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, 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                                     84-1063149
    -----------------------------------                -----------------
    (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 August 15, 2000, Registrant had 328,113,700 shares of common stock, No par
value, outstanding.


<PAGE>

                      ARETE INDUSTRIES, INC. AND SUBSIDIARY

                                      INDEX


                                                                        Page No.

   Consolidated Financial Statements:

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

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

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

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

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

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



<PAGE>


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

                                                      2000       1999
                                                      ----       ----
Current assets:
   Cash and cash equivalents                     $   99,920  $   15,844
   Restricted cash                                        -      25,000
   Accounts receivable, less allowance for
    doubtful accounts of $0                          12,639         519
   Intercompany                                           -           -
   Prepaid expenses                                       -       1,200
                                                 ----------  ----------

    Total current assets                            112,559      42,563

Notes receivable                                     25,400           -

Furniture and equipment, at cost net of accumulated
   depreciation of $1,198 (2000) and $233 (1999)     19,870       2,096

Security deposit                                      5,664           -

Investment in and advances to Verbaltech Labs &
Banking                                                 611           -

Investment in and advances to Aggression Sports
   (Note 2)                                          (4,330)     40,560
                                                 ----------  ----------

                                                 $  159,774  $   85,219
                                                 ==========  ==========

           LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Accounts payable (Note 3)                    $   203,449  $  204,318
   Accrued expenses                                  87,263      34,409
   Accrued payroll taxes (Note 3)                   174,998     146,130
   Notes payable                                      5,000      24,500
   Convertible note payable - officer                81,021      81,021
   Stock subscription payment received                    -       7,333
                                                 ----------  ----------

    Total current liabilities                       551,731     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 par value, 100,000
      shares authorized, 3,000 shares issued and
      outstanding (liquidation preference $32,475)        -      30,000
   Common stock, $.0001 par value; 500,000,000
      shares authorized, 328,113,700 (2000) and
      301,397,155 (1999) shares issued and
      outstanding                                 7,862,710   7,414,758
   Accumulated deficit                           (8,254,667) (7,857,250)
                                                 ----------  ----------

    Total stockholders' deficit                    (391,957)   (412,492)
                                                 ----------  ----------

                                                 $  159,774  $   85,219
                                                 ==========  ==========

                            See accompanying notes.
                                       2

<PAGE>


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

                                                            2000         1999
                                                            ----         ----
Revenues:
   Management fees                                     $   30,000   $        -

Operating expenses:
   Depreciation                                                849           -
   Rent                                                      6,931           -
   Salaries                                                112,231           -
   Stock issued for services (Note 4)                       47,500           -
   Other operating expenses                                114,203           -
                                                       -----------  -----------

    Total costs and expenses                               281,714           -
                                                       -----------  -----------
         Total operating income (loss)                    (251,714)          -

Other income (expense):
   Equity in loss of Aggression Sports (Note 2)            (75,005)           -
   Gain on sale of equipment                                     -            -
   Interest expense                                         (1,847)        (134)
   Interest and miscellaneous income                         9,863          107
                                                       -----------  -----------

    Total other income (expenses)                          (66,989)         (27)
                                                       -----------  -----------

Net loss from continuing operations (Note 5)              (318,703)         (27)
Net loss from discontinued operations (Note 1)                   -     (186,880)
                                                       -----------  -----------

Net loss applicable to common shareholders             $  (318,703) $  (186,907)
                                                       ===========  ===========

Basic and diluted loss per share                       $         *  $         *
                                                       ===========  ===========
Weighted average common shares outstanding             265,404,922  282,307,824
                                                       ===========  ===========



* - Less than $.01 per share


                            See accompanying notes.
                                       3

<PAGE>


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

                                                            2000         1999
                                                            ----         ----
Revenues:
   Management fees                                     $    30,000  $         -

Operating expenses:
   Depreciation                                                849            -
   Rent                                                      6,931            -
   Salaries                                                112,231            -
   Stock issued for services (Note 4)                       47,500            -
   Other operating expenses                                114,203            -
                                                       -----------  -----------

