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: June 30, 2003

                                       or

[ ]  Transition Report pursuant 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.)

                 7102 La Vista Place, Suite 100, Niwot, CO 80503
                -------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (303) 652-3113
               --------------------------------------------------
              (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 August 14, 2003, Registrant had 57,599,581 shares of common stock, No par
value, outstanding.


<PAGE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES


                                      INDEX
<TABLE>
<CAPTION>

                                                                                      Page No.

<S>                                                                                   <C>
     Consolidated Financial Statements:

     Index to Consolidated Financial Statements                                            1

     Consolidated Balance Sheet at June 30, 2003 and December 31, 2002
     (unaudited)                                                                           2

     Consolidated Statements of Operations for the Three Months Ended June 30
     2003 and 2002 (unaudited)                                                             3

     Consolidated Statements of Operations for the Six Months Ended June 30
     2003 and 2002 (unaudited)                                                             4

     Consolidated Statement of Stockholders' Deficit for the Six Months Ended

     June 30, 2003 (unaudited)                                                             5

     Consolidated Statements of Cash Flows for the Six Months Ended June 30,
     2003 and 2002 (unaudited)                                                             6

     Notes to Unaudited Consolidated Financial Statements at June 30, 2003               7-10

     Item 2

     Management's Discussion and Analysis of Financial Condition and Results of
     Operations                                                                          11-15

     Part II - Other Information                                                          16

     Signatures                                                                           17
</TABLE>


                                       1
<PAGE>




                    ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                      December 31, 2002 and June 30, 2003
                                   (Unaudited)




<TABLE>
<CAPTION>

                                     ASSETS

                                                                                    2002              2003
                                                                                   ------            ------
Current assets:
<S>                                                                           <C>             <C>
    Cash and cash equivalents                                                 $        381    $         89
    Accrued interest receivable                                                     24,632          31,197
    Inventory                                                                       20,302          20,302
    Prepaid expenses                                                                 2,285             275
                                                                                 ---------       ---------
      Total current assets                                                          47,600          51,863

Furniture and equipment, at cost net of accumulated
    depreciation of $74,309 (2002) and $88,422 (2003)                               97,056          82,943
Intellectual property                                                               32,215          31,065
                                                                                 ---------       ---------

                                                                              $    176,871    $    165,871
                                                                              ============    ============


                                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable (Note 2)                                                 $    422,697         429,884
    Accrued expenses                                                               576,333         576,898
    Accrued payroll taxes (Note 2)                                                 289,761         289,761
    Settlement due                                                                  18,650          18,650
    Notes payable - related parties                                                 27,532          10,268
                                                                                 ---------       ---------
      Total current liabilities                                                  1,334,973       1,325,461

Commitments and contingencies (Notes 1 and 2)

Stockholders' deficit (Notes 4 and 5):
    Convertible Class A preferred stock; $10 face value,
      1,000,000 shares authorized:
        Series 1, 30,000 shares authorized, 16,001
          shares issued and outstanding                                            160,014         160,014
        Series 2, 25,000 shares authorized, 18,542 (2002)
          and 19,329 (2003) shares issued and outstanding                          185,425         193,287
    Common stock, no par value; 499,000,000 shares
      authorized, 34,399,581 (2002) and 47,599,581 (2003)
      shares issued and outstanding                                              9,592,587       9,833,082
    Accumulated deficit                                                        (10,877,308)    (11,127,153)
    Notes receivable from sale of stock                                           (218,820)       (218,820)
                                                                                 ---------       ---------
      Total stockholders' deficit                                               (1,158,102)     (1,159,590)
                                                                               -----------     -----------

                                                                              $    176,871    $    165,871
                                                                              ============    ============

</TABLE>

                            See accompanying notes.

