UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q


(Mark
One)




x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
quarterly period ended September 30, 2008





o 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: 000-50370




HYBRID
      DYNAMICS CORPORATION(Exact
      name of small business issuer in its charter)Nevada
            
            33-1041835(State
      or other jurisdiction of  incorporation or
      organization)
            
            (I.R.S.
      Employer Identification No.)52-66
      Iowa Avenue, Paterson, NJ 07503(Address
      of principal executive offices)(973)
      279-3261(Issuer's
      telephone number)(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 Exchange Act 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.   Yes x    No
o





Large
      accelerated filer
            o
            
            Accelerated
      filer
            oNon-accelerated
      filer
            o (Do not check if a
      smaller reporting company)
            
            Smaller
      reporting company
            x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes o   No x





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:





10,396,027
shares outstanding as of November 7, 2008.








HYBRID
DYNAMICS CORPORATION





INDEX








PagePART I
            FINANCIAL INFORMATION
            1Item 1.
            Financial Statements
            1Condensed Consolidated Balance Sheets
      (Unaudited)
            1Condensed Consolidated Statements of Operations
      (Unaudited)
            2Condensed Consolidated Statements of Cash Flows
      (Unaudited)
            3Notes to the Condensed Consolidated Financial Statements
      (Unaudited)
            5Item 2.
            Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
            13Item 3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            15Item 4T.
            Controls and Procedures
            15PART II
            OTHER INFORMATION
            15Item 1.
            Legal Proceedings
            15Item 2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            15Item 3.
            Defaults Upon Senior Securities
            16Item 4.
            Submission of matters to a Vote of Security
      Holders
            16Item 5.
            Other Information
            16Item 6.
            Exhibits
            16Signatures
            17






















Table of Contents


PART I– FINANCIAL INFORMATION




Item 1.     Financial Statements





HYBRID
DYNAMICS CORPORATION And Subsidiaries


Condensed
Consolidated Balance Sheets


(Unaudited)





September
      30
              
              
              December
      312008
              
              
              2007(Unaudited)
              
              
              (Audited)ASSETSCurrent
      Assets:Cash
              
              $
              5,804
              
              
              $
              4Inventory,
      net
              
              
              77,132
              
              
              
              -Total
      Current Assets
              
              
              82,936
              
              
              
              4Equipment
      (net of accumulated depreciation of $28,455 and $3,338)
              
              
              40,975
              
              
              
              3,640Total
      Assets
              
              $
              123,911
              
              
              $
              3,644LIABILITIES
      & STOCKHOLDERS' EQUITY (DEFICIT)Current
      LiabilitiesAccounts
      Payable
              
              $
              178,058
              
              
              $
              132,955Accrued
      Expenses
              
              
              -
              
              
              
              80Accrued
      Wages Payable Officers
              
              
              224,249
              
              
              
              82,352Notes
      and Accounts Payable Officers
              
              
              -
              
              
              
              17,159Notes
      and Accounts Payable Shareholders
              
              
              223,578
              
              
              
              161,667Current
      Portion of Note Payable
              
              
              21,480
              
              
              
              -Total
      Current Liabilities
              
              
              647,365
              
              
              
              394,213Long
      Term Portion of Notes Payable
              
              
              4,167
              
              
              
              52,8116%
      Convertible Promissory Notes Payable
              
              
              50,000Total
      Liabilities
              
              
              701,532
              
              
              
              447,024Stockholders'  DeficitPreferred
      Stock - $0.0001 par value, 340,000 shares authorizedno
      shares issued and outstanding
              
              $
              -
              
              
              $
              -Series
      A Preferred Stock - $5.00 stated value, 660,000 shares
      authorized60,000
      shares and no shares issued and outstanding, respectively
              
              
              300,000
              
              
              
              -Common
      Stock - $.00015 par value, 99,000,000 shares authorized,10,396,027
      shares and 5,187,285 shares issued and outstanding
      respectively
              
              
              1,559
              
              
              
              778Additional
      Paid-In Capital
              
              
              1,466,233
              
              
              
              1,092,338Accumulated
      (Deficit)
              
              
              (2,345,413
              )
              
              
              (1,536,496
              )Total
      Stockholders' Deficit
              
              
              (577,621
              )
              
              
              (443,380
              )Total
      Liabilities and Stockholders' Equity (Deficit)
              
              $
              123,911
              
              
              $
              3,644











The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements


1
 Table of Contents


HYBRID
DYNAMICS CORPORATION


And
Subsidiaries


Condensed
Consolidated Statements of Operations


(Unaudited)





For
      the Three Month Period
              
              
              For
      the Nine Month PeriodEnding
      September 30,
              
              
              Ending
      September 30,2008
              
              
              2007
              
              
              2008
              
              
              2007(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Revenues
              
              $
              10,392
              
              
              $
              -
              
              
              $
              14,865
              
              
              $
              220Cost
      of Goods Sold
              
              
              1,289
              
              
              
              -
              
              
              
              8,260
              
              
              
              64Gross
      Profit
              
              
              9,103
              
              
              
