11/18/2003 4:13:31 PM
(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT=S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATION

General As used herein the term "Company" refers to Gateway Distributors, Ltd., a Nevada corporation, its subsidiaries and predecessors, unless the context indicates otherwise. The Company was originally incorporated in the State of Nevada on May 26, 1993. Gateway sold the TRSG Inc shell in exchange for reduction of debt and purchased the operating assets. On January 7, 2003, the Company created a new Nevada corporation, The Right Solution Gateway, as one of it's operating subsidiaries. This operating subsidiary bought the assets from the Company in exchange for 100% of the common stock of The Right Solution Gateway, it's subsidiary.

As a result of this transaction, the Company is now a holding company and does not have any direct operations. All of the Company's operations are conducted through The Right Solution Gateway and Grandma Hamman's. These products are marketed through retail sales and network marketing organizations within the United States and wholesale personal import sales outside of the United States.

Network marketing enables the Company's subsidiary The Right Solution Gateway's independent distributors in the United States to earn profits by selling the Company's products to retail consumers. Distributors may also develop their own distributor downline organizations by sponsoring others to do business in any market where the Company operates, entitling the sponsors to receive overrides or commissions (cash incentives, including royalties and bonuses) on product sales within their downline organizations.

Retail and store sales are completed through Grandma Hamman's, also a wholly owned subsidiary of the Company.

The Company believes that through special blends, whole foods, such as grains and vegetables, can be combined to help produce optimum health. Recent studies reveal that prevention through health maintenance is a key to enjoying a healthier lifestyle. However, health challenges today are at an all- time high. The need for proper nutrition has never been greater. The Company markets whole food products based on the proposition that pure, natural, unprocessed, unpreserved, unsprayed, simple, organic foods provide whole food nutrition. The Company believes that whole food nutrition is the key, the answer, and the solution to creating a long healthy life. The health care products that the Company sells are intended to provide nutritional supplementation to the product's users. The products are not intended to diagnose, treat, cure or prevent any disease.

Results of Operations

Sales for the Nine Months ended September 30, 2003, were $851,599 compared to $839,863 for the same period in 2002. Sales for the three months ended September 30, 2003 of $264,000 are down $17,000 from the comparable three months ended September 30, 2002 of $281,000. This is primarily due to reduced pricing intended to increase subscriptions to automatic monthly product shipments. The increase in sales over the nine month period of approximately $11,000 is attributable to the Company=s maintaining sufficient inventory and the purchase of it's subsidiary, Grandma Hamman's. The inventory being maintained at sufficient levels was the result of the Company's diligence in tracking monthly usage of product, length of time required in manufacturing and delegating product funding.

Costs of sales were $192,496 for the Nine Months ended on September 30, 2003, compared to $200,196 for the comparable period in 2002 and for the three months ended September 30, 2003 were $67,710, a $15,384 decrease from $83,094 for the same three months in 2002. Cost of sales decreased by

approximately $8,000 for the nine months and $15,384 for the three months due to the diligence listed above.

Selling, general, and administrative expenses were $1,322,278 for the Nine Months ended on September 30, 2003 and $2,778,896 for the comparable period in 2002, a decrease of approximately $1,456,000. For the three months ended September 30, 2003 these expenses were $580,198 a drop of $691,749 compared to the three months ended September 20, 2002. The primary reason for these decreases was a drop in professional fees and implementing cost cutting measures.

Net loss was $793,590 during the Nine Months ended September 30, 2003, compared to a net loss of $1,878,958 for the comparable period in 2002. The Company's reduction in the operating loss for the Nine Months ended September 30, 2003, of approximately $1,085,368 was the result of the reduction in professional fees and implementing cost cutting measures. The decrease in net loss for the three months ended September 30, 2003 to $429,719 from a net loss for the three months ended September 20, 2002 of $885,410 can be attributed to the same factors.

Liquidity and Capital Resources

The Company had a net working capital deficit of $5,107,000 at the end of September 2003, as compared to a $5,956,000 deficit at the end of December 31, 2002. The Company's working capital deficit decreased $849,000 primarily as a result of converting debt for stock of $278,000 and proceeds from the sales of stock.

Cash flow from operations was $(576,295) for the Nine Months ended September 30, 2003, compared with cash flow used in operations of $(871,756) for the comparable period in 2002, an improvement of $295,000.

Cash flows used in investing activities for the Nine Months ended September 30, 2003 were $(329,988), compared with cash income from investing activities of $63,346 for the comparable period in 2002, a net change of $393,000.

Cash flow received in financing activities was $968,860 for the Nine Months ended September 30, 2003 as compared to $805,531 received from the comparable period in 2002, an increase of $163,000. Due to the Company's cash flow fluctuations, the Company experiences occasional cash flow shortages. To satisfy its cash requirements, including the debt service, the Company must periodically raise funds from external sources. This often involves the Company conducting exempt offerings of its equity securities.

Impact of Inflation

The Company believes that inflation has had a negligible effect on operations over the past two years. The Company believes that it can offset inflationary increases in the cost of materials and labor through increased sales and improved operating efficiency.

Capital Expenditures

The Company made approximately $152,000 in capital expenditures over the periods covered by this report.

Going Concern

The Company's ability to continue as a going concern is an issue raised as a result of continued losses over the years. The Company's ability to continue as a going concern is subject to the ability of the Company to obtain a profit and /or obtaining the necessary funding from outside sources. Management is committed to taking the necessary steps to ensure the Company remains a going concern. Management's plan to address the Company's ability to continue

as a going concern includes: (1) obtaining additional funding from the sale of the Companies securities; (2) increasing sales; (3) obtaining loans and grants from various financial institutions where possible. Although management believes that it will be able to obtain the necessary funding to allow the Company to remain a going concern through the methods discussed above, there can be no assurances that such methods will prove successful.

Nov 18, 2003