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the 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. Management's significant estimates include depreciation of
long-lived assets, amortization of deferred loan costs, valuation of the ARO
liability, and valuation of stock based transactions. Actual results could
differ from those estimates.

(3)       Stock Based Compensation Plans

          We have two types of share-based compensation plans, one covers
employees and the other covers our Board of Directors, both of which are similar
in nature.

          Effective January 1, 2006, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based
Payment" ("SFAS No.123R") utilizing the modified prospective approach. Prior to
the adoption of SFAS No. 123R, we accounted for stock option grants in
accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees" (the intrinsic value method), and accordingly,
recognized no compensation expense for employee stock option grants. The options
generally vest ratably over three years and expire within ten years.

                                       8
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<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
March 31, 2006
(Unaudited)


          Under the modified prospective approach, SFAS No. 123R applies to new
awards and to awards that were outstanding on January 1, 2006 as well as those
that are subsequently modified, repurchased or cancelled. Under the modified
prospective approach, compensation cost recognized for the three months ended
March 31, 2006 includes compensation cost for all share-based awards granted
prior to, but not yet vested as of January 1, 2006, based on the grant-date fair
value estimated in accordance with the original provisions of SFAS No. 123, and
compensation cost for all share-based awards granted subsequent to January 1,
2006, based on the grant-date fair value estimated in accordance with the
provisions of SFAS No. 123R. Prior periods were not restated to reflect the
impact of adopting the new standard.

          As a result of SFAS No. 123R, the compensation cost related to
non-qualified stock options recognized was immaterial in the three months ended
March 31, 2006. We view all awards of stock compensation as a single award with
an expected life equal to the average expected life of component awards and
amortize the award on a straight-line basis over the life of the award.

          For pro forma purposes, the estimated fair value of the Company's
stock-based awards to employees is amortized over the options' vesting period.
The following table illustrates the effect on net income or loss per share if
the Company had applied the fair value recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," to its stock-based employee
compensation for the three months ended March 31, 2005:


           Net income- as reported..........................         $  21,190
           Deduct total stock-based employee compensation
             expense determined under fair value based
             method for all awards, net of related tax
             effects........................................            (1,700)
                                                                     ---------
           Net income  - pro forma..........................         $  19,490
                                                                     =========

           Basic and diluted net income per share - as
             reported                                                $    --
                                                                     =========
           Basic and diluted net income per share - pro
             forma                                                   $    --
                                                                     =========


          We receive a tax deduction for certain stock option exercises during
the period the options are exercised, generally for the excess of the price at
which the stock is sold over the exercise price of the options. During the three
months ended March 31, 2006, there were no stock options exercised. In addition,
we receive an additional tax deduction when restricted stock vests at a higher
value than the value used to recognize compensation expense at the date of
grant.

          The fair value of each option award is estimated on the date of grant
using the Black-Scholes option-pricing model. Expected volatility is based on
the annualized historical stock prices to derive an expected term. The risk-free
rate for periods within the contractual life of the option is based on the U.S.
treasury yield curve in effect at the time of grant. The Company uses the
Black-Scholes option pricing model to compute the fair value of stock options
which requires the Company to make the following assumptions:

     o    The risk-free interest rate is based on the five year Treasury bond at
          date of grant.

     o    The dividend yield on the Company's common stock is assumed to be zero
          since the Company does not pay dividends and has no current plans to
          do so in the future.

     o    The market price volatility of the Company's common stock is based on
          daily, historical prices for the last three years.

     o    The term of the grants is based on the simplified method as described
          in Staff Accounting Bulletin No. 107.

          In addition, the Company estimates a forfeiture rate at the inception
of the option grant based on historical data and adjusts this prospectively as
new information regarding forfeitures becomes available.

                                       9

<PAGE>
<TABLE>
<CAPTION>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
March 31, 2006
(Unaudited)


          The expected term has been calculated using the Securities and
Exchange Commission Staff's shortcut approach from Staff Accounting Bulletin No.
107. We have analyzed historical volitility and based on an analysis of all
relevant factors use a three-year period to estimate expected volatility of our
stock option grants.

         At March 31, 2006, there was $2,070 of total unrecognized compensation
cost related to non-vested stock option awards which is expected to be
recognized over a weighted-average period of one year.

