FORM 10-QSB/A - 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/A

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

    For the period ended:   March 31, 2001
                            --------------
or

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


For the transition period from ___________________ to _______________________


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


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


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


    2955 Valmont Road, Suite 310, Boulder, CO                80301
    ------------------------------------------            -------------
    (Address of principal executive offices)               (Zip Code)


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


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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                         [ X  ] Yes     [  ] No


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

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


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

As of April 30, 2001,  Registrant had 432,762,922 shares of common stock, no par
value, outstanding.

<PAGE>

                                TABLE OF CONTENTS


                                                                       Page No.

Consolidated Financial Statements:

   Consolidated Balance Sheet at March 31, 2001 and December 31, 2000
   (unaudited)                                                             2

   Consolidated Statements of Operations for the Three Months Ended
   March 31, 2001 and 2000 (unaudited)                                     3

   Consolidated Statement of Stockholders' Deficit for the Three Months
   Ended  March  31, 2001 (unaudited)                                      4

   Consolidated Statements of Cash Flows for the Three Months Ended
   March 31, 2001 and 2000                                                 5-6

   Notes to Unaudited Consolidated Financial Statements at March 31,
   2001                                                                    7-9

Management's  Discussion and Analysis of Financial Condition
and Results of Operations                                                 10-12

Part II - Other Information                                                12

Signatures                                                                 13

<PAGE>

<TABLE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                      March 31, 2001 and December 31, 2000
                                  (Unaudited)
                                     ASSETS
<CAPTION>


                                                                              2001           2000
                                                                          -----------    -----------
Current assets:
<S>                                                                       <C>            <C>
    Cash and cash equivalents                                             $       792    $    13,376
    Certificate of deposit                                                          -         52,387
    Prepaid expenses                                                           51,320         26,031
                                                                          -----------    -----------

      Total current assets                                                     52,112         91,794

Furniture and equipment, at cost net of accumulated
    depreciation of $9,318 (2001) and $5,478 (2000)                            15,155         18,995

Security deposit                                                                5,954          5,954

Investment in and advances to Applied Behavior Systems,
    LLC (Note 2)                                                                    -              -

Investment in and advances to Aggression Sports
    (Note 2)                                                                  153,245         89,222
                                                                          -----------    -----------

                                                                          $   226,466    $   205,965
                                                                          ===========    ===========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable (Note 3)                                             $   215,866    $   201,979
    Accrued expenses                                                          606,433        508,462
    Accrued payroll taxes (Note 3)                                            198,445        191,755
    Notes payable (Note 4)                                                    100,000         50,000
    Notes payable - related parties (Note 4)                                  180,407        201,561
                                                                          -----------    -----------

      Total current liabilities                                             1,301,151      1,153,757

Commitments and contingencies (Notes 1, 3 and 6)

Stockholders' deficit (Note 4):
    Convertible Class A preferred stock; $10 face value, 100,000 shares
      authorized, 3,000 shares issued and
      outstanding (liquidation preference $32,475)                                  -              -
    Common stock, no par value; 499,900,000 shares
      authorized, 405,622,922 (2001) and 372,422,912 (2000)
      shares issued and outstanding                                         8,835,621      8,515,871
    Accumulated deficit                                                    (9,718,056)    (9,346,413)
    Notes receivable from sale of stock                                      (192,250)      (117,250)
                                                                          -----------    -----------

      Total stockholders' deficit                                          (1,074,685)      (947,792)
                                                                          -----------    -----------

                                                                          $   226,466    $   205,965
                                                                          ===========    ===========
</TABLE>
                             See accompanying notes.

                                        2
<PAGE>

<TABLE>
                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF OPERATIONS
               For the Three Months Ended March 31, 2001 and 2000
                                   (Unaudited)
<CAPTION>


                                                                   2001             2000
                                                              -------------    -------------

Revenues:
<S>                                                           <C>               <C>
    Management fees - Aggression Sports (Note 2)              $      23,400     $          -
    Other income                                                     18,240                -
                                                              -------------    -------------

      Total revenues                                                 41,640                -

Operating expenses:
    Depreciation                                                      3,840                -
    Research and development (Note 2)                               111,612                -
    Rent                                                             20,960                -
    Other operating expenses                                        216,441                -
                                                              -------------    -------------

      Total costs and expenses                                      352,853                -
                                                              -------------    -------------

