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:   September 30, 2000
                            ------------------
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 310, 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.)


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.

                                         [ X ] Yes     [   ] No


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

As of September 29, 2000,  Registrant had 341,120,748 shares of common stock, No
par value, outstanding.

<PAGE>

                      ARETE INDUSTRIES, INC. AND SUBSIDIARY

                                      INDEX

                                                                        Page No.

   Consolidated Financial Statements:

   Consolidated Balance Sheet at September 30, 2000 and December 31, 1999
   (unaudited)                                                              2

   Consolidated Statements of Operations for the Three Months Ended
   September 30, 2000 and 1999 (unaudited)                                  3

   Consolidated Statements of Operations for the Nine Months Ended
   September 30, 2000 and 1999 (unaudited)                                  4

   Consolidated Statement of Stockholders' Deficit for the Nine Months
   Ended  September 30, 2000 (unaudited)                                    5

   Consolidated Statements of Cash Flows for the Nine Months Ended
   September 30, 2000 and 1999                                              6-7

   Notes to Unaudited Consolidated Financial Statements at September 30,
   2000                                                                     8-11


<PAGE>



                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                    September 30, 2000 and December 31, 1999
                                  (Unaudited)

                                     ASSETS

                                                           2000       1999
                                                           ----       ----
Current assets:
   Cash and cash equivalents                          $    4,843  $   15,844
   Restricted cash                                        50,919      25,000
   Accounts receivable, less allowance for
    doubtful accounts of $0                               70,194         519
   Prepaid expenses                                        2,393       1,200
                                                      ----------  ----------

    Total current assets                                 128,349      42,563

Notes receivable Verbaltech Labs & Banking                82,200           -

Furniture and equipment, at cost net of accumulated
   depreciation of $3,170 (2000) and $233 (1999)          21,830       2,096

Security deposit                                           5,664           -

Investment in and advances to Verbaltech Labs &
   Banking                                                 1,469           -

Investment in and advances to Aggression Sports
   (Note 2)                                               39,286      40,560
                                                      ----------  ----------

                                                      $  278,798  $   85,219
                                                      ==========  ==========

             LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
   Accounts payable (Note 3)                          $  209,644  $  204,318
   Accrued expenses                                      146,162      34,409
   Accrued payroll taxes (Note 3)                        184,976     146,130
   Advances from Aggression Sports (Note 2)              113,294           -
   Notes payable                                          51,000      24,500
   Convertible note payable - officer                    104,251      81,021
   Stock subscription payment received                         -       7,333
                                                      ----------  ----------

    Total current liabilities                            809,327     497,711

Commitments and contingencies (Notes 1, 3 and 6)

Stockholders' deficit (Note 4):
   Redeemable preferred stock; 100,000,000 shares
    authorized:
      Convertible Class A; $10 face value, 100,000
        shares authorized, 3,000 shares issued and
        outstanding (liquidation preference $32,475)           -      30,000
   Common stock, no par value; 500,000,000 shares
    authorized, 341,120,748 (2000) and 301,397,155
    (1999) shares issued and outstanding               8,010,783   7,414,758
   Accumulated deficit                                (8,541,312) (7,857,250)
                                                      ----------  ----------

    Total stockholders' deficit                         (530,529)   (412,492)
                                                      ----------  ----------

                                                      $  278,798  $   85,219
                                                      ==========  ==========

                            See accompanying notes.
                                       2

<PAGE>



                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
                             STATEMENT OF OPERATIONS
             For the Three Months Ended September 30, 2000 and 1999
                                  (Unaudited)
                                                         2000          1999
                                                         ----          ----

Management fees                                       $ 108,000     $       -

Operating expenses:
   Depreciation                                           1,972             -
   Rent                                                  19,947             -
   Salaries                                             162,023             -
   Stock issued for services (Note 4)                   127,500             -
   Other operating expenses                              34,701             -
                                                      ---------     ---------

    Total costs and expenses                            346,143             -
                                                      ---------     ---------

      Total operating income (loss)                    (238,143)            -

Other income (expense):
   Equity in loss of Aggression Sports (Note 2)         (49,228)            -
   Gain on sale of equipment                             10,000             -
   Interest expense                                      (1,034)       (1,016)
   Interest and miscellaneous income                     (8,240)          201
                                                      ---------     ---------

    Total other income (expense)                        (48,502)         (815)
                                                      ---------     ---------

Net loss from continuing operations                    (286,645)         (815)

Net loss from discontinued operations (Note 1)                -       (256,481)
                                                      ---------     ----------

Net loss (Note 5)                                    $ (286,645)   $ (257,296)
                                                     ==========    ==========

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

Weighted average common shares outstanding          332,752,000   285,663,342
                                                    ===========   ===========