         The following table represents stock option activity for the three
months ended March 31, 2006:

                                                                                      Weighted
                                                                   Weighted            Average
                                                                    Average          Contractual       Intrinsic
                                                                   Exercise           Terms (in        Value of
                                                 Shares              Price             years)           Options
                                             -------------      --------------     --------------   ---------------

<S>                                                <C>               <C>                <C>               <C>
Options outstanding, beginning of period..         527,416           $0.46              3.98
Options granted...........................            -                -                 -
Options exercised or canceled.............            -                -                 -
                                             -------------
Options outstanding, end of period........         527,416           $0.46              3.98               -
                                             =============
Options exercisable, end of period........         509,083           $0.47              3.85               -
                                             =============



(4)       Acquisitions and Divestitures

          Effective July 27, 2005, Gateway Pipeline Company and Gateway
Processing Company, wholly owned subsidiaries of the Company, sold their
four-inch gathering line and three-inch injection line as well as the Processing
Agreement contained in the First Amended and Restated Master Agreement dated
February 5, 2003, all of which was part of the Company's Madisonville Pipeline
Facility to a third party buyer for approximately $2.7 million. The Company
retained the ten-inch sales line connected to the Madisonville Pipeline Facility
and became a transporter of gas from the Madisonville Plant to the sales point.
Due to the sale of these facilities, the operations of the Madisonville Pipeline
Facility has been reported as a discontinued operation. Accordingly, prior
period financial statement amounts have been adjusted to give effect to this
disposition as a discontinued operation.


(5)       Debt

Note Payable

          Fort Cobb's revolving credit agreement provides for maximum available
borrowings of up to $250,000 through September 16, 2006. Principal outstanding
under the agreement accrues interest at a variable rate, based on the bank's
prime rate index plus 1.25%, with a minimum rate of 8%. The interest rate at
March 31, 2006 was 8%, however, it was increased on April 1, 2006 to 9% due to
the rise in the bank's prime rate index. The balance under the agreement is due
upon demand, or if no demand is made, at maturity, and is renewable annually.
Costs of obtaining this debt were capitalized as deferred loan costs and are
being charged to interest expense ratably over the maturity period of the note.
Fort Cobb uses the proceeds from time to time for general working capital
purposes. The agreement, along with the Fort Cobb Term Note discussed below, is
collateralized with the assets of Fort Cobb and guaranteed by the Company. The
Company had $174,000 of available borrowings under this agreement as of March
31, 2006.

                                       10

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<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
March 31, 2006
(Unaudited)


Long-term Debt

         Long-term debt at March 31, 2006 consisted of the following:

              Term note - Fort Cobb                $     309,241
              Term note - Fort Cobb vehicles              15,999
              Trade note payable                          66,683
                                                   -------------
                                                         391,923
              Less current maturities                   (190,284)
                                                   -------------
                                                   $     201,639

Term Note - Fort Cobb

          Effective June 1, 2001, Fort Cobb borrowed $750,000 from a bank.
Principal outstanding under the note accrues interest at a variable rate, based
on the bank's prime rate index plus 1.25%, with a minimum rate of 8%. The
interest rate at March 31, 2006 was 8%, however, it was increased on April 1,
2006 to 9% due to the rise in the bank's prime rate index. The note requires
monthly principal and interest payments of approximately $13,000, with the
balance under the note due June 1, 2008. Costs of obtaining this debt are being
charged to interest expense ratably over the term of the note. Fort Cobb used
the proceeds to refinance its previous borrowings from the Company, and the
Company used the proceeds for general corporate purposes.

Term Note - Fort Cobb Vehicles

          Effective March 2003, Fort Cobb borrowed $57,900 from a bank to buy
three replacement service vehicles. The note requires monthly principal and
interest payments of $1,387, including interest at 6.99%, and matures on March
25, 2007.

Trade Note Payable

          Effective in October 2005, in connection with the Settlement and
Release Agreement with Michael Fadden, the Company's former Chief Executive
Officer and President, the Company executed a trade note for $96,000, bearing no
interest, payable in twenty-four monthly installments of $4,000. The note is
secured by a letter of credit. Interest expense is being recognized over the
life of the note at an imputed rate of 10%; accordingly, the obligation was
initially recorded at its present value of $86,683 in the accompanying balance
sheet. The balance at March 31, 2006 is $66,683.

Letters of Credit

          As of March 31, 2006, the Company had outstanding letters of credit
totaling $1,388,000.

