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, 2003

                                       or

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

  For the transition period from ___________________ to _______________________


                        Commission File Number 33-16820-D


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


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


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


                                 (303) 652-3113
              ----------------------------------------------------
              (Registrant's telephone number, including area code)



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


<PAGE>


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

                                [ X ] Yes [ ] No


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

Indicated  by check mark  whether the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

                                 [ ] Yes [ ] No


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

As of November 12, 2003,  Registrant had 73,092,626  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 September 30, 2003 and
December 31, 2002 (unaudited)                                         2

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

Consolidated Statements of Operations for the Nine
Months Ended September 30, 2003 and 2002 (unaudited)                  4

Consolidated Statement of Stockholders' Deficit for
the Nine Months Ended September 30, 2003 (unaudited)                  5

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

Notes to Unaudited Consolidated Financial Statements
at September 30, 2003                                                7-11
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations                                  12-18

Part II - Other Information                                          19

Signatures                                                           20



<PAGE>

<TABLE>
                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
                           CONSOLIDATED BALANCE SHEET
                    December 31, 2002 and September 30, 2003
                                   (Unaudited)
<CAPTION>

                                     ASSETS
                                     ------


                                                                 2002              2003
                                                              ------------    ------------
<S>                                                           <C>             <C>
Current assets:
    Cash and cash equivalents                                 $        381    $      3,904
    Accrued interest receivable                                     24,632          34,479
    Inventory                                                       20,302            --
    Inventory and molds held for disposal (Note 4)                    --            25,244
    Prepaid expenses                                                 2,285            --
                                                              ------------    ------------
      Total current assets                                          47,600          63,627

Furniture and equipment, at cost net of accumulated
    depreciation of $74,309 (2002) and $13,328 (2003)               97,056           1,273
Intellectual property                                               32,215            --
                                                              ------------    ------------
                                                              $    176,871    $     64,900
                                                              ============    ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
                      -------------------------------------


Current liabilities:
    Accounts payable (Note 2)                                 $    422,697    $    431,954
    Accrued expenses                                               576,333         580,549
    Accrued payroll taxes (Note 2)                                 289,761         289,761
    Settlement due                                                  18,650          18,650
    Notes payable - related parties                                 27,532          15,978
                                                              ------------    ------------
      Total current liabilities                                  1,334,973       1,336,892

Commitments and contingencies (Notes 1 and 2)

Stockholders' deficit (Notes 5 and 6):
    Convertible Class A preferred stock; $10 face value,
      1,000,000 shares authorized:
        Series 1, 30,000 shares authorized, 16,001
          shares issued and outstanding                            160,014         160,014
        Series 2, 25,000 shares authorized, 18,542 (2002)
          and 20,000 (2003) shares issued and outstanding          185,425         200,000
    Common stock, no par value; 499,000,000 shares
      authorized, 34,399,581 (2002) and 59,474,581 (2003)
      shares issued and outstanding                              9,592,587       9,961,807
    Accumulated deficit (Including $81,898 accumulated
      during the development stage)                            (10,877,308)    (11,327,868)
    Deferred compensation                                             --           (27,125)
    Notes receivable from sale of stock                           (218,820)       (238,820)
                                                              ------------    ------------
      Total stockholders' deficit                               (1,158,102)     (1,271,992)
                                                              ------------    ------------
                                                              $    176,871    $     64,900
                                                              ============    ============
</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 September 30, 2002 and 2003
                                   (Unaudited)
<CAPTION>
                                                                        2002            2003
                                                                    ------------    ------------
<S>                                                                 <C>             <C>
Operating expenses:
   Depreciation                                                     $       --      $        200
   Rent                                                                     --             2,277
   Other operating expenses                                                 --            78,469
                                                                    ------------    ------------
     Total operating expenses                                               --            80,946
                                                                    ------------    ------------
       Total operating loss                                                 --           (80,946)

Other income (expense):
   Interest expense                                                      (16,360)         (4,234)
   Interest and miscellaneous income                                       3,277           3,282
                                                                    ------------    ------------
     Total other income (expense)                                        (13,083)           (952)
                                                                    ------------    ------------
Net loss from continuing operations                                      (13,083)        (81,898)

Net loss from discontinued operations (including loss on disposal
   of $102,006 in 2003) (Note 4)                                        (135,309)       (118,813)
                                                                    ------------    ------------

Net loss (Note 3)                                                   $   (148,392)   $   (200,711)
                                                                    ============    ============


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

Weighted average common shares outstanding                            28,900,000      54,100,000
                                                                    ============    ============
</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 September 30, 2002 and 2003
                                   (Unaudited)
<CAPTION>