              -
              
              
              
              6,605
              
              
              
              156Operating
      ExpensesGeneral
      and Administrative
              
              
              128,591
              
              
              
              117,931
              
              
              
              541,962
              
              
              
              389,056Share
      based compensation
              
              
              82,167
              
              
              
              45,210
              
              
              
              259,500
              
              
              
              45,210Depreciation
      and Amortization
              
              
              3,607
              
              
              
              492
              
              
              
              6,621
              
              
              
              1,476Total
      Operating Expenses
              
              
              214,365
              
              
              
              163,633
              
              
              
              808,083
              
              
              
              435,742Other
      ExpensesGain on sale of equipment
              
              
              -
              
              
              
              -
              
              
              
              (309
              )
              
              
              -Interest Expense
              
              
              3,262
              
              
              
              4,121
              
              
              
              7,748
              
              
              
              7,994Total
      Other Expenses
              
              
              3,262
              
              
              
              4,121
              
              
              
              7,439
              
              
              
              7,994Net
      (Loss)
              
              $
              (208,524
              )
              
              $
              (167,754
              )
              
              $
              (808,917
              )
              
              $
              (443,580
              )Net
      (Loss) Per Common Share
              
              $
              (0.07
              )
              
              $
              (0.34
              )
              
              $
              (0.27
              )
              
              $
              (0.89
              )Weighted
      Average Common Shares Outstanding
              
              
              2,975,664
              
              
              
              497,764
              
              
              
              2,975,664
              
              
              
              497,764









The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements


2
 Table of Contents


HYBRID
DYNAMICS CORPORATION


And
Subsidiaries


Condensed
Consolidated Statements of Cash Flows


(Unaudited)




For
      the Nine Month PeriodEnding
      September 30,2008
              
              
              2007(Unaudited)
              
              
              (Unaudited)Cash
      Flows from Operating ActivitiesNet
      (Loss)
              
              $
              (808,917
              )
              
              $
              (443,580
              )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      & Amortization
              
              
              6,621
              
              
              
              1,476Stock
      based compensation expenses
              
              
              67,000
              
              
              
              45,210Warrants
      issued for services
              
              
              -
              
              
              
              (3,600
              )Incentive
      stock options
              
              
              110,333
              
              
              
              -Non-cash
      expense
              
              
              667
              
              
              
              -(Gain)
      on sale of asset
              
              
              (309
              )
              
              
              -Changes
      in assets and liabilities:Inventory
              
              
              (22,816
              )
              
              
              -Accounts
      receivable
              
              
              -
              
              
              
              966Investment
      in subsidiary
              
              
              -
              
              
              
              (6,701
              )Accrued
      officers compensation
              
              
              141,897
              
              
              
              233,910Long-term
      portion of note payable
              
              
              58,310
              
              
              
              -Accounts
      payable and accrued expenses
              
              
              39,201
              
              
              
              123,036Net
      cash used by Operating Activities
              
              
              (408,013
              )
              
              
              (49,283
              )Cash
      Flows from Investing Activities:Proceeds
      from sale of assets
              
              
              4,000
              
              
              
              -Proceeds
      from subsidiary acquisition
              
              
              151,178
              
              
              
              -Capitalized
      patent costs
              
              
              -
              
              
              
              (1,428
              )Purchase
      of fixed assets
              
              
              (5,000
              )
              
              
              -Net
      cash used by Investing Activities
              
              
              150,178
              
              
              
              (1,428
              )Cash
      Flows from Financing Activities:Proceeds
      from sale of securities
              
              
              231,959
              
              
              
              -Loans
      from shareholders and investors
              
              
              50,000
              
              
              
              50,437Payment
      of officer advances
              
              
              (17,159
              )
              
              
              -Payment
      on notes payable
              
              
              (1,165
              )
              
              
              (39
              )Net
      cash from Financing Activities
              
              
              263,635
              
              
              
              50,398Net
      (Decrease) Increase in Cash
              
              $
              5,800
              
              
              $
              (313
              )Cash
      at Beginning of Period
              
              
              4
              
              
              
              1,912Cash
      at End of Period
              
              $
              5,804
              
              
              $
              1,599





3
 Table of Contents




HYBRID
DYNAMICS CORPORATION
 And
Subsidiaries
 Condensed
Consolidated Statements of Cash Flows
 (Unaudited)




Nine
      Months Ended September 30,2008
            
            
            2007Supplemental
      disclosure of cash flow informationCash
      paid for:Interest
            
            $
            683
            
            
            $
            -Income
      Taxes
            
            $
            -
            
            
            $
            -Supplemental
      disclosure of non-cash investing and financing activities:Warrants
      issued for services
            
            $
            20,025
            
            
            $
            -Shares
      issued in repayment of debt and related interest
            
            
            53,811
            
            
            
            -Shares
      issued for services
            
            
            67,000
            
            
            
            -Shares
      issued for acquisition of subsidiary
            
            
            140,166
            
            
            
            -Incentive
      stock options issued for services
            
            
            110,333
            
            
            
            -








































The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements


4
 Table of Contents




Notes to the Condensed Consolidated Financial
Statements


For the
Nine Months Ended September 30, 2008


(Unaudited)





Note 1 -
Unaudited Financial Information





The
unaudited financial information included for the nine-month interim periods
ended September 30, 2008 and 2007 were taken from the books and records without
audit. However, such information reflects all adjustments (consisting only of
normal recurring adjustments), which are of the opinion of management, necessary
to reflect properly the results of operations for the interim period presented.
The results of operations for the nine-month period ended September 30, 2008 are
not necessarily indicative of the results expected for the fiscal year ending
December 31, 2008.





