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 March 31, 2005.



__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.)
|                                               | 2500 Kalakaua Avenue, #301
Honolulu, Hawaii | 96815                            
|                                               | (Address of Principal Executive Office)     | (Zip Code)                       



Issuer's telephone number:  (604) 999-2189





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.  As of May 27, 2005, the following shares were outstanding: 20,397,787.



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





1







---

QUARTERLY FINANCIAL STATEMENTS OF

SHALLBETTER INDUSTRIES, INC.

MARCH 31, 2005
INDEX





|         |                                                                                                                        | PAGE
|-------- | ---------------------------------------------------------------------------------------------------------------------- | ----
|         |                                                                                                                        |     
|PART I.  | FINANCIAL INFORMATION                                                                                                  |     
|         |                                                                                                                        |     
|Item 1.  | Financial Statements and Condensed Notes                                                                               |     
|         |                                                                                                                        |     
|         | Condensed Consolidated Balance Sheet as of March 31, 2005 (Unaudited)                                                  | 3   
|         | Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2005 and 2004 (Unaudited) | 4   
|         | Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended March 31, 2005 and 2004 (Unaudited) | 5   
|         | Statement of Stockholders Deficiency from inception to March 31, 2005                                                 | 6   
|         | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                       | 7   
|         |                                                                                                                        |     
|Item 2.  | Managements Discussion and Analysis or Plan of Operation                                                              | 8   
|Item 3.  | Controls and Procedures                                                                                                | 10  
|         |                                                                                                                        |     
|PART II. | OTHER INFORMATION                                                                                                      |     
|         |                                                                                                                        |     
|Item 1.  | Legal Proceedings                                                                                                      | 11  
|Item 2.  | Changes in Securities and Use of Proceeds                                                                              | 11  
|Item 3.  | Default Upon Senior Securities                                                                                         | 11  
|Item 4.  | Submission of Matters to a Vote of Security Holders                                                                    | 11  
|Item 5.  | Other Information                                                                                                      | 11  
|Item 6.  | Exhibits                                                                                                               | 11  
|         | Signatures                                                                                                             | 12  







2









---

PART 1 - FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS AND EXHIBITS



The unaudited financial statements of registrant for the three and six months ended March 31, 2005, 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)                            
|CONSOLIDATED BALANCE SHEET                               
|                                                         
|                                                         
|(Expressed in U.S. Dollars)                              
|                                                         
|ASSETS                                                   
|                                                         
|LIABILITIES AND STOCKHOLDERS' DEFICIENCY                 
|Current liabilities                                      
|Accounts payable and accrued liabilities                 
|Due to related parties                                   
|Total current liabilities                                
|                                                         
|Commitments and contingencies                            
|                                                         
|Stockholders' Deficiency                                 
|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: 20,397,787                       
|Additional paid in capital                               
|Deficit accumulated during the development stage         
|Total Stockholders' Deficiency                           
|                                                         
|Total liabilities and stockholders' deficiency           
|                                                         
|                                                         
|See condensed notes to consolidated financial statements.





3





---



|SHALLBETTER INDUSTRIES, INC.                             
|---------------------------------------------------------
|(a development stage company)                            
|CONSOLIDATED STATEMENTS OF OPERATIONS                    
|(Unaudited)                                              
|                                                         
|                                                         
|                                                         
|                                                         
|(Expressed in U.S. Dollars)                              
|                                                         
|General and administrative expenses                      
|Accounting and legal                                     
|Consulting fees                                          
|Exploration                                              
|Foreign exchange loss                                    
|Geological reports                                       
|Interest (imputed - related parties)                     
|Management fees                                          
|Mineral claims license fees                              
|Office and miscellaneous                                 
|Rent                                                     
|Salaries and benefits                                    
|Travel                                                   
|                                                         
|Total general and administrative expenses                
|                                                         
|Net loss for the period                                  
|                                                         
|Basic and diluted net loss per share                     
|                                                         
|Weighted average shares outstanding                      
|                                                         
|                                                         
|See condensed notes to consolidated financial statements.



4





---



|SHALLBETTER INDUSTRIES, INC.                                
|------------------------------------------------------------
|(a development stage company)                               
|CONSOLIDATED STATEMENTS OF CASH FLOWS                       
|(Unaudited)                                                 
|                                                            
|                                                            
|                                                            
|(Expressed in U.S. Dollars)                                 
|                                                            
|Cash flows from operating activities                        
|Net loss                                                    
|Adjustments to reconcile net loss to net cash flows         
|used in operating activities :                              
|Interest (imputed - related parties)                        
|Changes in assets and liabilities                           
|Increase in accounts payable and accrued liabilities        
|Net cash flows used in operating activities                 
|                                                            
|Cash flows from financing activities                        
|Proceeds from the issuance of common stock                  
|Increase in amounts due to related parties                  
|Net cash provided by financing activities                   
|                                                            
|Increase (decrease) in cash and cash equivalents            
|Cash and cash equivalents, beginning of period              
|Cash and cash equivalents, end of period                    
|                                                            
|Supplementary cash flow information:                        
|Cash paid for interest and income taxes                     
|                                                            
|Supplementary non-cash investing and financing activities:  
|Conversion of debt to equity                                
|                                                            
|See condensed notes to consolidated financial statements.