                                                                        2002            2003
                                                                    ------------    ------------
<S>                                                                 <C>             <C>
Operating expenses:
   Depreciation                                                     $       --      $        200
   Rent                                                                     --             2,277
   Other operating expenses                                                 --            78,469
                                                                    ------------    ------------
     Total operating expenses                                               --            80,946
                                                                    ------------    ------------
       Total operating loss                                                 --           (80,946)

Other income (expense):
   Interest expense                                                      (21,229)        (13,560)
   Interest and miscellaneous income                                       9,833           9,847
                                                                    ------------    ------------
     Total other income (expense)                                        (11,396)         (3,713)
                                                                    ------------    ------------
Net loss from continuing operations                                      (11,396)        (84,659)

Net loss from discontinued operations (including loss on disposal
   of $102,006 in 2003) (Note 4)                                        (277,205)       (365,901)
                                                                    ------------    ------------

Net loss (Note 3)                                                   $   (288,601)   $   (450,560)
                                                                    ============    ============

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

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

Weighted average common shares outstanding                            25,900,000      46,600,000
                                                                    ============    ============
</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, 2003
                                   (Unaudited)
<CAPTION>


                                                     Series 1              Series 2
                                                  preferred  stock      preferred stock           Common stock
                                                -------------------   -------------------   -----------------------    Accumulated
                                                 Shares     Amount     Shares      Amount      Shares        Amount      deficit
                                                --------   --------   ---------  --------   ----------   ----------   -------------
<S>                                             <C>        <C>        <C>        <C>        <C>          <C>          <C>

Balance, December 31, 2002                        16,001   $ 160,014     18,542  $185,425   34,399,581   $9,592,587   $(10,877,308)

   Issuance of Series 2 preferred  stock
     to reimburse advances made to the
     Company (Note 5)                               --         --         1,458    14,575        --           --              --

   Exercise of stock options (Note 5)               --         --         --        --       3,500,000       65,500           --

   Issuance of common stock to employees
     and consultants for services (Note 5)          --         --         --        --      21,575,000      286,983           --

   Value of stock options granted to consultants
     (Note 5)                                       --         --         --        --           --          16,737           --

   Net loss for the nine months ended
     September 30, 2003                             --         --         --        --           --           --         (450,560)
                                                --------   --------   ---------  --------   ----------   ----------   -------------
Balance, September 30, 2003                       16,001   $160,014      20,000  $200,000   59,474,581   $9,961,807   $(11,327,868)
                                                ========   ========   =========  ========   ==========   ==========   =============
</TABLE>

                             See accompanying notes.

                                        5
<PAGE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
                      CONSOLIDATED STATEMENT OF CASH FLOWS
              For the nine months ended September 30, 2002 and 2003
                                   (Unaudited)


                                                          2002          2003
                                                          ----          ----
Cash flows from operating activities:
    Net loss                                            $(288,601)   $(450,560)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Depreciation and amortization                      24,504       21,050
        Stock issued and options granted for services     110,146      276,595
        Impairment loss                                      --        102,006
        Changes in assets and liabilities:
          Interest receivable                              (9,833)      (9,847)
          Prepaid expenses                                    424        2,285
          Accounts payable                                  8,452        9,257
          Accrued expenses                                 95,943        4,216
                                                        ---------    ---------
            Total adjustments                             229,636      405,562
                                                        ---------    ---------

        Net cash used in operating activities             (58,965)     (44,998)

Cash flows from investing activities:
    Purchase of property and equipment                       (200)        --
    Security deposit                                        5,216         --
                                                        ---------    ---------
        Net cash provided by investing activities           5,016         --
                                                        ---------    ---------
Cash flows from financing activities:
    Proceeds from issuance of preferred stock              54,930       14,575
    Proceeds from exercise of stock options                  --         65,500
    Note Receivable from sale of stock                       --        (20,000)
    Payment of note payable - related parties                --        (11,554)
                                                        ---------    ---------
      Net cash provided by financing activities            54,930       48,521
                                                        ---------    ---------

Net increase  in cash and cash equivalents                    981        3,523

Cash and cash equivalents at beginning of period              110          381
                                                        ---------    ---------

Cash and cash equivalents at end of period              $   1,091    $   3,904
                                                        =========    =========

                             See accompanying notes.

                                        6
<PAGE>



                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003


1.   Summary of significant accounting policies
-----------------------------------------------

     Basis of presentation:

     The  accompanying  financial  statements have been prepared by the Company,
     without audit.  In the opinion of management,  the  accompanying  unaudited
     financial  statements  contain all  adjustments  (consisting of only normal
     recurring  accruals)  necessary  for a fair  presentation  of the financial
     position as of December 31, 2002 and September 30, 2003, and the results of
     operations  and cash flows for the  periods  ended  September  30, 2002 and
     2003.

