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


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

                                   FORM 10-QSB

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


                    For the period ended: September 30, 2005
                                          ------------------

                                       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.)



                    P.O. Box 141, Westminster, CO 80036-0141
                -------------------------------------------------
               (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 November 19, 2005, Registrant had 262,155,754 shares of common stock, No
par value, outstanding.


<PAGE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES


                                      INDEX


                                                                        Page No.
                                                                        --------

Consolidated Financial Statements:

Index to Consolidated Financial Statements                                1

Consolidated Balance Sheet at December 31, 2004
and September 30, 2005 (unaudited)                                        2

Consolidated Statements of Operations for the Three
Months and Nine Months Ended September 30, 2004
and 2005 (unaudited)                                                      3

Consolidated Statement of Stockholders' Deficit for
the Nine Months Ended September 30, 2005 (unaudited)                      4

Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2004 and 2005 (unaudited)                     5-6

Notes to Unaudited Consolidated Financial Statements
at September 30, 2005                                                    7-10

Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations                                                11-16

Item 3                                                                   16

Part II - Other Information                                              17

Signatures                                                               18




<PAGE>

<TABLE>
                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
                           CONSOLIDATED BALANCE SHEET
                       December 31, 2004 and Sept 30, 2005
                                   (Unaudited)
<CAPTION>


                                     ASSETS

                                                                  2004            2005
                                                              ------------    ------------
<S>                                                           <C>             <C>
Current assets:
    Cash and cash equivalents                                 $        121    $        666
    Prepaid expenses                                                 3,000           3,000
                                                              ------------    ------------

      Total current assets                                           3,121           3,666

Furniture and equipment, at cost net of accumulated
    depreciation of $15,704 (2004) and $17,325 (2005)                3,969           2,347
                                                              ------------    ------------
Other Assets
    Investments held for sale                                         --             3,816
                                                              ------------    ------------

                                                              $      7,090    $      9,829

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable (Note 2)                                 $    262,019    $    221,192
    Accrued expenses                                               368,508         368,908
    Accrued payroll taxes (Note 2)                                 289,363         289,363
    Settlement due                                                  18,650          18,650
    Notes payable - related parties                                  3,437          31,661
                                                              ------------    ------------

      Total current liabilities                                    941,977         929,774

Commitments and contingencies (Notes 1, and 2)

Stockholders' deficit (Notes 5 and 6):
    Common stock, no par value; 499,000,000 shares
      authorized, 183,045,768 (2004) and 247,155,754 (2005)
      shares issued and outstanding                             11,811,498      12,133,179
    Accumulated deficit (including $1,617,978 accumulated
      during the development stage)                            (12,523,565)    (12,796,377)
    Notes receivable from sale of stock                           (222,820)       (256,747)
                                                              ------------    ------------

      Total stockholders' deficit                                 (934,887)       (919,945)
                                                              ------------    ------------

                                                              $      7,090    $      9,829
                                                              ============    ============
</TABLE>

                             See accompanying notes

                                        2
<PAGE>

<TABLE>
                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
                      CONSOLIDATED STATEMENT OF OPERATIONS For the three months
                ended Sept 30, 2004 and 2005
                                   (unaudited)
<CAPTION>


                                                                  2004              2005
                                                              -------------    -------------
<S>                                                           <C>              <C>
Revenue:
   Consulting revenue                                         $        --      $      72,500
                                                              -------------    -------------

Operating expenses:
   Depreciation                                                         607              423
   Rent                                                               3,500            2,390
   Other operating expenses                                         192,240           50,675
                                                              -------------    -------------

     Total operating expenses                                       196,347           53,488

       Total operating loss                                        (196,347)          19,012

Other income (expense):
   Loss on sale of investments                                      (19,545)            --
   Interest expense                                                  (4,800)            --
   Interest and miscellaneous income                                  3,282             --
                                                              -------------    -------------

     Total other income (expense)                                   (21,063)            --

Net loss from continuing operations                                (217,410)          19,012


Extingusihment of Debt (Note 2)                                       7,631            8,815
                                                              -------------    -------------

