UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-QSB





XQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004.



__TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____.





SHALLBETTER INDUSTRIES, INC.

(Name of small business in its charter)



|Minnesota                                      | 0-31297                  | 41-1961936                       
|---------------------------------------------- | ------------------------ | ---------------------------------
|(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.)

|1090 West Georgia Street, #1305
Vancouver, British Columbia, Canada | V6E 3V7   
|------------------------------------------------------------------- | ----------
|(Address of Principal Executive Office)                             | (Zip Code)



Issuer's telephone number:  (604) 685-9316



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ..X..  No ....



Applicable only to corporate issuers



State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.  At June 30, 2004, the following shares were outstanding: 20,000,000



Transitional Small Business Disclosure Format (Check one): Yes...     No  X





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PART 1 - FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS AND EXHIBITS



(a)

The unaudited financial statements of registrant for the six months ended June 30, 2004, follow.  The financial statements reflect all adjustments, which, in the opinion of management, are necessary to a fair statement of the results for the interim period presented.













SHALLBETTER INDUSTRIES, INC.

(A Development Stage Company)

FINANCIAL STATEMENTS





Quarter Ended June 30, 2004









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|INDEX TO FINANCIAL STATEMENTS:                  |  
|----------------------------------------------- | -
|                                                |  
|Consolidated Balance Sheets                     | 3
|Consolidated Statements of Operations           | 4
|Consolidated Statements of Stockholders’ Equity | 5
|Consolidated Statements of Cash Flows           | 6
|Notes to Consolidated Financial Statements      | 7









































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|SHALLBETTER INDUSTRIES, INC.  
|------------------------------
|(an exploration stage company)
|CONSOLIDATED BALANCE SHEETS   

|                                                       |   |             |   |              
|------------------------------------------------------ | - | ----------- | - | -------------
|                                                       |   | June 30,    |   | September 30,
|(Expressed in U.S. Dollars)                            |   | 2004        |   | 2003         
|                                                       |   | (Unaudited) |   | (Audited)    
|ASSETS                                                 |   |             |   |              
|Current assets                                         |   |             |   |              
|Cash and cash equivalents                              | $ | 55          | $ | 55           
|Prepaid expenses                                       |   | 136         |   | -            
|                                                       |   |             |   |              
|                                                       | $ | 191         | $ | 55           
|                                                       |   |             |   |              
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)         |   |             |   |              
|Current liabilities                                    |   |             |   |              
|Accounts payable and other accrued liabilities         | $ | 11,974      | $ | 12,409       
|Due to related parties                                 |   | 1,534,891   |   | 437,081      
|Total current liabilities                              |   | 1,546,865   |   | 449,490      
|                                                       |   |             |   |              
|Commitments and contingencies                          |   | -           |   | -            
|                                                       |   |             |   |              
|Stockholders' Equity (Deficit)                         |   |             |   |              
|Preferred Stock: $0.01 par value                       |   |             |   |              
|Authorized: 5,000,000 shares                           |   |             |   |              
|Issued and outstanding: nil                            |   | -           |   | -            
|Common Stock: $0.01 par value                          |   |             |   |              
|Authorized: 45,000,000 shares                          |   |             |   |              
|Issued and outstanding: 20,000,000 (2003 : 20,000,000) |   | 200,000     |   | 200,000      
|Additional paid in capital                             |   | (110,848)   |   | (140,575)    
|Deficit accumulated during the development stage       |   | (1,635,826) |   | (508,860)    
|Total Stockholders' Equity (Deficit)                   |   | (1,546,674) |   | (449,435)    
|                                                       |   |             |   |              
|                                                       | $ | 191         | $ | 55           
|                                                       |   |             |   |              

|See accompanying condensed notes
|--------------------------------





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|SHALLBETTER INDUSTRIES, INC.         
|-------------------------------------
|(an exploration stage company)       
|CONSOLIDATED STATEMENTS OF OPERATIONS
|(Unaudited)                          