     The  financial  statements  have been  prepared on the basis of the Company
     being a development stage entity,  having discontinued several unsuccessful
     ventures  including:   (i)  cessation  of  operations  of  its  subsidiary,
     Aggression  Sports,  Inc.;  and (ii) 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.   The  new  business   consists  of   developing
     opportunities  in the  traditional  and  alternative  and renewable  energy
     sectors,  which  contemplates  the  formation  of  capital  and  management
     resources  to pursue  development  of new business  opportunities  in these
     areas. The  reclassification  of the Company as in its 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 changed its financial
     statements  to reflect this  divergence  from its past  business  endeavors
     including losses from the write down of assets and valuation of assets held
     for  disposal  from  discontinued  operations.  The  Company  has  incurred
     significant  losses and at September  30,  2003,  the Company has a working
     capital deficit of $1,273,265 and a stockholders' deficit of $1,271,992. In
     addition,  the  Company is  delinquent  on  payment  of  payroll  taxes and
     creditor  liabilities  pursuant  to the plan of  reorganization  entered in
     September  of  1995.  As a  result,  substantial  doubt  exists  about  the
     Company's  ability to continue to fund future operations using its existing
     resources.

     On December 19, 2001, a new Series of the Company's Class A Preferred Stock
     was  designated  and the Company  initiated a private  placement to related
     parties of up to 25,000 shares of Series 2 Convertible  Preferred Stock, in
     a proposed  placement of up to $200,000 of such preferred  stock at $10 per
     share face value. As of September 30, 2003, the Company  received  proceeds
     of  $200,000  for the  purchase  of 20,000  shares of Series 2  Convertible
     Preferred  Stock from an affiliate.  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.

     The Company has embarked on an entirely new business  focusing on acquiring
     interests in  traditional  oil and gas ventures as well as  development  of
     alternative and renewable  energy  projects.  In the oil and gas field, the
     Company is  looking  for  conservation  oriented  projects  that offer high
     profit,  low risk projects  including  overlooked and by-passed reserves of
     natural gas, which will include shut-in and in-field development,  stripper
     wells,  re-completion and re-working projects. The Company is interested in
     combining  traditional oil and gas  investments  with projects that advance
     and exploit the use of alternative and renewable energy including bio-mass,
     co-generation,  solar,  wind,  municipal  and organic  waste  conversion to
     bio-fuels,  and alternative electrical energy feed stocks. The Company will
     seek to make investments for direct  participations  in the revenue streams
     from  such  projects  on a  project  finance  basis,  as  well  as  through
     acquisition of management,  capital, and assets by one or more acquisitions
     of going concerns.  Also under  consideration  is creation and operation of
     one or  more  investment  funds  to  engage  in  energy  related,  socially
     responsible investments. While the Company contemplates focusing all of its
     energy and  resources on this plan for the  indefinite  future,  it has not
     entirely  abandoned  its vision of  assisting  promising  emerging and high
     growth-stage  businesses with financial and board level managerial  support
     with a view of taking such  companies  public  through a registered  rights
     offering or dividend distribution to the Company's shareholders.

                                        7
<PAGE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003


2. Delinquent amounts payable
-----------------------------

     As of September 30, 2003,  the Company is delinquent on payments of various
     amounts to  creditors  including  payroll  taxes and  $62,316 to  creditors
     required to be paid under the terms of its plan of reorganization.  Failure
     to pay these liabilities could result in liens being filed on the Company's
     assets and may result in assets being  attached by  creditors  resulting in
     the Company's inability to continue operations.

3.   Income taxes
-----------------

     The book to tax temporary  differences resulting in deferred tax assets and
     liabilities  are primarily net operating loss  carryforwards  of $4,513,000
     which expire in years through 2023.

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

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

4.   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  requires  that it take the
     decisive step to formally discontinue its former operations.  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.  The effect in the current three
     month period of this  reclassification  includes a write-down  of inventory
     and  fixed  assets  held  for  disposal  from  discontinued  operations  of
     $102,006, and a loss of $16,807 from discontinued operations. The effect in
     the  current  nine  month  period  of  this  reclassification   includes  a
     write-down of assets from discontinued  operations of $102,006,  and a loss
     of $263,895 from discontinued operations.

