FORM 10-QSB - Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


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

                                   FORM 10-QSB

[X]  Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934.

                      For the period ended: March 31, 2002

                                       or

[]   Transition  Report  Pursuance  to  Section  13 or 15(d)  of the  Securities
     Exchange Act of 1934.

  For the transition period from ___________________ to _______________________



                        Commission File Number 33-16820-D
                                               ----------

                             ARETE INDUSTRIES, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Colorado                                           84-1508638
------------------------------                          -------------------
State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization                           Identification No.)


                 2955 Valmont Road, Suite 300, Boulder, CO 80301
                 -----------------------------------------------
                  (Address of principal executive offices) (Zip
                                      Code)


                                 (303) 247-1313
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


                                 Not Applicable
                     ---------------------------------------
                     (Former name, former address and former
                   fiscal year, if changed since last report.)


<PAGE>


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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.      [ X ] Yes       [ ] No


APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:

Indicated  by check mark  whether the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.      [ ] Yes      [ ] No


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

As of May 15, 2002,  Registrant had  498,325,562  shares of common stock, No par
value,  outstanding.  This number includes 10,000,000 shares considered unissued
for  accounting  purposes  which are held as collateral for notes payable by the
Company to non-affiliated parties.

<PAGE>


                                TABLE OF CONTENTS


                                                                       Page No.

Consolidated Financial Statements:

Index to Consolidated Financial Statements                                 1

Consolidated Balance Sheet at March 31, 2002 and
December 31, 2001 (unaudited)                                              2

Consolidated Statements of Operations for the Three Months Ended
March 31, 2002 and 2001 (unaudited)                                        3

Consolidated Statement of Stockholders' Deficit for the Three Months
Ended March 31, 2002 (unaudited)                                           4

Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2002 and 2001                                                   5-6

Notes to Unaudited Consolidated Financial Statements at
March 31, 2002                                                            7-9

Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations                                                10-15

Part II - Other Information                                              15-16

Signatures                                                                17



<PAGE>


<TABLE>
                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                      December 31, 2001 and March 31, 2002
                                   (Unaudited)
<CAPTION>

                                     ASSETS
                                     ------

                                                                   2001           2002
                                                               ------------    ------------
<S>                                                            <C>             <C>
Current assets:
    Cash and cash equivalents                                  $        110    $        463
    Accrued interest receivable                                      11,503          14,730
    Inventory                                                        65,029          65,029
    Prepaid expenses                                                  3,509           2,167
                                                               ------------    ------------
      Total current assets                                           80,151          82,389

Furniture and equipment, at cost net of accumulated
    depreciation of $49,547 (2001) and $57,649 (2002)               124,822         116,720
Security deposit                                                     12,598          14,119
Intellectual property                                                34,516          34,516
Investment in and advances to Applied Behavior Systems,
    LLC (Note 2)                                                       --              --
Investment in and advances to Aggression Sports
    (Note 2)                                                           --              --
                                                               ------------    ------------

                                                               $    252,087    $    247,744
                                                               ============    ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
                      -------------------------------------

Current liabilities:
    Accounts payable (Note 3)                                  $    411,849    $    409,342
    Accrued expenses                                                852,323         886,518
    Accrued payroll taxes (Note 3)                                  289,128         286,428
    Settlement due                                                   18,650          18,650
    Notes payable (Note 4)                                          100,000         100,000
    Notes payable - related parties (Note 4)                        165,568         182,557
                                                               ------------    ------------

      Total current liabilities                                   1,837,518       1,883,495

Commitments and contingencies (Notes 1, 3 and 4)

Stockholders' deficit:
      Convertible Class A preferred stock; $10 face value,
      1,000,000 shares authorized, no shares issued and
      outstanding                                                      --              --
    Common stock, no par value; 499,000,000 shares
      authorized, 488,325,562 shares issued and
      outstanding                                                 9,074,130       9,074,130
    Accumulated deficit                                         (10,440,741)    (10,491,061)
    Notes receivable from sale of stock                            (218,820)       (218,820)
                                                               ------------    ------------