                                        2

<PAGE>

                    ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
               For the three months ended June 30, 2002 and 2003
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                   2002             2003
                                                   ----             ----
Revenues:
<S>                                          <C>             <C>
    Sales                                    $         --    $         --
                                                ---------       ---------
      Total revenues                                   --              --

Operating expenses:
    Depreciation                                    8,101           6,598
    Rent                                            6,464           4,259
    Other operating expenses                       78,079          88,320
                                                ---------       ---------
      Total operating expenses                     92,644          99,177
                                                ---------       ---------

        Total operating loss                      (92,644)        (99,177)

Other income (expense):
    Interest expense                                 (573)         (4,334)
    Interest and miscellaneous income               3,328           3,282
                                                ---------       ---------

      Total other income (expense)                  2,755          (1,052)
                                                ---------       ---------

Net loss (Note 3)                            $    (89,889)   $   (100,229)
                                             ============    ============


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


Weighted average common shares outstanding     24,416,000      46,545,000
                                             ============    ============
</TABLE>

*-Less than $.01 per share



                            See accompanying notes.

                                        3

<PAGE>

                    ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                For the six months ended June 30, 2002 and 2003
                                  (Unaudited)


<TABLE>
<CAPTION>

                                                 2002                 2003
                                                 ----                 ----
Revenues:
<S>                                          <C>             <C>
    Sales                                    $        379    $         --
                                              -----------     -----------
      Total revenues                                  379              --

Operating expenses:
    Depreciation                                   16,203          14,113
    Rent                                           16,268           6,343
    Other operating expenses                      109,804         226,628
                                              -----------     -----------

      Total operating expenses                    142,275         247,084
                                              -----------     -----------

        Total operating loss                     (141,896)       (247,084)

Other income (expense):
    Interest expense                               (4,869)         (9,326)
    Interest and miscellaneous income               6,556           6,565
                                              -----------     -----------

      Total other income (expense)                  1,687          (2,761)
                                              -----------     -----------

Net loss (Note 3)                            $   (140,209)   $   (249,845)
                                              ===========     ===========



Basic and diluted loss per share             $      (0.01)   $      (0.01)
                                              ===========     ===========

Weighted average common shares outstanding     24,416,000      42,720,000
                                              ===========     ===========

</TABLE>

                            See accompanying notes.

                                        4

<PAGE>

                    ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT
                     For the six months ended June 30, 2003
                                  (Unaudited)


<TABLE>
<CAPTION>

                                              Series 1 preferred stock        Series 2 preferred stock         Common stock
                                              -------------------------       -------------------------        ------------
                                               Shares           Amount          Shares          Amount            Shares
                                               ------           ------          ------          ------            ------

<S>                                                 <C>           <C>                <C>          <C>               <C>
Balance, December 31, 2002                          16,001        $ 160,014          18,542       $ 185,425         34,399,581

Issuance of Series 2 preferred  stock
   to reimburse advances made to the
   Company (Note 4)                                      -                -             787           7,862                  -

Exercise of Stock Options                                -                -               -               -          2,000,000

Issuance of common stock to employees
   and consultants for services (Note 4)                 -                -               -               -         11,200,000

Value of stock options granted to consultants
   (Note 4)                                              -                -               -               -                  -

Net loss for the six months ended
   June 30, 2003                                        -                -               -               -                  -
                                                   -------       ----------         -------      ----------        -----------
                                                   16,001        $ 160,014          19,329       $ 193,287         47,599,581
                                                   =======       ==========         =======      ==========        ===========

</TABLE>

                    ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT
                     For the six months ended June 30, 2003
                                  (Unaudited)

                                    Continued

<TABLE>
<CAPTION>

                                                    Common Stock       Accumulated
                                                       Amount            deficit
                                                   -------------      ------------
<S>                                                 <C>               <C>
Balance, December 31, 2002                          $ 9,592,587       $(10,877,308)

Issuance of Series 2 preferred  stock
   to reimburse advances made to the
   Company (Note 4)                                           -                  -

Issuance of Series 2 preferred  stock
   for cancellation of notes payable
   (Note 4)                                                   -                  -

Exercise of Stock Options                                40,000                  -

Issuance of common stock to employees
   and consultants for services (Note 4)                183,758                  -

Issuance of common stock in payment
   of accrued interest (Note 4)                                                  -

Value of stock options granted to consultants
   (Note 4)                                              16,737                  -

Net loss for the six months ended
   June 30, 2003                                             -            (249,845)
                                                   -----------       -------------
                                                   $ 9,833,082        $(11,127,153)
                                                   ===========       =============
</TABLE>

                            See accompanying notes.