5.   Stock transactions
-----------------------

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

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

                                        8
<PAGE>


                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003


5.   Stock transactions (continued)
-----------------------------------

     On January 29, 2003,  the Company issued  5,000,000  shares of common stock
     valued at $75,000,  and granted stock options to purchase  3,000,000 shares
     at $0.0165 per share to its officers and directors for compensation for the
     first  quarter.  These options are  exercisable  beginning 79 days from the
     date of issuance and for a period of two years thereafter. During the third
     quarter, 2,000,000 of these options were cancelled. Additionally during the
     first  quarter,  1,000,000  shares  of  common  stock  were  issued  to one
     consultant for services performed valued at $15,000.  On April 1, 2003, the
     Company issued 1,000,000  common shares to the CEO for compensation  valued
     at $14,000  or $0.014  per share and  granted  stock  options  to  purchase
     3,000,000  common shares at $0.0155 per share to its officers and directors
     for compensation in the second quarter. These options are exercisable for a
     period beginning  September 30, 2003 and expiring on April 1, 2005.  During
     the third quarter,  1,000,000 of these options were cancelled.  On April 3,
     2003,  the CEO and a consultant  exercised  1,000,000  common stock options
     each for  $0.02 per share for a total of  $25,000  in cash and  payment  of
     $15,000  in notes  payable  to the CEO.  Additionally,  during  the  second
     quarter, 1,000,000 shares of common stock were issued to one consultant for
     services  performed  valued at  $20,000.  Also,  during  the third  quarter
     4,000,000 stock options granted  originally granted in 2001 and 2002 to two
     directors and exercisable for $0.02 per share, were cancelled.

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

     During the second quarter,  the Company  inadvertently issued shares and/or
     granted stock options which exceeded the number of common shares  allocated
     to its 2002 Incentive Stock Option Plan by 683,333 shares. Certain of these
     include  shares  reserved  for  issuance on exercise of  outstanding  stock
     options. During the third quarter, as stated above certain of these options
     were cancelled, and a total of 7,000,000 stock options were restricted from
     exercise  unless and until other  options were  cancelled,  or such options
     included under a  subsequently  authorized  incentive  stock option plan in
     sufficient number to allow their exercise.

     On July 21,  2003,  Mr.  Gerald J.  Brandimarte  resigned as an officer and
     director of the Company,  agreeing to cancel his outstanding  stock options
     to purchase up to  4,000,000  shares of common stock  (including  2,000,000
     shares cancelled as discussed above.)

     On July 27, 2003 the Company issued  1,000,000 common shares for consulting
     services to an outside consultant valued at $9,100.

     By  agreement  dated  August 4,  2003,  the  Company  engaged  a  corporate
     consultant  to  provide  advisory  services,  recommendations  and to  make
     introductions  to assist the Company in refining and executing its business
     plan,  including corporate finance,  mergers and acquisitions and corporate
     visibility.  The  agreement  is for an  initial  term of 6 months  from its
     execution date and is renewable for additional periods. The Company paid an
     initial consulting fee 7,000,000 common shares valued at $0.01 per share or
     $70,000,  $47,000  of which was  expensed  in the  current  period  and the
     balance of $23,000 was deferred and expensed during the fourth quarter.

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

                                        9

<PAGE>



                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003



5.    Stock transactions (continued)
------------------------------------

     During the third quarter,  the Company  received  $6,713 from an affiliated
     company  toward a subscription  for Series 2 Preferred  Stock and on August
     14,  2003 was issued 671 shares of such  preferred  stock,  completing  the
     $200,000 subscription agreement executed by such affiliate. These shares of
     the Series 2 Preferred  Stock are  convertible  into  20,000,000  shares of
     common stock.

     On August 21, 2003, the board of directors of the Company  adopted the 2003
     Omnibus Stock Option and  Compensation  Plan,  designating up to 40,000,000
     common shares that may be issued thereunder,  redesignated  5,000,000 stock
     options previously granted to this Plan, and designated 7,000,000 new stock
     options  exercisable  at $0.01  per  share,  in  direct  grants  to the two
     directors,  plus set aside  10,000,000  shares  issuable under the new 2003
     Plan as employee  stock  purchase  rights,  priced at $0.01 per share.  The
     Company  also  authorized  and filed a  Registration  Statement on Form S-8
     covering  the shares  designated  under such Plan.  The Company  intends to
     submit the new 2003 Plan for  shareholder  approval  at its next  annual or
     special shareholder meeting, during the first or second quarter of 2004.

     On September 8, 2003 a consultant exercised an option to purchase 1,000,000
     shares of common stock at $0.02 per shares, with a full recourse promissory
     note.

     On  September  25,  2003  the  Company   appointed  three  new  independent
     directors,  created Audit,  Compensation  and Nominating  Committees of the
     independent  directors,  and issued stock  compensation  of 125,000  common
     shares  valued at $1,375 plus stock options to purchase  250,000  shares of
     common stock at $0.011 per share to each new director as  compensation  for
     the fourth quarter of 2003. On September 29, 2003, two of the new directors
     exercised  their stock options for 250,000  shares each with cash of $2,750
     each. The third director exercised his stock option,  subsequent to the end
     of the third quarter for $2,750.

