UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                    FORM 10-Q


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

                  For the quarterly period ended June 30, 2008

[ ]  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 Identification Number)
 incorporation or organization)

                        1415 Louisiana Street, Suite 4100
                                Houston, TX 77002
                     --------------------------------------
                    (Address of principal executive offices)

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

     Indicate by check mark 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 issuer is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and smaller
reprting company" in Rule 12b-2 of the Exchange Act. (Check one):

     Large accelerated filer    [ ]         Accelerated filer [ ]
     Non-accelerated filer      [ ](Do not check if a smaller reporting company)
     Smaller reporting company  [X]

     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 August 1, 2008, the Issuer had 19,207,249 shares of its common stock
outstanding.

<PAGE>




                   GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
                            INDEX TO QUARTERLY REPORT
                                  ON FORM 10-Q


Part  I - Financial Information
----  -------------------------

Item  1.         Financial Statements                                          2
                 Consolidated Balance Sheets as of June 30, 2008
                     and December 31, 2007                                     2
                 Consolidated Statements of Operations for the
                     three and six month periods ended June 30, 2008
                     and June 30, 2007                                         3
                 Consolidated Statements of Cash Flows for the six
                     month periods ended June 30, 2008 and June 30, 2007       4
                 Notes to Consolidated Financial Statements                    5

Item  2.         Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                      16

Item  4T.         Controls and Procedures                                     21

Part  II - Other Information                                                  22
----  ----------------------

Item  1.          Legal Procedings                                            22
Item  2.          Unregistered Sales of Equity Securities and
                     Use of Proceeds                                          22
Item  3.          Defaults Upon Senior Securities                             22
Item  4.          Submission of Matters to a Vote of Security Holders         22
Item  5.          Other Information                                           22
Item  6.          Exhibits                                                    22

Signatures                                                                    23
----------

Certification of Robert Panico Pursuant to Section 302
Certification of Christopher M. Rasmussen Pursuant to Section 302
Certification of Robert Panico Pursuant to Section 906
Certification of Christopher M. Rasmussen Pursuant to Section 906

                                       1

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Part I - Financial Information

Item 1.  Financial Statements


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)


                                                                               June 30,      December 31,
                                                                                 2008            2007
                                                                             ------------    ------------
ASSETS
<S>                                                                          <C>             <C>
Current Assets
   Cash and cash equivalents .............................................   $  1,217,933    $  1,807,224
   Restricted cash .......................................................        605,425            --
   Accounts receivable trade, net ........................................      2,471,230       1,852,849
   Prepaid expenses and other assets .....................................        268,939          41,812
                                                                             ------------    ------------
        Total current assets .............................................      4,563,527       3,701,885
                                                                             ------------    ------------

Property and Equipment, at cost
   Gas gathering, processing and transportation ..........................     11,152,214      11,120,558
   Office furniture and other equipment ..................................        134,984         229,298
                                                                             ------------    ------------
                                                                               11,287,198      11,349,856
   Less accumulated depreciation and amortization ........................     (3,590,791)     (3,390,634)
                                                                             ------------    ------------
                                                                                7,696,407       7,959,222
                                                                             ------------    ------------

Other Assets
   Deferred tax assets, net ..............................................      1,654,323       1,668,743
   Intangible assets, net of accumulated amortization of $143,680 and
     $65,278 as of June 30, 2008 and December 31, 2007, respectively .....        843,739         922,142
   Other .................................................................        201,488         269,601
                                                                             ------------    ------------
                                                                                2,699,550       2,860,486
                                                                             ------------    ------------
        Total assets .....................................................   $ 14,959,484    $ 14,521,593
                                                                             ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable ......................................................   $  1,362,602    $  1,138,653
   Accrued expenses and other liabilities ................................        200,450         251,368
   Trade notes payable ...................................................        223,594            --
   Current maturities of capital lease ...................................         18,748          17,371
                                                                             ------------    ------------
        Total current liabilities ........................................      1,805,394       1,407,392
                                                                             ------------    ------------

Future asset retirement obligations ......................................        408,329         394,640
Long-term debt ...........................................................        600,000         750,000
Long-term capital lease, less current maturities .........................         19,691          29,422
Minority interest ........................................................        805,225         816,222

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;
      19,107,249 and 19,026,665 shares issued and outstanding  at June 30,
      2008 and December 31, 2007, respectivley ...........................      4,776,812       4,756,665
   Additional paid-in capital ............................................     17,182,950      17,089,744
   Accumulated deficit ...................................................    (10,638,917)    (10,722,492)
                                                                             ------------    ------------
        Total stockholders' equity .......................................     11,320,845      11,123,917
                                                                             ------------    ------------
        Total liabilities and stockholders' equity .......................   $ 14,959,484    $ 14,521,593
                                                                             ============    ============


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

                                                    2
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<CAPTION>


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


                                                                      Three Months Ended June 30,      Six Months Ended June 30,
                                                                      ----------------------------    ----------------------------
                                                                          2008            2007            2008            2007
                                                                      ------------    ------------    ------------    ------------
<S>                                                                   <C>             <C>             <C>             <C>
Operating revenues
    Sales of natural gas ..........................................   $  3,679,554    $  2,458,289    $  6,452,636    $  4,139,399
    Transportation of natural gas and liquids .....................        816,070         441,641       1,596,231         914,432
    Treating and other ............................................        170,367          40,995         318,691          84,981
                                                                      ------------    ------------    ------------    ------------
                                                                         4,665,991       2,940,925       8,367,558       5,138,812
                                                                      ------------    ------------    ------------    ------------
Operating costs and expenses
    Cost of natural gas purchased .................................      3,321,047       2,256,542       5,890,161       3,747,039
    Operation and maintenance .....................................        291,038         113,483         552,054         235,096
    Depreciation and amortization .................................        187,793          92,537         374,293         188,224
    Accretion expense .............................................          6,115           6,598          13,689          13,193
    General and administrative ....................................        635,019         482,953       1,312,573       1,006,751
                                                                      ------------    ------------    ------------    ------------
                                                                         4,441,012       2,952,113       8,142,770       5,190,303
                                                                      ------------    ------------    ------------    ------------
Operating income (loss) ...........................................        224,979         (11,188)        224,788         (51,491)