| |                 |  |  |  |  |  |  |  | 
| | --------------- |  |  |  |  |  |  |  | 
| | Cumulative from |  |  |  |  |  |  |  | 

| | inception (April 1, |  | Three Months Ended |  | Nine Months Ended
| | ------------------- |  | ------------------ |  | -----------------

|                                     | 2002) through              |  | June 30,         |  | June 30,        |  | June 30,        |  | June 30,       
|------------------------------------ | -------------------------- |  | ---------------- |  | --------------- |  | --------------- |  | ---------------
|(Expressed in U.S. Dollars)          | June 30, 2004              |  | 2004             |  | 2003            |  | 2004            |  | 2003           
|                                     |                            |  |                  |  |                 |  |                 |  |                
|General and administrative expenses  |                            |  |                  |  |                 |  |                 |  |                
|Accounting and legal                 | $                   49,679 |  | $         8,927  |  | $       11,205  |  | $       26,565  |  | $      11,558  
|Office and miscellaneous             | 39,458                     |  | 25,144           |  | 1,579           |  | 36,234          |  | 1,611          
|Consulting fees                      | 272,500                    |  | 212,500          |  | 15,000          |  | 242,500         |  | 15,000         
|Exploration                          | 150,000                    |  | 150,000          |  | -               |  | 150,000         |  | -              
|Foreign exchange loss (gain)         | 1,332                      |  | (124)            |  | 615             |  | 173             |  | 579            
|Interest (imputed - related parties) | 39,152                     |  | 13,669           |  | 3,175           |  | 29,727          |  | 4,713          
|Management fees                      | 556,474                    |  | 155,500          |  | 50,000          |  | 318,500         |  | 118,987        
|Mineral claims license fees          | 32,882                     |  | 7,272            |  | 12,805          |  | 7,272           |  | 12,805         
|Geological reports                   | 36,000                     |  | 18,000           |  | 9,000           |  | 18,000          |  | 9,000          
|Rent                                 | 99,661                     |  | 12,000           |  | 12,500          |  | 36,000          |  | 31,831         
|Salaries and benefits                | 186,000                    |  | 48,000           |  | 12,000          |  | 114,000         |  | 36,000         
|Travel                               | 172,688                    |  | 123,215          |  | 12,347          |  | 147,995         |  | 12,347         
|                                     |                            |  |                  |  |                 |  |                 |  |                
|                                     | 1,635,826                  |  | 774,103          |  | 140,226         |  | 1,126,966       |  | 254,431        
|                                     |                            |  |                  |  |                 |  |                 |  |                
|Net loss for the period              | $          (1,635,826)     |  | $  (774,103)     |  | $  (140,226)    |  | $(1,126,966)    |  | $  (254,431)   
|                                     |                            |  |                  |  |                 |  |                 |  |                
|Basic and diluted net loss per share |                            |  | $         (0.04) |  | $        (0.01) |  | $        (0.06) |  | $        (0.02)
|                                     |                            |  |                  |  |                 |  |                 |  |                
|Weighted average shares outstanding  |                            |  | 20,000,000       |  | 16,376,345      |  | 20,000,000      |  | 16,376,345     
|                                     |                            |  |                  |  |                 |  |                 |  |                
|                                     |                            |  |                  |  |                 |  |                 |  |                
|                                     |                            |  |                  |  |                 |  |                 |  |                
|                                     |                            |  |                  |  |                 |  |                 |  |                
|                                     |                            |  |                  |  |                 |  |                 |  |                
|                                     |                            |  |                  |  |                 |  |                 |  |                

|See accompanying condensed notes
|--------------------------------





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|SHALLBETTER INDUSTRIES, INC.                                              
|--------------------------------------------------------------------------
|(an exploration stage company)                                            
|CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY                            
|FOR THE PERIOD FROM DATE OF INCEPTION (NOVEMBER 16, 2001) TO JUNE 30, 2004