      Total stockholders' deficit                                (1,585,431)     (1,635,751)
                                                               ------------    ------------

                                                               $    252,087    $    247,744
                                                               ============    ============
</TABLE>

                             See accompanying notes.
                                        2
<PAGE>

<TABLE>
                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
               For the three months ended March 31, 2001 and 2002
                                   (Unaudited)
<CAPTION>


                                                                  2001            2002
                                                              -------------    -------------
<S>                                                           <C>              <C>
Revenues:
   Management fees - Aggression Sports                        $      23,400    $        --
   Sales                                                               --                379
   Other income                                                      18,240             --
                                                              -------------    -------------

     Total revenues                                                  41,640              379

Operating expenses:
   Depreciation                                                       3,840            8,102
   Research and development                                         111,612             --
   Rent                                                              20,960            9,804
   Other operating expenses                                         216,441           34,247
                                                              -------------    -------------

     Total operating expenses                                       352,853           52,153
                                                              -------------    -------------

       Total operating loss                                        (311,213)         (51,774)

Other income (expense):
   Equity in loss of Aggression Sports (Note 2)                     (33,590)            --
   Minority interest in Aggression Sports loss (Note 2)                --              2,522
   Interest expense                                                 (29,812)          (4,296)
   Interest and miscellaneous income                                  2,972            3,228
                                                              -------------    -------------

     Total other income (expense)                                   (60,430)           1,454
                                                              -------------    -------------

Net loss (Note 5)                                             $    (371,643)   $     (50,320)
                                                              =============    =============

Basic and diluted loss per share from continuing operations   $       *        $       *
                                                              =============    =============

Basic and diluted loss per share                              $       *        $       *
                                                              =============    =============


Weighted average common shares outstanding                      393,295,000      488,326,000
                                                              =============    =============
</TABLE>


* - Less than $.01 per share

                             See accompanying notes.
                                        3
<PAGE>

<TABLE>
                    ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                   For the three months ended March 31, 2002
                                  (Unaudited)
<CAPTION>

                                                   Common stock
                                            --------------------------   Accumulated
                                               Shares        Amount        deficit
                                            -----------   ------------   ------------

<S>                                         <C>           <C>            <C>
Balance, December 31, 2001                  488,325,562   $  9,074,130   $(10,440,741)

    Net loss for the three months ended
      March 31, 2002                               --             --          (50,320)
                                            -----------   ------------   ------------
Balance, March 31, 2002                     488,325,562   $  9,074,130   $(10,491,061)
                                            ===========   ============   ============
</TABLE>

                             See accompanying notes
                                        4
<PAGE>


                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
               For the three months ended March 31, 2001 and 2002
                                   (Unaudited)


                                                          2001         2002
                                                        ---------    ---------
Cash flows from operating activities:
    Net loss                                            $(371,643)   $ (50,320)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Depreciation and amortization                       3,840        8,102
        Equity in loss of Aggression Sports                33,590         --
        Stock issued for services and interest on notes    70,348         --
        Changes in assets and liabilities:
          Interest receivable                                --         (3,227)
          Prepaid expenses                                (25,289)       1,342
          Accounts payable                                 13,887       (2,507)
          Accrued expenses                                104,661       31,495
                                                        ---------    ---------
            Total adjustments                             201,037       35,205
                                                        ---------    ---------
        Net cash used in operating activities            (170,606)     (15,115)

Cash flows from investing activities:
    Investments in and advances to Aggression Sports      (73,123)      (1,521)
    Maturity of certificate of deposit                     52,387         --
                                                        ---------    ---------
        Net cash used in investing activities             (20,736)      (1,521)

Cash flows from financing activities:
    Proceeds from exercise of stock options                65,000         --
    Proceeds from note payable - related parties           63,758       16,989
    Proceeds from note payable                            100,000         --
    Payments on long term debt                            (50,000)        --
                                                        ---------    ---------
      Net cash provided by financing activities           178,758       16,989
                                                        ---------    ---------
Net increase (decrease) in cash and cash equivalents      (12,584)         353
Cash and cash equivalents at beginning of period           13,376          110
                                                        ---------    ---------
Cash and cash equivalents at end of period              $     792    $     463
                                                        =========    =========

                          (Continued on following page)
                             See accompanying notes.
                                        5

<PAGE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
               For the three months ended March 31, 2001 and 2002
                                   (Unaudited)

                        (Continued from preceding page)

Supplemental disclosure of cash flow information:         2001          2002

    Interest paid during the period                     $    --      $     --
    Income taxes paid during the period                 $    --      $     --


During the quarter  ended March 31, 2001, a note payable to a related party with
an outstanding balance of $84,912 was converted into common stock.