* - Less than $.01 per share


                            See accompanying notes.
                                       3

<PAGE>



                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
                             STATEMENT OF OPERATIONS
             For the Nine Months Ended September 30, 2000 and 1999
                                  (Unaudited)

                                                          2000          1999
                                                          ----          ----

Management fees                                        $ 138,000    $       -

Operating expenses:
   Depreciation                                            2,821             -
   Rent                                                   26,878             -
   Salaries                                              274,254             -
   Stock issued for services (Note 4)                    175,000             -
   Other operating expenses                              148,904             -
                                                       ---------    ----------

    Total costs and expenses                             627,857             -
                                                       ---------    ----------

      Total operating income (loss)                     (489,857)            -

Other income (expense):
   Equity in loss of Aggression Sports (Note 2)         (126,233)            -
   Gain on sale of equipment                              10,000        40,061
   Interest expense                                       (9,638)       (2,797)
   Interest income                                         2,186           621
                                                       ---------   -----------

    Total other income (expense)                        (123,685)      37,885
                                                       ---------   ----------

Net loss from continuing operations                     (613,542)       37,885

Net loss from discontinued operations (Note 1)           (70,520)     (564,395)
                                                       ---------   -----------

Net loss (Note 5)                                     $ (684,062)   $ (526,510)
                                                      ==========    ===========

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

Weighted average common shares outstanding           323,610,000   272,707,956
                                                     ===========   ===========



* - Less than $.01 per share

                            See accompanying notes.
                                        4

<PAGE>
<TABLE>



                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
                   STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                  For the Nine Months Ended September 30, 2000
                                  (Unaudited)
<CAPTION>


                                     Class A preferred stock      Common stock       Accumulated
                                       Shares     Amount       Shares      Amount      deficit
                                       ------     ------       ------      ------    -----------
<S>                                    <C>       <C>        <C>          <C>         <C>

Balance, December 31, 1999              3,000    $30,000    301,397,155  $7,414,758  $(7,857,250)

   Conversion of Series A preferred
    stock to common (Note 4)           (3,000)   (30,000)     2,600,000      30,000            -

   Issuance of common stock for
    services (Note 4)                       -          -     20,134,933     225,863            -

   Issuance of common stock for
    transfer of certificate of deposit
    and accrued interest (Note 4)           -          -      8,750,000      33,152            -

   Sale of common stock                     -          -      1,738,660      38,833            -

   Common stock issued upon exercise
    of options (Note 4)                     -          -      6,000,000      66,000            -

   Interest in sale of Arete common
    stock be equity-method investee
    (Note 2)                                -          -              -     199,677            -

   Exercise of Class A Preferred
    options and conversion to common
    stock                                   -          -        500,000       2,500            -

   Net loss for the nine months ended
    September 30, 2000                      -          -              -           -     (684,062)
                                       ------    -------    -----------  ----------    ---------

Balance, September 30, 2000                 -    $     -    341,120,748  $8,010,783  $(8,541,312)
                                       ======    =======    ===========  ==========  ===========
</TABLE>

                            See accompanying notes.
                                        5

<PAGE>


                     ARETE INDUSTRIES, INC. AND SUBSIDIARY
                             STATEMENT OF CASH FLOWS
             For the Nine Months Ended September 30, 2000 and 1999
                                  (Unaudited)
                                                         2000        1999
                                                         ----        ----
Cash flows from operating activities:
   Net loss                                           $(684,062)  $(526,510)
   Adjustments to reconcile net loss to net
    cash provided by (used in) operating activities:
      Depreciation and amortization                       2,937           -
      Equity in loss of Aggression Sports               126,233           -
      Stock issued for services                         225,863     197,561
      Changes in assets and liabilities:
       Accounts receivable                              (69,675)    (26,680)
       Security deposit                                  (5,664)          -
       Prepaid expenses                                  (1,193)     10,979
       Accounts payable                                   5,326           -
       Accrued expenses                                 150,599     362,036
       Customer deposits                                      -     (10,791)
                                                      ---------   ---------

        Total adjustments                               434,426     533,105
                                                      ---------   ---------

      Net cash provided by (used in) operating
        activities                                    (249,636)       6,595

Cash flows from investing activities:
   Purchase of property and equipment                   (3,932)     (68,227)
   Investments in and advances to Aggression Sports    106,334            -
   Purchase of certificate of deposit                  (25,919)           -
                                                      --------    ---------

      Net cash provided by (used in) investing
        activities                                      76,483      (68,227)

Cash flows from financing activities:
   Proceeds from issuance of common stock               67,152       86,298
   Proceeds from exercise of stock options              68,500            -
   Proceeds from note payable                                -       85,250
   Payments on long term debt                           26,500      (48,800)
                                                      --------    ---------

    Net cash provided by financing activities          162,152      122,748
                                                      --------    ---------