|                                                          |            |            |                  | Deficit                |                
|--------------------------------------------------------- | ---------- | ---------- | ---------------- | ---------------------- | ---------------
|                                                          |            |            |                  | Accumulated            |                
|                                                          |            | Stock      | Additional       | during the             |                
|                                                          | Common     | Amount At  | Paid In          | Development            |                
|(Expressed in U.S. Dollars)                               | Shares     | Par Value  | Capital          | Stage                  | Total          
|                                                          |            |            |                  |                        |                
|Initial capitalization as a result of reverse acquisition | 16,376,345 | $  163,763 | $      (113,763) | $                    - | $        50,000
|                                                          |            |            |                  |                        |                
|Imputed interest on amount due to related parties         | -          | -          | 3,076            | -                      | 3,076          
|                                                          |            |            |                  |                        |                
|Net loss for the period                                   |            |            |                  | (228,409)              | (228,409)      
|                                                          |            |            |                  |                        |                
|Balance, March 31, 2003                                   | 16,376,345 | $ 163,763  | $      (110,687) | $      (228,409)       | $    (175,333) 
|                                                          |            |            |                  |                        |                
|Recapitalization to effect acquisition of Shallbetter     | 3,623,655  | 36,237     | (36,237)         | -                      | -              
|                                                          |            |            |                  |                        |                
|Imputed interest on amount due to related parties         | -          | -          | 6,349            | -                      | 6,349          
|                                                          |            |            |                  |                        |                
|Net loss for the period                                   | -          | -          | -                | (280,451)              | (280,451)      
|                                                          |            |            |                  |                        |                
|Balance, September 30, 2003                               | 20,000,000 | $ 200,000  | $      (140,575) | $      (508,860)       | $    (449,435) 
|                                                          |            |            |                  |                        |                
|Imputed interest on amount due to related parties         | -          | -          | 29,727           | -                      | 29,727         
|                                                          |            |            |                  |                        |                
|Net loss for the period                                   | -          | -          | -                | (1,126,966)            | (1,126,966)    
|                                                          |            |            |                  |                        |                
|Balance, June 30, 2004                                    | 20,000,000 | $ 200,000  | $      (110,848) | $   (1,635,826)        | $ (1,546,674)  
|                                                          |            |            |                  |                        |                
|                                                          |            |            |                  |                        |                
|                                                          |            |            |                  |                        |                
|                                                          |            |            |                  |                        |                
|                                                          |            |            |                  |                        |                

|See accompanying condensed notes
|--------------------------------







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|SHALLBETTER INDUSTRIES, INC.         
|-------------------------------------
|(an exploration stage company)       
|CONSOLIDATED STATEMENTS OF CASH FLOWS
|(Unaudited)                          

| |  |                 |  |  |  | 
| |  | --------------- |  |  |  | 
| |  | Cumulative from |  |  |  | 

| |  | inception (April 1, |  | Nine Months Ended
| |  | ------------------- |  | -----------------

|                                                |   | 2002) through |   | June 30,    |   | June 30, 
|----------------------------------------------- | - | ------------- | - | ----------- | - | ---------
|(Expressed in U.S. Dollars)                     |   | June 30, 2004 |   | 2004        |   | 2003     
|Cash flows from operating activities            |   |               |   |             |   |          
|Net loss                                        | $ | (1,635,826)   | $ | (1,126,966) | $ | (254,431)
|Adjustments to reconcile net loss to net cash   |   |               |   |             |   |          
|used in operating activities :                  |   |               |   |             |   |          
|Interest (imputed - related parties)            |   | 39,152        |   | 29,727      |   | 4,713    
|Changes in assets and liabilities:              |   |               |   |             |   |          
|Prepaid expenses                                |   | (136)         |   | (136)       |   | -        
|Accounts payable and accrued liabilities        |   | 11,974        |   | (435)       |   | -        
|Net cash used in operating activities           |   | (1,584,836)   |   | (1,097,810) |   | (249,718)
|                                                |   |               |   |             |   |          
|Cash flows from financing activities            |   |               |   |             |   |          
|Proceeds from issuance of common stock          |   | 50,000        |   | -           |   | -        
|Advances from related parties                   |   | 1,534,891     |   | 1,097,810   |   | 249,770  
|Net cash provided by financing activities       |   | 1,584,891     |   | 1,097,810   |   | 249,770  
|                                                |   |               |   |             |   |          
|Increase in cash and cash equivalents           |   | 55            |   | -           |   | 52       
|Cash and cash equivalents - beginning of period |   | -             |   | 55          |   | -        
|Cash and cash equivalents - end of period       | $ | 55            | $ | 55          | $ | 52       
|                                                |   |               |   |             |   |          
|                                                |   |               |   |             |   |          
|                                                |   |               |   |             |   |          
|                                                |   |               |   |             |   |          