    Total costs and expenses                               281,714            -
                                                       -----------  -----------
        Total operating income (loss)                     (251,714)          -

Other income (expense):
   Equity in loss of Aggression Sports (Note 2)            (77,005)           -
   Gain on sale of equipment                                     -       40,061
   Interest expense                                         (8,604)      (1,781)
   Interest and miscellaneous income                        10,426          420
                                                       -----------  -----------

    Total other income (expenses)                          (75,183)      38,700
                                                       -----------  -----------

Net loss from continuing operations (Note 5)              (326,897)      38,700
Net loss from discontinued operations (Note 1)             (70,520)    (307,913)
                                                       -----------  -----------

Net loss applicable to common shareholders             $  (397,417) $  (269,213)
                                                       ===========  ===========

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

Weighted average common shares outstanding             265,404,922  266,086,314
                                                       ===========  ===========



* - Less than $.01 per share


                            See accompanying notes.
                                       4

<PAGE>
<TABLE>


                     ARETE INDUSTRIES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENT STOCKHOLDERS' DEFICIT
               For the Six Months Ended June 30, 2000 and 1999
                                  (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)                                     -             -       7,127,885      93,910              -

   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)                    -             -               -     183,557              -

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

   Net loss for the six months ended
    June, 2000                                            -             -               -           -       (397,417)
                                                      -----        ------     -----------  ----------    -----------

                                                          -        $          328,113,700  $7,862,710    $(8,254,667)
                                                      =====        ======     ===========  ==========    ===========
</TABLE>
                            See accompanying notes.
                                       5

<PAGE>


                     ARETE INDUSTRIES, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENT CASH FLOWS
               For the Six Months Ended June 30, 2000 and 1999
                                  (Unaudited)

                                                          2000        1999
                                                          ----        ----
Cash flows from operating activities:
   Net loss                                            $(397,417)   $ 38,700
   Adjustments to reconcile net loss to net
    cash provided by (used in) operating activities:
     Depreciation and amortization                           965           -
     Equity in loss of Aggression Sports                  77,005           -
     Stock issued for services                            93,910     153,223
     Changes in assets and liabilities:
       Accounts receivable                               (12,120)   (106,007)
       Security deposit                                   (5,664)          -
       Prepaid expenses                                    1,200      (8,437)
       Accounts payable                                     (869)    247,258
       Accrued expenses                                   81,722           -
       Customer deposits                                       -     (10,792)
                                                        --------    --------

        Total adjustments                                236,149     275,245
                                                        --------    --------

     Net cash provided by (used in) operating
       Activities                                       (161,268)    313,945

Cash flows from investing activities:
   Purchase of property and equipment                          -     (25,517)
   Investments in and advances to Aggression Sports      106,692           -
   Proceeds from certificate of deposit                   25,000           -
                                                        --------    --------

     Net cash provided by investing activities           131,692     (25,517)

Cash flows from financing activities:
   Proceeds from issuance of common stock                 67,152      64,198
   Proceeds from exercise of stock options                66,000           -
   Proceeds from note payable                                  -      41,000
   Payments on long term debt                            (19,500)    (48,800)
                                                        --------    --------

    Net cash provided by financing activities            113,652      56,398
                                                        --------    --------

Net increase in cash and cash equivalents                 84,076     344,826
Cash and cash equivalents at beginning of period          15,844      20,047
                                                        --------    --------

Cash and cash equivalents at end of period              $ 99,920    $364,873
                                                        ========    ========

                         (Continued on following page)
                             See accompanying notes.
                                      6

<PAGE>


                     ARETE INDUSTRIES, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENT CASH FLOWS
               For the Six Months Ended June 30, 2000 and 1999
                                  (Unaudited)

                        (Continued from preceding page)

Supplemental disclosure of cash flow information:

   Interest paid during the period                       $ 8,604     $ 1,781
                                                         =======     =======
   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
                                  June 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 June 30,  2000,  and the  results of
   operations and cash flows for the periods ended June 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  provided  executive
   support to help  Aggression  Sports get prepared to start its own operations.
   Aggression  Sports is in the process of  developing  a web site to market its
   proprietary outdoor products.