5
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            

---

SHALLBETTER INDUSTRIES, INC.

(A development stage company)

Notes to Consolidated Financial Statements

March 31, 2005

(Unaudited)

(Expressed in U.S. Dollars)



1. Basis of Presentation

The accompanying unaudited interim consolidated balance sheets, statements of operations, stockholders deficiency and cash flows reflect 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 March 31, 2005, and the results of operations and cash flows for the interim periods ended March 31, 2005 and 2004. 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 the 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, 2004 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.



These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has not generated any revenue and requires additional funds to maintain its operations. Management's plans in this regard are to raise equity financing as required. There is no assurance that such additional funds will be available for the Company on acceptable terms, if at all. Management believes that actions presently taken to revise the Company's operating and financial requirements provide the opportunity for the Company to continue as a going concern. The Company's ability to achieve these objectives cannot be determined at this time. If the Company is unsuccessful in its endeavors, it may be forced to cease operations. These consolidated financial statements do not include any adjustments that might result from this uncertainty.

2.  Earnings Per Share

Basic earnings (loss) per share are based on the weighted average number of shares of common stock outstanding during the period presented. Diluted earnings (loss) per share is based on the weighted average number of shares of common stock outstanding and dilutive common stock equivalents during the periods presented. All earnings (loss) per share amounts in these financial statements are basic earnings per share as defined by SFAS No. 128, Earnings Per Share.



3. Related Party Transactions

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 $17,350 and $32,614 at an interest rate of 5.35% per annum on the amounts due to related parties for the three-month and six-month periods ended March 31, 2005 respectively.

As of March 31, 2005, the Company has an amount of $1,407,827 due to related parties.

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

|                |  |              | Three months ended |                | Six months ended
|--------------- |  | ------------ | ------------------ | -------------- | ----------------
|                |  |              | March 31,          |                | March 31,       
|                |  |              | 2005               |                | 2004            
|                |  |              |                    |                |                 
|Management fees |  | $     45,000 |                    | $       58,000 |                 
|Consulting fees |  | -            |                    | 15,000         |                 
|                |  |              | $     45,000       |                | $       73,000  



7





---



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.  consolidated financial statements and related notes.



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 10KSB 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.

8



---



Business 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 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 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.



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



The management of the Company is presently in discussions with a number of exploration teams in the West to either joint venture with, or to retain them, for the purposes of carrying out further exploration works on the Mongolian concessions. The intention of the Company is to have a Western geological team on the ground by the end of fall 2005 to confirm the results of the Chinese team. Funding for the exploration work is expected to be made available by the current shareholders of the Company either through an equity subscription or a convertible debt.



Future Plans



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.



We do not expect any purchase or sale of plant or significant equipment, nor do we have any plans to hire significant employees during the next twelve months.



Liquidity and Capital Resources



At March 31, 2005, the Company's assets had decreased to $nil and liabilities totaled $1,439,354 resulting in a working capital deficit of $1,439,354. Currently, its significant shareholders finance the Companys operations. The Company has incurred significant operating losses in recent years and 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.

9





---



Need for Additional Financing



The Company does not have sufficient capital to meet its short-term and long-term cash needs. Our plans in this regard are to seek loans, debt, or equity financings to cover both short-term and long-term cash needs to continue operations and expansion. There is no assurance that such additional funds will be available to the Company on acceptable terms, if at all. 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 operations expenses. Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have not generated any revenue and we require additional funds to satisfy our future operations. We believe that actions presently taken to revise the Company's operating and financial requirements provide the opportunity for the Company to continue as a going concern. Our ability to achieve these objectives cannot be determined at this time. If we are unsuccessful in our endeavors, we may be forced to cease operations, to develop another line of business, to finance our operations through the sale of any assets we have, or to enter into the sale of stock for additional capital, none of which may be feasible when needed. The Company has no specific management ability, financial resources, or plans to enter any other business as of this date.



From the aspect of whether it can continue toward the business goal of acquisition and exploration of mineral properties in the Outer Mongolia, we may use all of our available capital without generating a profit.



The effects of inflation have not had a material impact on its operation, nor is it expected to in the immediate future.





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.





10



---

PART II - OTHER INFORMATION



ITEM 1.

LEGAL PROCEEDINGS

Not applicable.



ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.



ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.



ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.



ITEM 5.

OTHER INFORMATION

Not applicable.



ITEM 6.

EXHIBITS



(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.









11







---

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



Date:  June 1, 2005





By: /S/ TERRY W. WONG

Terry W. Wong, Director and President



Date:  June 1, 2005













12