Other income (expense)
    Interest income ...............................................          5,305          26,828          16,611          40,390
    Interest expense ..............................................        (37,194)         (5,759)        (80,882)        (11,746)
    Gain on sale of intangible asset ..............................           --              --              --           286,579
    Other income (expense), net ...................................         (3,649)         30,201           1,302          25,125
    Minority interest .............................................        (11,896)        (26,352)        (28,824)        (47,307)
                                                                      ------------    ------------    ------------    ------------
         Other income (expense), net ..............................        (47,434)         24,918         (91,793)        293,041

Income from continuing operations before income taxes and
        discontinued operations ...................................        177,545          13,730         132,995         241,550
Income tax expense ................................................         (3,420)           --           (49,420)           --
                                                                      ------------    ------------    ------------    ------------
Income from continuing operations .................................        174,125          13,730          83,575         241,550

Discontinued operations, net of taxes
    Income (loss) from discontinued operations, net of taxes ......           --           (47,167)           --           335,043
    Gain on disposal of discontinued operations, net of taxes .....           --         1,256,934            --         1,256,934
                                                                      ------------    ------------    ------------    ------------
Net income ........................................................   $    174,125    $  1,223,497    $     83,575    $  1,833,527
                                                                      ------------    ------------    ------------    ------------
Basic and diluted income per common share
    Continuing operations .........................................   $       0.01    $       --      $       --      $       0.02
    Discontinued operations .......................................           --              0.07            --              0.09
                                                                      ------------    ------------    ------------    ------------
    Net income ....................................................   $       0.01    $       0.07    $       --      $       0.11
                                                                      ============    ============    ============    ============

Weighted average number of common shares outstanding
    Basic .........................................................     19,062,313      17,162,682      19,044,587      17,151,869
    Diluted .......................................................     19,240,228      17,690,704      19,184,029      17,616,297


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

                                                                 3
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<TABLE>
<CAPTION>


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


                                                                                          Six Months Ended June 30,
                                                                                       ------------------------------
                                                                                          2008                  2007
                                                                                       -----------        -----------

<S>                                                                                    <C>                <C>
Cash flows from operating activities - continuing operations
   Income from continuing operations ...........................................       $    83,575        $   241,550
   Adjustments to reconcile income from continuing operations to net cash
      provided by operating activities:
      Depreciation and amortization ............................................           374,293            188,224
      Stock based compensation expense .........................................           113,353             19,817
      Minority interest ........................................................            28,824             47,307
      Deferred tax benefit .....................................................            14,420               --
      Accretion expense ........................................................            13,689             13,193
      Amortization of deferred loan costs ......................................            76,143             15,100
      Gain on sale of intangible asset .........................................              --             (286,579)
      Change in operating assets and liabilities:
         Accounts receivable trade .............................................          (618,381)          (135,197)
         Prepaid expenses and other assets .....................................           185,630            306,887
         Accounts payable ......................................................           223,949            256,902
         Accrued expenses and other liabilities ................................           (63,003)             5,466
                                                                                       -----------        -----------
              Net cash provided by operating activities ........................           432,492            672,670
                                                                                       -----------        -----------

Cash flows from investing activities - continuing operations
      Capital expenditures .....................................................           (33,550)           (39,798)
      Proceeds from collection of note receivable ..............................              --              300,000
      Restricted cash for asset acquisition ....................................          (605,425)              --
      Other ....................................................................               475               --
                                                                                       -----------        -----------
              Net cash provided by (used in) investing activities ..............          (638,500)           260,202
                                                                                       -----------        -----------

Cash flows from financing activities - continuing operations
      Payments on borrowings ...................................................          (943,462)          (176,466)
      Proceeds from borrowings .................................................           600,000               --
      Proceeds from exercise of stock options ..................................              --               76,501
      Restricted cash for letter of credit, net ................................              --               23,464
      Deferred financing costs .................................................              --              (28,500)
      Distributions to minority partner ........................................           (39,821)           (56,722)
                                                                                       -----------        -----------
              Net cash used in financing activities ............................          (383,283)          (161,723)
                                                                                       -----------        -----------

Net increase (decrease) in cash and cash equivalents from continuing
     operations ................................................................          (589,291)           771,149

Discontinued operations:
   Net cash provided by operating activities ...................................              --              135,136
   Net cash provided by investing activities ...................................              --            2,721,501
   Net cash used in financing activities .......................................              --             (547,338)
                                                                                       -----------        -----------

Net increase in cash and cash equivalents from discontinued operations .........              --            2,309,299

Cash and cash equivalents at beginning of period ...............................         1,807,224          1,060,823
                                                                                       -----------        -----------
Cash and cash equivalents at end of period .....................................       $ 1,217,933        $ 4,141,271
                                                                                       ===========        ===========

Supplemental disclosures of cash flow information:
   Income taxes paid ...........................................................       $    46,000        $      --
   Cash paid for interest ......................................................            28,682             23,737

Supplemental schedule of noncash investing and financing activities:
    Trade note payable for insurance premiums....................................      $   408,703        $   438,878
                                                                                       ===========        ===========


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

                                                          4
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<PAGE>



GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
(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
bulletin board section under the symbol GNRG. Gateway conducts all of its
business through its wholly owned subsidiary companies, Gateway Pipeline
Company, Gateway Offshore Pipeline Company, Gateway Energy Marketing Company 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 and Form 10-Q, the Company's Code of Ethics, and current reports on Form
8-K are available at the Company's website, www.gatewayenergy.com.

         In the following discussion, "Mcf" refers to thousand cubic feet of
natural gas; "Mmcf" refers to million 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; and "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. The portion of Gateway-ADAC Pipeline L.L.C. not
owned by the Company is recorded as minority interest. All significant
intercompany transactions have been eliminated in consolidation.

         Effective May 31, 2007, the Company disposed of 100% of its ownership
interests in Fort Cobb Fuel Authority, LLC. The financial statements reflect the
historical results of its operations as discontinued operations (see Note 7).

         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, 2007.