Net increase in cash and cash equivalents              (11,001)      61,116
Cash and cash equivalents at beginning of period        15,844       20,047
                                                      --------    ---------

Cash and cash equivalents at end of period            $  4,843    $  81,163
                                                      ========    =========

                         (Continued on following page)
                            See accompanying notes.
                                       6

<PAGE>


                     ARETE INDUSTRIES, INC. AND SUBSIDIARY
                             STATEMENT OF CASH FLOWS
             For the Nine Months Ended September 30, 2000 and 1999
                                  (Unaudited)

                         (Continued from previous page)

Supplemental disclosure of cash flow information:

   Interest paid during the period                     $ 9,638      $ 2,797
                                                       =======      =======
   Income taxes paid during the period                 $     -      $     -
                                                       =======      =======

Supplemental disclosure of non-cash investing and financing activities:

   During the quarter  ended March 31,  2000,  the Company  issued  common stock
   valued at $15,548 to employees of Aggression Sports and treated such issuance
   as an advance.


                            See accompanying notes.
                                       7

<PAGE>



                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000


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, 1999 and September  30, 2000,  and the results of
   operations and cash flows for the periods ended September 30, 1999 and 2000.

   Discontinued operations:

   During March 2000, the Company  abandoned the direct mail and coupon business
   and shifted its focus toward Aggression Sports, Inc. (Aggression Sports) (see
   Note 2). The direct mail coupon  business  continued  until March 2000 and is
   not expected to generate a loss during 2000.  The Company has become  engaged
   in development of new business ventures including a development stage company
   which creates,  designs,  develops,  produces and markets  highly  innovative
   outdoor  adventure  sports  products and  adventure  travel  services;  and a
   software   development   company   engaged  in   development  of  a  patented
   neural-networking,   intelligent   agent  software   engine  and  its  unique
   applications for language learning, voice recognition, speech interpretation,
   vision recognition, and intelligent robotics.

   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 September 30,
   2000,  the  Company  has  a  working   capital  deficit  of  $680,978  and  a
   stockholders' deficit of $530,529. In addition,  the Company is delinquent on
   payment of certain payroll taxes and has certain  liabilities  remaining from
   its  confirmed  Chapter 11 Plan of  Reorganization  approved  by the Court in
   October of 1996.  Also,  the Company is a named  defendant in a Federal civil
   enforcement  action  brought  by the SEC in the  summer  of 1998 for  certain
   alleged  violations of the Federal Securities laws (See Note 6). As a result,
   substantial  doubt  exists  about the  Company's  ability to continue to fund
   future operations using its existing resources.

   Under its initiative to provide new venture management services,  the Company
   plans to assist,  Aggression  Sports,  Inc., dba Arete Outdoors in developing
   its  management  team and to  develop,  create,  produce and sell its line of
   specialty  outdoor  sporting goods,  equipment and adventure travel services.
   During 2000,  Arete  Outdoors  entered into an employment  agreement with its
   President and principal designer to issue up to 38% of its outstanding common
   stock in exchange  for the  assignment  of his interest in  approximately  30
   proprietary  designs including all license and patent rights in such products
   and any new products  designed  during the term of his employment  agreement.
   During 2000 Arete  Outdoors  generated  cash of $644,000  through the sale of
   Arete's common stock in open market transactions.

                                       8
<PAGE>



                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000

1. Summary of significant accounting policies (continued)

   Also, the Company plans to provide new venture management  services to assist
   in the formation of a new company,  funding,  and product development process
   concerning  several  unique  applications  of a  patented  neural-networking,
   intelligent  agent  software  engine in  conjunction  with  Applied  Behavior
   Systems,  LLC, an  unaffiliated  company.  The Company  has an  agreement  to
   provide basic business  services,  plus  management services in  exchange for
   fees and  an equity interest in  this proposed  new  application  development
   company.  Through the current quarter, the Company  has advanced $82,200 as a
   bridge loan  to  finance  operations  and  has  accrued $58,000 in management
   and service fees.

2. Investment in and advances to Aggression Sports

   During 1998,  the Company  acquired a 44%  ownership  interest in  Aggression
   Sports in exchange for 30,000,000 shares of the Company's common stock valued
   at $150,000.  Due to the uncertainty  related to the ultimate  realization of
   this  carrying  value,  the  $150,000  was written off during the nine months
   ended December 31, 1998.

   In January 2000,  Aggression Sports entered into an agreement to issue 30% of
   its outstanding common stock in exchange for the right, title and interest in
   approximately 30 products in various stages of development and various stages
   of the  patenting  process.  As a result  of this  agreement,  the  Company's
   interest in Aggression Sports was reduced to 31%.