(6)       Commitments and Contingencies

          The Company and its subsidiaries are parties to litigation and claims
arising in the ordinary course of business. Management, after consultation with
legal counsel, believes that the liabilities, if any, arising from such
litigation and claims, may be material to the consolidated financial statements.

(7)       Related Party Transactions

          Accrued expenses and other liabilities at March 31, 2006 include
unpaid directors' fees of $14,696. In connection with the Gateway-ADAC Pipeline,
L.L.C. partnership, the Company paid to ADAC $16,047 for distributable net
income and has a distributable payable to ADAC in the amount of $5,768 for the
three months ended March 31, 2006.

(8)       Subsequent Events

          The Company's former Chief Financial Officer filed a claim with the
American Arbitration Association on December 29, 2004, pursuant to the
Employment Agreement by and between him and the Company. On March 3, 2006, an
arbitrator issued an order in this case favorable to the Company. On March 31,
2006, the Plantiff filed a motion to reconsider to have the arbitrator
reevaluate the case. On April 14, 2006 the Company filed it's response to the
Plantiff's motion for reconsideration of the ruling. The arbitrator has
indicated that a ruling on the reconsideration order will be made by May 31,
2006.

                                       11

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<TABLE>
<CAPTION>
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
March 31, 2006
(Unaudited)

(9)       Segment Disclosures

          All of the Company's operations are in the domestic U.S., including
the Gulf of Mexico in Texas and federal waters. The Company's management reviews
and evaluates separately the operations of three main segments--Onshore
Operations, Offshore Operations and Fort Cobb Operations. Each segment is an
aggregation of operations subject to similar economic and regulatory conditions
such that they are likely to have similar long-term prospects for financial
performance. Onshore Operations include natural gas gathering, transportation
and distribution activities in Texas and Oklahoma. Offshore Operations include
natural gas and liquid hydrocarbon gathering and transportation activities in
the Gulf of Mexico, in Texas and in federal waters. The principal markets for
the Onshore segment are affiliates of large intrastate and interstate pipeline
companies and industrial customers, and for the Offshore segment they are
affiliates of large intrastate and interstate pipeline companies. Fort Cobb
Operations are comprised of a local natural gas distribution company in
Oklahoma. This segment supplies natural gas to approximately 2,350 customers,
principally for irrigation and crop drying fuel for farming cooperatives and
residential fuel.

          The accounting policies of the reportable segments are the same as
those described in Note 2 to the Consolidated Financial Statements. The Company
evaluates the segments based on operating margin, defined as revenues less cost
of purchased gas and operating and maintenance expenses. Such amounts are before
general and administrative expense, depreciation, interest income or expense or
income taxes. Inter-segment sales of $330,000 and $449,000 were eliminated
during consolidation for the three months ended March 31, 2006 and 2005.

          Summarized financial information of the Company's reportable segments
from continuing operations and a reconciliation of operating margin to
consolidated net income, is presented below:
                                                             Three Months Ended March 31,
                                                         ----------------------------------
                                                            2006                    2005
                                                         ----------              ----------
                     Onshore Operations
        <S>                                              <C>                     <C>
        Revenues..................................       $1,857,656              $1,273,646
        Operating margin..........................          259,488                 125,286
        Depreciation and amortization.............           66,221                  68,386
        Interest expense..........................            2,831                  11,141
        Capital expenditures......................            9,597                   6,747
        Total assets..............................        5,591,282               5,088,584

                     Offshore Operations
        Revenues..................................          346,556                 236,953
        Operating margin..........................          274,093                 175,052
        Depreciation and amortization.............           37,694                  37,694
        Total assets..............................        1,422,780               1,401,767

                    Fort Cobb Operations
        Revenues..................................          540,158                 597,756
        Operating margin..........................           31,400                  91,850
        Depreciation and amortization.............           29,324                  47,847
        Interest expense..........................            8,884                  14,311
        Capital expenditures......................              803                   8,015
        Total assets..............................        1,813,934               1,933,577

                            Total
        Revenues..................................        2,744,370               2,108,355
        Operating margin..........................          564,981                 392,188
        Depreciation and amortization.............          133,239                 153,927
        Interest expense..........................           11,715                  25,452
        Capital expenditures......................           10,400                  14,762
        Total assets..............................        8,827,996               8,423,928