Note 2 -
Financial Statements and Basis of Presentation





Management
has elected to omit substantially all footnotes relating to the condensed
consolidated financial statements of the Company included in this
report.  For a complete set of footnotes, reference is made to the
Company's Current Report on Form 10-KSB for the year ending December 31, 2007 as
filed with the Securities and Exchange Commission and the audited financial
statements included therein.





The
accompanying unaudited financial statements include the accounts of the Company,
the accounts of its wholly owned subsidiary Pukka USA, Inc. (as the accounting
parent of the consolidated group), and the accounts of Pukka’s wholly owned
subsidiaries, Red Iron Group LLC, Fire Ant Corporation, and Infomac Corporation
for all periods presented and the accounts of Delaware American Motors, Inc.
(“DAM”) and its wholly owned subsidiary Delaware American Motors LLC (“DAMLLC”)
for the period from its date of acquisition, May 13, 2008 to September 30,
2008.





Note 3 –
Going Concern





The
accompanying financial statements contemplate continuation of the Company as a
going concern. The Company incurred a net loss of $808,917 and $755,376 for the
nine months ended September 30, 2008 and year ended December 31, 2007,
respectively, and as of September 30, 2008 the Company has an accumulated
deficit of $2,345,413 and a working capital deficit of
$564,429.  Further losses are anticipated in the development of the
Company’s business and there can be no assurance that the Company will be able
to achieve or maintain profitability. The continuing operations of the Company
and the recoverability of the carrying value of the assets is dependent upon the
ability of the Company to obtain necessary financing to fund its working capital
requirements, and upon future profitable operations.  The accompanying
financial statements do not include any adjustments relative to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result from the outcome of this
uncertainty.





We do not
currently have any commitments for financing.  Our present operations
depend upon the continued support of our shareholders and executive officers,
and our continuation as a going concern is dependent upon continued financial
support from these parties.





There can
be no assurance that capital will be available as necessary to meet our working
capital requirements or, if the capital is available, that it will be on
reasonable terms acceptable us.  The


5
 Table of Contents


issuances
of additional equity securities by the Company may result in dilution in the
equity interests of our current stockholders. Obtaining commercial loans,
assuming those loans would be available, will increase our liabilities and
future cash commitments. If we are unable to obtain financing in the amounts and
on terms deemed acceptable, the business and future success may be adversely
affected. Management intends to finance operating costs over the next twelve
months with loans from related parties, commercial loans and/or private
placement of capital stock.





Note 4 –
Acquisition





On May
13, 2008 the Company issued 4,500,000 shares of Common Stock as the sole
consideration paid in exchange for 100% of the issued shares of common stock of
DAM.





Note 5 -
Inventory





Inventories
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out method (“FIFO”).  Inventory is stated at cost and
reserves are recorded to state the inventory at net realizable
value.  Inventory at September 30, 2008 consists of the
following:




September
      30,
                2008Motorcycles
      prototypes
              
              $
              72,173Parts
      and supplies
              
              
              22,857Valuation
      allowance
              
              
              (17,898
              )$
              77,132




Note 6 –
Property, Plant and Equipment





Property,
plant and equipment at September 30, 2008 consists of the
following:





September
      30,
              2008Machinery,
      office furniture and equipment
            
            $
            69,430Accumulated
      depreciation
            
            
            (28,455
            )$
            40,975





Depreciation
expense was $3,065 and $9,194 for the three and nine months ended September 30,
2008, respectively.





Note 7 –
Accounts and Notes Payable





The
Company had outstanding accounts payable of $178,058 and $132,955 as of
September 30, 2008 and December 31, 2007, respectively.  Accounts
payable also include amounts owed on credit cards used for the payment of goods
and services with annual interest rates from 7.99% to 17.99%.  In
addition, the Company has $223,578 and $127,046 as of September 30, 2008 and
December 31, 2007, respectively in current accounts payable obligations owed to
certain vendors who are shareholders of the Company.





In May
2007 the Company terminated its lease agreement for its Bluffdale, Utah office
and warehouse space.  The Company agreed to pay $55,000 in settlement
of prior rent and expenses


6
 Table of Contents


related
to the termination.  The settlement is payable with interest at 12%
per annum payable $1,000 monthly with all unpaid principal and interest due on
February 5, 2009.  Accounts payable includes the current liability due
of $43,808 as of September 30, 2008.  The Company is in default on its
payment of this obligation.