Net loss (Note 3)                                             $    (209,779)   $      27,827
                                                              =============    =============

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

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


Weighted average common shares outstanding                      155,200,000      241,800,000
                                                              =============    =============
</TABLE>

* Less than $.01 per share

                             See accompanying notes

                                        3
<PAGE>

<TABLE>
                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
                      CONSOLIDATED STATEMENT OF OPERATIONS
                For the nine months ended Sept 30, 2004 and 2005
              and from inception (August 1, 2003 to Sept 30, 2005)
                                   (unaudited)
<CAPTION>


                                                                                                Inception to
                                                                  2004             2005         Sept 30, 2005
                                                              -------------    -------------    -------------
<S>                                                           <C>              <C>              <C>
Revenue:
   Consulting revenue                                         $        --      $      72,500    $      72,500
                                                              -------------    -------------    -------------

Operating expenses:
   Depreciation                                                       1,585            1,621            4,197
   Rent                                                              10,000            8,935           31,513
   Other operating expenses                                         819,039          284,349        1,665,489
                                                              -------------    -------------    -------------

     Total operating expenses                                       830,624          294,905        1,701,199
                                                              -------------    -------------    -------------

      Total operating loss                                         (830,624)        (222,405)      (1,628,699)

Other income (expense):
   Gain (Loss) on Sale of Investments                               (10,502)            --            (10,502)
   Interest expense                                                 (13,245)            (903)         (37,314)
   Interest and miscellaneous income                                  9,847           10,365           23,494
                                                              -------------    -------------    -------------

     Total other income (expense)                                   (13,900)           9,462          (24,322)
                                                              -------------    -------------    -------------

Net loss from continuing operations                                (844,524)        (212,943)      (1,653,021)

Extingusihment of Debt (Note 2)                                      54,054            8,815           62,869

Net loss (Note 3)                                             $    (790,470)   $    (204,128)   $  (1,590,152)
                                                              =============    =============    =============

Basic and diluted loss per share from continuing operations   $       (0.01)             $ *    $       (0.01)
                                                              =============    =============    =============

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


Weighted average common shares outstanding                      134,000,000      217,900,000      162,900,000
                                                              =============    =============    =============
</TABLE>

* Less than $.01 per share

                             See accompanying notes

                                        4
<PAGE>

<TABLE>
                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                  For the nine months ended September 30, 2005
                                   (Unaudited)
<CAPTION>

                                                     Common stock                  Accumulated
                                                       Shares        Amount          deficit
                                                   ------------    ------------   ------------
<S>                                                 <C>            <C>            <C>
Balance, December 31, 2004                          183,045,768    $ 11,811,498   $(12,523,565)

    Exercise of stock options (Note 5)               20,000,000         121,500           --

    Issuance of common stock to employees
      and consultants for services (Note 5)          42,545,751         192,454           --

    Purchase of stock by directors in connection      1,564,235           7,727           --
      with granted purchase rights

    Dividend of Subsidiary Stock                           --              --          (68,684)

    Net loss for the nine months ended
      September 30, 2005                                   --              --         (204,128)
                                                   ------------    ------------   ------------

Balance, September 30, 2005                         247,155,754    $ 12,133,179   $(12,796,377)
                                                   ============    ============   ============
</TABLE>




                             See accompanying notes

                                        5
<PAGE>

<TABLE>
                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                For the nine months ended Sept 30, 2004 and 2005
              and from inception (August 1, 2003 to Sept 30, 2005)
                                   (Unaudited)
<CAPTION>

                                                                                        Inception to
                                                             2004            2005     September 30, 2005
                                                          -----------    -----------    -----------
<S>                                                       <C>            <C>            <C>
Cash flows from operating activities:
   Net loss                                               $  (790,470)   $  (204,128)   $(1,590,152)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
       Depreciation and amortization                            1,585          1,621          4,197
       Stock  and options issued for services,
         accounts payable, and interest on notes              764,026        192,454      1,626,796
       Changes in assets and liabilities:
         Interest receivable                                   (9,847)          --           44,325
         Inventory                                               --             --           25,243
         Prepaid expenses                                     (26,000)          --           (3,000)
         Accounts payable                                     (26,034)       (40,826)       (94,077)
         Accrued expenses                                    (220,790)           400       (207,990)
                                                          -----------    -----------    -----------