                             See accompanying notes.
                                        6

<PAGE>
                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2002


1.   Summary of significant accounting policies
     ------------------------------------------

     Basis of presentation:

     The  accompanying  financial  statements have been prepared by the Company,
     without audit.  In the opinion of management,  the  accompanying  unaudited
     financial  statements  contain all  adjustments  (consisting of only normal
     recurring  accruals)  necessary  for a fair  presentation  of the financial
     position as of December  31,  2001 and March 31,  2002,  and the results of
     operations and cash flows for the periods ended March 31, 2001 and 2002.

     Operations:

     The Company  provided  executive  support to help Aggression  Sports,  Inc.
     (Aggression  Sports) (see Note 2) get prepared to start its own operations.
     Aggression  Sports is in the process of developing a web site to market its
     proprietary outdoor products.

     Basis of presentation:

     The financial  statements have been prepared on a going concern basis which
     contemplates  the  realization of assets and  liquidation of liabilities in
     the ordinary  course of business.  As shown in the  accompanying  financial
     statements,  the Company has incurred  significant  losses and at March 31,
     2002,  the  Company  has a working  capital  deficit  of  $1,801,106  and a
     stockholders' deficit of $1,635,751. In addition, the Company is delinquent
     on payment of payroll taxes and creditor  liabilities  pursuant to the plan
     of  reorganization.  As  a  result,  substantial  doubt  exists  about  the
     Company's  ability to continue to fund future operations using its existing
     resources.

     On December  19,  2001,  by board  resolution  pursuant  to a  subscription
     agreement,  the board of directors  designated  25,000 of Class A Preferred
     Stock as Series 2 Convertible  Preferred Stock, in a proposed  placement of
     up to $200,000 of such preferred  stock at $10 per share face value.  As of
     May  15,  2002,  the  Company  received   proceeds  of  $28,000   for  the
     subscription of 2,800 shares of Series 2 Convertible Preferred Stock.

2.   Investment in and advances to affiliates
     ----------------------------------------

     Aggression Sports:

     In prior years, the Company acquired a 31% ownership interest in Aggression
     Sports in exchange  for  30,000,000  shares of the  Company's  common stock
     valued at  $150,000.  During the three  months  ended June 30 and March 31,
     2001, Aggression Sports sold 550,000 and 5,690,000 shares,  respectively of
     Arete for gross proceeds of $82,362.

     During May 2001,  the Company agreed to buy out the 30% share of Aggression
     Sports owned by the creator of  Aggression's  products for $40,000 worth of
     the Company's stock to be issued over a four-month  period. As of September
     30, 2001,  8,000,000 shares of common stock were issued and the Company had
     a remaining liability of $15,650. The Company has recorded an impairment in
     the value of this investment.

                                        7

<PAGE>

                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2002



2.   Investment in and advances to affiliates (continued)
     ----------------------------------------------------

     Applied Behavior Systems, LLC:

     The Company has an agreement to provide new venture management  services to
     assist in the  formation of a new company and product  development  process
     concerning  several unique  applications  of a patented  neural-networking,
     intelligent  agent  software  engine in conjunction  with Applied  Behavior
     Systems,  LLC (ABS),  an  unaffiliated  company.  Under the agreement,  the
     Company earned fees for  management  services and is entitled to receive an
     equity  interest  in this  new  application  development  company.  Through
     December  31, 2001,  the Company has advanced  $260,672 as a bridge loan to
     finance  operations.  As these  advances  have been used for  research  and
     development  by ABS,  these  amounts  have been  recorded as  research  and
     development expenses in the accompanying financial statements. During 2001,
     the Company  charged  management  fees of $81,419 to ABS. These  management
     fees have not been recorded as revenue at this time since collectibility is
     not reasonably  assured.  During May 2001, the Company ceased funding ABS's
     operations.