        Total operating income (loss)                              (311,213)               -

Other income (expense):
    Equity in loss of Aggression Sports (Note 2)                    (33,590)          (2,000)
    Interest expense                                                (29,812)          (6,757)
    Interest income                                                   2,972              563
                                                              -------------    -------------

      Total other income (expense)                                  (60,430)          (8,194)
                                                              -------------    -------------

Net loss from continuing operations                                (371,643)          (8,194)

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

Net loss applicable to common shareholders                    $    (371,643)   $     (78,714)
                                                              =============    =============


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

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


Weighted average common shares outstanding                      393,295,000      265,404,922
                                                              =============    =============
</TABLE>

* - Less than $.01 per share

                             See accompanying notes.

                                        3
<PAGE>

<TABLE>
                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                    For the Three Months Ended March 31, 2001
                                   (Unaudited)
<CAPTION>

                                                    Common stock
                                              -------------------------   Accumulated
                                                 Shares       Amount        deficit
                                              -----------   -----------   -----------
<S>                                           <C>           <C>           <C>
Balance, December 31, 2000                    372,422,912   $ 8,515,871   $(9,346,413)

   Issuance of common stock for
     services (Note 4)                          3,050,643        35,348             -

   Issuance of common stock upon conversion
     of note payable - related party           16,649,367        84,912             -

   Issuance of common stock in payment of
     interest on notes payable                  2,000,000        30,000

   Common stock issued upon exercise
     of options (Note 4)                        6,500,000        65,000             -

   Interest in sale of Arete common stock
     by equity-method investee (Note 2)                 -        24,490             -

   Common stock issued upon exercise
     of options paid for by a note
     receivable (Note 4)                        5,000,000        80,000
   Net loss for the quarter ended
     March 31, 2001                                     -             -      (371,643)
                                              -----------   -----------   -----------

Balance, March 31, 2001                       405,622,922   $ 8,835,621   $(9,718,056)
                                              ===========   ===========   ===========
</TABLE>


                             See accompanying notes.

                                        4
<PAGE>

<TABLE>
                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS
               For the Three Months Ended March 31, 2001 and 2000
                                   (Unaudited)
<CAPTION>

                                                                2001         2000
                                                              ---------    ---------
Cash flows from operating activities:
<S>                                                           <C>          <C>
    Net loss                                                  $(371,643)   $ (78,714)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Depreciation and amortization                             3,840          116
        Equity in loss of Aggression Sports                      33,590        2,000
        Stock issued for services and interest on notes          70,348       46,410
        Note issued for services                                      -            -
        Changes in assets and liabilities:
          Accounts receivable                                         -           74
          Prepaid expenses                                      (25,289)       1,200
          Accounts payable                                       13,887      (23,690)
          Accrued expenses                                      104,661        4,358
                                                              ---------    ---------

            Total adjustments                                   201,037       30,468
                                                              ---------    ---------

        Net cash used in operating activities                  (170,606)     (48,246)

Cash flows from investing activities:
    Investments in and advances to Aggression Sports            (73,123)     (15,548)
    Maturity (purchase) of certificate of deposit                52,387       25,000
                                                              ---------    ---------

        Net cash provided by (used in) investing activities     (20,736)       9,452

Cash flows from financing activities:
    Proceeds from issuance of common stock                            -       64,652
    Proceeds from exercise of stock options                      65,000       66,000
    Proceeds from note payable - related parties                 63,758            -
    Proceeds from note payable                                  100,000            -
    Payments on long term debt                                  (50,000)     (19,500)
                                                              ---------    ---------

      Net cash provided by financing activities                 178,758      111,152
                                                              ---------    ---------

Net increase in cash and cash equivalents                       (12,584)      72,358
Cash and cash equivalents at beginning of period                 13,376       15,844
                                                              ---------    ---------

Cash and cash equivalents at end of period                    $     792    $  88,202
                                                              =========    =========
</TABLE>


                             See accompanying notes.

                                        5
<PAGE>

<TABLE>
                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS
               For the Three Months Ended March 31, 2001 and 2000
                                   (Unaudited)

                         (Continued from preceding page)
<CAPTION>

                                                                2001         2000
                                                              ---------    ---------
Supplemental disclosure of cash flow information:

<S>                                                           <C>          <C>
    Interest paid during the period                           $       -    $     507
                                                              =========    =========
    Income taxes paid during the period                       $       -    $       -
                                                              =========    =========
</TABLE>

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.