                                        5

<PAGE>

                    ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                For the six months ended June 30, 2002 and 2003
                                  (Unaudited)


<TABLE>
<CAPTION>

                                                           2002          2003
                                                           ----          ----
Cash flows from operating activities:
<S>                                                     <C>          <C>
    Net loss                                            $(140,209)   $(249,845)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Depreciation and amortization                      16,203       15,263
        Stock issued and options granted for services          --      200,495
        Changes in assets and liabilities:
          Interest receivable                              (6,555)      (6,565)
          Prepaid expenses                                 (2,583)       2,010
          Accounts payable                                  4,021        7,187
          Accrued expenses                                 89,893          565
                                                         --------     --------
            Total adjustments                             100,979      218,955
                                                         --------     --------

        Net cash provided by operating activities         (39,230)     (30,890)

Cash flows from investing activities:

    Security deposit                                          616           --
                                                         --------     --------

        Net cash used in investing activities                 616           --

Cash flows from financing activities:

    Proceeds from issuance of preferred stock              38,947        7,862
    Proceeds from exercise of stock options                    --       40,000
    Payment of note payable - related parties                  --      (17,264)
                                                         --------     --------

      Net cash provided by financing activities            38,947       30,598
                                                         --------     --------

Net increase (decrease) in cash and cash equivalents          333         (292)
Cash and cash equivalents at beginning of period              110          381
                                                         --------     --------

Cash and cash equivalents at end of period              $     443    $      89
                                                        =========    =========
</TABLE>


                            See accompanying notes.
                                       6

<PAGE>



                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003


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, 2002 and June 30, 2003, and the results of
     operations and cash flows for the periods ended June 30, 2002 and 2003.

     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 June 30,
     2003, the Company has a working capital deficit of $1,273,598 and a
     stockholders' deficit of $1,159,590. 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
     June 30, 2003, the Company received proceeds of $193,287 for the purchase
     of 19,329 shares of Series 2 Convertible Preferred Stock. As a development
     stage company, the Company continues to rely on infusions of debt and
     equity capital to fund operations. Subsequent to the end of the second
     quarter, the Company received an additional $6,713 from Eagle Capital to
     complete its subscription for the Series 2 Convertible Preferred Stock and
     issued an additional 671 shares of such preferred stock for a total
     issuance of 20,000 shares of the Series 2 Convertible Preferred. The
     Company relies principally on cash infusions from its directors and
     affiliates, deferred compensation and expenses from the executive officers,
     and paid a significant amount of personal services, salaries and incentives
     in the form of common stock and common stock options.

     The Company has modified its business plan to focus on identification of a
     high-growth and high margin industry sector in which present conditions are
     favorable for entry by the Company and to develop ventures in the chosen
     industry directly and through acquisition of management, capital, and
     assets by one or more acquisitions of going concerns. The Company is
     evaluating several areas at the present time including the energy industry,
     such as purchasing interests in producing oil and/or gas properties, and
     alternative energy ventures such as wind energy and renewable energy. Also
     under consideration is creation and operation of one or more investment
     funds to engage in energy related and socially responsible investments. The
     Company will continue to seek to build a portfolio of equity and debt
     positions in promising emerging and high growth-stage companies and to
     provide such companies with financial and board level managerial support.
     The Company believes that it can provide its potential portfolio companies
     access to private and public debt and/or equity capital by offering these
     companies the opportunity to go public through a registered rights offering
     or dividend distribution to the Company's shareholders.

2.   Delinquent amounts payable

     As of June 30, 2003, 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.

                                       7
<PAGE>


                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003



3.   Income taxes

     The book to tax temporary differences resulting in deferred tax assets and
     liabilities are primarily net operating loss carryforwards of $4,414,000
     which expire in years through 2023.

     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 reasonably assured.

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

4.   Stock transactions

     Effective July 15, 2002, the shareholders of the Company approved a 20 for
     1 reverse stock split. All common share references in these financial
     statements have been revised to reflect the reverse split.