Revenue Recognition Policy

         Revenues from the sales of natural gas are generated under purchase and
sales contracts that are priced at the beginning of the month based upon
established gas indices. The Company purchases and sells the gas using the same
index to minimize commodity price risk. 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. Onshore and offshore transportation revenues 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 six months ended June 30, 2008, property and
equipment included $83,056 of equipment financed under a capital lease, net of
$16,944 of accumulated amortization. Depreciation and amortization is provided
using the straight-line method over estimated useful lives ranging from six to

                                       5

<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


30 years for pipeline systems, gas plant and processing equipment, and from two
to ten 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 and six months ended June 30, 2008 and 2007, depreciation
and amortization expense was $187,793 and $92,537 and $374,293 and $188,224,
respectively. Property, plant and equipment and identifiable intangible assets
are reviewed for impairment, in accordance with Statement of Financial
Accounting Standards ("SFAS") 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 six months ended June
30, 2008.

Future Asset Retirement Obligation

         The Company provides for future asset retirement obligations under the
provisions of SFAS No. 143, "Accounting for 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 six
months ended June 30, 2008 and 2007:

                                                Six Months Ended June 30,
                                              -----------------------------
                                                  2008             2007
                                              ------------     ------------

                 Beginning balance            $    394,640     $    368,255
                 Accretion                          13,689           13,193
                 Ending balance               $    408,329     $    381,448


Goodwill and Other Intangibles

         SFAS No. 142, "Goodwill and Other Intangible Assets" addresses the
methods used to capitalize, amortize and to assess the impairment of intangible
assets. In evaluating the Company's intangibles, management considered all of
the criteria set forth in SFAS No. 142 for determining useful life. Management
performs our annual impairment test for intangible assets in the fourth quarter
of each fiscal year. No impairments were indicated as a result of impairment
reviews for intangible assets in 2007 nor was there any indication that
intangible assets were impaired during the six months ended June 30, 2008.

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.

Concentrations of Credit Risk

         The Company maintains all cash in deposit accounts, which at times may
exceed federally insured limits. The Company has not experienced losses in such
accounts.

                                       6

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GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


Restricted Cash

         Restricted cash is related to the amount of cash deposited with a third
party agent in anticipation of the closing of the purchase of the 33% minority
interst in Gateway-ADAC Pipeline, LLC. (See Note 9)

Income Taxes

         The Company computes income taxes using the asset and liability method
whereby deferred tax assets are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities from
a change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is established against such assets where
management is unable to conclude more likely than not that such asset will be
realized.


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.
Accordingly, 177,915 and 528,022 shares of common stock for the three months
ended June 30, 2008 and 2007, respectively, and 139,442 and 464,428 shares of
common stock for the six months ended June 30, 2008 and 2007, respectively, were
excluded from the calculation of diluted earnings per share because of their
anti-dilutive effect. Earnings per common share were computed as follows:

                                                          Three Months Ended               Six Months Ended
                                                               June 30,                        June 30,
                                                      ---------------------------     ---------------------------
                                                         2008            2007            2008            2007
                                                      -----------     -----------     -----------     -----------
<S>                                                   <C>             <C>             <C>             <C>
Weighted average number of common shares
    outstanding .................................      19,062,313      17,162,682      19,044,587      17,151,869
Effect of dilutive securities ...................         177,915         528,022         139,442         464,428
                                                      -----------     -----------     -----------     -----------
Weighted average dilutive common shares
    outstanding .................................      19,240,228      17,690,704      19,184,029      17,616,297
                                                      ===========     ===========     ===========     ===========

Income from continuing operations ...............     $   174,125     $    13,730     $    83,575     $   241,550
Income from discontinued operations, net of
    taxes .......................................            --         1,209,767            --         1,591,977
                                                      -----------     -----------     -----------     -----------
Net income ......................................     $   174,125     $ 1,223,497     $    83,575     $ 1,833,527
                                                      ===========     ===========     ===========     ===========

Basic and diluted income per common
     share:
     Continuing operations ......................     $      0.01     $      --       $      --       $      0.02
     Discontinued operations ....................            --              0.07            --              0.09
                                                      -----------     -----------     -----------     -----------
     Net income .................................     $      0.01     $      0.07     $      --       $      0.11
                                                      ===========     ===========     ===========     ===========

Accounting Pronouncements and Recent Regulatory Developments

         In September 2006, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157
defines fair value, establishes a framework for measuring fair value and
requires enhanced disclosures about fair value measurements. SFAS No. 157
requires companies to disclose the fair value of their financial instruments
according to a fair value hierarchy, as defined, and companies may be required
to provide additional disclosures based on that hierarchy. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after

                                       7
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<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


November 15, 2007 and interim periods within those fiscal years. On February 12,
2008 the FASB approved the Financial Staff Position ("FSP") SFAS No. 157-2,
"Effective Date of FASB Statement No. 157" ("FAS No. 157-2"), which delays the
effective date of SFAS No. 157 to fiscal years beginning after November 15,
2008, and interim periods within those fiscal years for non-financial assets and
non-financial liabilities, except for those items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually). The Company adopted SFAS No. 157 as it applies to financial
assets and liabilities as of January 1, 2008. The partial adoption of SFAS No.
157 is not expected to materially affect how the Company determines fair value
and it had no material impact on the Company's unaudited consolidated financial
statements for the six months ended June 30, 2008. The Company is currently
evaluating the impact that the adoption of SFAS No. 157, as it relates to
non-financial assets and liabilities, may have on its consolidated financial
statements.

         In March 2008, the FASB issued SFAS No. 161, "Disclosures About
Derivative Instruments and Hedging Activities - an amendment of FASB Statement
No. 133" ("SFAS No. 161"). SFAS No. 161 expands the disclosure requirements in
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
regarding an entity's derivative instruments and hedging activities. SFAS No.
161 is effective for the Company's fiscal year beginning January 1, 2008. As
SFAS No. 161 relates specifically to disclosures, SFAS No. 161 will have no
impact on the Company's financial condition, results of operations or cash
flows.

         In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles" (SFAS No. 162), which identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements that are presented in conformity with
GAAP. The Company plans to adopt SFAS No. 162 when it becomes effective. The
adoption of SFAS No. 162 will have no impact on the Company's consolidated
financial position or results of operations.

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
Shipwreck asset retirement obligation, deferred tax valuation allowance,
valuation of assumed liabilties, intangible lives, pipeline asset allocations,
and valuation of stock based transactions. Actual results could differ from
those estimates.