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

                             See accompanying notes.

                                        6
<PAGE>
                       ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001


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,  2000 and March 31,  2001,  and the results of
     operations and cash flows for the periods ended March 31, 2000 and 2001.

     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. 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 March 31,
     2001,  the  Company  has a working  capital  deficit  of  $1,249,039  and a
     stockholders' deficit of $1,074,685. 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.

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

     In prior years, the Company acquired a 31% ownership interest in Aggression
     Sports in exchange  for  30,000,000  shares of the  Company's  common stock
     valued  at  $150,000.  During  the  three  months  ended  March  31,  2001,
     Aggression  Sports  sold  5,690,000  shares of Arete for gross  proceeds of
     $79,002.  Arete's 31% interest in the proceeds of $24,490 has been recorded
     as additional paid-in capital.

     Applied Behavior Systems, LLC:

     The Company has an agreement to provide new venture management  services to
     assist in the  formation of a new company and product  development  process
     concerning  several unique  applications  of a patented  neural-networking,
     intelligent  agent  software  engine in conjunction  with Applied  Behavior
     Systems,  LLC (ABS),  an  unaffiliated  company.  Under the agreement,  the
     Company is entitled to fees for  management  services  and will  receive an
     equity interest in this new application development company.  Through March
     31, 2001, the Company has advanced $251,766 as a bridge

                                        7
<PAGE>

                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001


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

     loan to finance  operations.  As these advances have been used for research
     and  development  by ABS,  these amounts have been recorded as research and
     development expenses in the accompanying financial statements. During 2001,
     the Company  charged  management  fees of $48,000 to ABS. These  management
     fees have not been recorded as revenue at this time since collectibility is
     not reasonably assured.

3.   Delinquent amounts payable
     --------------------------

     As of March 31,  2001,  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 three months ended March 31, 2001, (1) an officer of the Company
     converted an $84,912 note payable into  16,649,367  shares of the Company's
     common stock,  (2) the Company issued  3,050,643 shares of common stock for
     services  valued at $35,348,  (3) the Company  issued  2,000,000  shares of
     common  stock in  exchange  for a $30,000  of  accrued  interest  on a note
     payable and (4) the Company issued  11,500,000  shares of common stock upon
     the exercise of stock  options.  The Company also issued  10,000,000 of its
     common stock to be held as collateral  for the payment of two notes payable
     with a principal  balance of $100,000 in the  aggregate.  These shares have
     not been reflected as outstanding as they are considered treasury shares.

     In January 2001, the board of directors  authorized the issuance of options
     to purchase  5,000,000 and  6,500,000  shares of common stock for $.015 and
     $.010 per share, respectively, to one individual. The 5,000,000 options
     were exercised in exchange for a note  receivable  of $75,000 and the
     6,500,000 options were  exercised by reducing the balance of accrued wages
     payable to the individual.

5.   Income taxes
     ------------

     The book to tax temporary  differences resulting in deferred tax assets and
     liabilities  are primarily net operating loss  carryforwards  of $3,356,000
     which expire in years through 2021.

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

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

6.   Commitments and contingencies
     -----------------------------

     Securities and Exchange Commission investigation:

     In  August  1999,  the  U.S.   Securities  and  Exchange   Commission  (the
     "Commission") instituted a  civil action in the  Federal  District Court in

                                        8
<PAGE>

                      ARETE INDUSTRIES, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001


6.   Commitments and contingencies (continued)
     -----------------------------------------

     Colorado for the District of Colorado instituting an injunctive  proceeding
     against the Company,  its current CEO and former  officers  and  directors,
     under Section 17(a) of the  Securities Act of 1933 and Section 10(b) of the
     Securities  Exchange Act of 1934 and Rule 10b-5  thereunder,  alleging that
     false and/or misleading information was contained in certain press releases
     issued by the Company in February 1998,  and further  citing  violations of
     Section  15(d) of the  Exchange  Act and rules 15d-1 and 15d-3 for late and
     missing filings of periodic  reports under the Exchange Act. As of the date
     of this report, a final order approving a consent to entry of an injunction
     has been entered as to the two former  officers and directors in which they
     consented to the entry of an injunction  against them without  admitting or
     denying the factual findings of the commissions contained in the settlement
     offer and order and agreeing to payment of civil penalties.