     On December 19, 2001, by board resolution pursuant to a subscription
     agreement, the board of directors designated 25,000 shares 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 June 30, 2003, the Company received proceeds of $193,287 for
     the purchase of 19,329 shares of Series 2 Convertible Preferred Stock.
     These preferred shares are convertible into 19,328,671 shares of common
     stock.

     On January 29, 2003, the Company issued 5,000,000 shares of common stock
     valued at $75,000, and granted stock options to purchase 3,000,000 shares
     at $0.0165 per share to its officers and directors for compensation for the
     first quarter. These options are exercisable beginning 79 days from the
     date of issuance and for a period of two years thereafter. Additionally
     during the first quarter, 1,000,000 shares of common stock were issued to
     one consultant for services performed valued at $15,000. On April 1, 2003,
     the Company issued 1,000,000 common shares to the CEO for compensation
     valued at $14,000 or $0.014 per share and granted stock options to purchase
     3,000,000 common shares at $0.0155 per share to its officers and directors
     for compensation in the second quarter. These options are exercisable for a
     period beginning June 30, 2003 and expiring on April 1, 2005. On April 3,
     2003, the CEO and a consultant exercised 1,000,000 common stock options
     each for $0.02 per share for a total of $25,000 in cash and payment of
     $15,000 in notes payable to the CEO. Additionally, during the second
     quarter, 1,000,000 shares of common stock were issued to one consultant for
     services performed valued at $20,000.

     By agreement dated March 6, 2003, the Company engaged a consultant to
     provide corporate communications support for a period of six months from
     such date for compensation of 3,000,000 common shares and stock options to
     purchase up to 4,000,000 common shares for $0.015 per share for a period
     expiring 6 months from such date (valued at $16,737). 1,500,000 of these
     shares were issued in the first quarter valued at $22,500 and the Company
     issued the second 1,500,000 shares during the second quarter valued at
     $30,000.

     On March 7, 2003, the Company issued 200,000 shares of common stock valued
     at $7,258 in final settlement of a wage claim.

                                       8
<PAGE>



                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003


4. Stock transactions (continued)

     During the second quarter, the Company inadvertently issued shares and/or
     granted stock options which exceeded the number of common shares allocated
     to its 2002 Incentive Stock Option Plan by 683,333 shares. Certain of these
     include shares reserved for issuance on exercise of outstanding stock
     options. During the second quarter, the Company adopted a policy not to
     allow exercise of the most recently granted stock options unless other
     outstanding options expire, other shares pending issuance are cancelled or
     shares that were issued under the plan can be reassigned outside of the
     2002 Plan or included in the anticipated 2003 Omnibus Stock Compensation
     and Incentive Plan in sufficient number to allow their exercise.

     The Company has adopted the disclosure-only provisions of Statement of
     Financial Accounting Standards No. 123, Accounting for Stock-Based
     Compensation. Accordingly, no compensation cost has been recognized for the
     stock option plans. Had compensation costs for the Company's stock option
     plans been determined based on the fair value at the grant date for awards
     during the period ended June 30, 2003 in accordance with the provisions of
     SFAS No. 123, the Company's net loss and loss per share would have been
     increased to the pro forma amounts indicated below:

                                                  2002              2003
                                                  ----              ----

        Net loss - as reported              $    (140,209)    $    (249,845)
        Net loss - pro forma                     (140,209)         (302,987)
        Loss per share - as reported             (0.01)            (0.01)
        Loss per share - pro forma               (0.01)            (0.01)



     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option-pricing model with the following weighted-average
     assumptions used for grants in 2003, dividend yield of 0%; expected
     volatility of 100%, risk-free interest rate of 1.45% to 1.75%; and expected
     life of .5 to 2 years.

5.   Subsequent Events

     On July 21, 2003, Mr. Gerald J. Brandimarte resigned as an officer and
     director of the Company, agreeing to cancel his outstanding stock options
     to purchase up to 4,000,000 shares of common stock. Mr. Brandimarte
     resigned after efforts to develop a variable rate bond trust financing
     vehicle proved unsuccessful and to resolve an inherent conflict of interest
     relating to his ownership and management position with Tri-State Transfer
     Industries, LLC., with whom the Company has a letter of intent to acquire a
     5% Limited Liability Membership Interest at such time as this company
     completes the most preliminary steps of its development stage.