The
Company has an unsecured promissory note payable to a shareholder in the
principal amount of $20,000, with interest at the rate of 20% per annum due on
June 30, 2008.  The accompanying financial statements include $1,000
and $1,750 of interest expense for each of the three and nine months ended
September 30, 2008 and a total current liability due of $28,232 as of September
30, 2008.  The Company is in default on its payment of this
note.





The
Company had outstanding commercial notes payable of $25,647 as of September 30,
2008.  Commercial notes payable consist of: (i) a Term Loan secured
with the Company’s transport vehicle, this loan is dated April 2006, is for an
initial term of 60 months payable $430.81 per month at an annual rate of
interest of 5.95%; (ii) a Line of Credit Loan from a bank with a maximum loan
amount of $15,000 and payable interest only monthly at a variable annual rate,
the annual rate at December, 2007 was 10.5%; and The Company’s president (the
former sole owner and founder of DAMLLC) is personally obligated on the Term
Loan and the Line of Credit Loan loans.





6%
Convertible Promissory Notes





The
Company has four (4) unsecured 6% Convertible Promissory Notes payable in the
aggregate amount of $50,000 (the “Convertible Notes”).  The
Convertible Notes bear interest at the rate of 6% per annum and are due on dates
ranging from August 8, 2010 through September 8, 2010.  The
Convertible Notes may be converted into shares of the Company’s common stock at
the election of the holder at any time prior to the maturity date at the rate of
fifteen cents ($0.15) per share.  Interest may, at the election of the
Company, be paid in shares of the Company’s common stock at the rate of fifty
cents ($0.50) per share.





In
accordance with Emerging Issues Task Force (“EITF”) No.00-27, “Application of EITF Issue
No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Rates’, to Certain Convertible
Instruments.”  We determined
there to be no value attributable to the beneficial conversion feature of the
Convertible Notes in that the effective conversion price of those shares was
greater than the FMV price of our common share.





Note 8 –
Accrued Officers’ Compensation





The
Company has an Employment Agreement with its president and with its chief
executive officer.  The agreements provide for the payment of monthly
compensation in the aggregate amount of $9,975 and $9,000,
respectively.  The accompanying financial statements include
$19,743.18 and $32,895.29 of accrued officer compensation and payroll tax
expense for the three and nine months ended September 30, 2008, respectively and
$224,249 of accrued and unpaid compensation and payroll taxes as of September
30, 2008.





The
Company has entered into an Employment Agreement with its chief executive
officer also provides for the a grant of incentive stock options vesting 350,000
shares on June 23, 2008, 350,000 shares on January 15, 2009 and 300,000 shares
on June 15, 2009.  Future vesting is contingent upon the executive
being employed on the vesting date.


7
 Table of Contents


The
accompanying financial statements also include $93,435 and $82,353 of officer
compensation expense for the three and nine months ended September 30, 2008,
respectively and $179,399 of accrued and unpaid compensation and payroll taxes
as of September 30, 2008 for accrued and unpaid compensation owing to its three
former executive officers who resigned Between June 24 – June30,
2008.   The Company entered into a settlement agreement with
these officers on October 10, 2008 that provided for, among other things, the
release of this liability.





Note 9 –
Commitments and Contingencies





Facilities
Lease





The
Company rents 8,300 sq. ft. of office, garage and storage space in a single
facility located in Paterson, New Jersey.  The lease is for an initial term
of 60 months from April, 2006 at $2,500 per month and includes 2 five year
renewal terms at an increase in monthly payments to $3,100 per month and $3,600
per month, respectively. The accompanying financial statements include rent
expense of $7,500 for the three months ended September 30, 2008.





The
following table summarizes the future annual rentals for all periods including
renewal periods:





AmountAnnual
      Rent for the period October to December, 2008
            
            $
            7,500Annual
      Rent for the year 2009
            
            
            30,000Annual
      Rent for the year 2010
            
            
            30,000Annual
      Rent for the year 2011
            
            
            7,500Annual
      Rent for the year 2012
            
            
            -Thereafter
            
            
            -Total
      Aggregate Annual Rent
            
            $
            75,000





Note 10 –
Product Familiarization





In March
2008 the Company performed the first test drive of a scooter
prototype.  Multiple road tests under varied operating conditions have
been completed. Functioning with only electric scooter components installed, the
prototype attained a top speed of 54 mph, with a preliminary city driving range
of approximately 32 miles given a test rider of approximately 200
lbs.  Major components of the electrical drive system are in place,
including the motor-control circuitry, lithium iron phosphate battery pack, and
3kw drive motor.  However, these components have not been optimized to work
in concert for ultimate efficiency. The purpose of building this prototype was
to provide the company with a further knowledge base of the components and the
build process.  At this point we do not believe that this prototype
will not serve as the platform for which a commercially viable scooter will be
built upon.  The accompanying financial statements for the period
ending September 30, 2008 include $4,744 of prototype product familiarization
expense.