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

                                                  2002              2003
                                                  ----              ----

        Net loss - as reported               $  (288,601)      $  (450,560)
        Net loss - pro forma                    (310,033)         (531,713)
        Loss per share - as reported               (0.01)            (0.01)
        Loss per share - pro forma                 (0.01)            (0.01)

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes  option-pricing model with the following weighted-average
     assumptions  used for  grants  in  2003,  dividend  yield  of 0%;  expected
     volatility of 100%,  risk-free interest rate of .86% to 1.75%; and expected
     life of .17 to 2 years.

                                        10

<PAGE>

                     ARETE INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Entity)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003



6.   Subsequent Events
----------------------

     On October 9, 2003,  the Company issued  1,168,045  common shares valued at
     $12,849 to two professional contractors for legal and bookkeeping services.

     On October 15, 2003, the Company, via its compensation  committee,  renewed
     the  employment  agreement of the Company  CEO,  authorized  resumption  of
     accrual of annual salary of $180,000 per year in the event of  non-payment,
     and paid October salary of $15,000 with 1,250,000 common shares.

     On November 3, 2003, the Company signed an engagement with a company and an
     individual,  for shareholder public relations,  and product advertising and
     electronic  media  consulting,  and paid the shareholder  public  relations
     company 300,000  restricted shares of common stock valued at $3,600 and the
     product  advertising and electronic media consulting company 400,000 shares
     of   unrestricted   common  stock  valued  at  $4,800,   for  a  one  month
     consulting/advertising program from each beginning November 15, 2003.

     On November 4, 2003, the Company  extended a consulting  agreement  entered
     into with an  unaffiliated  party in  August,  2003 and paid an  additional
     4,250,000 shares in consulting fees valued at $59,400.

     On November 10, 2003,  three directors  exercised stock options for a total
     of 6,250,000  shares for  consideration of $38,250 in cash, and exchange of
     800 shares of the Company's Series 2 Convertible  Preferred Stock valued at
     $40,000.

                                       11

<PAGE>


Item 2-Management's Discussion and Analysis

Critical accounting policies

The Company has identified the accounting  policies  described below as critical
to its business  operations and the  understanding  of the Company's  results of
operations. The impact and any associated risks related to these policies on the
Company's  business  operations is discussed  throughout this section where such
policies  affect the  Company's  reported and expected  financial  results.  The
preparation  of  this  Report   requires  the  Company  to  make  estimates  and
assumptions  that affect the reported  amount of assets and  liabilities  of the
Company,  revenues and expenses of the Company  during the reporting  period and
contingent  assets and  liabilities  as of the date of the  Company's  financial
statements.  There can be no assurance  that the actual  results will not differ
from those estimates.

Stock issuances:

The Company has relied upon the  issuance of shares of its common and  preferred
stock, and options to purchase its common stock and preferred stock to fund much
of the Company's operations.  The following describes the methods used to record
various stock related transactions.

Stock issued for services is valued at the market price of the  Company's  stock
at the date of grant.

Compensation related to the issuance of stock options to employees and directors
is recorded at the intrinsic value of the options,  which is the market price of
the  Company's  common  stock  less  the  exercise  price of the  option  at the
measurement  date. The Company's  common stock issued to consultants is recorded
at the market price of the Company's  common stock at the measurement  date. The
measurement date is generally the date the options are fully vested.

Revenue recognition:

The Company has  provided  management  services to  companies  in the process of
developing new products with no operations.  These management fees have not been
recorded as revenue when such services were performed since  collectibility  was
not reasonably assured.

                                       12
<PAGE>

Overview

The  Company  has  determined  to  discontinue  certain  operations  in favor of
exclusively  focusing its resources on developing business  opportunities in the
Energy  sector as more  specifically  described  herein,  and as a  result,  has
entered the development  stage,  recasting former operations as discontinued and
has written down certain fixed assets and inventory from discontinued operations
of its Aggression Sports,  Inc.  subsidiary,  as held for disposition as well as
recasting   operating  results  into  discontinued   operations  and  continuing
operations,  respectively,  for  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.

During the quarter ended  September 30, 2003, the Company filed a Current Report
on Form 8-K reporting events transpiring following the end of the second quarter
reported in its Form  10Q-SB for the period  ended June 30, 2003 filed on August
19, 2003.  The  disclosures  and exhibits  contained in such current  report are
incorporated  herein by reference,  which  information is summarized  below, but
qualified  in its  entirety by the more  detailed  disclosure  contained in such
Current Report.

Effective  July  15,  2002,  the  Company  enacted  a  recapitalization  of  its
outstanding  common  shares by  effecting a 20 to 1 reverse  stock  split,  done
without  changing the total amount of authorized  common shares.  All references
herein to common stock have been  restated to reflect the effect of this reverse
split.  The  conversion  privilege  of the  designated  Series  1 and  Series  2
Convertible  Preferred  Stock has been  adjusted  to  reflect  the effect of the
referenced reverse stock split.