   During the nine months ended September 30, 2000, the Company paid salaries of
   $15,548 for services  performed by certain  individuals on Aggression  Sports
   behalf. The investment in Aggression Sports has been reduced by the Company's
   31% share of Aggression  Sports' loss for the nine months ended September 30,
   2000 exclusive of the gain on the sale of Arete common stock.

   During the nine months  ended  September  30,  2000,  Aggression  Sports sold
   17,456,500  shares of Arete for  gross  proceeds  of  $644,120.  Arete's  31%
   interest in the proceeds of $199,677 has been recorded as additional  paid-in
   capital.

3. Delinquent amounts payable

   As of September  30, 2000,  the Company is  delinquent on payments of various
   amounts  to  creditors  including  payroll  taxes and  $62,316  to  creditors
   remaining from its confirmed  Chapter 11 Plan of  Reorganization  approved by
   the Court in October of 1996.  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.

                                       9
<PAGE>



                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000

4. Stockholders' equity

   During the nine months ended  September 30, 2000, (1) an officer and a former
   officer of the Company converted their Class A preferred stock into 2,600,000
   shares of the  Company's  common  stock,  (2) the Company  issued  20,134,933
   shares of common  stock for services  valued at $225,863  ($0.011 per share),
   (3) the Company  issued  8,750,000  shares of common  stock in exchange for a
   $25,000  certificate of deposit,  accrued interest and for guarantying a note
   payable of the Company and (4) the Company issued  6,000,000 shares of common
   stock upon the exercise of stock options at $.011 per share.

   In January  2000,  the board of  directors  adopted,  subject to  shareholder
   approval,  the 2000 Omnibus Stock Option and Incentive Plan which  designates
   and reserves 50,000,000 shares of common stock to be issued under the Plan.

   In January 2000, the board of directors authorized the issuance of options to
   purchase  65,000 shares of Class A preferred  stock for $10 per share to five
   individuals.  The options are first exercisable between May and July 2000 and
   are  exercisable  for a period  of one year  from  those  dates.  The Class A
   preferred stock is convertible  into the Company's  common stock at $.025 per
   share.

5. Income taxes

   The book to tax  temporary  differences  resulting in deferred tax assets and
   liabilities  are  primarily net operating  loss  carryforwards  of $2,170,000
   which expire in years through 2020.

   As of September  30, 2000 and December 31, 1999,  total  deferred tax assets,
   liabilities and valuation allowances are as follows:

                                                       2000         1999
                                                       ----         ----
    Deferred tax asset resulting from loss
      carryforward                                   $ 434,000    $ 352,000
    Valuation allowance                               (434,000)    (352,000)
                                                     ---------    ---------

      Net deferred tax asset                         $       -    $       -
                                                     =========    =========

   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. The Company's net operating  loss  carryforwards
   expire as follows:

                December 31, 2015                             $  458,000
                       2016                                      224,000
                       2017                                      304,000
                       2018                                      614,000
                       2019                                      161,000
                       2020                                      409,000
                                                              ----------

                                                              $2,170,000
                                                              ==========

                                       10
<PAGE>



                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000

6. Commitments and contingencies

   Securities and Exchange Commission civil enforcement action:

   In August 1999,  the Securities  and exchange  Commission  instituted a civil
   enforcement action in the Federal District Court for the District of Colorado
   against the Company,  its former  officers and directors and the current CEO.
   The complaint  alleges press releases issued in February of 1998 concerning a
   status of a business  relationship between the Company and an unrelated third
   party company were misleading in violation of Section 17(a) of the Securities
   Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule
   10b-5.  Additionally,  the suit  includes the  Company's  alleged  failure to
   timely file the required  periodic  reports with the Commission under Section
   15(d) of the  Exchange  Act and Rules  15b-1 and 15b-13.  The action  further
   alleges  that two  former  officers  of the  Company  aided and  abetted  the
   Company's  violation of Section 15(d) of the Exchange Act and Rules 15d-1 and
   15d-13.  The SEC is seeking an injunction  against the defendants.  Company's
   counsel has  determined it to be  impractical  to render an opinion as to the
   outcome  of the  pending  action  against  the  Company  and the  individuals
   involved.

   As authorized by the Company's corporate charter,  the board of directors has
   agreed to indemnify, and advance fees and expenses to Mr. Raabe for his costs
   of defending  the action.  The case  progress is at a stage wherein it is too
   early to predict the actual costs of the defense.


                                       11

<PAGE>


ITEM 2: MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS


General Summary

In the First  Quarter of this year,  we  discontinued  our print and direct mail
operations  and embarked on a completely  new direction for the Company.  During
the Second Quarter, we acquired a professional senior management team and recast
Arete  Industries,  Inc. as a New Venture  Management  Services.  In the current
Quarter, with the immediate focus of establishing the financial viability of the
company, we are implementing our new strategic  development plan for New Venture
Management Services.