           Total adjustments                                  482,940        153,649      1,395,494
                                                          -----------    -----------    -----------

       Net cash used in operating activities                 (307,530)       (50,479)      (194,658)

Cash flows from investing activities:
   Purchase of property and equipment                          (5,071)          --           (5,072)
   Purchase of Investment held for sale                          --           (3,816)        (3,816)
                                                          -----------    -----------    -----------

       Net cash provided (used) by investing activities        (5,071)        (3,816)        (8,888)

Cash flows from financing activities:
   Proceeds from issuance of preferred stock                     --             --            6,713
   Proceeds from issuance of common stock                        --            7,727         17,727
   Proceeds from exercise of stock options                     73,500        121,500        246,750
   Proceeds from stock subscriptions                            1,500           --
   Note Receivable from sale of stock                          16,000        (33,927)       (17,927)
   Pyament of dividend of subsidary stock                        --          (68,684)       (68,684)
   Payment of note payable - related parties                  (10,725)        28,224         19,515
                                                          -----------    -----------    -----------
     Net cash provided by financing activities                 80,275         54,840        204,094
                                                          -----------    -----------    -----------

Net increase in cash and cash equivalents                    (232,326)           545            548
Cash and cash equivalents at beginning of period               25,345            121            118
                                                          -----------    -----------    -----------

Cash and cash equivalents at end of period                $  (206,981)   $       666    $       666
                                                          ===========    ===========    ===========
</TABLE>
                             See accompanying notes

                                        6
<PAGE>


                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005

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, 2004 and September 30, 2005, and the results of
     operations and cash flows for the periods ended September 30, 2004 and
     2005. The Company is currently considered to be in the development stage as
     more fully defined in Financial Accounting Standards Board Statement No. 7.
     The Company has not generated any revenues from its activities in the oil
     and gas business.

     The Company formed Global Direct Marketing Services in October 1998 as an
     operating subsidiary for its then ongoing operations as a direct mail
     cooperative coupon advertising business. Certain assets and liabilities of
     Arete were contributed to Global. The consolidated financial statements of
     the Company include the accounts of Arete for the entire period, the
     accounts of Global since inception, and Aggression Sports, Inc., a majority
     owned subsidiary, now inactive, since October 1, 2001 and Colorado Oil and
     Gas Inc. formed December 2004 (inception) to August 30, 2005. All
     intercompany accounts have been eliminated in the consolidation. All
     operations prior to August 1, 2003 have been reclassified as discontinued.

     Since August 1, 2003, the Company's financial statements have been prepared
     on the basis of the Company being a development stage entity, having
     discontinued several unsuccessful ventures including cessation of
     operations of its subsidiary, Aggression Sports, Inc., having discontinued
     operations as a business development company focused on developing certain
     bond and other funding vehicles for growth stage companies, and having
     embarked on an entirely new business of developing opportunities in the
     traditional and alternative and renewable energy sectors, and which
     contemplates the formation of capital and management resources to pursue
     development of new business opportunities. The recast of the Company as
     development stage is intended to more correctly and accurately reflect the
     current status of the Company and to properly record results of operations
     and changes in financial condition as it pursues its new business plan. As
     shown in the accompanying financial statements, the Company has recast its
     financial statements to reflect this divergence from its past business
     endeavors including losses from write down of assets and valuation of
     assets held for disposal from discontinued operations. (See: Note 4 -
     Discontinued Operations)

     The Company has incurred significant losses and at September 30, 2005, the
     Company has a working capital deficit of $ 926,108 and a stockholders'
     deficit of $ 919,945. In addition, the Company is delinquent on payment of
     payroll taxes and creditor liabilities. As a result, substantial doubt
     exists about the Company's ability to continue to fund future operations
     using its existing resources.