3.   Delinquent amounts payable

     As of March 31,  2002,  the  Company is  delinquent  on payments of various
     amounts to  creditors  including  payroll  taxes and  $62,316 to  creditors
     required to be paid under the terms of its plan of reorganization.  Failure
     to pay these liabilities could result in liens being filed on the Company's
     assets and may result in assets being  attached by  creditors  resulting in
     the Company's inability to continue operations.

4.   Notes payable

     Notes payable - individuals:

     During  January  2001,  the Company  borrowed  $100,000  from two unrelated
     individuals  evidenced by a note  bearing no interest,  payable on June 15,
     2002,  but callable  initially  on January 15,  2001,  and then on July 15,
     2001.  The  Company  issued   2,000,000  shares  of  its  common  stock  as
     consideration for the loans and 10,000,000 shares of its common stock to be
     held as  collateral  for  payment of the loans.  The loans were not paid by
     June 15, 2001,  therefore,  the lenders  have the option of  retaining  the
     collateral  shares  in full  payment  of the  notes.  The  Company's  Chief
     Executive  Officer also transferred  1,500,000 shares of common stock owned
     personally  to  the  note  holders  as  additional  consideration  for  the
     transaction.

                                        8
<PAGE>


                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2002


4.   Notes payable (continued)
     -------------------------

     Notes payable - related parties:

     During 2000, an officer of the Company and a company owned by the Company's
     Chief  Executive  Officer  loaned  to the  Company  $17,957  and  $116,700,
     respectively,  evidenced by notes payable.  During 2001,  three officers of
     the Company and a company owned by the Company's  Chief  Executive  Officer
     loaned to the Company  $171,634  and  $40,264,  respectively,  evidenced by
     notes payable.  The notes are due upon demand, bear interest at 9.5% to 10%
     per annum and are unsecured.

     During  2001,  the three  officers  of the  Company  applied  note  payable
     balances of $202,200 and issued a note payable to the Company of $21,213 to
     exercise options representing 53,500,000 shares of common stock.

     During 2002, an officer of the Company and a company owned by the Company's
     Chief Executive Officer loaned $16,989 to the Company.

5.   Income taxes

     The book to tax temporary  differences resulting in deferred tax assets and
     liabilities  are primarily net operating loss  carryforwards  of $3,967,000
     which expire in years through 2022.

     A 100% valuation  allowance has been  established  against the deferred tax
     assets,  as utilization of the loss  carryforwards and realization of other
     deferred tax assets cannot be reasonable assured.

     The Company's net  operating  losses are  restricted as to the amount which
     may be utilized in any one year.

6.   Subsequent events

     On December  19,  2001,  by board  resolution  pursuant  to a  subscription
     agreement,  the board of directors  designated  25,000 of Class A Preferred
     Stock as Series 2 Convertible  Preferred Stock, in a proposed  placement of
     up to $200,000 of such preferred  stock at $10 per share face value.  As of
     May 15, 2002, the Company received proceeds of $28,000 for the subscription
     of 2,800 shares of Series 2 Convertible Preferred Stock.

                                        9
<PAGE>


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

Critical accounting policies:

The Company has identified the accounting  policies  described below as critical
to its business  operations and the  understanding  of the Company's  results of
operations. The impact and any associated risks related to these policies on the
Company's  business  operations is discussed  throughout this section where such
policies  affect the  Company's  reported and expected  financial  results.  The
preparation  of this Annual  Report  requires the Company to make  estimates and
assumptions  that affect the reported  amount of assets and  liabilities  of the
Company,  revenues and expenses of the Company  during the reporting  period and
contingent  assets and  liabilities  as of the date of the  Company's  financial
statements.  There can be no assurance  that the actual  results will not differ
from those estimates.

Stock issuances:

The Company has relied upon the issuance of shares of its common stock,  options
to purchase its common stock and  preferred  stock to fund much of the Company's
operations.  The following  describes  the methods used to record  various stock
related transactions.