   Basis of presentation:

   The  financial  statements  have been prepared on a going concern basis which
   contemplates  the realization of assets and liquidation of liabilities in the
   ordinary  course  of  business.  As  shown  in  the  accompanying   financial
   statements, the Company has incurred significant losses and at June 30, 2000,
   the Company has a working  capital  deficit of $439,172  and a  stockholders'
   deficit of $391,957.  In addition,  the Company is  delinquent  on payment of
   payroll   taxes   and   creditor   liabilities   pursuant   to  the  plan  of
   reorganization,  and is being  investigated  by the  Securities  and Exchange
   Commission for alleged  securities law violations  (see Note 6). As a result,
   substantial  doubt  exists  about the  Company's  ability to continue to fund
   future operations using its existing resources.

   The Company plans to assist  Aggressions Sports set up its web site to market
   a line of specialty  sporting goods.  During 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,  and
   generated cash of $417,000 through the sale of Arete's common stock.

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.  During  the six  months  ended  June  30,  2000,
   Aggression  Sports  sold  26,490,000  shares of Arete for gross  proceeds  of
   $417,175.  Arete's 44% interest in the proceeds of $183,557 has been recorded
   as additional paid-in capital.


                                        8


<PAGE>


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



2. Investment in and advances to Aggression Sports (continued)

   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 six months  ended June 30,  2000,  the  Company  paid  salaries of
   $15,548 for services  performed by certain  individuals  on Agression  Sports
   behalf. The investment in Aggression Sports has been reduced by the Company's
   44% share of  Aggression  Sports' loss for the six months ended June 30, 2000
   exclusive of the gain on the sale of Arete common stock.

3. Delinquent amounts payable

   As of June 30, 2000, the Company is delinquent on payments of various amounts
   to creditors  including payroll taxes and $62,316 to creditors required to be
   paid  under the  terms of its plan of  reorganization.  Failure  to pay these
   liabilities could result in liens being filed on the Company's assets and may
   result in assets  being  attached by  creditors  resulting  in the  Company's
   inability to continue operations.

4. Stockholders' equity

   During  the six  months  ended June 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 7,127,885 shares
   of common stock for services  valued at $93,910  ($0.013 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 guaranting 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. The board also approved  compensatory common stock grants of 7,750,000
   shares in the  aggregate  to six  individuals  for  services to be  performed
   valued at $77,500.


                                        9


<PAGE>


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



5. Income taxes

   The book to tax  temporary  differences  resulting in deferred tax assets and
   liabilities  are  primarily net operating  loss  carryforwards  of $2,082,000
   which expire in years through 2020.

   As of June 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    $ 416,400    $ 352,000
Valuation allowance                                     (416,400)    (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                                       321,000
                                                            ----------

                                                            $2,082,000
                                                            ==========


6. Commitments and contingencies

   Securities and Exchange Commission investigation:

   The Company  received a letter from the  Securities  and Exchange  Commission
   dated March 30, 1998  indicating  that the staff of  Securities  and Exchange
   Commission pursuant to a formal order of private investigation was conducting
   an investigation of certain matters.  On October 23, 1998, the Securities and
   Exchange  Commission  sent another letter to the Company  indicating that the
   staff  of  the  Central  Regional  Office  of  the  Securities  and  Exchange
   Commission  intends to recommend to the Commission that an enforcement action
   be instituted against the Company and two former officers of the Company. The
   staff proposed to allege that based on facts developed in their investigation
   that  misleading  press  releases  regarding  the  acquisition  of a  private
   company,  that company's business  relationships,  and sales projections were
   released. The proposed action would allege that these press releases included
   material   misstatements   and/or  omitted  to  disclose  material  facts  in
   connection  with the offer,  purchase and sale of Company  common  stock,  in
   violation of Section 17(a) of the Securities Act of 1933 and Section 10(b) of
   the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder.