     As a development stage company, the Company continues to rely on infusions
     of debt and equity capital to fund operations. 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.

                                        7
<PAGE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005



2. Delinquent amounts payable

     As of September 30, 2005, the Company is delinquent on payments of various
     amounts to creditors including payroll taxes. 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.

3.   Income taxes

     The book to tax temporary differences resulting in deferred tax assets and
     liabilities are primarily net operating loss carryforwards of $ 5,767,000
     which expire in years through 2024.

     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.   Discontinued Operations

     The Company's decision to pursue projects and investments in traditional
     oil and gas as well as the `New' alternative and renewable Energy business
     is an entirely new business direction that required that it take the
     decisive step to formally discontinue its former operations beginning
     August 1, 2003. This decision is reflected by a change in the presentation
     of the Company's financial statements to segregate discontinued operating
     results in previous periods from continuing operations going forward. There
     is no effect in the current three month period of this reclassification.
     During March 2000, the Company abandoned the direct mail and coupon
     business. At September 30, 2005, the remaining liabilities of this division
     were $58,230 in unpaid payroll taxes. As of the year ended December 31,
     2004, and the nine months ended September 30, 2005, $54,054 and $ 0
     respectively, of debt were reclassified as extinguished. During 2003, the
     Company abandoned the development of Aggression Sports Inc., a subsidiary.
     At September 30, 2005, the remaining liabilities of this division were
     $91,077 in trade payables and $79,351 in unpaid payroll taxes. During the
     current quarter, the company resolved to dissolve its two subsidiaries and
     has initiated procedures to close out all inter-company accounts and
     consolidating accounts related to these subsidiaries.

5. Stock transactions

     During the nine months ended September 30, 2005, the Company issued a total
     of 42,485,751 common shares for compensation of officers, directors and
     consultants, valued at an aggregate of $192,450, and issued 21,564,235
     shares on exercise of compensatory stock options and compensatory stock
     purchase rights for proceeds to the Company of $129,227.

                                        8
<PAGE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005



5. Stock transactions (continued)

     On March, 16, 2005, the Company and the CEO agreed to settle all consulting
     services accrued through March 30, 2005 with a Convertible Promissory Note
     for $60,000 with 8% interest from March 30, 2005 due on demand after July
     1, 2005. The Promissory Note converts into 10,000,000 registered common
     shares at $0.006 per common share. In addition, in consideration for the
     payment of 10,000,000 registered common shares valued at $48,000,
     representing compensation through June 30, 2005, the CEO agreed to
     terminate his consulting agreement and negotiate quarterly compensation
     with the compensation committee of the board each quarter commencing July
     1, 2005. During the nine months ended September 30, 2005 $30,000 of the
     note was converted. The CEO resigned in July 2005. A new CEO was hired off
     the Board of Directors and for the three months ended September 30, 2005
     the new CEO was issued 3,000,000 shares representing $12,000 as
     compensation for that period including serving on the Broad of Directors.

     Also, during the six months ended September 30, 2005, 2,000,000 stock
     options granted to the CEO in prior periods expired, and 2,000,000 stock
     options granted to a consultant also expired.

     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 quarter ended March 31, 2005 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:

                                                 2004           2005
                                             -----------    ------------

        Net loss - as reported               $ (505,216)   $ (110,720)
        Net loss - pro forma                   (505,216)     (121,250)
        Loss per share - as reported             *              *
        Loss per share - pro forma               *              *

     * - Less than $0.01 per share

     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 2004 and 2005, 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.

                                        9
<PAGE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005


6. Dividend distribution of Colorado Oil & Gas, Inc.

     During the fourth quarter of fiscal year ended December 31, 2004, the
     Company formed a new subsidiary, Colorado Oil and Gas, Inc. ("COG") to
     pursue acquisitions of producing oil and gas properties that were presented
     by one of the Company's directors. In the first quarter of 2005, the
     Company began pursuing acquisition of a specific property for this
     subsidiary and authorized three of its directors to become officers and
     directors of the new subsidiary company to begin due diligence and
     negotiations for acquisition of this prospect. Should this prospect prove
     viable after full investigation, it is the Company's intent to complete
     capitalization of the subsidiary and upon completion of an acquisition, of
     which there is no assurance.