8
 Table of Contents




Note 11 –
Capital Stock




Common
Stock




As of
September 30, 2008, the Company has 10,396,027 shares of its $0.00015 par value
common stock (“Common Stock”) issued and outstanding.




On July
10, 2007 the Company’s Common Stock began trading on the Over the Counter
Bulletin Board (“OTCBB”) electronic quotation system under the trading symbol
HBDY.




During
the nine months ended September 30, 2008 the Company issued 200,000 shares of
Common Stock as compensation for consulting services.  The
accompanying financial statements include $67,000 in expense for the nine months
ended September 30, 2008.





On March
21, 2008 the Company issued 358,742 shares of Common Stock to the holder of a
$50,000 convertible note who elected to convert the note to shares of Common
Stock at the conversion rate of $0.15 per share.  The accompanying
financial statements include $877 of interest expense for the nine months ended
September 30, 2008 in respect of this note.





On May
13, 2008 the Company issued 4,500,000 shares of Common Stock in exchange for
100% of the outstanding shares of common stock of DAM.  The Company
recorded the transaction as a purchase for a value of $140,166 being the net
book value of DAM and its subsidiary on the date of acquisition.





During
the three months ended September 30, 2008 the Company issued $50,000 of 6%
convertible promissory notes.  The notes are convertible into shares
of the Company’s common stock at the rate of fifteen cents ($0.15) per share at
the election of the holder.  In the event all notes are converted the
total aggregate number of shares of common stock issuable is 333,333
shares.  The notes bear interest at the rate of 6% per annum and may,
at the election of the Company, be paid in shares of the Company’s common stock
at the rate of fifty cents ($0.50) per share.  In the event the
Company elects to pay interest in shares the total aggregate number of shares of
common stock issuable as of September 30, 2008 is 411 shares





Private
Placement Unit Offering





On
January 31, 2008 the Company closed on the sale of thirty (30) investment units
(the “Units”).  Each unit was sold for $10,000 and included 2,000 shares of
Series A Convertible Preferred Stock, 5,000 shares of Common Stock and 20,000
Class A Warrants.  This issuance was made in reliance upon the exemption
from registration provided by Section 4(2) of the Securities Act (or
Regulation D promulgated thereunder) for transactions by an issuer not
involving a public offering. The securities issued are deemed restricted
securities for the purposes of the Securities Act. The Company received, net of
selling agent commission and costs and expenses of the offering, a total of
$231,959.  The Company issued a total of 60,000 shares of its Series A
Convertible Preferred Stock, 150,000 shares of its common stock and 600,000 of
its Class A Warrants.   The Subscription Agreement includes
registration rights and a value anti-dilution provision; see “Registration
Rights” and “Value Anti-Dilution”.  No further securities were issued
pursuant to this Offering and the Offering has been terminated.





In
accordance with Emerging Issues Task Force (“EITF”) No.00-27, “Application of EITF Issue
No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Rates’, to Certain Convertible
Instruments”,a portion
of the proceeds were allocated to the shares of Common Stock and to the Class A
Warrants based on their relative fair value, which totaled $133,680,
$26,880 and $106,800 allocated to the Common Stock and Warrants
respectively.  The fair value of the shares of Common Stock was
determined to be the


9
 Table of Contents


last
trade price on the date of issuance and the fair value of the Class A Warrants
was determined using the Black-Scholes option pricing model. Further, we
determined there to be no value attributable to the beneficial conversion
feature of the shares of the Series A Preferred Stock in that the effective
conversion price of those shares was greater than the closing price of our
common shares on the date of issuance.





Total
costs and expenses of the offering is $88,066, including the $20,025 fair value
of a warrant granted to the selling agent for the offering for the purchase of
112,500 shares of common stock at a price of $1.20 per share and expiring on
January 31, 2013.  The selling agent warrants have been valued using the
Black-Scholes model.





The
assumptions used in the Black-Scholes model are as follows: (1) dividend yield
of 0%; (2) expected volatility of 253%, (3) risk-free interest rate of 4.0%, (4)
expected life of 5 years and (5) estimated fair value of our common stock of
$0.18 per share.





Class A
Warrants





On
November 20, 2007 the Company entered into the Class A Warrant Agreement which
provides for the issuance of up to 6,600,000 Class A Warrants for the purchase
of up to 6,600,000 shares of Common Stock at an exercise price of $1.00 per
share.  The Class A Warrants (a) may be exercised at any time before
expiration or redemption, (b) may be called for redemption at a redemption price
of $0.01 per warrant and (c) expire on December 31, 2012. The Company may call
the Class A Warrants at any time after the Common Stock has traded above $1.50
for 10 consecutive trading days.  As of September 30, 2008 there are
1,712,500 Class A Warrants issued and outstanding.