|See accompanying condensed notes
|--------------------------------







6

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|SHALLBETTER INDUSTRIES, INC.                            
|--------------------------------------------------------
|(an exploration stage company)                          
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
|(Unaudited)                                             



1.  Basis of Presentation

The accompanying unaudited interim consolidated balance sheets, statements
of operations and cash flows reflected all adjustments, consisting of normal recurring adjustments and other adjustments,
that are, in the opinion of management, necessary for a fair presentation of the financial position of the Company,
at June 30, 2004, and the results of operations and cash flows for the interim periods ended June 30, 2004 and 2003.
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instruction
for Form 10-QSB pursuant to the rules and regulations of Securities and Exchange Commission and, therefore, do not
include all information and notes normally provided in audited financial statements and should be read in conjunction
with the Company's consolidated financial statements for the year ended September 30, 2003 included in the annual report
previously filed on Form10-KSB. The results of operations for the interim periods presented are not necessarily indicative
of the results to be expected for the full year.



2.  Related Party Transactions

(a)

The amounts due to related parties are payable to directors and principal shareholders. These amounts are unsecured, interest free and no stated terms of repayment. The Company recorded imputed interest of $29,727 at an interest rate of 5.35% per annum on the amounts due to related parties for the nine-month period ended June 30, 2004.

(b)

The Company incurred the following expenses to its directors and principal shareholders:

|                |  |           | Three months ended |          | Nine-months ended
|--------------- |  | --------- | ------------------ | -------- | -----------------
|                |  |           | June 30,           |          |                  
|                |  |           | 2004               |          | 2003             
|                |  |           |                    |          |                  
|Management fees |  | $ 155,500 |                    | $ 49,983 |                  
|Consulting fees |  | 195,000   |                    | -        |                  
|                |  |           | $ 350,500          |          | $ 49,983         



On May 18, 2004, the Company arranged debt settlements of $379,996 with directors and officers through issuance of 211,109 shares at $1.80 each. The shares have not been issued as of June 30, 2004.



On May 18, 2004, the Company arranged debt settlement of $336,020 with a consultant through issuance of 186,678 shares at $1.80 each. The shares have not been issued as of June 30, 2004.









7

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS



Certain statements in this report, including statements in the following discussion, which are not statements of historical fact, are what are known as forward-looking statements, which are basically statements about the future.  For that reason, these statements involve risk and uncertainty since no one can accurately predict the future.  Words such as plans, intends, will, hopes, seeks, anticipates, expects, and the like, often identify such forward-looking statements, but are not the only indication that a statement is a forward-looking statement.  Such forward-looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits.  Numerous factors and future events could cause the Company to change such plans and objectives, or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits.  Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10QSB and in the Company’s other filings with the Securities and Exchange Commission.  No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.



Introduction



The information presented here should be read in conjunction with Shallbetter Industries, Inc.'s financial statements and other information included in this Form 10-QSB. When used in this Form 10-QSB, the words "expects", "anticipates, "estimates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties, including those set forth below under "Risks and Uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.



Plan of Operations



Shallbetter Industries Inc. (the Company) is an exploration stage company engaged in the acquisition and exploration of mineral properties in the Outer Mongolia. The Company is a reporting issuer trading on the OTCBB under the symbol SBNS.