     Following the end of the second quarter, an additional 3,000,000 in common
     stock options were cancelled, and an additional 5,000,000 common stock
     options were suspended pending reassignment to a subsequent compensation
     plan or the availability under the current plan to allow for their exercise
     prior to such reassignment.

                                        9
<PAGE>



                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003

     By agreement dated August 4, 2003, the Company engaged a corporate
     consultant to provide advisory services, recommendations and to make
     introductions to assist the Company in refining and executing its business
     plan, including corporate finance, mergers and acquisitions and corporate
     visibility. The agreement is for a term of 6 months for compensation of
     7,000,000 common shares valued at $0.01 per share or $70,000 and is
     renewable for additional periods.

     Also, on August 4, 2003, the Company issued 1,000,000 shares of common
     stock valued at $10,000 to a consultant for printing, direct mail and
     further media services, and issued 500,000 common shares each to its
     remaining two directors for compensation valued at $5,000 each.

     Following the end of the second quarter, the Company received $6,713 from
     an affiliated company toward a subscription for Series 2 Preferred Stock
     and issued 671 shares of such preferred stock, completing the $200,000
     subscription agreement executed by such affiliate.

                                       10
<PAGE>

Item 2-Management's Discussion and Analysis

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 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 and preferred
stock, and 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 when such services were performed since collectibility was
not reasonably assured.

Overview

Effective July 15, 2002, the Company enacted a recapitalization of its
outstanding common shares by effecting a 20 to 1 reverse stock split, done
without changing the total amount of authorized common shares. All references
herein to common stock have been restated to reflect the effect of this reverse
split. The conversion privilege of the designated Series 1 and Series 2
Convertible Preferred Stock has been adjusted to reflect the effect of the
referenced reverse stock split.
                                       11
<PAGE>
During fiscal years 2000 and 2001, the Company operated as a business incubator
for its Arete Outdoors subsidiary and a software development project of a
language teaching software system, robotic control system and other applications
utilizing a proprietary artificial intelligence engine developed by Dr. William
Hutchison. These projects were initially funded internally, but the Company was
unable to raise sufficient additional capital to continue to support further
start-up and development stage activities and were abandoned at the end of 2001.
During fiscal year 2002, the Company had downsized and engaged in restructuring
to engage in business development activities for emerging growth companies by
pursuing several alternative financing vehicles to provide candidates with
growth capital. In the second half of fiscal year 2002, the Company initiated
efforts to raise capital through investment grade debt securities and engaged in
the process of finding acquisition and business development clients. These
activities stalled due to the inability of the Company and its affiliates to
successfully execute an underwriting of a variable rate bond note funding.
However, at the end of fiscal year 2002, the Company, initiated a transaction to
acquire an interest in a venture to create a series of municipal solid waste and
construction and demolition facilities on the east coast. This project is still
in its formative stages.

At the end of July, 2003, Mr. Brandimarte resigned as an officer and director of
the Company. He also resigned and recanted his interest in Eagle Capital Funding
Corp., an affiliate of the Company. He also assigned his Membership Interest in
Eagle Capital Fund - I, LLC to Eagle Capital Funding Corp. ("ECF"), the Managing
Member of Eagle Capital Fund - I, LLC. ("ECF-I") In September, 2002, Messrs.
Raabe, Stewart and Brandimarte each purchased an 18% interest in ECF-I, with
1,000,000 shares each of their common stock of the Company, or a total of
3,000,000 shares. ECF is currently owned by the CEO and Mr. Stewart, a director
and executive officer of the Company and it owns 20,000 shares of the Company's
Series 2 Convertible Preferred Stock (the "Series 2 Preferred") as of August 14,
2003. The 20,000 shares of Series 2 Preferred are convertible into 20,000,000
shares of the Company's common stock at $0.01 in face value of preferred per
common share, and were purchased for $10.00 per share or $200,000 in cash. ECF-I
owns 10,000 of the 20,000 outstanding shares of the Series 2 Preferred
convertible into 10,000,000 common shares which were purchased with $100,000 in
notes payable by the Company to third parties who purchased LLC Membership
Interests in ECF-I with the referenced notes payable. Through their ownership of
ECF and their direct and indirect interests in ECF-I, the two directors
currently own a controlling interest in the Company.