During fiscal years 2000 and 2001, the Company operated as a business  incubator
for its Arete  Outdoors  subsidiary  and a  software  development  project  of a
language teaching software system. Initially funded internally,  the Company was
unable  to  complete   follow-on  funding  for  these  projects  and  they  were
terminated.  Since the  second  quarter  of 2002,  the  Company  has been in the
process  of  recapitalization  and  reconfiguration  of its  business  plan  and
operations,  and  has  been  operating  under a  business  model  as a  business
development  company  looking  to acquire  interests  in  emerging,  high-growth
private  companies  and develop  advanced  funding  vehicles  through its public
company status for the source of capital to acquire and assist these prospective
opportunities.  In  August  2003,  after  the  resignation  of one of the  three
officers and board  members  responsible  for  executing  the capital  formation
portion of the business model, the Company realized that the business  direction
it had been  pursuing  was not likely to bear fruit,  and began to evaluate  the
possibility  of  engaging  in an  entirely  new  business  of  acquiring  direct
participations  in  traditional  oil and gas projects as well as sponsoring  and
financing  alternative and renewable energy  projects.  In September the Company
formally  took  the  first  steps  to  engage  in this  new  direction  with the
appointment  of  independent  outside  directors  and  formation  of  an  Audit,
Compensation  and  Nominating  Committees,  and retention of  professionals  and
consultants  to  assist in the  formation  of  capital  and  development  of new
business  opportunities.  Taking  this new  direction  requires a break from the
remnants of  opportunities  that have been  abandoned or put in suspense,  and a
sharp focus on pursuing these parallel paths in a single industry, both in terms
of expense of company  resources and in its financial  accounting  and corporate
governance  policies and practices.  This has resulted in a reclassification  of
the  Company to a  development  stage  entity,  and in the current  period,  has
resulted in a  substantial  write down of assets from  discontinued  operations.
(See: Note 4 - Financial Statements).

                                       13
<PAGE>

Additionally,  we continue  our  efforts to  compromise  or resolve  outstanding
obligations  including  accrued  employee  compensation,  withholding  and other
taxes,  operating  and trade  payables of the Company and its former  subsidiary
operations.  To date these efforts have been funded by cash advances,  infusions
from related  parties,  and by the issuance of common  stock for  services.  The
Company  will be  required to rely upon  ongoing  financial  support  from these
parties for the foreseeable future.

On  September  25,  2003 the Company  expanded  its board of  directors  to five
members to appoint  three new  independent  board  members,  and  created  three
committees,  a  Compensation  Committee,  an Audit  Committee  and a  Nominating
Committee   consisting  of  the  three  new  independent   board  members.   The
Compensation Committee has been authorized to determine officer compensation and
administer and authorize  grants under  compensation  plans. The Audit Committee
sets Company financial and auditing policies, and includes a financial expert as
required under new  legislation  and SEC rules.  The Nominating  Committee makes
director  nominations  for the annual meeting of  shareholders.  The two current
board  members  have  authority  to renew or defer  renewal  of the terms of the
independent directors in their discretion prior the end of each successive term.
The board appointed the three new board members for contemporaneous  three month
terms  coterminous  with each fiscal  quarter,  to be compensated on a quarterly
basis.  The  Company has  determined  also to actively  recruit  senior,  highly
qualified and high profile individuals involved in the energy sector to serve as
advisory board member,  to assist us locating and evaluating  deals for funding,
and in making other  introductions to potential  investment partners and service
providers.

The Company plans to continue to take aggressive measures to bring in profitable
revenue  producing  projects  in  traditional  and  the  `New  Energy'  area  of
alternative and renewable energy while remaining  extremely frugal with our cash
and other  resources.  We  intend to avoid  expansion  of  overhead  in favor of
outsourcing professional services,  recruiting professionally qualified and high
profile experienced and well connected advisory board members in traditional and
alternative  energy. We also intend to ensure that transactional  costs of deals
in which the Company  engages  are shared by the various  parties to such deals,
and/or funded from proceeds of third party  financings or from revenue  streams.
The  Company's  CEO continues to devote full time to the business of the Company
accessing the expertise of the board members and outside  consultants.  In order
to compensate the CEO other officers and these  consultants  without  revenue or
equity  capital  available to the Company has  endeavored to provide  incentives
through direct issuances of common stock and granting of stock options. Aided by
its drastic reductions in overhead, the Company has been nominally successful in
raising cash for operating  expenses with proceeds of exercise of stock options,
cash advances and  contributions by affiliates and insiders.  None-the-less  the
lack of  liquidity  in the public  market  for the  Company's  common  stock has
restricted  the  possibilities  for  raising  equity  capital,  and the  lack of
adequate  working  capital for business  development,  has impeded the Company's
progress in executing  its new business  plan.  While  management  has been very
active in its business  development  activities of late,  there are currently no
specific  projects or funding  opportunities  currently under  contract,  and no
assurances can be made that the current  projects will result in any significant
revenue for operations in the immediate future.