New Core Philosophy:  New Venture Management  Services In the long run, business
firms derive competitive  advantages from their unique bundles of assets such as
location,  brand names,  distribution  channels,  patents and corporate cultures
that  contribute  to their  ability to create,  produce,  sell and deliver their
goods and  services to  consumers.  Firms will have a  competitive  advantage if
their  resources are  distinctive or superior  compared to other firms with whom
they compete. The decisions that are made early in the life of a firm that weigh
the relative value and development of these assets substantially  determine that
firm's  chances of success or  failure.  The  essence of Arete  Industries'  New
Venture  Management  Services  is  that it has  unique  management  and  capital
resources  that it can offer to young,  aspiring  firms that  other  competitive
firms in their  position do not possess and cannot  acquire.  Our new  financial
opportunity   lies  in  matching  our  management   and  capital   resources  to
high-growth,  leading-edge  opportunities  where the resources are  economically
relevant.


Our New Venture Management Services initiative has taken us into two new areas:

1)   Outdoor sporting goods equipment design, development and sales; and

2)   Patented  intelligent  agent  software  that has  unique  applications  for
     language learning,  voice  recognition,  vision recognition and intelligent
     robotics.

We offer the following  detailed  information  showing what we have accomplished
thus far and the current status and processes  implemented to achieve  financial
viability for Arete Industries, Inc.


I.   Outdoor Sporting Goods Equipment

The Business  Opportunity  of Arete  Outdoors(TM).  We believe there is a strong
specialty  outdoor and  adventure  sports  market  segment in the US, Canada and
Europe  with  largely  un-met  or  at  best  poorly-met  needs.  Our  belief  is
demonstrated  by a large and  growing  number of  people  who enjoy  backcountry
running,  cross-country skiing, road biking, mountain cycling,  camping, skiing,
snowboarding,  snowshoeing,  trekking  and hiking.  The largest  segment of this
population,  the now-aging  Baby-Boomers,  is always seeking better gear, tools,
toys and apparel in order to continue to enjoy aggressive  outdoor sports.  They
are also known to be open to new ways of enjoying  their  outdoor  leisure time.
The snowboard is probably one of the clearest examples of a buying  population's
willingness  and desire to seek and use new equipment  technologies to enjoy the
great outdoors.  Snowboarding, the last real revolution in the ski industry, was
introduced  about ten years ago, and has developed  into the equipment of choice
by people  under 30 years  old,  and is now seen on  virtually  every ski resort
slope in the US, Canada and Europe.


<PAGE>

Arete  Outdoors began patent  protection  and product  development in January of
2000 and is now  ready to  launch  the first  two  offerings  in its  innovative
leading-edge line of outdoor  products.  These products reflect the objective of
the company to offer users a truly exciting and unique outdoor experience.  Both
product groups represent major  innovations in design and usability,  and in the
case of our  RUSH(TM)  Downhiller,  we have  literally  created an entirely  new
outdoor sport.

SnowFangs(TM)  We believe  that  SnowFangs  (patent  pending) are the first real
innovation in snowshoe  design in 10,000 years.  SnowFangs  innovation is a dual
platform,  which puts the shoe several inches below the snowshoe deck. This dual
profile increases the ability to traverse steep slopes, high angle step kicking,
and  unparalleled  secure terrain travel ranging from snow, to rock, to ice. The
SnowFangsO is  lightweight,  inviting the winter outdoor  enthusiast to use both
traditional and non-traditional resort areas for use and fun.

PowderRUSH(TM)  and  DirtRUSH(TM).  The RUSH is a downhill  or  gravity  powered
scooter built on a custom  mountain-bike  frame which has two articulated custom
snowboards  on it's  PowderRUSH(TM)  version and mountain bike wheels and knobby
tires and a front suspension with front-end  caliper or disk-type  brakes.  They
are  specially  designed  for easy on and off  loading  on chair  lifts and have
rugged  suspensions to handle the most ardent enthusiasts while safely smoothing
the ride over mogul or bump.  Downhilling  is an entirely new sport  designed to
attract new and old patrons back to the ski slopes.