Stock issued for services is valued at the market price of the  Company's  stock
at the date of grant.

Compensation related to the issuance of stock options to employees and directors
is recorded at the intrinsic value of the options,  which is the market price of
the  Company's  common  stock  less  the  exercise  price of the  option  at the
measurement  date. The Company's  common stock issued to consultants is recorded
at the market price of the Company's  common stock at the measurement  date. The
measurement date is generally the date the options are fully vested.

Revenue recognition:

The Company has  provided  management  services to  companies  in the process of
developing new products with no operations.  These management fees have not been
recorded as revenue at this time since collectibility is not reasonably assured.

Research and development:

The Company has also advanced funds to these start-up companies. As the start-up
companies have used these advances for research and  development,  these amounts
have  been  recorded  as  research  and  development  expense  in the  Company's
financial statements.

                                       10
<PAGE>

Overview.

The  Company  has  revised  its  business  development  focus  from new  venture
management,  requiring  substantial  overhead  in the form of senior  management
associates  and  office   support   toward  the   development  of  new  business
opportunities with established management and business models, proven market for
products,  an existing  customer and revenue  base,  and high growth  potential.
Management  desires  to engage  in  relationships  with  businesses  which  have
exhibited sufficient  managerial,  financial and operational maturity to rapidly
grow  beyond  the  development  stage as self  sustaining  businesses  with only
nominal  additional capital and input from the Company or investors which it may
be able to attract on behalf of these  businesses.  The current  objective is to
emulate the  structure and  activities  of a publicly held Business  Development
Corporation ("BDC").

To achieve this objective,  the Company must resolve  internal issues  including
reducing  its  overhead,  resolving  outstanding  liabilities  and  maximize its
potential to achieve a return on its past investments. Refusing to abandon these
ventures  entirely,  Management is considering a spin-off of Aggression  Sports,
Inc.  through a  registered  rights  offering and  possibly  certain  contingent
intellectual  property and contract rights from its Applied Behavior Systems and
Seventh  Generation  Technologies  venture  into  separate,  independent  public
companies  with  their  own  management  teams  and  investors,   in  which  the
shareholders of the Company will continue to participate through the spin-offs.

During early 2001, the Company continued its efforts to develop a revenue stream
from management  services and building equity  ownership in its portfolio of new
entrepreneurial  opportunities  while initiating the process of reduction of its
overhead and initiating a search for investment  opportunities  in more advanced
stages of development and with better business  fundamentals.  In prior periods,
revenue and equity was created from opportunities that were developed  in-house,
but the Company's  in-house  projects ran out of money and the Company could not
secure the next round of financing for itself and its incubated  companies,  nor
due to deteriorating  economic conditions experienced in the second half of 2001
carrying over to 2002, was it able to close  acquisition  and funding of certain
new  opportunities,  in particular a new capital funding  subsidiary  created to
conduct  construction  and bond  financing  for  opportunities,  entitled  Eagle
Capital Funding Corp.  ("Eagle Capital.") Due to the termination or postponement
of  certain  projects  scheduled  for  closing  after the  terrorist  attacks of
September 11, 2001 on the World Trade Center,  the  individual  sponsoring  this
opportunity  took  on  employment  for a Wall  Street  investment  bank  and the
initiative was put on hold by the Company,  hoping to find a new opportunity for
this subsidiary.

In  response  to  continuing  adverse  conditions  and to  address  the  current
investment  environment  that  favors  investments  with  earnings,  cash  flow,
management  and growth  potential,  the  Company  continues  to take  actions to
reposition  itself to  execute  its  revised  business  plan,  by  reducing  its
operating  overhead and settling and/or  mediating its  outstanding  obligations
with a view to effecting a recapitalization,  preserving its existing assets and
becoming  attractive  to sources of new capital and  acquisition  opportunities.