2006
Qualified Incentive Stock Option Plan





The 2006
Qualified Incentive Stock Option Plan (the “Qualified Plan”) provides for the
issuance of options for the purchase of up to 1,000,000 shares of the Company’s
restricted $0.00015 shares of Common Stock at a price to be no less than the
fair value of the Company’s shares of common stock on the date of
grant.  Awards under the Plan may only be made to employees of the
Company and the Qualified Plan provides for termination of the options granted
upon the termination of employment.  The Qualified Plan stock options
and the common stock which may be issued pursuant to the Plan are not registered
securities, and the Company has no obligation to register such
securities.  As of September 30, 2008 the Company has granted 350,000
options and reserved for issuance an additional 650,000 options to Steven Radt
the Company’s Chief Executive Officer.  The accompanying financial
statements include $110,333 of expense for the nine months ended September 30,
2008 for the fair value of the options on June 23, 2008, the date
vested.  The options have been valued using the Black-Scholes model
based on assumptions as follows: (1) dividend yield of 0%; (2) expected
volatility of 429%, (3) risk-free interest rate of 4.19%, (4) expected life of
10 years and (5) estimated fair value of our common stock of $0.30 per
share.





2007
Consultant’s Stock Plan





On August
15, 2007 the Board of Directors approved the adoption of the Company’s 2007
Consultant’s Stock Plan which provides for the issuance of up to 1,000,000
shares of the Company’s $0.00015 shares of Common Stock at a price to be no less
than the fair value of the Company’s shares of common stock on the date of
grant.  On August 21, 2007 the Company filed SEC Form S-8 in
registration of shares to be issued pursuant to this plan.  As of
September 30, 2008 there are 670,000 shares unissued and there are no options
granted or outstanding.


10
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Summary
of Warrants and Options Outstanding





A summary
of the status of warrants and options granted at September 30, 2008 and December
31, 2007 and changes during the periods then ended is presented
below:





For
      the Nine Months
            
            
            For
      the Twelve MonthsEnded
      September 30, 2008
            
            
            Ended
      December 31, 2007Shares
            
            
            Weighted
      Average Exercise Price
            
            
            Shares
            
            
            Weighted
      Average Exercise PriceOutstanding
      at beginning of period
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -Granted
            
            
            1,712,500
            
            
            
            0.60
            
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Outstanding
      at end of period
            
            
            1,712,500
            
            
            $
            0.60
            
            
            
            -
            
            
            $
            -Weighted
      average fair value of warrants granted during the period
            
            
            1,712,500
            
            
            $
            0.25
            
            
            
            -
            
            
            $
            -





A summary
of the status of the warrants outstanding at September 30, 2008 is presented
below:





Warrants
      Outstanding
            
            Warrants
      ExercisableExercise
      Prices
            
            Number
      Outstanding
            
            Weighted-Average
      Remaining Contractual Life
            
            Weighted
      Average Exercise Price
            
            Number
      Exercisable
            
            Weighted-Average
      Exercise Price0.30
            
            1,000,000
            
            10.00
            
            0.30
            
            350,000
            
            0.301.00
            
            600,000
            
            4.60
            
            1.00
            
            600,000
            
            1.001.20
            
            112,500
            
            4.60
            
            1.20
            
            112,500
            
            1.20.60
            
            1,712,500
            
            7.75
            
            .60
            
            1,062,500
            
            .79





Preferred
Stock





The
Company has 340,000 shares of $0.0001 par value shares of undesignated preferred
stock authorized with no shares issued and outstanding.  This stock,
if issued, will carry liquidation preferences and other rights, as determined by
the Board of Directors.





Series A
8% Convertible Preferred Stock





The
Company has 660,000 shares of its preferred stock designated as “Series A 8%
Convertible Preferred Stock.” Each share of Series A Preferred Stock (a) has a
stated value of $5.00 per share (“Stated Value”), (b) is non-voting, (c)
includes a dividend of 8% per annum paid annually, (d) may


11
 Table of Contents


be
redeemed at any time for an amount equal to the Stated Value plus all
accumulated and unpaid dividends, (e) may be converted into 10 shares of
$0.00015 par value common stock, and has a (f) liquidation preference of $5.00
per share plus all declared accumulated and unpaid dividends.  As of
September 30, 2008 there are 60,000 shares of Series A 8% Convertible Preferred
Stock issued and outstanding.  No dividends have been declared or paid
as of September 30, 2008.





Value
Anti-Dilution





The
Company has granted value anti-dilution rights (the “Provision”) to the
purchasers of the securities sold pursuant to the January 31, 2008 private
placement.  The Provision provides for the issuance of additional
shares of common stock or rights to additional shares of common stock in the
event the Company issues shares for less than the average price of the shares of
Common Stock included in and underlying the Units (a “Trigger
Event”).  The aggregate number of shares of Common Stock issuable in
respect of a Unit is 45,000 shares for an aggregate average price of $0.667 per
share (the “Aggregate Average Price”).  Any issuance by the Company
for less than the Aggregate Average Price during the 1 year period following the
closing of the Unit offering, will trigger the Provision with the exception of
shares of Common Stock issued pursuant to obligations outstanding as of the date
of the offering, existing stock option plans and issuances in exchange for
services, goods or in payment of liabilities or claims of non-affiliates up to
an aggregate of 400,000 shares of Common Stock.  In addition, the
Provision is capped such that no more than a total of 9,300,000 shares can be
issued under the Provision (assuming $600,000 of total Units are sold), which is
an effective Aggregate Average Price Per Common Share of not less than $0.05 per
share.