During the fourth quarter of fiscal 2002, we continued to downsize our
operations, preserved our assets and resources, and maintained our current
reporting status as a public company in order to preserve our continuity and our
ability to launch our new corporate vision. In December 2002, the Company moved
its corporate offices into an executive suite, reducing its overhead to an
absolute minimum. During the first and second quarters of the current fiscal
year, we have re-examined our corporate direction and focus and have determined
to pursue business as a business development company, but to concentrate our
resources on developing ventures in a single industry sector while retaining the
option of assisting growth stage companies in other industries achieve their
objectives of going public through an association with the Company through a
registered rights offering or stock dividend to the Company's public
shareholders. Presently, we continue our efforts to compromise or resolve
outstanding obligations including accrued employee compensation, withholding and
other taxes, operating and trade payables of the Company and its former
subsidiary operations. To date these efforts have been funded by cash advances,
infusions from related parties, and by the issuance of common stock for
services. The Company will be required to rely upon ongoing financial support
from these parties for the foreseeable future.

                                       12
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Financial Condition

As of June 30, 2003, the Company had $165,871 in total assets and $1,325,461 in
total liabilities, as compared to $176,871 and $1,334,973 at the end of fiscal
year ended December 31, 2002, respectively. Accounts payable and accrued
expenses at June 30, 2003 were $1,296,543 as compared to $1,288,791 at December
31, 2002. During the six month period ended June 30, 2003, the Company repaid
$17,754 in notes payable to the CEO, paid $89,000 in compensation and paid
$87,500 in consulting fees with issuance of common stock and stock options.
During April of 2003, the Chief Executive Officer exercised 1,000,000 in stock
options with $5,000 in cash and payment of $15,000 of note payable; and a
consultant exercised 1,000,000 in common stock options with $20,000 in cash.

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 $58,230 remaining from its printing and direct mail advertising
business. The Company owes approximately $231,531 in unpaid Federal payroll
taxes for calendar years 1995 through 1997, 2000 and 2001. Further the Company
owes $62,316 to creditors under its Plan of Reorganization confirmed in
September 1995. (See: Note 2 to Financial Statements.)

During the period ended June 30, 2003, the Company continued to rely upon
infusions of cash from loans and cash advances by officers, directors and
affiliates of the Company. During the second quarter of 2003, $4,316.95 was
received in partial payment of a subscription agreement for purchase of Series 2
Preferred Stock. The proceeds were used for overhead, payment of corporate
obligations, legal fees and accounting expenses for corporate reporting. As of
June 30, 2003, executive salaries and bonuses of $518,873 were accrued and
unpaid, and the Company had $218,820 in notes receivable for stock sales from
former management members.

Results of operations

The Company's operations during the second quarter of 2003 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 currently not providing new venture
management or advisory activities and therefore not generating revenue from
executive and management services.

The Company's revenues from operations for the three month period ended June 30,
2003 were $0, as compared to revenues of $0 for the same period in 2002.
Operating expenses for the three month period ended June 30, 2003 were $99,177,
as compared to $92,644 for the same period in 2002, resulting in an operating
loss of $99,177 and $92,644 for the three month period ended June 30, 2003 and
2002, respectively. Operating expenses for the three month period ended June 30,
2003 included officer and director compensation of $14,000, consulting of
$50,000 and other operating expenses of $35,177, including accounting fees,
bookkeeping, transfer agent fees, and storage fees. Operating expenses for the
comparative three month period ended June 30, 2002 were $29,000 in accrued
executive salaries, rent of $6,464 and other operating expenses of $57,180
including consulting, bookkeeping, shareholder communication, transfer agent
fees, accounting and auditing expenses and costs associated with the annual
shareholders meeting in July 2002.