(3)      Acquisition of Gulfshore Midstream Assets

         On September 6, 2007, the Company through its wholly-owned subsidiary
Gateway Offshore Pipeline Company entered into an Asset Purchase Agreement with
Gulfshore Midstream Pipelines, Ltd. ("Gulfshore"), Gulfshore Midstream, LLC,
Trailblazer Partners, Ltd. and Bayou Trail Enterprises, Ltd. The effective date
of the transaction was August 1, 2007.

         Pursuant to the Asset Purchase Agreement, the Company acquired pipeline
assets from Gulfshore which extend from the western and central Gulf of Mexico
in water depths ranging from 50 to 650 feet. These pipeline assets range from 6"
to 16" in diameter. The Company acquired the assets for consideration consisting
of $3,130,000 in cash, 1,550,000 shares of Gateway common stock and the
assumption of certain liabilities related to the pipeline assets acquired.

         The acquisition extended the Company's presence in the offshore Gulf of
Mexico from Galveston Island to New Orleans, Louisiana. The acquisition also
increased the Company's throughput volumes by approximately 65,000 MMBtu per
day.

         The acquisition of Gulfshore was accounted for using the purchase
method of accounting in accordance with SFAS No. 141, "Business Combinations."
Assets acquired and liabilities assumed were recorded at their estimated fair
values as of August 1, 2007, and Gulfshore's results of operations have been
included in the Company's consolidated operations from that date.

                                       8

<PAGE>
<TABLE>
<CAPTION>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


         The total purchase price of the acquisition is as follows:

         Cash consideration                                 $      3,130,000
         Fair value of Gateway common stock                        1,162,500
         Estimated assumed liabilities                               374,333
         Direct transaction costs                                    274,596
                                                            ----------------
         Total purchase price                               $      4,941,429
                                                            ----------------


         Direct transaction costs of $274,596 include investment banking, legal
fees, and other external costs directly related to the acquisition which have
been capitalized as part of the purchase price allocation.

         We recorded intangible assets in conjunction with the acquisition in
the amount of $988,286. The intangible assets include the contract rights
attributable to the acqusition and will be amortized over a period from two to
seven years based on the estimated life of the contracts. We do not believe that
the acquired intangible assets have any significant residual value at the end of
their useful life.

         Amortization expense for intangible assets for the three and six months
ended June 30, 2008 was $39,201 and $78,403, respectively, and is recorded in
depreciation and amortization expense on the statement of operations.

Pro Forma Results of Operations

         The following unaudited pro forma consolidated results of operations
for the three and six months ended June 30, 2007 is presented as if the
Gulfshore acquisition had been made on January 1, 2007. The operations of
Gulfshore have been included in our statement of operations since the
acquisition effective date of August 1, 2007. The pro forma consolidated net
income and earnings per share includes the income from discontinued operations
as presented on the consolidated statement of operations.

                                                            --------------    --------------
                                                             Three Months       Six Months
                                                            Ended June 30,    Ended June 30,
                                                                 2007              2007
                                                            --------------    --------------

                 <S>                                          <C>               <C>
                 Revenues ................................    $3,407,308        $6,071,578
                 Operating costs and expenses ............     3,244,727         5,775,531
                                                              ----------        ----------
                 Operating income ........................       162,581           296,047
                 Other income ............................        24,918           293,041
                 Discontinued operations, net of tax .....     1,209,767         1,591,977
                                                              ----------        ----------
                 Net income ..............................    $1,397,266        $2,181,065
                                                              ==========        ==========
                 Basic earnings per share ................    $     0.08        $     0.13
                                                              ==========        ==========
                 Diluted earnings per share ..............    $     0.08        $     0.12
                                                              ==========        ==========

(4)      Stock-Based Compensation Plans

         Our 2007 Equity Incentive Plan provides for stock-based compensation
for officers, employees and non-employee directors.

         The Company accounts for stock based compensation under the provisions
of SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"). The
options generally vest ratably over three years and expire between five and ten
years.

         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 six months ended June
30, 2008 includes compensation cost for all share-based awards granted prior to,

                                       9
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


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.

         Compensation cost related to non-qualified stock options recognized for
the three months ended June 30, 2008 and 2007 was $28,016 and $13,527,
respectively. For the six months ended June 30, 2008 and 2007, compensation cost
was $44,353 and $19,817, respectively. We view all awards of share-based
compensation as a single award with an expected life equal to the average
expected life of component awards and amortize the fair value of the award over
the requisit service period.

         We receive a tax deduction for certain stock option exercises during
the period the options are exercised, generally for the excess of the value of
the stock over the strike price received on the date of exercise. During the six
months ended June 30, 2008, there were no 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. We record these deductions as a tax asset with a corresponding amount
recorded as additional paid-in capital when we can receive a tax cash savings
from these awards. Due to the Company having significant unused net
operating-loss carryforwards, the recording of this tax benefit is deferred
until such tax savings is realized.

         The fair value of each option award is estimated on the date of grant
using the Black-Scholes option-pricing model. Expected volatility is estimated
using 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. 110.

         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.

         At June 30, 2008, there was $221,165 of total unrecognized compensation
cost related to non-vested stock option awards which is expected to be
recognized over a weighted-average period of three years.

The following table represents stock option activity for the six months ended
June 30, 2008:

                                                                                      Weighted          Intrinsic
                                                                   Weighted            Average           Value of
                                                                   Average           Contractual       Options as of
                                                                   Exercise           Terms (in          June 30,
                                                 Shares              Price             years)              2008
                                             ----------------    --------------     --------------    ----------------
<S>                                                <C>                 <C>                <C>           <C>
Options outstanding, beginning of period..         790,000             $0.43              4.18
Options granted...........................         243,947              0.85              4.89
Options canceled..........................            --                 --                --
Options exercised.........................            --                 --                --
                                                 ---------
Options outstanding, end of period........       1,033,947             $0.53              3.93          $ 272,950
                                                 =========                                              =========
Options exercisable, end of period........         433,333             $0.38              3.50          $ 168,778
                                                 =========                                              =========

                                                        10
</TABLE>

<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


         The market value of the Company's common stock on June 30, 2008 was
$0.77 per share.

         The weighted-average grant-date fair value of options granted during
the six months ended June 30, 2008 was $0.56 per share.