     In April, 2005, the Company granted two directors stock compensation in the
     amount of 2,500,000 common shares each as well as stock options to purchase
     2,500,000 shares of common stock for $0.004 per share for their services in
     bringing this prospect into the Company and completing the deal. On May 4,
     2005,COG, issued a total of 700,000 shares of its common stock as founders
     shares of which 550,000 shares were issued to the Company, or 78.6% and
     150,000 common shares, or 21.4% of the total amount issued, were issued in
     equal portions to each of the subsidiary's three directors (who are also
     directors of the Company.) The Company has advanced $50,000 to COG for
     costs of acquisition of oil and gas properties. During the third quarter of
     2005 the Company received 250,000 more shares of COG in exchange for the
     advances. In September 2005, the Company issued a dividend of approximately
     900,000 shares of its COG stock to its shareholders at a ratio of one share
     of COG for two hundred fifty shares of the Company's shares held at the
     record date (September 9, 2005) The Company still retains approximately
     50,000 shares of COG at September 30, 2005. The Company carries the balance
     of its stock as an investment held.

                                       10
<PAGE>


Item 2-Management's Discussion and Analysis/Plan of Operation

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
Company's common stock options issued to consultants are recorded at the fair
value of the Company's options computed using the Black-Scholes Model.

Plan of Operation.

In the third quarter of 2003 we discontinued our previous business development
activities to focus on traditional and alternative energy. As a result, we
entered the development stage. This required us to recast our former operations
as discontinued, write down certain fixed assets and inventory from discontinued
operations, and, as well, recast operating results into discontinued operations
and continuing operations, respectively, beginning August 1, 2003 and continuing
through the current period. As a result, operating results, including losses,
expenses and revenues attributed to discontinued operations are stated
separately from these same items from continuing operations. Therefore, since
the current and past business operations relate to entirely different
businesses, the financial statements now provide two separate comparisons of the
current and comparable prior period for continuing operations, and the same for
discontinued operations. (See: Note 4 - Financial Statements).

                                       11
<PAGE>


During the Third Quarter of 2003, we began to pursue acquiring direct
participations in traditional oil and gas projects as well as sponsoring and
financing alternative and renewable energy projects. This included pursuing
lower-risk projects involving overlooked and by-passed reserves of domestic oil
and gas, and seeking funding through professional equity funds looking
specifically for such opportunities. Since inception of our new development
stage, we have reviewed numerous prospects and pursued funding and acquisition
efforts for two specific deals through an oil and gas investment banking
consultant which we contracted in June of 2004. Ultimately, the first deal was
terminated without cause by the seller of that project in April of 2004, and
after significant evaluation and due diligence on our part, the second group of
prospects initiated in May of 2004 did not qualify for financing, and in the
first quarter of 2005, we terminated our negotiations with the seller group for
this prospect. During the nine month period 2005, we decided to pursue a much
smaller and ostensibly easier prospect to acquire and fund which included a
number of producing shallow wells in Colorado with several potential re-entry
and in-field development wells for total cost of under $3 Million. That deal is
currently being pursued through a new subsidiary of the Company that will be
operated by three of our outside directors. We believe that this prospect can be
purchased partially with debt against its existing production, and with one or
more tranches of equity funding for the balance of the purchase price and
drilling and completion costs for the new and re-entry wells. If successful,
this prospect will cover operating costs of a small operation and possibly
additional investment capital for other prospects. The subsidiary was spun-off
to the shareholders of the Company in September 2005 on a pro rata basis of
1 for 250 to shareholders of record on September 9, 2005. The subsidiary will
continue to pursue the oil and gas business on its own and file to register its
stock during the first half of 2006.