                Reconciliation to net income
        Operating margin..........................     $    564,981            $    392,188
        Less:
          Depreciation and amortization...........          133,239                 153,927
          Accretion expense.......................            6,155                   5,744
          General and administrative..............          381,716                 326,005
          Interest expense........................           11,715                  25,452
          Minority interest.......................           13,847                       -
        Plus:
          Interest income.........................            6,751                     305
          Other income, net.......................            2,025                  10,666
          Discounted operations...................                -                 129,159
                                                       ------------            ------------

        Net income................................     $     27,085            $     21,190
                                                       ============            ============
                                             12
</TABLE>
<PAGE>


Item  2.  Management's Discussion and Analysis of Financial Condition and
          ---------------------------------------------------------------
          Results of Operations.
          ----------------------

          This Quarterly Report on Form 10-QSB contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 that relate to possible future events, our future performance, and our
future operations. In some cases, you can identify these forward-looking
statements by the use of words such as "may," "will," "should," "anticipates,"
"believes," "expects," "plans," "future," "intends," "could," "estimate,"
"predict," "potential," "continue," or the negative of these terms or other
similar expressions. These statements are only our predictions. Our actual
results could and likely will differ materially from these forward-looking
statements for many reasons, including the risks described herein. We cannot
guarantee future results, levels of activities, performance, or achievements. We
are under no duty to update any of the forward-looking statements after the date
of this document to conform them to actual results or to changes in our
expectations.

Critical Accounting Policies

          A summary of the significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows. Certain reclassifications have been made to the prior period statements
to be consistent with the current presentation.

Revenue Recognition Policy

          Revenues from the sales of natural gas are generated under
back-to-back purchase and sales contracts. Revenues from the sales of natural
gas are recognized at the redelivery point, which is the point at which title to
the natural gas transfers to the purchaser. Transportation revenues are
generated under contracts which have a stated fee per unit of production (Mcf,
MMBtu, or Bbl) gathered or transported. Transportation revenues onshore are
recognized at the redelivery point, which is the point at which another party
takes physical custody of the natural gas or liquid hydrocarbons. Transportation
revenues offshore are recognized at the receipt point.

Property and Equipment

          Property and equipment is stated at cost, plus capitalized interest
costs on major pipeline projects during their construction period. Additions and
improvements that add to the productive capacity or extend the useful life of an
asset are capitalized. Expenditures for maintenance and repairs are charged to
expense as incurred. Depreciation is provided using the straight-line method
over estimated useful lives ranging from 6 to 30 years for pipeline systems, gas
plant and processing equipment, and from 2 to 10 years for office furniture and
other equipment. Upon disposition or retirement of pipeline components or gas
plant components, any gain or loss is charged or credited to accumulated
depreciation. When entire pipeline systems, gas plants or other property and
equipment are retired or sold, any resulting gain or loss is credited to or
charged against operations.

          Impairment losses are recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows are not sufficient to recover the assets' carrying value. The amount of
impairment is measured by comparing the fair value of the asset to its carrying
amount. There was no impairment required as of March 31, 2006.

Asset Retirement Obligation

          The Company provides for the future asset retirement obligations
related to the Shipwreck offshore platform because, eventually, law or
regulation will require its abandonment. The present value of the estimated
future asset retirement obligation, as of the date of acquisition, was
capitalized to gas gathering, processing and transportation equipment. The
present value of the estimated future asset retirement obligation, as of the
balance sheet date, is presented as a noncurrent liability. Until the platform
is ultimately sold or retired, the Company will recognize (i) depreciation
expense on the additional capitalized costs; (ii) accretion expense as the
present value of the future asset retirement obligation increases with the
passage of time, and; (iii) the impact, if any, of changes in estimates of the
liability.

Use of Estimates

          The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the 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. Management's significant estimates include depreciation of

                                       13

<PAGE>
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<CAPTION>


long-lived assets, amortization of deferred loan costs, valuation of the ARO
liability, and valuation of stock based transactions. Actual results could
differ from those estimates.


Results of Operations

General

          The Henry Hub closing index price for natural gas during the three
months ended March 31, 2006 averaged $7.50 per MMBtu, compared to $5.69 for the
same period of the prior year. In the accompanying financial statements, the
Company's revenues from sales of natural gas, along with the cost of natural gas
purchased, increased proportionately from prior year levels. Because the Company
buys and sells gas under "back-to-back" purchase and sale contracts designed to
minimize commodity price risk, the Company's net operating margin is relatively
insensitive to fluctuations in the market price of gas. Accordingly, 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.