         During the second quarter of 2008, the Company made a stock grant of
70,584 restricted shares of common stock to the Company's Board of Directors.
The value of the stock grant was $0.85 per share and recognized as Board
compensation expense.


(5)      Debt

         The Company's outstanding debt at June 30, 2008 consisted of the
following:

                  Trade note payable - Insurance.....   $  223,594
                  Revolving credit facility..........      600,000
                                                        ----------
                                                           823,594
                  Less current maturities............     (223,594)
                                                        ----------
                                                        $  600,000
                                                        ==========

Trade Notes Payable

         In January 2008, the Company executed a premium finance agreement for
its insurance premiums. The total of the note was $408,703 with an interest rate
of 7.10%. The note requires monthly principal and interest payments. The amount
of the monthly payment varies depending on any changes in coverage and policy
renewal period changes.

Revolving Credit Facility

         On August 23, 2007, the Company entered into a Credit Agreement (the
"Agreement") with a bank (the "Lender") regarding a revolving credit facility
provided by the Lender to the Company. The original borrowing base under the
Agreement has been established at $2.5 million, which may be increased at the
discretion of the Lender to an amount not to exceed $20 million. The credit
facility is secured by substantially all of the Company's assets and has a term
of two years, maturing in August 2009. Interest on outstanding balances will
accrue at Lender's prime rate, plus one percent and is payable on a monthly
basis.

             In connection with the acquisition of the Gulfshore Midstream
assets, the Company borrowed $1,150,000 on the credit facility. As of June 30,
2008, the interest rate was 6.00% and the available borrowings were $1,900,000.


Letters of Credit

         At June 30, 2008, the Company had outstanding letters of credit for gas
purchases totaling $1,150,000.

(6)      Commitments and Contingencies

         From time to time the Company is involved in litigation concerning its
properties and operations. There is no known or pending litigation expected to
have a material effect on the Company's consolidated financial statements.

(7)      Discontinued Operations

         On April 13, 2007, the Company entered into a Member Interest Purchase
Agreement with Navitas Assets, LLC, regarding the sale of all of the Company's
interest in Fort Cobb Fuel Authority, LLC, subject to due diligence and approval
by the Oklahoma Corporation Commission. The sale was completed on May 31, 2007.
The total purchase price for the sale consisted of cash of $2,585,000, plus the
cash paid for the net working capital of Fort Cobb in the amount of $121,289,

                                       11

<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


and other customary adjustments. In addition, Gateway was released from its
guarantee of bank debt owed by Fort Cobb. Accordingly, the consolidated
financial statement amounts for the three and six months ended June 30, 2007
have been adjusted to give effect to this disposition as a discontinued
operation.

     Following are the results of operations of the Fort Cobb subsidiary for the
three and six months ended June 30, 2007:

                                             Three Months         Six Months
                                                Ended               Ended
                                               June 30,            June 30,
                                                 2007                2007
                                             ------------        ------------
      Operating revenues (1) ...........     $    196,382        $  1,117,541
      Operating costs and expenses
        (2) ............................          189,334             692,097
      General and administrative
        expenses (3) ...................           27,722              62,074
      Other expenses, net (4) ..........          (26,493)            (28,327)
                                             ------------        ------------
      Income (loss) from
        discontinued operations,
        net of taxes ...................          (47,167)            335,043
      Gain on disposal of
        discontinued operations,
        net of taxes ...................        1,256,934           1,256,934
                                             ------------        ------------
      Net income .......................     $  1,209,767        $  1,591,977
                                             ============        ============

      Basic and diluted income
        per share from discontinued
        operations .....................             --                  0.02

      Basic and diluted income per
        share from gain on
        disposal of discontinued
        operations .....................             0.07                 0.07
                                             ------------         ------------
      Total ............................     $       0.07         $       0.09
                                             ============         ============

      Weighted average number
        of common shares
        outstanding:
      Basic ............................       17,162,682           17,151,869
      Diluted ..........................       17,690,704           17,616,297


(1)  This revenue stream contains gas sales to customers of Fort Cobb.

(2)  This cost is comprised of the gas purchased for sale to customers of Fort
     Cobb, depreciation expense, and other operating expenses.

(3)  This cost is comprised of direct general and administrative expenses of
     Fort Cobb.

(4)  This cost is comprised of interest expense, miscellaneous non-operating
     income, income taxes, and interest income.

                                       12

<PAGE>
<TABLE>
<CAPTION>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


(8) 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 the operations separately of the two main segments--Onshore Operations
and Offshore 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. Offshore Operations include natural gas and liquid hydrocarbon gathering,
transportation, and processing activities in the Gulf of Mexico in Texas as well
as 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.

         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 and amortization expense,
interest income or expense or income taxes. Operating margin is not a GAAP
measure but the components of operating margin are computed by using amounts
that are determined in accordance with GAAP. A reconciliation of operating
margin to operating income, which is its nearest comparable GAAP financial
measure, is included in the tables below.

         Summarized financial information for the three and six months ended
June 30, 2008 and 2007 of the Company's reportable segments from continuing
operations is as follows:

                                                        Three Months Ended               Six Months Ended
                                                            June 30,                        June 30,
                                                       2008           2007            2008             2007
                                                    -----------    -----------     -----------      -----------
                  Onshore Operations
        <S>                                         <C>            <C>             <C>              <C>
        Revenues.................................   $ 3,775,130    $ 2,595,205     $ 6,663,554      $ 4,406,768
        Cost of natural gas purchased.............    3,321,047      2,256,542       5,890,161        3,747,039
        Operation and maintenance expense.........       57,705         51,430         129,052          106,797
                                                    -----------    -----------     -----------      -----------
            Operating margin......................      396,378        287,233         644,341          552,932
        General and administrative expense........          181            170             231              251
        Depreciation and amortization expense....        49,115         53,500          98,102          109,723
                                                    -----------    -----------     -----------      -----------
            Operating income......................      347,082        233,563         546,008          442,958

        Interest expense..........................        1,593          2,195           3,346            4,528
        Capital expenditures......................            -         20,933               -           23,655

        Total assets..............................    4,818,381      5,223,470       4,818,381        5,223,470