     Under provisions of the Company's  Articles and By-laws and pursuant to the
     Change in Control  Agreement  dated April 30, 1998, in which the two former
     officers and directors  resigned,  the Company  agreed to indemnify and pay
     legal  fees and the  civil  penalties  of these  two  former  officers  and
     directors  which  agreement  has  been  finalized  in the  form  of a final
     settlement   agreement  between  the  Company,   the  former  officers  and
     directors,  their attorney and the current CEO,  entered into in the fourth
     quarter of 2000.

     The Company and the current CEO are presently defending this action through
     separate  counsel,  have filed  responsive  pleadings  and have  engaged in
     serious  settlement  discussions  independently  with the  Commission.  The
     Company has executed a settlement offer and the regional  enforcement staff
     has  transmitted it to the Commission in Washington for approval,  of which
     there are no guarantees it will do so. The CEO and the regional enforcement
     staff have had serious  settlement  discussions and a verbal offer has been
     tendered  for referral to and approval by the  Commission,  also,  of which
     there is no assurance that the offer will be accepted. Case preparation and
     discovery  have been put on hold pending a response from the  Commission in
     Washington D.C.

     As authorized in the Company's  corporate  charter,  the board of directors
     has agreed to  indemnify  and advance  fees and expenses to the CEO for his
     costs of defending this action.

                                        9
<PAGE>

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

Forward Looking Statements

This Quarterly Report on Form 10-QSB includes forward-looking  statements within
the meaning of the Private  Securities  Litigation  Reform Act of 1995. This Act
provides a "safe harbor" for  forward-looking  statements to encourage companies
to provide  prospective  information  about  themselves so long as they identify
these statements as forward looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected  results.  All statements  other than  statements of historical  fact,
including   statements  regarding  industry  prospects  and  future  results  of
operations of financial  position,  made in this Quarterly Report on Form 10-QSB
are forward looking. We use words such as "anticipates,"  "believes," "expects,"
"future"  and  "intends"  and similar  expressions  to identify  forward-looking
statements. Forward-looking statements reflect management's current expectations
and  are  inherently   uncertain.   The  Company's  actual  results  may  differ
significantly from management's expectations.  The following discussion includes
forward-looking statements regarding expectations of future profitability of our
business,  gross margin,  improvement in operating loss and sales,  all of which
are inherently  difficult to predict.  Actual results could differ significantly
for a variety of reasons, including the accessibility to additional capital, the
rate of growth and consumer acceptance of the Internet and online commerce,  the
amount that the Company invests in new business  opportunities and the timing of
those  investments,  customer  spending  patterns,  the mix of products  sold to
customers,  the mix of  revenues  derived  from  product  sales as  compared  to
services, and risks of fulfillment throughout and productivity.  These risks and
uncertainties,  as well as  other  risks  and  uncertainties,  could  cause  the
Company's actual results to differ significantly from management's expectations.

General Summary

As  previously  reported,  we embarked on a new  direction of  operations in the
early part of 2000 of providing New Venture Management Services. The first major
step in that direction was our  development of Aggression  Sports,  Inc.,  d/b/a
Arete Outdoors during the first quarter 2000 followed late in the second quarter
2000  with  our  next  opportunity,  Applied  Behavior  Systems,  LLC.  with its
SpeechTeach  Technology,  which evolved into the  initiative  to create  Seventh
Generation  Technologies,  Inc.  as  a  vehicle  to  pursue  development  of  an
intelligent  robotics operating system.  Since launching these  initiatives,  we
have made a substantial  investment in these  businesses,  but have  encountered
difficulty in raising further needed development capital,  and/or establishing a
revenue base which would sustain operations.  In order to preserve the viability
of these  investments and meet our  commitments,  we have terminated  supporting
ongoing  operations for these ventures  financially until alternative  resources
and  opportunities  can be developed, of which there can be no assurance made at
this time.

In the last half of 2000, the management  team rapidly  transformed  the Company
with investments in, and management  services  contributed to, several promising
companies and projects.  The next step in Arete  Industries'  development  is to
begin a program  that  management  has  coined as the  `Dividend  Program'.  The
Dividend  Program is intended to provide an  attractive  investment  vehicle for
professional  investors to invest in the Company's current development  projects
and in future  portfolio  companies the Company may identify for  acquisition in
the future. The Dividend Program is also intended to distribute direct ownership
to  the  shareholders  in  the  Company's   future  mergers,   acquisitions  and
investments.  Management  believes that the Program will also attract  promising
new  acquisition  opportunities  by offering the  entrepreneurs  and investors a
near-term  path to liquidity in the public markets  through a registered  public
spin-off and/or rights offering to Arete's shareholders.