Marketing and Sales The initial marketing opportunity we see with the RUSH is to
sell to ski resorts for their  winter and summer  rental  pools and then develop
retail sales to the  resort's  patrons.  The RUSH  provides ski resorts a unique
year-round revenue opportunity with its easy and inexpensive convertibility from
one version to the other on the same frame  configuration.  Ski  resorts  across
North America and Europe are  experiencing  a growth  plateau in patronage for a
number  of  reasons  including  the aging of the baby  boom  population  and the
growing  costs and  physical  stress of alpine  skiing.  Resorts  are seeking to
increase and/or stabilize their revenues by attracting  baby-boomer age families
and new patrons as well as  increasing  their summer slope use. In order to sell
the  PowderRUSH  to  resorts in North  America,  it is first  necessary  to gain
approval  from ski area  management.  Beginning in early August of this year, we
started  contacting ski resorts  across the US, Canada and Europe.  We were very
fortunate to gain initial  acceptance with our first order of PowderRUSH's  from
Copper Mountain Resort. Copper Mountain, is owned by Intrawest Corp., one of the
elite  owners  of  destination  ski  and  outdoor   recreation   resorts  on  an
international   scale  and  which   owns   Mammoth   Mountain   in   California,
Whistler/Blackcombe  outside  Vancouver,  British Columbia and a number of other
destination  resorts.  Located in the heart of the  Colorado  Rockies,  our back
yard, Copper Mountain has expressed a keen interest in our PowderRush as well as
our other  products and ideas that will attract new business to the resort.  The
first delivery of the  PowderRush to Copper  Mountain is scheduled for November,
2000.


<PAGE>


In addition to selling to the ski resorts,  Arete  Outdoors has sought  exposure
for its new products in several internationally  attended trade shows. In August
of this year,  representatives of the Company attended the nationally recognized
Outdoor  Retailer  Trade show in Salt Lake City,  Utah. We also  introduced  the
DirtRUSH at the Interbike Expo,  held in Las Vegas,  Nevada this past September.
The  Interbike   Expo  is  the  principal   North  American  venue  for  cycling
enthusiasts'  new product  introduction.  It was attended by over 3,000 retailer
and rental shop owners,  many of whom came by our booth and took  literature and
indicated their  interest.  At the Interbike Show, we introduced the DirtRUSH to
bicycle  retailers and rental shops that rent and sell mountain bicycles because
the  DirtRUSH  is a superior  substitute  for  mountain  bikes on the trails and
designated  ski  slopes  during  the  summer.  The low  center of gravity on the
DirtRUSH  makes it safer compared to  traditional  bicycles  while  providing an
enjoyable ride to the most ardent enthusiast.

Additionally,    Arete   Outdoor   attended   the   Outdoor   Sports   Show   in
Friederichshafen,  Germany.  This European  trade show attracts  buyers from the
European ski resorts, mountain shops and mass retailers. Arete Outdoors set up a
sales and distribution center in Garmisch, Germany to be managed by Martin Bader
of Bergsport International. Mr. Bader has been in the ski product sales industry
for over five years and has been hired to develop  and manage a team of European
sales representatives.  Europe is a much larger market than North America, which
we  believe  will  prove to be much more  receptive  to our  current  and future
products.  We were very  fortunate  to be able to execute a first  year  product
launch in Europe at the same time we are launching in North America.

Manufacturing  and  Fulfillment.  The SnowFangs are  manufactured  in the US and
assembled by Arete  Outdoors.  The DirtRush and PowderRush are  manufactured  in
Taiwan and  shipped to the US for  distribution  by Arete  Outdoors.  The Taiwan
manufacturer  has  been  making  bicycles  for more  than  thirty  years.  Arete
Outdoors, will ship and fill orders at its Berthoud, Colorado headquarters.

Future New Products from Arete Outdoors The  PowerPole(TM)  (patent  pending) is
the third new product  developed for production by  AreteOutdoors'  design team.
This  breakthrough  cross-country  ski  pole  utilizes  a  spring  lever  arm to
dramatically  increase  effective pole length and provide  faster  cross-country
speeds compared to traditional  poles. In July of this year, we filed for patent
protection for our fourth new product,  the Snap Organic Mountain Bike Pedal and
Snap Road Bike Pedal.  This device keeps the foot in place on the bicycle  pedal
using almost any type shoe and will not damage the shoe.  Working similar to the
conventional  dot  snap,  the  pedals  are a major  improvement  in  safety  and
usability by permitting easier attachment and quick release of the shoe from the
pedal in a 360 degree arc when necessary.

Website  Development.  Part of our overall  marketing  strategy  for current and
future products and services is the use of a strong interactive web site. During
the current quarter the  AreteOutdoors.com  interactive,  community web site was
created and put into operation. Consumers can visit the site and learn about our
products,  where  and how to buy,  read  articles  on  people  who have used our
products,  see other non-competitive  products, and learn about adventure travel
opportunities,  etc.  People  can  also  put up  articles  and  pictures  on the
community  section of the web site.  Arete Outdoors will endeavor to improve and
upgrade  the  website as its  resources  allow,  however,  we are  focusing  our
resources on direct corporate sales and developing a team of professional  sales
representatives to market through more traditional channels.