                  Offshore Operations
        Revenues.................................   $   890,861    $   345,720     $ 1,704,004      $   732,044
        Operation and maintenance expense.........      233,333         62,053         423,002          128,299
                                                    -----------    -----------     -----------      -----------
            Operating margin......................      657,528        283,667       1,281,002          603,745
        Depreciation and amortization expense.....      137,500         38,139         273,815           76,661
        Accretion expense.........................        6,115          6,598          13,689           13,193
                                                    -----------    -----------     -----------      -----------
            Operating income......................      513,913        238,930         993,498          513,891

        Capital expenditures......................       29,203           --            31,657            3,630

        Total assets..............................    6,425,840      1,303,499       6,425,840        1,303,499

                                                       13
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


                                                        Three Months Ended              Six Months Ended
                                                             June 30,                        June 30,
                                                        2008           2007            2008             2007
                                                    -----------    -----------     -----------      -----------
                 Corporate Operations
        <S>                                         <C>            <C>             <C>              <C>
        General and administrative expense.......   $   634,838    $   482,783     $ 1,312,342      $ 1,006,500
        Depreciation and amortization expense.....        1,178            898           2,376            1,840
                                                    -----------    -----------     -----------      -----------
            Operating loss........................      636,016        483,681       1,314,718        1,008,340

        Interest expense..........................       35,601          3,564          77,536            7,218
        Capital expenditures......................          995         12,513           1,893           12,513

        Total assets..............................    3,715,263      4,052,674       3,715,263        4,052,674


                         Total
        Revenues.................................   $ 4,665,991    $ 2,940,925     $ 8,367,558      $ 5,138,812
        Cost of natural gas purchased.............    3,321,047      2,256,542       5,890,161        3,747,039
        Operation and maintenance expense.........      291,038        113,483         552,054          235,096
                                                    -----------    -----------     -----------      -----------
            Operating margin......................    1,053,906        570,900       1,925,343        1,156,677
        General and administrative expense........      635,019        482,953       1,312,573        1,006,751
        Depreciation and amortization expense.....      187,793         92,537         374,293          188,224
        Accretion expense.........................        6,115          6,598          13,689           13,193
                                                    -----------    -----------     -----------      -----------
            Operating income (loss)...............      224,979        (11,188)        224,788          (51,491)

        Interest expense..........................       37,194          5,759          80,882           11,746
        Capital expenditures......................       30,198         33,446          33,550           39,798

        Total assets..............................   14,959,484     10,579,643      14,959,484       10,579,643

             Reconciliation to net income
        Operating margin.........................   $ 1,053,906    $   570,900     $ 1,925,343      $ 1,156,677
        Less:
          Depreciation and amortization...........      187,793         92,537         374,293          188,224
          Accretion expense.......................        6,115          6,598          13,689           13,193
          General and administrative..............      635,019        482,953       1,312,573        1,006,751
          Interest expense........................       37,194          5,759          80,882           11,746
          Minority interest.......................       11,896         26,352          28,824           47,307
          Income tax expense......................        3,420              -          49,420                -
        Plus:
          Interest income.........................        5,305         26,828          16,611           40,390
          Gain on sale of intangible asset........            -              -               -          286,579
          Other income (loss), net................      (3,649)         30,201           1,302           25,125
          Discontinued operations, net of taxes...           -         (47,167)              -          335,043
          Gain on disposal of discontinued                   -
            operations - net of taxes.............                   1,256,934               -        1,256,934
                                                    -----------    -----------     -----------      -----------
        Net income...............................   $   174,125    $ 1,223,497     $    83,575      $ 1,833,527
                                                    ===========    ===========     ===========      ===========

                                                       14
</TABLE>

<PAGE>


GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2008
(Unaudited)


(9)      Subsequent Events


         On July 3, 2008, Gateway Processing Company, a subsidiary of Gateway
Energy Corporation (the "Company") closed on a Member Interest Purchase
Agreement with Allen Drilling Acquisition Company ("ADAC"), effective as of July
1, 2008, regarding the purchase of ADAC's one-third interest in Gateway-ADAC
Pipeline, LLC ("Gateway-ADAC") for $539,167 and 100,000 shares of Company common
stock. Gateway-ADAC owns the Company's Madisonville pipeline, connecting the
Madisonville gas treatment plant to two major pipelines.

                                       15

<PAGE>


Item  2. Management's Discussion and Analysis or Plan of Operations.
         -----------------------------------------------------------

         This Quarterly Report on Form 10-Q 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 in our Annual Report on Form 10-KSB for
the year ended December 31, 2007, and our quarterly reports on Form 10-QSB and
Form 10-Q. We cannot guarantee future results, levels of activities,
performance, or achievements. We undertake 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.

Revenue Recognition Policy

         Revenues from the sales of natural gas are generated under purchase and
sales contracts that are priced at the beginning of the month based upon
established gas indices. The Company purchases and sells the gas using the same
index to minimize commodity price risk. 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. Onshore and offshore transportation revenues are
recognized at the Company's 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 six to 30 years for pipeline systems,
gas plant and processing equipment, and from two to ten 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 June 30, 2008.

Future 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
long-lived assets, amortization of deferred loan costs, valuation of the
Shipwreck asset retirement obligation, deferred tax valuation allowance,

                                       16

<PAGE>


valuation of assumed liabilties, intangible lives, pipeline asset allocations,
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 six months
ended June 30, 2008 averaged $9.44 per MMBtu, compared to $7.55 for the same
period of the prior year. In the accompanying consolidated 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 purchase and sales contracts that are priced at
the beginning of the month based upon established gas indices 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 two main segments--Onshore operations and Offshore operations.

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Total Operations
                                                 Three Months Ended June 30,
                                              ---------------------------------
                                                 2008                   2007
                                              ----------             ----------
       Revenues...........................    $4,665,991             $2,940,925
       Operating margin...................     1,053,906                570,900
       Depreciation and amortization......       187,793                 92,537

         Operating margins for the three months ended June 30, 2008 increased
$483,000 compared to the same period of the prior year. Onshore operating margin
increased $109,000 and offshore operating margin increased by $374,000. These
segments are discussed individually below in greater detail.