Outdoors Equipment:  Arete Outdoors.
-----------------------------------

During the fourth and first quarters of 2000 and 2001 respectively,  we executed
the  first  production  and  marketing  season  for our two  products,  the Rush
Downhiller snow scooter and our SnowFangs. The Rush was marketed to mountain ski
resorts  across the country and  introduced  to the Colorado  ski resort  Copper
Mountain  and by January  2001,  was on the slopes of this  popular  ski resort.
Initial feed back from those renting the Rush was very favorable.  People of all
down  hilling  skill  levels  using the Rush found it easy to  operate,  fun and
unique.  The snowshoe was marketed  through  traditional  wholesale  channels to
high-end  mountaineering shops through several  representative  groups in the US
and Europe. Feedback from users who tried the snowshoe was very positive,  while
we missed  most of the  selling  season  due to design  and  production  delays.
Finally,  to develop a more stable and low cost  source of  revenue,  we hired a
marketing  and sales  manager  in  November  of 2000,  to  initiate a program of
distributing  and selling  third party  outdoor  products  into the  traditional
wholesale/retail market.

The  combination of lower than expected  sales  revenues and higher  development
costs  created a  situation  which  reasonably,  in our  opinion,  supports  our
determination  to  seek  alternative  ways of  generating  revenues  from  Arete
Outdoors.  With a view  toward  maximizing  the  developed  Rush  and  SnowFangs
snowshoe  and several  other  products  we have taken  steps to cease  incurring
further costs and the process of seeking other investors/partners.  Part of this
process  included  terminating  our  existing  arrangements  with  Michael  Lowe
subsequent to the end of the first quarter.  We are also seeking  outside buyers
or strategic  partners to continue  marketing and  development  of our products,
including the Rush and SnowFangs  snowshoe.  Patent applications have been filed
on the Rush and  SnowFangs.  We will  examine  the  benefits  of seeking  patent
protection of the other products.

                                       10
<PAGE>


We are  optimistic  about this phase as  preliminary  discussions  with  several
national outdoor equipment  manufacturers have yielded exploratory  interest. We
plan  to make  the web  site  Adventure  Travel  Services  available  with  this
transition as well.

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

II.   Patented Intelligent Agent Software

Applied  Behavior  Systems,  LLC,  ("ABS") has developed a patented  intelligent
agent  software  that has  unique  applications  for  language  learning,  voice
recognition,  vision  recognition  and  intelligent  robotics.  In June  2000 we
entered a New Venture  Management  Services  with ABS which  agreed to pay Arete
$16,000 per month. The services include accounting,  management services, office
facilities  with common  computer and telephone  network  services.  In November
2000, we entered into an agreement with ABS to form a new company,  subsequently
called Seventh  Generation  Technologies,  Inc. ("7GT"),  which would expand the
relationship beyond bringing to market a new teaching software for children with
developmental  learning  disabilities  called  "Speech  Teach"  to  include  the
development  of self training  software for robots.  The new  agreement  permits
exploration and utilization of this software for  applications  beyond education
and language. The agreement is with 7GT (Seventh Generation  Technologies,  Inc,
f/k/a VerbalTech Labs, Inc.). 7GT has opened and conducted several meetings with
outside  investors and  interested  potential  industrial  users of this type of
technology.  7GT has carried its development of the adaptive capabilities of the
new  software  to  the  point  it  is  actively  seeking  outside  investor  and
partnering.  Initial  efforts to develop the software  for this new  application
point to the  realistic  ability to instruct a robotic  operation  verbally.  To
carry  development  of this  software  application  further  outside  funding is
necessary,  as well as a potential  refocusing of 7GT to only the development of
the robotic  software.  For  prudent  business  reasons  cost  cutting  steps to
maintain its market viability have been implemented, including reduced payroll.