The business of mineral deposit exploration and extraction involves a high degree of risk. Few properties that are explored are ultimately developed into production. At present, none of the Company’s properties has a known body of commercial ore. Other risks facing the Company include competition, reliance on third parties and joint venture partners, environmental and insurance risks, political and environmental instability, statutory and regulatory requirements, fluctuations in mineral prices and foreign currencies, share price volatility, title risks, and uncertainty of additional financing.



The Company owns three mineral exploration licenses in the Gobi Altai central Mongolian region covering an area of approximately 75,000 hectares. Our present focus is to evaluate, explore and develop the exploration concessions granted us, subject to review of a detailed exploration program.





8

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During the period, the Company has initiated an early stage exploration program by sending a qualified team of engineers and geologists from China to engage in assay works and soil sampling on the Outer Mongolian Gobi Altai region concessions.  Soil samplings from various targeted anomalous zones were taken for evaluation and analysis. A full independent evaluation report will be published by the Company as soon as the results become available.



Funding during this period was raised through advance from significant shareholders.  These funds were used to finance ongoing expenses incurred by the Company.



Liquidity and Working Capital



As of June 30, 2004, the Company had total current assets of $191 and total current liabilities of $1,546,865. The Company has a working capital deficit of $1,635,826. Currently, its significant shareholders finance the Company’s operation.



The Company has no other capital resources other than the ability to use its common stock to raise additional capital. No commitments to provide additional funds have been made by management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover operating expenses.



Outlook



We are now seeking strategic joint venture partners that will bring the necessary resources and experience to develop and further explore targeted regions of the concessions in Outer Mongolia.



We are also trying to obtain additional funding through the sale of our securities by private placement or through several resource-based investment bank financings.



We will concentrate our efforts on drilling and regional exploration work on the mineral claims currently held by us and will consider additional projects if and when opportunities arise.



Results of Operations



The Company has had no operations during the nine-month period ended June 30, 2004. The Company received no revenue and incurred expenses of $1,126,966 stemming from general and administrative and exploration expenditures as compared to $254,431 for the same period of last year. The increase of $872,535 was mainly due to the management fees and consulting fees paid to the directors and consultants for their services and exploration work involved.



The Company expects the trend of losses to continue at an increasing rate until we can achieve commercial production on some of the mineral properties or sell some of mineral properties, of which there can be no assurance.



On May 18, 2004, the Company approved debt settlements of $379,996 with directors and officers through issuance of 211,109 shares at $1.80 each, and a debt settlement of
$336,020 with a consultant through issuance of 186,678 shares at $1.80 each. As of June 30, 2004, the shares had not been issued. It is expected
that the shares will be issued during the fourth quarter of the current fiscal year.



The Company has no other capital resources other than the ability to use its common stock to achieve additional capital. No commitments to provide additional funds have been made by management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover operation expenses.







9

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ITEM 3.

CONTROLS AND PROCEDURES



As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports.  It should be noted that design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.



In addition, there has been no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REPORT REFLECT MANAGEMENT’S BEST JUDGMENT BASED UPON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS AND UNCERTAINTIES.  ACTUAL RESULTS MAY VARY MATERIALLY.





PART II - OTHER INFORMATION



ITEM 1.

LEGAL PROCEEDINGS



ITEM 2.

CHANGES IN SECURITIES



ITEM 3.

DEFAULTS UPON SENIOR SECURITIES



ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K.



(a)

The following exhibits are filed herewith:



31.1

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



31.2

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



32.1

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



32.2

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



(b)

Two reports on Form 8K/A were filed by the Company on May 14, 2004.  The initial report regarding change of certifying acountants was filed
on December 19, 2003.  The amended reports filed May 14, 2004, were filed to provide additional disclosure regarding the change in accountants
and to attached the response letter from the previous accountant.





10

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SIGNATURES



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



SHALLBETTER INDUSTRIES, INC.







By:/S/ ANTHONY C.Y. CHOW

Anthony C. Y. Chow, Chairman and CEO





By: /S/ TERRY W. WONG

Terry W. Wong, Director and President





Date: August 13, 2004

































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