                                       11
<PAGE>


During the quarter  ended  March 31,  2002,  the Company  ended its lease on its
office space in Boulder, Colorado running at approximately $4,800 per month, and
signed a new,  short term lease for the smaller  suite in the same  building for
approximately  1,200  square  feet at a monthly  rental of $1,986 for six months
from March 1, 2002,  with options to negotiate a longer term thereafter or go on
a month to month basis.  Also, the Company has only one salaried  employee,  its
CEO, who continues to defer his salary and the Company's CFO works  part-time on
an as needed/hourly basis. The Company also has retained its newest board member
as a  financial  and  business  consultant  on an outside  contractor  basis for
assistance in corporate  operations,  recruitment of business  opportunities and
financial analysis.

In December of 2001,  the  Company  entered  into a letter of intent to create a
subsidiary  to acquire  the  interests  of William W.  Stewart in certain  minor
league sports  franchise  development  projects.  This  agreement  also included
retaining  Mr.  Stewart as a consultant  and his  appointment  onto the board of
directors  of the Company.  The  agreement  also  included the transfer of Eagle
Capital (prior to initiation of operations) to Mr. Stewart and the granting of a
subscription agreement to Eagle Capital to purchase up to $200,000 in face value
of a new series of the Company's  Class A Convertible  Preferred  Stock.  During
April 2002,  Eagle Capital  funded  approximately  $28,000 of its  subscription,
which funds have been advanced to pay Company expenses including rent,  auditing
and Edgar filing expenses. During the period ended March 31, 2002, the Company's
operations  continued to be funded  principally by cash infusions from insiders,
by  management  deferring  its  salaries,  and  issuances  of  common  stock for
services.  Management  anticipates that ongoing expenses for the short term will
be covered by proceeds of its current  private  placement to Eagle Capital to be
replaced by revenues  from  operations  as it executes  its  business  plan as a
Business Development Company.

The  principal  challenges  facing  the  Company  in  accomplishing  its  stated
objectives are in resolving its  liabilities and acquiring  immediate  operating
capital to effect the proposed recapitalization and spin-off transactions.  This
is  complicated  by the fact  that the  Company  has  reached  the  limit of its
authorized   capital  stock  and  cannot  issue  new  equity  without  obtaining
permission of its shareholders to recapitalize or authorize  additional capital.
Therefore,  in addition to  negotiating  conversion of existing debt and accrued
employee  compensation  into  equity,  Management  will  be  required  to  raise
sufficient funds to pay its ongoing operating expenses and to cover the expenses
of holding its next annual shareholders meeting as soon as possible,  neither of
which can be assured at this time.  Management  has deferred  their  salaries to
date  and the CEO has  continued  to  advance  funds to  defer  certain  ongoing
expenses of the Company pending receipt of additional subscription proceeds from
Eagle Capital.

Financial Condition

As of March 31, 2002,  the Company had $ 247,744 in total assets and  $1,883,495
in total  liabilities,  as  compared to $252,087  and  $1,837,518  at the end of
fiscal year ended December 31, 2001, respectively.  Accounts payable and accrued

                                       12
<PAGE>

expenses at March 31, 2002 were $1,582,288 as compared to $1,553,300 at December
31,  2001.  The  increase  during  the first  quarter  of 2002,  of  $28,988  is
attributable  to increases in accrued  salaries.  Losses were  partially  funded
through increased accounts payable and by accruing or deferring salaries.

The Company's subsidiary,  Global Direct Marketing Services,  Inc., which is now
inactive,  has left an obligation  of trade  payables of $87,625 and unpaid 1999
payroll taxes of $46,897 remaining from its printing and direct mail advertising
business. The Company owes approximately $79,000 in unpaid Federal payroll taxes
for calendar  years 1995 through 1997  including  penalties  and  interest.  The
Company owes approximately $65,858 in 2000 and $97,373 in 2001, respectively, in
accrued payroll taxes, including penalties and interest.

During the period  ended  March 31,  2002,  the Company  continued  to rely upon
infusions of cash from loans and cash advances by executives of the Company. The
proceeds were used for overhead,  payment of corporate  obligations and business
development  activities.  As of March 31, 2002, additional executive salaries of
$29,900 and cash  advances of $16,989 have been accrued and salaries of $439,372
and bonuses of $381,860,  which were  accrued as of December  31,  2001,  remain
unpaid.