Onshore Operations
                                                 Three Months Ended June 30,
                                              ---------------------------------
                                                 2008                   2007
                                              ----------             ----------
        Revenues..........................    $3,775,130             $2,595,205
        Operating margin..................       396,378                287,233
        Depreciation and amortization.....        49,115                 53,500

         Operating margins for onshore operations increased in the second
quarter by $109,000 compared to the same period of the prior year. The increase
was mainly due to an increase in sales volumes as well as renegotiated purchase
and sales contracts on the Company's Waxahachie distribution system, offset by a
reduction in transportation volumes on the Madisonville pipeline.

Offshore Operations
                                                 Three Months Ended June 30,
                                              ---------------------------------
                                                 2008                   2007
                                              ----------             ----------
        Revenues..........................    $  890,861             $  345,720
        Operating margin..................       657,528                283,667
        Depreciation and amortization.....       137,500                 38,139

         Operating margins for offshore operations increased in the second
quarter by $374,000 compared to the same period of the prior year. The increase
was due to a contribution of $310,000 by the Gulfshore assets, which were
acquired effective August 1, 2007. The Company's Bolivar pipeline system also
added to the margin increase due to an increase in transporation volumes. The
increase in depreciation and amortization expense is associated with the
Gulfshore Midstream offshore pipeline acquisition completed in the third quarter
of 2007.

Discontinued Operations

         On April 13, 2007, the Company entered into a Member Interest Purchase
Agreement with Navitas Assets, LLC, regarding the sale of all of the Company's
interest in Fort Cobb Fuel Authority, LLC, subject to due diligence and approval

                                       17

<PAGE>


by the Oklahoma Corporation Commission. The sale was completed on May 31, 2007.
The total purchase price for the sale consisted of cash of $2,585,000, plus the
cash paid for the net working capital of Fort Cobb in the amount of $121,289,
and other customary adjustments. In addition, Gateway was released from its
guarantee of bank debt owed by Fort Cobb. Accordingly, the consolidated
financial statement amounts for the three and six months ended June 30, 2007
have been adjusted to give effect to this disposition as a discontinued
operation.

     Following are the results of operations of the Fort Cobb subsidiary for the
three months ended June 30, 2007:

              Operating revenues (1)........................   $     196,382
              Operating costs and expenses (2)..............         189,334
              General and administrative expenses (3).......          27,722
              Other expenses, net (4).......................         (26,493)
                                                                ------------
              Loss from discontinued operations, net
                of taxes....................................         (47,167)
              Gain on disposal of discontinued
               operations, net of taxes.....................       1,256,934
                                                               -------------
              Net income....................................   $   1,209,767
                                                               =============

              Basic and diluted loss per share from
               discontinued operations, net of taxes......     $        --

              Basic and diluted income per share from
               gain on disposal of discontinued
               operations, net of taxes.....................           0.07
                                                               ------------
              Total.........................................   $       0.07
                                                               ============

              Weighted average number of common
               shares outstanding:
              Basic.........................................     17,162,682
              Diluted.......................................     17,690,704


     (1)  This revenue stream contains gas sales to customers of Fort Cobb.

     (2)  This cost is comprised of the gas purchased for sale to customers of
          Fort Cobb, depreciation expense, and other operating expenses.

     (3)  This cost is comprised of direct general and administrative expenses
          of Fort Cobb.

     (4)  This cost is comprised of interest expense, miscellaneous
          non-operating income, income taxes, and interest income.

Operations Support and Other Income (Expense)

         General and administrative expenses for the second quarter increased by
$152,000 compared to the same period in 2007. This increase relates to higher
overall salary and benefits due to the Company's addition of staff in late 2007
to help identify and support strategic growth opportunities and increased board
expenses due to $60,000 in stock based compensation related to immediately
vested restricted stock grants during the second quarter.

         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. Interest expense for the quarter ended June 30, 2008 increased
$31,000 compared to the same period in 2007 primarily because of the outstanding
balance on the Company's revolving credit facility which was used to acquire the
Gulfshore assets and the amortization of fees associated with the credit
facility.

                                       18

<PAGE>


         Income tax expense for the second quarter 2008 related to the estimated
state and federal tax provisions. The effective tax rate of 2% is a result of a
refund of previously paid taxes in the first quarter of 2008.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Total Operations
                                                  Six Months Ended June 30,
                                              ---------------------------------
                                                 2008                   2007
                                              ----------             ----------
       Revenues...........................    $8,367,558             $5,138,812
       Operating margin...................     1,925,343              1,156,677
       Depreciation and amortization......       374,293                188,224

         Operating margins for the six months ended June 30, 2008 increased
$769,000 compared to the same period of the prior year. Onshore operating margin
increased $92,000 and offshore operating margin increased by $677,000. These
segments are discussed individually below in greater detail.


Onshore Operations
                                                  Six Months Ended June 30,
                                              ---------------------------------
                                                 2008                   2007
                                              ----------             ----------
        Revenues..........................    $6,663,554             $4,406,768
        Operating margin..................       644,341                552,932
        Depreciation and amortization.....        98,102                109,723

         Operating margins for onshore operations increased in the second
quarter by $92,000 compared to the same period of the prior year. The increase
was mainly due to an increase in sales volumes as well as renegotiated purchase
and sales contracts on the Company's Waxahachie distribution system, offset by a
reduction in transportation volumes on the Madisonville pipeline.

Offshore Operations
                                                  Six Months Ended June 30,
                                              ---------------------------------
                                                 2008                   2007
                                              ----------             ----------
        Revenues..........................    $1,704,004             $  732,044
        Operating margin..................     1,281,002                603,745
        Depreciation and amortization.....       273,815                 76,661

         Operating margins for offshore operations increased by $677,000 for the
six months ended June 30, 2008 compared to the same period of the prior year.
The increase was due to a contribution of $662,000 by the Gulfshore assets,
which were acquired effective August 1, 2007. The Company's Bolivar pipeline
system also added to the margin increase due to an increase in transporation
volumes. The increase in depreciation and amortization expense is associated
with the Gulfshore Midstream offshore pipeline acquisition completed in the
third quarter of 2007.