          During 2005, the Company sold its four-inch gathering line and
three-inch injection line as well as the Orginial Madisonville Agreements ("the
Sold Assets"), all of which were part of the Company's Madisonville Pipeline
Facility. The Company presented the operating results of those assets in the
accompanying consolidated statements of operations and cash flows for the three
months ended March 31, 2005 as discontinued operations. The amounts for that
period presented below have been adjusted to remove the operating results of the
Sold Assets and to reflect those amounts seperately as discontinued operations.

Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005

Total Operations
                                                             Three Months Ended March 31,
                                                       ------------------------------------------
                                                             2006                    2005
                                                       -----------------       ------------------
      <S>                                                <C>                     <C>
       Revenues..................................         $2,744,370              $2,108,355
       Operating margin..........................            564,981                 392,188
       Depreciation and amortization.............            133,239                 153,927

          Operating margins for the three months ended March 31, 2006 increased
$173,000 compared to the same period of the prior year. Onshore operating margin
increased $134,000, Offshore operating margins increased $99,000, and Fort Cobb
operating margins decreased by $60,000. These segments are discussed
individually below in greater detail.

Onshore Operations
                                                             Three Months Ended March 31,
                                                       ------------------------------------------
                                                             2006                    2005
                                                       -----------------       ------------------
        Revenues.................................         $1,857,656              $1,273,646
        Operating margin.........................            259,488                 125,286
        Depreciation and amortization............             66,221                  68,386

         Operating margins for onshore operations increased in the first quarter
by $134,000 from the same period of the prior year. The increase was mainly due
to increased throughput volumes at the Company's Waxahachie and Madisonville
pipeline facilities.




Offshore Operations
                                                              Three Months Ended March 31,
                                                       -------------------------------------------
                                                             2006                     2005
                                                       -----------------       -------------------
        Revenues..................................         $346,556                $236,953
        Operating margin..........................          274,093                 175,052
        Depreciation and amortization.............           37,694                  37,694

          Operating margins for offshore operations increased in the first
quarter by $99,000 from the same period of the prior year. This increase is due
to an increase of 6,800 MMbtu per day on the Company's Pirates' Beach system.

                                       14
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Fort Cobb Operations
                                                              Three Months Ended March 31,
                                                       -------------------------------------------
                                                             2006                     2005
                                                       -----------------       -------------------
        <S>                                                <C>                     <C>
        Revenues.................................           $540,158                $597,756
        Operating margin.........................             31,400                  91,850
        Depreciation and amortization............             29,324                  47,847

          Operating margins for Fort Cobb operations decreased in the first
quarter by $60,000 from the same period of the prior year due to reduction in
sales volumes. This decrease is in part due to a warmer than average three-month
period effecting both volumes sold and purchased. On March 31, 2006, the Company
filed with the Oklahoma Corporation Commission a Notice of Intent to file an
application for a general rate change. The application will be filed on or after
May 15, 2006.

Discontinued Operations

          Effective July 27, 2005, Gateway Pipeline Company and Gateway
Processing Company, wholly owned subsidiaries of the Company, sold their
four-inch gathering line and three-inch injection line as well as the Original
Madisonville Agreements to a third party buyer for approximately $2.7 million.
The Company retained the ten-inch sales line connected to the Madisonville
Pipeline Facility and became a transporter of gas from the Madisonville Plant to
the sales point. Due to the sale of these facilities, the operations of the
Madisonville Pipeline Facility has been reported as a discontinued operation.
Accordingly, prior period financial statement amounts have been adjusted to give
effect to this disposition as a discontinued operation. Interest has been
allocated to this discontinued operation based on the debt amounts directly
attributable to and secured by the underlying assets disposed in accordance with
Emerging Issue Task Force 87-24 "Allocation of Interest to Discontinued
Operations." For the three months ended March 31, 2005, the amount of interest
allocated to discontinued operations was $76,618.

     Following are the results of operations of the Madisonville pipeline
facility for the three months ended March 31, 2005:

              Operating revenues (1)................ $   4,039,410
              Operating costs and expenses (2)......     3,832,176
              Other expenses, net (3)...............        78,075
                                                     -------------
              Income from discontinued
                  operations, net of taxes.......... $     129,159
                                                     =============
              Basic and diluted income per share
                  from discontinued
                  operations........................ $        0.01
                                                     =============
              Weighted average number of
                  common shares outstanding:
              Basic and diluted...................      16,432,232


(1)  Operating revenues were $4,039,410 for the three months ended March 31,
     2005. This revenue stream contains gas sales from the gas purchased from
     the Madisonville producer and the price upside revenue received when the
     market price of the gas that the Company receives is in excess of certain
     contract minimum prices.