<PAGE>


Adventure Travel Services Seeking to expand into related outdoor sports markets,
we also  stepped  into the  high-end  adventure  expedition  niche of the travel
market.  In August,  we retained  the  services  of Marion  Emmons.  Ms.  Emmons
specializes  in  arranging  and  marketing   adventure  travel.  Also  known  as
"Adventure Girl", Ms Emmons has signed up as a booking agent arranging trips for
approximately 15 different  professional guiding services offering trips ranging
from pack trips into the Sangre de Cristo Mountains in Colorado,  Copper Canyon,
Mexico, or lost Inca villages in Peru, to white water rafting and snowshoe trips
across  the  globe  exclusively  for  Arete  Outdoors.  This  move is a  natural
expansion of services for Arete Outdoors to new outdoor experiences created from
its new products.

Financial  Progress of the Outdoor  Equipment and Services.  Arete  Outdoors has
developed,  designed,  manufactured  and  is  now  in  the  marketing  phase  of
generating  sales with the  introduction of its first group of new products.  At
this time, we have taken our first sales order for the PowderRush product.  This
first sale is the Colorado ski resort of Copper Mountain.  We have also made our
first entree at several national and international  outdoor  enthusiast  product
trade  shows to start  exposing  our  products,  the  DirtRush,  PowderRush  and
SnowFangs to the specialty outdoor retail, rental and ski resort industry. While
we are encouraged by the response in interest to these new products, we are only
now commencing to generate sales. In the meantime, we have incurred research and
development,  production and other costs associated with the four products, plus
website  development  expenses,  which for the time being (2000-2001 ski season)
will exceed the sales  revenues  generated from our marketing and sales efforts.
It is our goal in the 2001-2002-ski  season to have a dramatic increase in sales
when we will have in place many more ski resorts and equipment rental and retail
stores selling and renting products to the outdoor sports consumers.

Ownership  In the  Third  Quarter  of  2000,  there  has been no  change  in the
ownership of Arete Outdoors. Arete Outdoors was originally formed in May of 1998
as Aggression Sport, Inc. by the Company and Boulder Sport, Inc., which is owned
by Tom Raabe,  Chairman  and CEO of Arete  Industries.  Since  inception,  Arete
Industries has owned 44% of Aggression.  In 1999, it began  operating  under the
dba of Arete Outdoors.  In December of 1999, Arete Outdoors  exchanged with Mike
Lowe his participation, and present and future product designs for 30% ownership
with an option to purchase an additional 6%, which vests on certain  performance
milestones, which Arete Outdoors has not met to date.

The current financial  statements  contained herein treat subsidiary  Aggression
Sports,  Inc. (d/b/a Arete  Outdoors) on a  non-consolidated  basis,  i.e. as an
investment.


II.   Patented Intelligent Agent Software

June 2,  2000  Engagement  Agreement.  In line with the  prior  quarter  reports
announcing the new strategic  direction of Arete Industries,  Inc., an agreement
was entered into with Applied Behavioral  Systems,  LLC to form Verbal TechLabs,
Inc.  ("VTL"),  on June 2, 2000. In that  agreement,  the parties  agreed to pay
Arete. $16,000 per month to provide its New Venture Management  Services,  which
include  accounting and management  services and include office  facilities with
common computer and telephone network services.  In addition, we would receive a
14.3% equity  ownership  interest,  which after taking into account the proposed
first round of $3 million investment, will be diluted to approximately 10%.


<PAGE>


Language  Learning  Software VTL has developed a software  program that enhances
the  education  and  language  training  skills of children  with  developmental
learning  disabilities.  (Downs Syndrome,  mental retardation,  autism and other
learning  disabilities.)  VTL's  software  is  unique  in that it  adapts to the
particular  language  learning skills of the student.  It works by measuring the
accuracy of the student's verbal  expressions  against the intended response and
automatically  cues  the  student  according  to his or her  progress.  It  also
distinguishes  itself from other competitive software programs because it is the
only program that teaches people how to speak (expressive  language) rather than
just listen (receptive language).  The increase in the participating  children's
vocabulary and in their ability to express themselves will translate into market
leadership  because parents and teachers will see tangible  results by using the
program.  Two  issued  patents  protect  the  teaching  software  and others are
pending.

Interactive Teacher Demo In mid-September,  VTL completed a working prototype of
its "interactive  teacher" software program. The working prototype  successfully
demonstrated  the  ability  to  integrate  the  intelligent  agent and the voice
recognition software into an effective method of teaching language.

Potential New  Development  Direction The speed with which it was created by the
VTL design team and quality of the voice recognition features of the interactive
teacher prompted us to explore other applications beyond education and language.
As a result,  we  discovered  it is highly  likely that  entirely  new realms of
industries  like speech  interpretation  and intelligent  robotics  applications
could be suitable for this  software.  We will remain  focused on  continuing to
complete  program  function for language and  education.  However,  if the early
research  is  correct,  development  of  these  applications  could  potentially
significantly   expand  our  ability  to  create   significant   value  for  our
shareholders.  For  example,  our ability to identify  the words  spoken from an
independent  speaker  without  training the device is as good or better than the
technology that launched two recent IPOs, Nuance Communications, Inc. (NUAN) and
SpeechWorks  International  (SPWX)  that are  trading  approximately  100  times
estimated 2000 sales. As a result,  Arete Industries is working closely with the
principals of the company to determine  the best  direction of the company given
this new information.