                                       14
<PAGE>



Financial Condition

As stated above,  beginning in the current quarter,  we have principally written
down  Aggression  Sports,  Inc.'s fixed assets and  inventory and molds held for
disposal from discontinued operations either entirely or by a percentage that we
have estimated would  reasonably be recovered from liquidation or by selling the
entire business  opportunity  outright to a third party. Total  assets as
of  September  30, 2003 were  $64,900  after a  write-down  of $102,006 of fixed
assets, inventory, intellectual property and molds held for disposal relative to
discontinued operations in the current quarter. This compares to total assets of
$176,871 as of the fiscal year ended December 31, 2002.  Total  Liabilities were
1,336,892 as of September  30, 2003 as compared to $1,334,973 as of December 31,
2002.  Accounts  payable  and  accrued  expenses  at  September  30,  2003  were
$1,302,264  as compared  to  $1,288,791  at December  31,  2002.  Together  with
operating  losses  from  continuing  operations  of  $84,659,  the net loss from
discontinued  operations  of $365,901  (including  loss on disposal of assets of
$102,006)  resulted in a net loss of $450,560  contributing  to the  accumulated
deficit as of September 30, 2003 of  $11,327,868,  as compared to an accumulated
deficit  as of  December  31,  2002 of  10,877,308.  (See:  Note 4 to  Financial
Statements.)

The Company's subsidiary,  Global Direct Marketing Services,  Inc., which is now
inactive,  has left an obligation  of trade  payables of $87,625 and unpaid 1999
payroll taxes of $58,230 remaining from its printing and direct mail advertising
business.  The Company owes  approximately  $231,531 in unpaid  Federal  payroll
taxes for calendar years 1995 through 1997,  2000 and 2001.  Further the Company
owes  $62,316  to  creditors  under  its  Plan of  Reorganization  confirmed  in
September 1995. (See: Note 2 to Financial Statements.)

During the period ended  September 30, 2003, the Company  continued to rely upon
infusions of cash from  exercise of stock  options,  loans and cash  advances by
officers,  directors and affiliates of the Company.  During the third quarter of
2003,  $6,713 was received in partial  payment of a  subscription  agreement for
purchase of Series 2 Preferred  Stock, and $25,500 was received from exercise of
stock  options.  The  proceeds  were used for  overhead,  payment  of  corporate
obligations,  legal fees and accounting expenses for corporate reporting.  As of
September 30, 2003,  executive salaries and bonuses of $518,873 were accrued and
unpaid,  and the Company had $218,820 in notes  receivable  for stock sales from
former management members together with notes receivable for exercise of a stock
option of $20,000 from a third party, for a total of $238,820.

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
2002.

                                       15
<PAGE>

The Company had no revenues  from  operations  in during the three month  period
ended  September 30, 2003, nor during the comparable  period ended September 30,
2002.  Net loss from  continuing  operations  for the three month  period  ended
September  30,  2003 was  $81,898  as  compared  to a net loss  from  continuing
operations of $13,083 for the three month period ended  September 30, 2002. [The
loss from  continuing  operations  for 2002 was solely  the  result of  interest
accrual on notes payable and interest earned on notes receivable on investments,
a majority of which  continues to be  outstanding.]  Net loss from  discontinued
operations  during the three month period ended  September  30, 2003 of $118,813
included a write down for loss on  disposal of assets  relating to  discontinued
operations of $102,006.  The net loss from discontinued  operations as reclassed
from the three month period ended September 30, 2002 was $135,309. This resulted
in an aggregate net loss for the three month period ended  September 30, 2003 of
$200,711 compared to a net loss for the comparable period in fiscal year 2003 of
$148,392.

The Company  had no revenues  from  operations  in during the nine month  period
ended  September  30,  2003,  and only $379 during the  comparable  period ended
September  30,  2002.  Net loss from  continuing  operations  for the nine month
period  ended  September  30,  2003 were  $84,659 as compared to a net loss from
continuing  operations of $11,396 for the nine month period ended  September 30,
2002.  [The loss from  continuing  operations  for 2002 was solely the result of
interest  accrual on notes  payable and interest  earned on notes  receivable on
investments,  a majority of which  continues to be  outstanding.]  Net loss from
discontinued operations during the nine month period ended September 30, 2003 of
$365,901  included  a write  down for loss on  disposal  of assets  relating  to
discontinued  operations of $102,006. The net loss from discontinued  operations
as reclassed  from the nine month period ended  September 30, 2002 was $277,205.
This resulted in an aggregate net loss for the nine month period ended September
30, 2003 of $450,560  compared to a net loss for the comparable period in fiscal
year 2002 of $288,601.