(2)  Operating costs and expenses were $3,832,176 for the three months ended
     March 31, 2005. This cost is comprised of the gas purchased at the well
     head from the Madisonville purchaser and other operating expenses.

(3)  Other expenses were $78,075 for the three months ended March 31, 2005. This
     cost is attributable to the 15% guaranteed return to ADAC as a result of
     the guarantee that ADAC provided on the $900,000 Balloon Note that is
     extinguished upon their conversion of the ADAC guarantee into a 33.33%
     interest in the Madisonville project just prior to closing of the final
     funding, interest expense on the debt associated with the Madisonville
     pipeline facility, as well as depreciation expense.

                                       15
</TABLE>

<PAGE>


Operations Support

          General and administrative expenses for the quarter increased by
$56,000 compared to 2005, primarily due to increased insurance expense and
increased wages and salaries, partially offset by a decrease in consulting and
legal fees, which includes a $42,800 write-off of an accounts payable which
management determined is no longer owed. The increase in salaries was due to the
hiring of a CEO and CFO of the Company during the second quarter of 2005.

          Interest income fluctuates directly with the average amount of cash on
deposit.

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

Liquidity and Capital Resources

          Going forward, the Company's strategy is to maximize the potential of
currently owned properties, to construct new treating facilities and related
pipeline systems, and to acquire properties that meet its economic performance
hurdles. Until we are able to successfully raise additional growth capital, we
will execute our growth strategy through strategic alliances. Also, any
currently owned properties are subject to sale under the right circumstances
(valuation and timing) if the Company believes that the proceeds from any such
sale could be effectively redeployed.

          The Company is actively seeking additional outside capital to allow it
to accelerate the implementation of its growth strategy. Such new capital may
take any of several forms. If we are successful raising new capital, then we
believe the resultant projects will yield greater results to the Company in less
time.

          There is no guarantee that we will be able to raise outside capital or
be able to sell assets on terms favorable to the Company. Without a significant
infusion of new capital, we believe we can finance the construction of new
facilities and generate new cash flows to the Company, but at a pace that can be
supported by cash flows and our existing financing agreements.

          The Company has available cash of $1,015,640 at March 31, 2006.

          Net cash provided by operating activities totaled $229,000 for the
three months ended March 31, 2006, compared to $193,000 during the same period
of the previous year.

          Absent significant acquisitions or development projects, the Company
will continue to fund its operations through internally generated funds and
available cash and bank borrowings as needed. The Company believes its cash
flows from such sources will be sufficient to fund its ongoing operations for
the foreseeable future.

          Fort Cobb's revolving credit agreement provides for maximum available
borrowings of up to $250,000 through September 16, 2006. Principal outstanding
under the agreement accrues interest at a variable rate, based on the bank's
prime rate index plus 1.25%, with a minimum rate of 8%. The interest rate at
March 31, 2006 was 8%, however, it was increased on April 1, 2006 to 9% due to
the rise in the bank's prime rate index. The balance under the agreement is due
upon demand, or if no demand is made, at maturity, and is renewable annually.
Costs of obtaining this debt were capitalized as deferred loan costs and are
being charged to interest expense ratably over the maturity period of the note.
Fort Cobb uses the proceeds from time to time for general working capital
purposes. The agreement, along with the Fort Cobb Term Note discussed below, is
collateralized with the assets of Fort Cobb and guaranteed by the Company. The
Company had $174,000 of available borrowings under this agreement as of March
31, 2006.

          Effective June 1, 2001, Fort Cobb borrowed $750,000 from a bank.
Principal outstanding under the note accrues interest at a variable rate, based
on the bank's prime rate index plus 1.25%, with a minimum rate of 8%. The
interest rate at March 31, 2006 was 8%, however, it was increased on April 1,
2006 to 9% due to the rise in the bank's prime rate index. The note requires
monthly principal and interest payments of approximately $13,000, with the
balance under the note due June 1, 2008. Costs of obtaining this debt are being
charged to interest expense ratably over the term of the note. Fort Cobb used
the proceeds to refinance its previous borrowings from the Company, and the
Company used the proceeds for general corporate purposes.