Note 12 –
Material Subsequent Events and Contingencies





On
October 10, 2008 the Company entered into a settlement agreement with the
Company’s former executive officers.  The agreement provided for,
among other things, the release of the Company from its obligation for the
payment of accrued and unpaid compensation and advances from these former
executives in the aggregate amount of $167,333.  The Company has
agreed to indemnify and hold the former executives harmless from certain Company
liabilities in the aggregate amount of $191,226.  In addition, the
former executives transferred all of their 2,000,000 shares of the Company’s
common stock owned by them to the Company’s current executive
officers.














12
 Table of Contents


Item 2. Management's Discussion and Analysis or Plan
of Operation





The
following discussion of our plan of operations should be read in conjunction
with the financial statements and the related notes thereto included elsewhere
in this quarterly report.





Forward
Looking Statements





Because
the Company intends to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company cautions readers
regarding forward looking statements found in the following discussion and
elsewhere in this report and in any other statement made by, or on the behalf of
the Company, whether or not in future filings with the Securities and Exchange
Commission. Forward-looking statements are statements not based on historical
information and which relate to future operations, strategies, financial results
or other developments. Forward looking statements are necessarily based upon
estimates and assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
beyond the Company's control and many of which, with respect to future business
decisions, are subject to change. These uncertainties and contingencies can
affect actual results and could cause actual results to differ materially from
those expressed in any forward-looking statements made by or on behalf of the
Company. The Company disclaims any obligation to update forward-looking
statements.





Results
of Operations





Third
Quarter 2008 Compared To Third Quarter 2007





Revenues
and Cost of Sales





The
company had total revenue of $10,392 for the three months ended September 30,
2008 compared to $0.00for the same period in 2007 which is an increase of
$10,392.  Cost of goods for 2008 was $1,289.





Selling,
General and Administrative Expenses





For the
three months ending September 30, 2008 operating expenses increased to $214,365
compared to $163,633 in 2007. This increase is primarily a reflection of the
increased expenses associated with an increase in operating expenses as a result
of our acquisition of DAM and the value of stock based compensation
expenses.





Our
expenses for the three months ended September 30, 2008 include no non-cash stock
based compensation expenses compared to $45,210 non-cash stock based
compensation expenses for the same period in 2007.





Product
Familiarization Expenses





For the
three months ending September 30, 2008 the Company incurred nodirect product
familiarization expenses compared to no product familiarization expenses for the
same period in 2007.







13
 Table of Contents




Net
Income




The
company had a net loss of $208,524 for the three months ended September 30, 2008
compared to a net loss of $167,754 for the same period in 2007. The 2008 loss
was due primarily to expenditures for salaries, consulting and professional fee
expenses and for product development related to our investment in new products
and technology.





Liquidity
and Capital Resources





Since our
inception, we have funded our operations primarily through private sales of
equity securities, the use of short and long-term debt and credit from our
vendors, shareholders and executive officers.  As of September 30,
2008, we had $5,804 of cash on hand, $77,132 in inventory, and $647,365 in
current liabilities of which $224,249 is payable to officers and $223,578 is
payable to shareholders.





Net cash
used by operating activities for the nine months ended September 30, 2008 was
$(408,013) which was primarily the result of the net loss of $808,917.
 This compared to net cash used by operating activities of $49,283 with a
net loss of $435,742 for the nine months ended September 30,
2007.





Net cash
from financing activities for the nine months ended September 30, 2008 of
$263,635 was due primarily to the private placement sale of investment units and
promissory notes issued to certain of our shareholders.





We have
no commitments for financing and we do not have sufficient funds to continue to
operate at current levels.  To continue operations and remain current
in our public reporting obligations we require additional financing and are
exploring various methods for obtaining additional capital including short-term
borrowing and the issuance of our equity or debt securities.





The price
of our common stock has declined from $0.90 on May 12, 2008, the date we
acquired DAM to $0.04 on September 30, 2008.  This decline has had an
adverse impact on our ability to raise additional cash from the sale of our
equity securities.  In addition, the holders of our Series A
Convertible Preferred Stock hold a anti-dilution right which requires us to
issue to them additional securities in the event we issue equity securities for
less than $0.667 per common share.  This right has the effect of
further depressing the price of equity securities and restricting our ability to
raise additional financing.





There can
be no assurance that capital will be available as necessary to meet our working
capital requirements or, if the capital is available, that it will be on
reasonable terms acceptable us.  The issuances of additional equity
securities by the Company may result in dilution in the equity interests of our
current stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments. If we are
unable to obtain financing in the amounts and on terms deemed acceptable, the
business and future success may be adversely affected. Management intends to
finance operating costs over the next twelve months with loans from related
parties, commercial loans and/or private placement of capital stock.





RECENT
DEVELOPMENTS





There
have been no significant recent developments.