Discontinued Operations

         On April 13, 2007, the Company entered into a Member Interest Purchase
Agreement with Navitas Assets, LLC, regarding the sale of all of the Company's
interest in Fort Cobb Fuel Authority, LLC, subject to due diligence and approval
by the Oklahoma Corporation Commission. The sale was completed on May 31, 2007.
The total purchase price for the sale consisted of cash of $2,585,000, plus the
cash paid for the net working capital of Fort Cobb in the amount of $121,289,
and other customary adjustments. In addition, Gateway was released from its
guarantee of bank debt owed by Fort Cobb. Accordingly, the consolidated
financial statement amounts for the three and six months ended June 30, 2007
have been adjusted to give effect to this disposition as a discontinued
operation.

                                       19

<PAGE>


         Following are the results of operations of the Fort Cobb subsidiary for
the six months ended June 30, 2007:

                Operating revenues (1).....................   $ 1,117,541
                Operating costs and expenses (2)...........       692,097
                General and administrative expenses (3)....        62,074
                Other expenses, net (4)....................       (28,327)
                                                              -----------
                Income from discontinued operations,
                   net of taxes............................       335,043
                Gain on disposal of discontinued
                   operations, net of taxes................     1,256,934
                                                              -----------
                Net income.................................   $ 1,591,977
                                                              ===========

                Basic and diluted income per share from
                   discontinued operations, net of taxes...   $      0.02

                Basic and diluted income per share from
                  gain on disposal of discontinued
                  operations, net of taxes.................          0.07
                                                              -----------
                Total......................................   $      0.09
                                                              ===========

                Weighted average number of common
                  shares outstanding:
                Basic......................................    17,151,869
                Diluted....................................    17,616,297


     (1)  This revenue stream contains gas sales to customers of Fort Cobb.

     (2)  This cost is comprised of the gas purchased for sale to customers of
          Fort Cobb, depreciation expense, and other operating expenses.

     (3)  This cost is comprised of direct general and administrative expenses
          of Fort Cobb.

     (4)  This cost is comprised of interest expense, miscellaneous
          non-operating income, income taxes, and interest income.

Operations Support and Other Income (Expense)

         General and administrative expenses for the six months ended June 30,
2008 increased by $306,000 compared to the same period in 2007. This increase
relates to higher overall salary and benefits due to the Company's addition of
staff in late 2007 to help identify and support strategic growth opportunities
and increased board expenses due to $60,000 in stock based compensation related
to immediately vested restricted stock grants during the second quarter.

         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. Interest expense for the six months ended June 30, 2008
increased $69,000 compared to the same period in 2007 primarily because of the
outstanding balance on the Company's revolving credit facility which was used to
acquire the Gulfshore assets during August 2007 and the amortization of fees
associated with the credit facility.

         Income tax expense for the six months ended June 30, 2008 related to
the estimated state and federal tax provision.

Liquidity and Capital Resources

         Going forward, the Company's strategy is to maximize the potential of
currently-owned properties, to construct new pipeline systems, and to acquire
properties that meet its economic performance hurdles. The Company is actively
seeking additional outside capital to allow it to accelerate the implementation
of its growth strategy, and such new capital may take several forms. 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 only at a pace that can be supported
by cash flows and our existing financing agreements.

         The Company had available cash of $1,217,933 at June 30, 2008.

                                       20

<PAGE>


         Net cash provided by continuing operating activities totaled
approximately $432,000 for the six months ended June 30, 2008, compared to
$673,000 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.

         On August 23, 2007, the Company entered into a Credit Agreement (the
"Agreement") with a bank (the "Lender"), regarding a revolving credit facility
provided by the Lender to the Company. The original borrowing base under the
Agreement has been established at $2.5 million, which may be increased at the
discretion of the Lender to an amount not to exceed $20 million. The credit
facility is secured by substantially all of the Company's assets and has a term
of two years. Interest on outstanding balances will accrue at Lender's prime
rate, plus one percent.

         In connection with the acquisition of the Gulfshore Midstream assets,
the Company borrowed $1,150,000 on the credit facility. As of June 30, 2008, the
interest rate was 6.00% and the available borrowings were $1,900,000.

         At June 30, 2008, the Company had outstanding letters of credit for gas
purchases totaling $1,150,000.

         Natural gas prices as represented by the NYMEX Henry Hub index averaged
$9.44 and $7.55 for the six months ended June 30, 2008 and 2007, respectively.
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 June 30, 2008;
however, see Note 6 to the consolidated financial statements regarding
Commitments and Contingencies.


Subsequent Events

         On July 3, 2008, Gateway Processing Company, a subsidiary of Gateway
Energy Corporation (the "Company") entered into a Member Interest Purchase
Agreement with Allen Drilling Acquisition Company ("ADAC"), effective as of July
1, 2008, regarding the purchase of ADAC's one-third interest in Gateway-ADAC
Pipeline, LLC ("Gateway-ADAC") for $539,167 and 100,000 shares of Company common
stock. Gateway-ADAC owns the Company's Madisonville pipeline, connecting the
Madisonville gas treatment plant to two major pipelines.


Item 4T.  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 the 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.

                                       21

<PAGE>


         There were no changes in the Company's internal controls over financial
reporting that occurred during the quarter ended June 30, 2008 that have
materially affected, or are reasonably likely to materially affect, the internal
control over financial reporting.


                           Part II - OTHER INFORMATION
                           ---------------------------

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

                  None

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

                  During the second quarter of 2008, the Company issued 70,584
                  shares of restricted common stock to the Company's Board of
                  Directors for their services as members of the Board.

                  On May 27, 2008, the Company issued 10,000 shares of common
                  stock to the Company's investor relations firm for services
                  rendered.


Item 3.           Defaults Upon Senior Securities
                  -------------------------------

                  None

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


         At the Annual Meeting of Stockholders held on May 21, 2008, the seven
nominees named below received the following votes with respect to the election
of the Board of Directors.

                                  Name          Votes For       Votes Withheld
                    ----------------------   ---------------  -----------------

                    Charles O. Buckner         14,150,879             584,689
                    Steven W. Cattron          13,674,187           1,061,381
                    William A. Henry           14,149,779             585,789
                    Robert Panico              12,040,606           2,694,962
                    John A. Raasch             13,035,154           1,700,414
                    J. Darby Sere'             14,149,126             586,442
                    Gordon L. Wright           14,135,879             599,689


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

                                       22

<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

           August 14, 2008
           ---------------
               (Date)


                                       23