In January  2003,  the Company  moved to an executive  suite on a month to month
basis  reducing  its rent to $1,000 per month.  The  Company  continues  to rent
storage  space for file storage,  furniture and excess  equipment as well as its
Arete Outdoors inventory for approximately $125 per month.

As stated above,  we will continue to operate the Company on an austere  program
of minimum  overhead,  while  obtaining  access to expertise in the areas we are
pursuing 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.

                                       16
<PAGE>

Liquidity and Capital Resources

The  Company  had  a  working  capital  deficit  as of  September  30,  2003  of
$1,273,265.  This  compares to a working  capital  deficit of  $1,287,373  as of
December 31, 2002.  During the quarter ended  September 30, 2003 an aggregate of
11,875,000  shares of common stock were issued for  aggregate  consideration  of
$128,725 (for an average of $0.0108 per share) and the Company issued 671 shares
of Series 2 Convertible Preferred Stock valued at face value of $6,713.

The Company had a  stockholder's  deficit at September  30, 2003 of  $1,271,992.
This is compared to  stockholder's  deficit at December 31, 2002 of  $1,158,102.
The  stockholder's  deficit  increased  due to the Company  operating at a loss,
offset by the exercise of stock  options for cash,  payment of notes  payable to
insiders, and the issuance of preferred stock for cash.

At  September  30,  2003,  the Company had no material  commitments  for capital
expenditures.

Due to its recent liquidity  issues,  the Company has defaulted on several short
term obligations including for its operating overhead, trade payables, and state
and  federal  employment  taxes,  resulting  in tax liens  being  imposed on the
Company's  assets,  which  will  have to be  resolved  with an  infusion  of new
capital, of which no assurances can be made.

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

During the second quarter of 2002, the Company reduced the number of outstanding
common shares to allow it to raise equity  capital and to effect  conversion and
exercise of outstanding  common stock options and conversion rights of preferred
stock which has been  reserved  for  issuance to insiders in exchange  for their
accrued cash advances, and for issuance in a private placement of up to $200,000
in Series 2 Convertible  Preferred stock,  which the Company completed on August
14, 2003 and had 20,000 outstanding shares of Series 2 Convertible Preferred.

The  Company  may  continue  to be  required  to  issue  further  stock  to  pay
executives,  consultants  and  other  employees,  which  may  have a  continuing
dilutive effect on other shareholders of the Company.  Failure of the Company to
acquire  additional  capital in the form of either debt or equity  capital  will
most likely  impair the ability of the  company to meet its  obligations  in the
near-term.

                                       17
<PAGE>

Subsidiaries/Employees

Arete Industries,  Inc. has its CEO on a full time basis and its second director
who serves  part-time  as a corporate  officer.  A third  executive  officer and
director  resigned  during the  current  quarter.  The Company  appointed  three
independent  directors  during the third quarter to serve on the Company's newly
formed Audit,  Compensation and Nominating Committees of the Board of Directors.
The Company  employs  independent  contractors  for special  services  including
accounting  services,   shareholder  relations,   marketing  and  business  plan
development,  and business  development,  merger and acquisition  services.  The
Company's  subsidiary,  Aggression Sports, Inc. presently has no employees other
than its acting  president,  the  Company's  current  CEO.  The CEO operates and
manages both entities.  As described elsewhere herein, the CEO and the other two
directors  did receive  compensation  in the form of stock and  Incentive  Stock
Options during the first three  quarters of fiscal year 2003.  Subsequent to the
end of the third quarter 2003, the  Compensation  Committee  approved renewal of
the CEO's  employment  agreement,  setting  his annual  salary at  $180,000  and
approving  accrual of such salary  commencing the fourth quarter of 2003 forward
until further notice.

                                       18
<PAGE>


PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

During the Period ended September 30, 2003, 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 and Reports on Form 8-K

Exhibit 31.1    Certification of CEO and 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 and CFO Pursuant to 18 U.S.C, Section 1350,
                as adopted and Section 906 of the Sarbanes-Oxley Act of 2002.

A Current Report on Form 8-K was filed on September 4, 2003 disclosing in Item 5
thereof,  Other  Information,  certain  material  events  since  the date of the
Company's  Second  Quarterly Report on Form 10-QSB for the period ended June 30,
2003,  including certain  cancellations and suspensions from exercise of certain
outstanding  stock  options,  and  disclosing  the adoption of, and a summary of
material  provisions  and grants made,  under the  Company's  2003 Omnibus Stock
Option and Incentive Plan, including certain designated grants to board members,
including  the  re-grant  of  5,000,000  stock  options  previously  granted and
reserved under the Company's former plan for 2002.

                                       19
<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 19, 2003

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

                                       20
<PAGE>