14
 Table of Contents




Item 3.     Quantitative and Qualitative
Disclosures About Market Risk




The
Company has no market risk sensitive instruments.





Item 4T.  Controls and Procedures





The
Company maintains a system of disclosure controls and procedures that is
designed to provide reasonable assurance that information, which is required to
be disclosed by the Company in the reports that it files or submits under the
Securities and Exchange Act of 1934, as amended, is accumulated and communicated
to management in a timely manner. The Company's principal executive officer and
principal financial officer have evaluated this system of disclosure controls
and procedures as of the end of the period covered by this quarterly report, and
believe that the system is operating effectively to ensure appropriate
disclosure.





Other
than as described hereinabove, there has been no change in the Company’s
internal control over financial reporting that occurred during the last fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.




PART II– OTHER INFORMATION




Item 1.    Legal Proceedings





None.





Item 2.     Unregistered Sales of Equity
Securities and Use of Proceeds





On May
13, 2008 the Company issued 4,500,000 shares of Common Stock as the sole
consideration paid in exchange for 100% of the issued shares of common stock of
Delaware American Motors, Inc. and its wholly-owned subsidiary Delaware American
Motors LLC.  This issuance was made in reliance upon the exemption
from registration provided by Section 4(2) of the Securities Act (or
Regulation D promulgated thereunder) for transactions by an issuer not
involving a public offering. The securities issued are deemed restricted
securities for the purposes of the Securities Act.





On June
23, 2008 the granted 1,000,000 incentive stock options pursuant to the terms of
its 2006 Incentive Stock Option Plan.  The options vest 350,000 on the
date of grant with an exercise price of $0.30 per share, 350,000 vesting on
January 15, 2009 and 300,000 vesting June 15, 2009.  Future vesting is
contingent upon the executive being employed on the vesting
date.  This issuance was made in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act (or
Regulation D promulgated thereunder) for transactions by an issuer not
involving a public offering. The securities issued are deemed restricted
securities for the purposes of the Securities Act.





During
the three months ended September 30, 2008 the Company issued four (4)
convertible promissory notes to four individual shareholders in the aggregate
principal amount of $50,000.  These issuances were made in reliance
upon the exemption from registration provided by Section 4(2) of the
Securities Act (or Regulation D promulgated thereunder) for transactions by
an issuer not involving a public offering. The securities issued are deemed
restricted securities for the purposes of the Securities Act.





15
 Table of Contents




Limitations
on the Payments of Dividends




The holders of Series A
Preferred Stock shall be entitled to receive dividends at a rate of eight
percent (8%) per annum of the Original Issue Price which shall be prior and in
preference to any declaration or payment of any dividend (payable other than in
shares of Common Stock) or other distribution on the Common Stock of the
Corporation. The dividends on the Series A Preferred Stock shall accrue from the
date of issuance of each share and shall be payable annually on December 31 of
eachyear (each a "Dividend Date") commencing on December 31, 2008,
except that if any such date is a Saturday, Sunday or legal holiday (a
"Non-Business Day") then such dividend shall be payable on the next day that is
not a Non-Business Day on which banks in the State of Nevada are permitted to be
closed (a "Business Day") to holders of record as they appear on the stock books
of the Corporation on the applicable record date, which shall be not more than
60 nor less than 10 days preceding the payment date for such dividends, as fixed
by the Board of Directors (the "Record Date"). The dividends on the Series A
Preferred Stock shall be payable only when, as and if declared by the Board of
Directors out of funds legally available therefore, or in shares of the
Company’s Common Stock at a value equal to the greater of (i) the average
closing bid price for the 20 trading days immediately preceding the date the
dividend is declared or (ii) twenty-five cents ($0.25).  Any dividends
on the Series A Preferred Stock which have accrued but have not been paid, shall
be accumulated and shall be payable only when, as and if declared by the Board
of Directors as provided in the preceding sentence.





Item 3.     Defaults Upon Senior
Securities





None.





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





None.





Item 5.    Other Information





None.





Item 6.     Exhibits




Exhibit
      No.
            Exhibit10.1
            Form
      of 6% Convertible Promissory Note10.2
            Finder’s
      Fee Agreement with Birchwood Capital Advisors, Inc. dated September 8,
      200810.3
            Settlement
      Agreement and Release between the Company and Paul Ressler, Leonard
      DuCharme and Darren Jensen dated October 10, 200831.1
      *
            Rule
      13a-14(a)/15d-14(a) Certification of Principal Executive
      Officer31.2
      *
            Rule
      13a-14(a)/15d-14(a) Certifications of Principal Financial & Accounting
      Officer32.1
      *
            Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 of Principal Executive
    Officer32.2
      *
            Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 of Principal Accounting
    Officer*
      Filed herewith.





16
 Table of Contents


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.








Hybrid
      Dynamics CorporationDate
            November
      14, 2008
            /s/
      STEVEN RADTSteven
      Radt, CEOPrincipal
      Executive OfficerDate
            November
      14, 2008
            /s/
      MARK S. KLEINMark
      S. Klein, TreasurerPrincipal
      Accounting Officer

























17