                                        10


<PAGE>


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


6. Commitments and contingencies (continued)

   Additionally,  the staff's  proposed action would be based on facts developed
   in their investigation that, between January 1988 to the present, the Company
   failed to file, or filed on an untimely basis, required periodic reports with
   the  Commission,  in violation of Section 15(d) of the Exchange Act and Rules
   15d-1 and 15d-13 thereunder. The proposed action would further allege the two
   former officer's 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 thereunder.  The
   Company's   legal   counsel  has   indicated   that  at  this  state  of  the
   investigation,  it is  impracticable  to render an opinion  about whether the
   likelihood of an  unfavorable  outcome is either  "probable"  or "remote".  A
   contingency  exists with respect to this matter,  the ultimate  resolution of
   which cannot presently be determined.


                                        11


<PAGE>

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF
       OPERATIONS Overview

Management is  implementing  a strategic  plan to bring the Company to financial
viability. As reported at the Company's annual meeting held on June 2, 2000, the
Company has recast itself as a seed-stage business incubator.  In March of 2000,
Management  discontinued  the  Company's  print and direct mail  operations  and
terminated the franchised  cooperative coupon direct mail advertising  business.
Management then directed the Company's  resources  toward  launching its outdoor
adventure equipment company,  Aggression Sports, Inc. dba Arete Outdoors.  After
May 1,  2000 with the  addition  to the  management  team of Mr.  Thomas  Gorman
(finance),   Mr.   Lawrence   Mortimer   (marketing)  and  Mr.  Michael  Parsons
(operations),  the Company could offer seasoned  executive talent and facilities
to seed  stage  companies.  Management  believes  this plan will  serve the dual
purpose of spreading the overhead of its  executive  management  and  facilities
over several  businesses and  maximizing  the finanicial  benefit to the company
through the performance of the incubator partners.

The  incubator  concept  provides  four  sources  of income  from its  incubator
partners:  (i) fees for sharing basic services  (rent,  accounting,  information
technology and support services,  among others) to its incubator partners,  (ii)
fees for executive management services provided to its incubator partners, (iii)
fees and other  non-cash or in-kind  compensation  for  investment  banking-type
services that help its incubator partners receive additional equity capital; and
(iv)  liquidation  of equity upon the  graduation  of its  incubatees  through a
liquidity event such as an initial public offering, or a spin-off or acquisition
transaction.

The Company's  management team is focused locating businesses to work with whose
founding  owners or  entrepreneurs  know  their  market and  product,  and whose
business  service or product  concepts have been developed to a prototype  stage
with an acceptable indication of market acceptance.  The vision of Management is
not to be driven by any  particular  industry  or sector,  but to find  business
opportunities  that stand out when the following  questions are asked:  Is there
someone  willing to buy what the business will make?  Can the business make what
someone is willing to buy? Can their potential cash flow attract investors?  Can
the business be a market leader? And, what is the character of the founders?

At this time,  the  Company is engaged  with  three  incubator  partners:  Arete
Outdoors,   VerbalTech  Labs  and  Cloudwalker,   and  is  surveying  additional
candidates.

Aggression Sports,  Inc., dba Arete Outdoors was orginally formed in May of 1998
as Aggression Sports,  Inc. by the Company and Boulder Sports,  LLC. pursuant to
the change in contol agreement signed at that time in which former management of
the Company  resigned and Tom Raabe,  the current Chairman and CEO, and Mr. Fred
Boethling,  former director, Company Secretary and CFO took over its management.
Upon  inception,  the Company owned 44% of Aggression  Sports,  Inc. and Boulder
Sports,  LLC,  wholly  owned by Mr.  Raabe,  owned 56%.  The  purpose of the new
company  was to pursue  building a business  in the  `adrenaline'  or  `extreme'
sports industry.  In early 1999,  Aggression  Sports,  Inc. took a trade name of
Arete Outdoors  (hereinafter  referred to as either Aggression  Sports,  Inc. or
Arete Outdoors).  Previously,  in late 1998, the Company engaged the services of
Mr.  Mike Lowe to manage  Aggression  Sports  and to  develop  products  for it.
Additionally, Mr. Lowe was paid by the Company to act as Chief Operating Officer
for the purpose of assisting in the Company's  then ongoing  turnaround  efforts
with  regard  to its print and  direct  mail,  cooperative  coupon  direct  mail
business.