III.     Other Opportunities

Subsequent  event.  In April 2001, we formed a new company  called Eagle Capital
Funding  Corp.  This new  business  will help  local  municipalities  and county
agencies  fund  construction  projects  in the  state  of  Colorado.  The  Tabor
Amendment,  passed in  Colorado  in the  mid-1990's,  creates the niche this new
opportunity fills. The Tabor Amendment  requires any governmental  entity in the
state of Colorado to obtain voter  approval for certain  types of  expenditures.
For example,  the Tabor Amendment  prohibits cities,  counties or the state from
issuing bonds or raising taxes absent voter approval.  This places a significant
burden  on  governing   bodies  when   attempting  to  carry  out  their  duties
particularly as regards large capital development  projects such as new building
construction.  Colorado,  and especially  cities/counties from Greeley to Pueblo
(a/k/a the "Front Range") are experiencing  rapid growth and development.  In an
effort to satisfy the governing needs to manage this growth,  alternative  means
of funding capital expenditures has become important.  Gerald J. Brandimarte has
been  brokering  such  financing  options for several  years.  Mr.  Brandimarte,
recently pursued this business with a small front-range commercial  construction
firm, sought to pursue this business  independently.  Our New Venture Management
Services offer him such an  opportunity.  We will provide Mr.  Brandimarte  with
office support,  namely accounting,  telephone answering,  etc., in return for a
percentage of gross revenues on all deals closed and funded.  An agreement dated
effective April 16, 2001 was entered into by the Company with Mr. Brandimarte.

Employees:
Arete Industries, Inc. has seven full time employees,  Outdoors has no employees
and ABS has two employees.

Financial Condition
-------------------
The Company had a working  capital  deficit as of March 31, 2001, of $1,249,039.
This compares to a working  capital  deficit of $1,061,963 at December 31, 2000.
Losses  were  partially  funded  with  accrued  salaries  and shares  issued for
services.  During the 3-month  period ended March 31, 2001,  the Company  issued
3,050,643 shares of common stock for services.

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

The Company's  operating  revenues for the three months ended March 31, 2001 was
$41,640,  net of an additional $18,600 charged to Aggression Sports, Inc., which
amount has been eliminated in the preparation of the financial statements.

For the quarter ended March 31, 2001, the Company incurred $352,853 in operating
expenses.  The Research and Development  line item of $111,612  represents money
advanced to ABS, LLC.  Following the end of the first quarter 2001,  the Company
stopped  funding  operations of  Aggression  Sports,  Inc.  except to protect or
preserve the value of its assets or to take advantage of business  opportunities
it may  encounter  to exploit its assets.  The Company  also has ceased  funding
operations of ABS, LLC. The Company 's future expectation is that these expenses
will not  increase  except  commensurate  with an increase  in revenue  from its
management services.


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<PAGE>

Liquidity and Capital Resources
-------------------------------
At this time we are seeking  buyers and/or  investors for Arete Outdoors to move
the products into the mainstream markets in the US and Europe.  Capital received
from sale of this  operation  to investors  will be used to  liquidate  expenses
incurred in developing the products, Rush and SnowFangs snowshoes to production.
The Company  anticipates  the sales proceeds will be adequate to resolve primary
obligations.

The Company had a stockholder's deficit at March 31, 2001 of $1,074,685. This is
compared to a  stockholder's  deficit at  December  31,  2000 of  $947,792.  The
stockholder's deficit increased due to the Company's operating at a loss.

Management believes its New Venture Management Services strategy, despite recent
adverse  events,  is appropriate for ultimate  viable  financial  success of the
company.  Despite  limited  working  capital  for  the  Company's  new  business
incubation  initiatives,   Management  is  committed  to  forging  ahead  toward
positioning  itself to attract  larger  sources  of  financing  to  improve  its
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  March  31,  2001,  the  Company  had no  material  commitments  for  capital
expenditures.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

During the Period ended March 31, 2001, 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.

       None

Item 3. Defaults Upon Senior Securities.

       None.

Item 5. Other Information.

       None.

Item 6. Exhibits and Reports on Form 8-K

The following exhibits are attached:

         Exhibit No.               Description
        -----------          -----------------------
            --                        NONE

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

                                       12

<PAGE>

                                   SIGNATURES

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

                                            ARETE INDUSTRIES, INC.


Date: May 22, 2001               By:  /s/  Thomas Y. Gorman, CFO
                                      -------------------------------
                                      Thomas Y. Gorman, CFO
                                      Principal Financial and Accounting Officer


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