Results of operations

The company's  operations during the first quarter of 2002 have been confined to
business development activities of its officers,  directors and consultants, and
administrative  bookkeeping tasks related to creditor and investor relations and
securities act compliance.  The Company is not providing new venture  management
or advisory  activities and therefore not generating  revenue from executive and
management services.

For the quarter ended March 31, 2002, the Company  incurred $52,153 in operating
expenses. This included accruals of deferred executive salaries of $29,900, rent
of  $9,804  and  other  operating  expenses  of  $12,449  including  consulting,
bookkeeping,  shareholder  communication,  transfer  agent fees,  accounting and
auditing  expenses and internet,  computer repair and network  maintenance.  The
Company was successful in reducing its rental expense by negotiating  out of its
larger space and moving to a smaller  suite in the same  building,  reducing its
monthly rental to $1,968 for office. The Company continues to rent storage space
for its files,  inventory and excess office  equipment.  During the period ended
March 31, 2002, to facilitate  its move out of its larger office space,  donated
most of its excess  office  furniture  to a  non-profit  foundation  in Boulder,
Colorado.  We envision  operating the Company as a holding company in the future
for other going concerns and revenue generating  businesses,  which will require
minimal staff for accounting and administrative  matters. Our future expectation
is that  monthly  operating  expenses  will remain as low as possible  until new
opportunities are initiated, of which there can be no assurance, in which event,
the  operating  costs  of the  Company  may  increase  relative  to the need for
administrative and executive staff and overhead to provide support for these new
business entities.

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<PAGE>


Total  other  income  (expenses)  of  $1,454  included  $3,228 in  interest  and
miscellaneous income, an interest expense of $4,296 resulting in a net loss from
operations of $50,320.

Liquidity and Capital Resources

The Company has a working  capital  deficit as of March 31, 2002 of  $1,801,106.
This  compares to a working  capital  deficit of  $1,757,367  as of December 31,
2001. The $43,739  increase in working  capital  deficit for quarter ended March
31,  2002 is  attributable  to an increase  of $34,195 in accrued  expense  from
$852,323  for the fiscal year ended  December  31, 2001, a decrease of $2,507 in
accounts  payable from $411,849 for the fiscal year ended  December 31, 2001, an
decrease  of $2,700 in accrued  payroll  taxes from  $289,128  (fye 2001) and an
increase of $16,989 in notes payable - related parties from $165,568 at December
31, 2001.  During the quarter  ended March 31,  2002,  no shares of common stock
were issued.

The Company had a stockholder's deficit at March 31, 2002 of $1,635,751. This is
compared to  stockholder's  deficit at  December  31,  2001 of  $1,585,431.  The
stockholder's deficit increased due to the Company's operating at a loss.

Due to its recent liquidity  issues,  the Company has defaulted on several short
term obligations including for its operating overhead, trade payables, and state
and  federal  employment  taxes,  resulting  in tax liens  being  imposed on the
Company's  assets,  which  will  have to be  resolved  with an  infusion  of new
capital, of which no assurances can be made.

At  March  31,  2002,  the  Company  had no  material  commitments  for  capital
expenditures.

The Company finds itself in a highly  illiquid  situation with few assets and no
revenue  to fund  ongoing  operations.  The  Company  has  relied on loans  from
insiders and deferral of salary and compensation by its employees. The Company's
current   business  plan  will  require  minimal  funds  for  overhead  and  for
maintaining its financial reporting  obligations.  Due to the illiquidity in the
Company's public trading market and the investment  environment in general,  the
Company's  ability to raise  additional  capital publicly or privately to launch
its  current  business  plan in the near term is severely  limited.  The Company
continues  because its principal  officers  continue to support the Company on a
deferred compensation basis.