III.     Other Opportunities

We believe  that  there is no  shortage  of  business  opportunities  that would
benefit from our management and capital resources and would be willing to engage
Arete to accelerate them through their development  stages of making and selling
a product, building their capital structure and developing a management team. We
will focus on companies  with  exciting  leading-edge  products or  services,  a
proven  market and the  ability to make a product  that the market is willing to
accept. We emphasize the integrity and experience of a new company's  management
team or the human element because we believe that  relationships are 90 % of the
formula for success. Finally, we focus on whether the prospective company can be
grown  significantly with our help to a point where we can have an exit strategy
in which we realize a  significant  capital  gain.  In this way, we believe that
Arete Industries,  Inc. can become an investment  vehicle in which investors can
participate in opportunities with potentials that are customarily only available
to angel investors and venture capitalists.


<PAGE>


The current  financial  statements  contained herein treat subsidiary  Agression
Sports,  Inc. (d/b/a Arete  Outdoors) on a  non-consolidated  basis,  i.e. as an
investment.


Financial Condition
-------------------
The Company had a working capital deficit as of September 30, 2000, of $680,978.
This  compares to a working  capital  deficit of $455,148 at December  31, 1999.
Losses  were  partially  funded  with  accrued  salaries  and shares  issued for
services. During the 3-month period ended September 30, 2000, the Company issued
13,007,048 shares of common stock for services.


Results of Operations
---------------------

The Company's  financial  performance  has been stabilized by the termination of
its co-op  coupon  business,  and the  execution  of the New Venture  Management
Services strategy has not yet developed into significant financial results.

The Company's operating revenues of $108,000 was management fees charged for its
New Venture Management Services for the three months ended. The nine month total
is $138,000 for New Venture Management Services.

For the quarter  ended  September  30, 2000,  the Company  incurred  $346,143 in
operating  expenses.  For the nine  month  period of this year  total  operating
expenses are $627,857.  The Company's future  expectation is that these expenses
will remain relatively  stable, but may increase over time relative to growth in
revenues from its management services.


Liquidity and Capital Resources
-------------------------------
Arete Outdoors will need significant  additional capital in the coming months as
additional  products  come on stream and prior to the  generation  of sufficient
revenue to cover these costs. The Company  anticipates  that these  requirements
will be covered by liquidation  of shares of the Company's  common stock held by
Arete  Outdoors,  or  otherwise  with  proceeds  of  private  placements  of the
Company's  securities  advanced  by the  Company in the form of loans or further
equity infusions. There are no assurances that Arete Outdoors will be successful
in  liquidating  such  shares at a favorable  price or that the Company  will be
successful in raising such funds in the short term.

The Company had stockholder's  deficit in excess of assets at September 30, 2000
of $530,529.  This is compared to  stockholder's  deficit in excess of assets at
December 31, 1999 of $412,492.  The  stockholder's  deficit increased due to the
Company's operating at a loss.


<PAGE>


Management  believes  that with a  successful  track  record of its New  Venture
Management  Services strategy,  it will become an attractive  investment for new
equity  investors,  but the Company has yet to qualify for conventional  bank or
venture capital  financing.  Additional debt and/or  infusions of equity capital
are  necessary  to  finance  working  capital  for the  Company's  new  business
incubation initiatives and to build its banking and operational  infrastructure.
Management  is resolved  to  continue  to support the Company and its  incubator
partners as long as it is able to generate  positive cash flow to finance growth
and retire debt within the near term, of which there is no assurance. Due to the
current financial  condition of the Company and the volatility in the market for
the Company's  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  securities,  or with bank debt on  favorable  terms in the near  future.
Never-the-less,  due to such  conditions,  the  Company may be required to issue
further common 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 or medium term.

At  September  30,  2000,  the Company had no material  commitments  for capital
expenditures.


PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

During the Period  ended  September  30,  2000,  there  were no  material  legal
proceedings  initiated  by or  against  the  Company  or  any  ofitsw  officers,
directors or subisdiates.


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

The following exhibits are attached:

         Exhibit No.               Description
        -----------          -----------------------
          27                 Financial Data Schedule

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


<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: September 30, 2000              By:  /s/  Thomas Y. Gorman, CFO
                                      -------------------------------
                                      Thomas Y. Gorman, CFO
                                      Principal Financial and Accounting Officer