                                       12

<PAGE>


In December of 1999, Arete Outdoors entered an agreement with Mike Lowe in which
his  participation,  and present and future product designs were exchanged for a
30%  ownership  position  in  Arete  Outdoors  with an  option  to  purchase  an
additional 6% that vests on certain performance milestones.

Mike Lowe has been a leader in  mountaineering  and alpine sports throughout his
life.  Mike and his brother Greg were early leading  designers and innovators in
the outdoor  sports  industry.  He was in Army Special  Forces and a director of
Outward  Bound.  In 1972,  he  founded  Lowe  Alpine  Systems,  which,  with the
assistance  of his  Brother,  Greg Lowe,  grew to  approximately  $20 million in
sales.  In 1987,  the Lowe brothers sold Lowe Alpine  Systems to an  independent
group of investors. At that time, the company was a brand leader in the high-end
specialty  outdoor  products  industry.  The Lowe's did this by creating product
firsts and industry  standards,  including  numerous  climbing tools such as the
FootFang Crampon, and they pioneered the internal frame backpacks.

After a hiatus in which he started other outdoor product companies including his
own  line of  mountain  bikes  and  accessories,  Mike  Lowe is  reentering  the
specialty  outdoors  sporting goods industry in partnership with Arete Outdoors.
Lowe has developed and is developing  approximately  thirty  products that Arete
Outdoors  has the right to patent and bring to market.  These  products  cover a
number of  categories  in the  outdoor  sports  market  as well as the  consumer
market.  Arete  Outdoors also has a design and  development  agreement with Greg
Lowe,  brother  of Mike  Lowe,  for a line of  products,  which  will be  called
`Lifestyle Tools.' Greg is an accomplished and well sought after outdoor product
designer in his own right.  Since the beginning of 2000, Arete Outdoor has filed
for four  patents,  and is  ready to bring  two  products  to  market:  SnowFang
snowshoe,  the Dirt Rush and the Powder Rush Downhillers to market this fall for
the winter outdoor sports season.

The SnowFangs  snowshoe,  the Dirt Rush and Powder Rush  Downhillers  are unique
products that fill unmet needs in the outdoor sports market. These products have
had strong early indications of market  accptance.  During the second quarter of
2000, the development  process was nearly  complete for the SnowFangs  snowshoe.
Two versions of the SnowFangs snowshoe are scheduled to be released in the third
quarter of 2000.  Arete  Outdoors' next product,  the summer and winter downhill
scooter,  which have been  branded  the Dirt Rush and Powder Rush for the summer
and winter versions,  will be commercially produced in the third quarter and are
scheduled to be released for sale in the fourth quarter of 2000.

Arete  Outdoors  plans to build  market  leadership  by  developing  new outdoor
experiences with its new product designs and web-based user  interaction,  which
are intended to drive an ever growing loyal customer base.  Arete Outdoors plans
to market its  products  through  various  distribution  channels,  including  a
relational  data-base driven,  community-style  outdoor adventure  website.  The
first   version   of  the   website   has   been   published   under   the  name
www.areteoutdoors.com. Not all products will be suited for resale over the World
Wide Web, and other venues and channels will be used  depending on the nature of
the  product  and the most  appropriate  method to  achieve  the best  return on
investment.