                                       13
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The Company's revenues from operations for the six month period ended June 30,
2003 were $0, as compared to revenues of $379 for the same period in 2002.
Operating expenses for the six month period ended June 30, 2003 were $247,084,
as compared to $142,275 for the same period in 2002, resulting in an operating
loss of $247,084 and $141,896 for the six month period ended June 30, 2003 and
2003, respectively. Operating expenses for the six month period ended June 30,
2003 included officer and director compensation of $89,000, consulting of
$105,187 and other operating expenses of $52,897, including accounting fees,
bookkeeping, transfer agent fees, and storage fees. Operating expenses for the
comparative six month period ended June 30, 2002 were $61,000 in accrued
executive salaries, rent of $16,268 and other operating expenses of $65,007
including consulting, bookkeeping, shareholder communication, transfer agent
fees, accounting and auditing expenses and costs associated with the annual
shareholders meeting in July 2002.

In January 2003, the Company moved to an executive suite on a month to month
basis reducing its rent to $1,000 per month. The Company continues to rent
storage space for file storage, furniture and excess equipment as well as its
Arete Outdoors inventory for approximately $550 per month.

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.

Liquidity and Capital Resources

The Company had a working capital deficit as of June 30, 2003 of $1,273,598.
This compares to a working capital deficit of $1,287,373 as of December 31,
2002. During the quarter ended June 30, 2003 an aggregate of 5,500,000 shares of
common stock were issued for aggregate consideration of $104,000 (avg. $0.019
per share) and the Company issued 432 shares of Series 2 Convertible Preferred
Stock valued at face value of $4,316.

The Company had a stockholder's deficit at June 30, 2003 of $1,159,590. This is
compared to stockholder's deficit at December 31, 2002 of $1,158,102. The
stockholder's deficit increased due to the Company operating at a loss, offset
by the exercise of stock options for cash and payment of notes payable to
insiders, and the issuance of preferred stock for cash.

At June 30, 2003, the Company had no material commitments for capital
expenditures.
                                       14
<PAGE>
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.

Management believes that the Company will experience significant difficulty
raising significant additional equity capital or attracting viable acquisition
candidates until these matters have been resolved and the Company has eliminated
a substantial amount of its outstanding debt.

The Company has recently reduced the number of outstanding common shares to
allow it to raise equity capital and to effect 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 completed on August 14, 2003. As
of June 30, 2003, the Company had raised $193,287 in gross proceeds of this
private placement and had 19,329 outstanding shares of Series 2 Convertible
Preferred.

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-term.

Subsidiaries/Employees

Arete Industries, Inc. has its CEO on a full time basis and its second director
who serves part-time as a corporate officer. The Company employs independent
contractors for special services including shareholder relations, marketing and
business plan development, and business development, merger and acquisition
services. The Company's subsidiary, Aggression Sports, Inc. presently has no
employees other than its acting president, the Company's current CEO. The CEO
operates and manages both entities and remains on a deferred salary basis for
the first two quarters of 2003. During the first two quarters, the CEO accepted
2,000,000 shares of common stock as a compensation grant valued at $29,000, an
Incentive stock option to purchase 1,000,000 shares of common stock at $0.0165
per share and an incentive stock option to purchase 1,000,000 shares of common
stock at $0.0155 per share. During the first two quarters, the two outside
directors each received 2,000,000 share common stock grant valued at $30,000
each and Incentive Stock Options to purchase 1,000,000 common shares of common
stock each at $0.0165 per share for compensation for the first quarter and
1,000,000 common shares each at $0.0155 per share for compensation for the
second quarter. Following the end of the second quarter, the two outside
directors agreed to cancel 7,000,000 common stock options, and the CEO and
remaining director agreed to suspend from exercise their remaining 4,000,000
common stock options until such time as sufficient shares become available under
the Company's current plan or a future stock option plan.

                                       15
<PAGE>



PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

During the Period ended June 30, 2003, 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
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

Exhibit 31.1 Certification of CEO and CFO Pursuant to 18 U.S.C, Section 1350, as
adopted and Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C, Section 1350, as
adopted and Section 906 of the Sarbanes-Oxley Act of 2002.

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

                                       16
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                                   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: August 19, 2003

By: /s/ Thomas P. Raabe, CEO/ Interim CFO
   --------------------------------------
        Thomas P. Raabe, CEO/ Interim CFO
        Interim Principal Financial and Accounting Officer

                                       17
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