                                       16

<PAGE>


          Effective March 2003, Fort Cobb borrowed $57,900 from a bank to buy
three replacement service vehicles. The note requires monthly principal and
interest payments of $1,387, including interest at 6.99%, and matures on March
25, 2007.

          In October 2005, in connection with the settlement of a dispute with
Michael Fadden, the Company executed a trade note for $96,000, bearing no
interest, payable in twenty-four monthly installments of $4,000. The note is
secured by a letter of credit. Interest expense is being recognized over the
life of the note at an imputed rate of 10% and will be paid in full on October
1, 2007.

          At March 31, 2006, the Company's long-term debt to total
capitalization was approximately 7%.

          At March 31, 2006, the Company had outstanding letters of credit
totaling $1,388,000.

          Natural gas prices as represented by the NYMEX Henry Hub index
averaged $7.50 and $5.69 for the three months ended March 31, 2006 and 2005. The
Company's operating margin is not significantly affected by the price of natural
gas since gas gathering and transportation are generally based on fee
arrangements and sales of natural gas are made under back-to-back purchase and
sales arrangements. However, natural gas prices can affect exploration and
development which can result in higher or lower volumes available for gathering
and transportation.

Off-Balance Sheet Arrangements

          The Company has no off-balance sheet arrangements at March 31, 2006;
however, see Note 6 to the consolidated financial statements regarding
Commitments and Contingencies.


Subsequent Events

          The Company's former Chief Financial Officer filed a claim with the
American Arbitration Association on December 29, 2004, pursuant to the
Employment Agreement by and between him and the Company. On March 3, 2006, an
arbitrator issued an order in this case favorable to the Company. On March 31,
2006, the Plantiff filed a motion to reconsider to have the arbitrator
reevaluate the case. On April 14, 2006 the Company filed it's response to the
Plantiff's motion for reconsideration of the ruling. The arbitrator has
indicated that a ruling on the reconsideration order will be made by May 31,
2006.

Item 3.  Controls and Procedures
         -----------------------

          Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in Company reports filed under the Exchange
Act is accumulated and communicated to management, including the Company's
President and Chief Executive Officer and the Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.

          An evaluation of he Company's disclosure controls and procedures (as
defined in Section 13(a)-15(e) and 15d-15(e)) of the Securities Exchange Act of
1934 was carried out under the supervision and with the participation of the
Company's Chief Executive Officer and Chief Financial Officer as of the end of
the period covered by this quarterly report. The Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures as currently in effect are effective in ensuring that
the information required to be disclosed by the Company in the reports it files
or submits under the Act is (1) accumulated and communicated to the Company's
management in a timely manner, and (2) recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms.

          There were no changes in the Company's internal controls over
financial reporting that occurred during the quarter ended March 31, 2006 that
have materially affected, or are reasonably likely to materially affect, the
internal control over financial reporting.

                                       17

<PAGE>


                                     Part II
                                     -------


Item 1.       Legal Proceedings
              -----------------

          The Company's former Chief Financial Officer filed a claim with the
American Arbitration Association on December 29, 2004, pursuant to the
Employment Agreement by and between him and the Company. On March 3, 2006, an
arbitrator issued an order in this case favorable to the Company. On March 31,
2006, the Plantiff filed a motion to reconsider to have the arbitrator
reevaluate the case. On April 14, 2006 the Company filed it's response to the
Plantiff's motion for reconsideration of the ruling. The arbitrator has
indicated that a ruling on the reconsideration order will be made by May 31,
2006.


Item 2.       Unregistered Sales of Securities and Use of Proceeds
              ----------------------------------------------------

              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
              --------

              31.1     Section 302 Certification of Chief Executive Officer
              31.2     Section 302 Certification of Chief Financial Officer
              32.1     Section 906 Certification of Chief Executive Officer
              32.2     Section 906 Certification of Chief Financial Officer

                                       18

<PAGE>



                                   SIGNATURES


In accordance with to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                            GATEWAY ENERGY CORPORATION

                                            /s/  Robert Panico
                                            -----------------------------------
                                                 Robert Panico
                                                 President and
                                                 Chief Executive Officer




                                            /s/  Christopher M. Rasmussen
                                            -----------------------------------
                                                 Christopher M. Rasmussen
                                                 Chief Financial Officer

        May 12, 2006
-----------------------------
(Date)

                                       19