Arete Outdoors has an in house, R&D, product development and production team and
is  receiveing  management  and  investment  banking  support from the Company's
management  team.  Arete Outdoors  recently leased its own facility in Berthoud,
Colorado  to  house  R&D,  Product  Development  and  Production   coordination.
Management  believes that Arete  Outdoors  will be required to provide  in-house
customer  service,  support  and  product  fulfillment  for  wholesale,   direct
marketing and internet sales on an immediate basis.


                                       13

<PAGE>


During the period ended June 30, 2000,  the Company  engaged into a full service
incubator  relationship  with VerbalTech Labs, Inc.  (formerly  Applied Behavior
Systems,  LLC).  VTL has developed a  breakthrough  language  learning  software
program that  incorporates  voice  recognition,  neural network and  intelligent
agent  computer  technologies.  The  software  program  adapts  to the  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.  Two issued patents  protect
the teaching software and others are pending.  The teaching method is especially
effective  with people with learning  disabilities,  which is why VerbalTech has
chosen them as the focus of its first application.

There is an  immediate  and growing  need for  software  to service  this market
because of a lack of  qualified  speech and  language  professionals.  In the US
alone,  there are over 6.8 million  children and adults with  developmental  and
language delays (includes Downs Syndrome,  mental retardation,  autism and other
learning disabilities) and only 100,000 speech and language professionals.

Over 90% of these children are in regular  public school.  One of the reasons is
that  there are a series of federal  laws  (1975-Education  for All  Handicapped
Children Act, and  1990-Individuals  with  Disabilities  Education  Act),  which
require the states to specifically provide free and appropriate public education
to this segment of the population.  The legislation  also encourages  schools to
fund  "assistive  technology"  (including  software)  that  contributes  to  the
effectiveness of their education.

Management  believes  that the  growth  of the  opportunity  and  acceptance  of
teaching   software  in  the  US  classroom  creates  a  ready  market  for  the
introduction  of this product:  In 1999,  computers were in 78% of the US public
schools;  and in the 1998-1999  school year, $500 million was spent by US public
schools  on  instructional  software,  which was a 70%  increase  over the prior
school year.

Management  believes  that  VerbalTech  Labs'  language  teaching  software will
distinguish itself from existing 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 the parents and teachers will see tangible  results by using
the program.  Other  companies who use a receptive  teaching method will have to
undertake  extensive tests to attempt to prove the same results that are obvious
with  VerbalTech  program.  The  software  program is beta tested with pilot and
trial programs,  and has shown consistent and impressive results. It is ready to
be prepared for commercial introduction.

To move VerbalTech  into the next stage of its growth,  the Company is assisting
it in an effort to raise $3  million  in equity  capital  through a  convertible
preferred stock offering to venture capitalists and other accredited  investors.
The $3 million of additional equity capital will be used to prepare VerbalTech's
software for commercial introduction,  to provide the marketing and sales effort
to demonstrate market acceptance, and to finance initial operations. The Company
has an agreement with VerbalTech that provides for a 14.3% ownership interest by
the Company,  which after taking into account the proposed $3 million investment
in convertible  preferred,  will be diluted to approximately  10%. The Company's
agreement with VerbalTech  provides that the Company  receives a fee for raising
the money  and  provides  for  VerbalTech  to pay Arete a monthly  fee for basic
services (rent, accounting, IT, etc) and management services.

Also during the period ended June 30, 2000, the Company  provides the most basic
incubator  services to Cloudwalker  LLC., a Colorado limited  liability  company
that is  principally  owned and  managed  by Jeff  Lowe,  Mike  Lowe's  brother.
Cloudwalker is also a seed-stage  business venture,  which has recently launched
its products to the high-end  technical  specialty  retail  market.  Cloudwalker
manufactures and distributes innovative climbing and mountaineering clothing and
hardware.  At present,  Arete Industries is providing Cloudwalker basic services
and does not own any interest in the company. Arete Outdoors and Cloudwalker are
exploring new areas they can work together, beginning with Cloudwalker acting as
Arete Outdoors  sales  representative  to market the SnowFangs  snowshoes to its
customer base in North America and Europe through their in-house sales team.