We have encountered numerous challenges to date ranging from competition for
prospects from parties with better staffing, track records and financing to the
extraordinary costs and time involved in developing and validating data about
prospective acquisition targets. The costs and time involved in pursuing this
business plan are substantial and are compounded by our lack of qualified
personnel, and the expense involved in maintaining the Company's compliance
responsibilities under the federal securities laws. We have decided to address
these challenges by pursuing different acquisition and financing strategies
through a separate corporate subsidiary in order to attract different oil and
gas prospects and funding sources (see above discussion). Therefore, the Company
is not going to continue to pursue the business of oil and gas and the board has
decided to find a merger candidate for the Company.

Due to the fact that the Company presently relies exclusively upon contributions
of time and operating cash from its directors and officers to pursue its
business plan, which has been increasingly taxing on these individuals, and has
resulted in substantial dilution to the Company's shareholders. It has become
the chief priority of management to achieve cash flow sufficient to meet current
operating obligations and find a merger candidate that would provide cash flow
for the Company, management and administrative help, and create needed value for
the Company's shareholders. The board of directors have reviewed several
candidates during the last several months, including one from the prior CEO. The
board at present has three active candidates and expects to sign and announce a
letter of intent before mid December 2005.

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<PAGE>


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.

While we are very optimistic about our progress in developing these projects, no
assurances can be made that the current projects will result in any significant
revenue for operations in the immediate future.

Financial Condition

In prior periods, we wrote off Aggression Sports, Inc.'s fixed assets and
inventory and molds held for disposal from discontinued. Additionally, we
continue to reduce certain amounts payable from discontinued operations as
extinguishment of debt, through the passage of statutes of limitation. We expect
future write-downs and reclassifications from discontinued operations and
extinguishment of debt to be nominal and incremental in nature.

As of September 30, 2005, the Company had $9,829 in total assets. This compares
to total assets of $7,090 as of the fiscal year ended December 31, 2004. Total
liabilities were $929,774 as of September 30, 2005 compared to $941,977 as of
the fiscal year ended December 31, 2004. During the nine months ended September
30, 2005, total liabilities were decreased by $12,203. Operating losses from
continuing operations were $212,128 and the net loss for the nine months ended
September 30, 2005 was $204,128 that contributes to the accumulated deficit as
of September 30, 2005 of $12,796,377, as compared to an accumulated deficit as
of December 31, 2004 of $129,227 (See: Note 1 to Financial Statements.)

The Company's subsidiary, Global Direct Marketing Services, Inc., which is now
inactive, has left an obligation of $58,230 in unpaid payroll taxes. During
2003, the Company abandoned the development of the Aggression Sports, Inc.
subsidiary. At June 30, 2005, the remaining liabilities of this subsidiary were
$91,077 in trade payables and $79,351 in unpaid payroll taxes. As of September
30, 2005, the consolidated entity owes $289,363. (See: Notes 1 and 2 to
Financial Statements.)

During the quarter ended September 30, 2005, the Company continued to rely upon
infusions of cash from exercise of stock options by officers, directors and
consultants, and upon payment of compensation to officers, directors and
consultants in the form of common stock and common stock options. During the
nine months ended September 30, 2005, the Company paid $192,450 in compensation
to officers and directors, paid $129,227 to consultants and professionals.

As of September 30, 2005, executive salaries and bonuses of $286,624 were
accrued and unpaid, and the Company had $218,820 in notes receivable for stock
sales from former management members together with a note receivable for
exercise of a stock option of $4,000 from a third party for a total of $222,820.

                                       13
<PAGE>


Results of Operations

As stated above, the Company discontinued former operations and set about
pursuing a new business plan in the energy industry as a development stage
entity and reported results of continuing operations and of discontinued
operations separately for the current period and the comparable period of fiscal
2004.