The Company has  insufficient  authorized  and unissued  common  shares to allow
conversion  and  exercise of  outstanding  common stock  options and  conversion
rights of  preferred  stock which has been  reserved for issuance to insiders in
exchange  for  their  accrued  cash  advances,  and for  issuance  in a  private
placement of up to $200,000 in Series 2 Convertible  Preferred stock,  which the
Company is currently  conducting to an affiliated  entity. As of April 30, 2002,
the Company had raised $28,000 in gross  proceeds of this private  placement and
had 2,800 outstanding shares of Series 2 Convertible Preferred.  The Company has
agreed to a specific use of the first proceeds of this offering including paying
its auditing costs.  The Company has committed  another $25,000 to pay the costs
of holding its next  annual  meeting and other  specified  expenses.  Management
believes  that  the  Company  will  experience  significant  difficulty  raising
additional  capital or  attracting  viable  acquisition  candidates  until these
matters have been resolved and the Company has  eliminated a substantial  amount
of its outstanding debt.

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<PAGE>

Due to the current financial  condition of the Company and the volatility in the
market for its common  stock,  no assurance can be made that the Company will be
successful  in raising  any  substantial  amount of capital  through the sale of
equity or debt  securities,  or with bank  debt on  favorable  terms in the near
future.  Due to such conditions the Company may continue to be required to issue
further stock to pay executives, consultants and other employees, which may have
a continuing  dilutive effect on other  shareholders of the Company.  Failure of
the Company to acquire  additional  capital in the form of either debt or equity
capital  will  most  likely  impair  the  ability  of the  company  to meet  its
obligations in the near future or medium term.

Subsidiaries/Employees:

Arete  Industries,  Inc.  has  one  full  time  employee,  and  its  subsidiary,
Aggression  Sports,  Inc.  presently  has no  employees  other  than its  acting
president, the Company's current CEO. Seventh Generation Technologies,  Inc. has
no operations  and has no  employees.  Eagle  Capital  Funding Corp.  has had no
operations  since  inception  and the  entity  was  transferred  in total to Mr.
Stewart. The CEO remains on a deferred salary basis and its CFO is being paid on
an as needed-hourly or project-by-project  basis. Mr. Stewart, the Company's new
director  has been  retained on an  independent  contractor  basis as a business
consultant  for any  projects  he is  requested  to  complete  on  behalf of the
Company.

Additionally,  we are continuing to seek revenue generating activities for Arete
Outdoors  including  finding  manufacturing  and/or  marketing  partners for our
developed  products,  and are  hoping  to  recruit  a new  management  team  and
investors  focused on growing this company through  acquisition of young outdoor
sports companies, neither of which is currently in place nor can be assured with
any degree of certainty.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

During the Period ended March 31, 2002, there were no material legal proceedings
initiated  by or  against  the  Company  or any of its  officers,  directors  or
subsidiaries.

During the third  quarter of 2001,  the Company  concluded its defense of an SEC
enforcement  action  brought in the Federal  District  Court for the District of
Colorado,  for  violations  under  Section  15d of the '33 Act and  Section  10b
including  Rule 10b-5 of the '34 Act  against  the  Company,  one of its current
officers and two former officers and directors through  settlement of the action
by consenting to the entry of an  administrative  Cease and Desist Order without
admitting or denying the findings and conclusions  made by the SEC. No financial
sanctions  or  professional  bars were  imposed on the  Company  or the  current

                                       15
<PAGE>


officer in the  settlement.  The SEC  previously  settled  this  matter with the
former officers and directors through the imposition of financial  sanctions and
an injunction from future violations of the anti-fraud provisions of the federal
securities laws.

Item 2. Changes in Securities

(a)  Changes in  Instruments  Defining  Rights of Security  Holders.

Previously Reported.

(b)  Not Applicable

(c)  Item 701 Reg. SB. - The following  were the  unregistered  shares of common
     stock sold by the registrant during the period covered by this report.

None

Item 3. Defaults Upon Senior Securities.

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K

There are no Exhibits filed herewith.

There  were no  Reports  on Form 8-K filed  during  the  period  covered by this
report.

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<PAGE>


SIGNATURES

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


ARETE INDUSTRIES, INC.


Date: May 20, 2002
      ------------


By: /s/ Thomas Y. Gorman, CFO
    ------------------------------------------
    Thomas Y. Gorman, CFO
    Principal Financial and Accounting Officer

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