                                       14

<PAGE>


Through the implementation of its seed-stage incubator strategy with these three
relationships  and with other  groups in the  future,  management  is  currently
focused on developing profitable operations and then recapitalizing the business
when it has a  demonstrable  cash  flow  model to show to  potential  investors.
Management  believes  that it is improving  its ability to attract  capital from
professionally  managed  funds on terms which will be  favorable  to its current
shareholders.  Management  believes that they can take advantage of the publicly
held nature of the Company's  stock to pursue capital raising  transactions  and
strategic acquisitions in a number of industries.

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 June 30, 2000, of $439,172. 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 June 30,  2000,  the Company  issued  4,750,000
shares of common stock for services.


Results of Operations
---------------------
The  Company's  financial   performance  has  been  adversely  affected  by  the
termination  of its co-op coupon  business,  and the execution of the seed-stage
incubator strategy has not yet developed into significant financial results.

The Company generated operating revenues of approximately $8,035 with $7,515 (or
94% of sales) of cost of goods sold, during the first three months, ending March
31, 2000. As of March 1, 2000, the co-op coupon business was discontinued and is
reflected in the financial statements as a loss of discontinued operations.

For the  quarter,  the Company  incurred  $281,714 in  operating  expenses.  The
Company's  future  expectation  is that these  expenses  will remain  relatively
stable,  but may increase over time as the fees and revenues from its management
services increase.

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  liabilities  in excess of assets at June 30, 2000 of  $391,957.
This is compared  to  liabilities  in excess of assets at  December  31, 1999 of
$412,492.  The reduction in the  liabilities in excess of assets was due to cash
provided by Aggression Sports.


                                      15

<PAGE>


Management  believes  that with a  successful  track  record  of its  seed-stage
incubator  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  June  30,  2000,  the  Company  had  no  material  commitments  for  capital
expenditures.

                                      16

<PAGE>




PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

During the period ended June 30, 2000, there were no material legal  proceedings
initiated  by or  against  the  Company  or any of its  officers,  directors  or
subsidiaries.

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.
     o    1,288,660  shares  sold  to Gary  McMullen  for  $7,333,  as part of a
          private placement
     o    500,000  shares  issued  in  exchange  for  the  exercise  of  Class A
          convertible  preferred stock that was exercised then converted by Eric
          Popkoff for $2,500
     o    4,750,000 shares issued for salaries and services to Lawrence Mortimer
          (1,500,000 shares),  Michael Lowe (1,500,000 shares),  Michael Parsons
          (1,500,000 shares) and Greg Lowe (250,000 shares).

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security  Holders.  During the period
ended  June  30,  2000,   the  Company  held  its  regular   annual  meeting  of
shareholders.  Matters submitted were the election of directors, approval of the
Omnibus Stock Bonus and  Compensation  Plan and  ratification  of appointment of
independent auditors, all of such resolutions were voted on as follows:

Election of Thomas P. Raabe as director,
For: 252,430,492  Withhold Authority 347,000  and Not Voted
     -----------                     --------               --------------

Election of Thomas Y. Gorman as director,
For: 252,430,492  Withhold Authority 347,000  and Not Voted              .
     -----------                     --------               --------------

Ratification of Appointment of Causey Demgen & Moore as independent  auditors of
the Company;
For:  251,815,291    Against  662,700  Abstain  299,501    Not Voted   1,392,101
      ------------            -------          ---------              ----------

Approval of 2000 Omnibus Stock Bonus and Compensation Plan.
For: 75,601,411;  Against 3,318,850;  Abstain:  520,901;  Not Voted 174,728,431
     ----------           ----------            --------            -----------

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.

                                       17

<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: August 14, 2000              By:  /s/  Thomas Y. Gorman, CFO
                                      -------------------------------
                                      Thomas Y. Gorman, CFO
                                      Principal Financial and Accounting Officer