The Company had consulting revenues of $72,500 from operations during the nine
months ended September 30, 2005, and no revenues during the comparable period
ended September 30, 2004. Net loss from continuing operations for the nine
months ended September 30, 2005 was $212,128 as compared to a net loss from
continuing operations of $844,524 for the nine months ended September 30, 2004.
The net loss during the nine months ended September 30, 2005 was offset by
$8,815 in extinguishment of debt resulting in an aggregate loss of $204,128 as
compared to the net loss for the nine months ended September 30, 2004 of
$790,470 that was offset by $54,054 in extinguishment of debt. Net income from
continuing operations for the quarter ended September 30, 2005 was $19,012 as
compared to a net loss from continuing operations of $217,410 for the quarter
ended September 30, 2004. The net income during the quarter ended September 30,
2005 was added to $8,815 in extinguishment of debt resulting in net income of
$27,827 as compared to a net loss of $209,779 that included extinguishment of
debt income of $7,631.

The Company occupies an executive suite on a month to month basis for monthly
rent of $1,000 per month. The Company rents space for file storage, furniture
and excess equipment as well as its Arete Outdoors inventory for $125 per month.

As stated above, we will continue to operate the Company on an austere program
of minimum overhead, while utilizing skills of its board members, independent
contractors as administrative staff and individual independent contractors with
expertise in business development, capital acquisition, corporate visibility,
oil and gas development, geology and operations with the use of our common stock
and common stock options as incentives during the development stage of our new
business model. Further as opportunities for participation in profitable revenue
producing projects come forward, we intend that consultants and advisors will be
offered compensation from revenues or interests, direct participations,
royalties or other incentives from the specific projects to which they
contribute. While reducing the amount of variable costs, there is almost no way
to reduce or offset our fixed expenses related to office expense, legal,
accounting, transfer agent fees, Securities Act reporting, corporate governance,
and shareholder communications. 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 activities.

Liquidity and Capital Resources

The Company had a working capital deficit as of September 30, 2005 of $926,108.
This compares to a working capital deficit of $938,856 as of December 31, 2004.
During the nine months ended September 30, 2005 an aggregate of 64,049,986
shares of common stock were issued for aggregate consideration of $321,677 (for
an average of $0.00502 per share).

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<PAGE>


The Company had a stockholder's deficit at September 30, 2005 of $919,945. This
is compared to stockholder's deficit at December 31, 2004 of $934,887. The
stockholder's deficit decrease was due the Company's operating loss, dividend of
the subsidiary stock, and offset by the payment of services with the issuance of
stock and the exercise of stock options for cash.

At September 30, 2005, the Company had no material commitments for capital
expenditures.

Due to its ongoing 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
internally raising significant additional equity capital or debt until these
matters have been resolved and the Company has eliminated a substantial amount
of its outstanding debt and/or the potential merger of an operating company, of
which there is no assurance.

Unless and until it achieves success in its proposed activities, of which there
is no assurance, 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 or
revenue from proposed operations will most likely impair the ability of the
Company to meet its obligations in the near-term.

Item 3. Controls and Procedures
A review and evaluation was performed by the Company's management, including the
Company's CEO and Chief Financial Officer, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures as of the end
of the period covered by this Quarterly report. Based upon such evaluation, such
officers have concluded that the Company's disclosure controls and procedures
are effective.
There have been no significant changes in the Company's internal controls over
financial reporting that have materially affected, or are reasonably likely to
materially effect, the Company's internal controls over financial reporting.


                                       15
<PAGE>


PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

During the nine months ended September 30, 2005, there were no material pending
legal proceedings initiated by or against the Company or any of its officers,
directors or subsidiaries.

Item 2. Changes in Securities

None

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Securities Holders

None.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibit 31.1 Certification of CEO Pursuant to 18 U.S.C, Section 7241, as
adopted and Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2 Certification of CFO Pursuant to 18 U.S.C, Section 7241, as adopted
and Section 302 of the Sarbanes-Oxley Act of 2002

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

Exhibit 32.2 Certification of CFO Pursuant to 18 U.S.C, Section 1350, as adopted
and Section 906 of the Sarbanes-Oxley Act of 2002.

                                       16
<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: November 21, 2005

By: /s/ Charles Gamber
   --------------------------------------------------------
   Charles Gamber, CEO
   Principal Executive Officer

By: /s/ John Herzog
   --------------------------------------------------------
   John Herzog, Interim CFO
   Interim Principal Financial and Accounting Officer


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