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 June 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)892
      North 340 East, American Fork, UT 84003(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
              (Do
      not check if a smaller reporting company)
            o
            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 September 12, 2008.


1





HYBRID
DYNAMICS CORPORATION





INDEX




PagePART I
            FINANCIAL INFORMATION
            3Item 1.
            Financial Statements
            3Condensed Consolidated Balance Sheets
      (Unaudited)
            3Condensed Consolidated Statements of Operations
      (Unaudited)
            4Condensed Consolidated Statements of Cash Flows
      (Unaudited)
            5Notes to the Condensed Consolidated Financial Statements
      (Unaudited)
            7Item 2.
            Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
            15Item 3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            16Item 4T.
            Controls and Procedures
            17PART II
            OTHER INFORMATION
            17Item 1.
            Legal Proceedings
            17Item 2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            17Item 3.
            Defaults Upon Senior Securities
            18Item 4.
            Submission of Matters to a Vote of Security
      Holders
            18Item 5.
            Other Information
            18Item 6.
            Exhibits
            18Signatures
            19












2
 Table of Contents


PART I– FINANCIAL INFORMATION




Item 1.     Financial Statements





HYBRID
DYNAMICS CORPORATION And Subsidiaries


Condensed
Consolidated Balance Sheets


(Unaudited)





June
      30
              
              
              December
      312008
              
              
              2007(Unaudited)
              
              
              (Audited)ASSETSCurrent
      Assets:Cash
              
              $
              68,560
              
              
              $
              4Inventory, net
              
              
              67,832
              
              
              
              -Total Current Assets
              
              
              136,392
              
              
              
              4Equipment (net of accumulated depreciation of $25,391 and
      $3,338)
              
              
              44,024
              
              
              
              3,640Total Assets
              
              $
              180,416
              
              
              $
              3,644LIABILITIES
      & STOCKHOLDERS' EQUITY (DEFICIT)Current
      LiabilitiesAccounts Payable
              
              $
              165,623
              
              
              $
              132,955Accrued Expenses
              
              
              -
              
              
              
              80Accrued Wages Payable Officers
              
              
              201,018
              
              
              
              82,352Notes and Accounts Payable Officers
              
              
              11,561
              
              
              
              17,159Notes and Accounts Payable Shareholders
              
              
              219,977
              
              
              
              161,667Current Portion of Note Payable
              
              
              16,130
              
              
              
              -Total Current Liabilities
              
              
              614,309
              
              
              
              394,213Long-Term
      Portion of Note Payable
              
              
              6,610
              
              
              
              52,811Total Liabilities
              
              
              620,919
              
              
              
              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
              
              
              1,394,827
              
              
              
              1,092,338Accumulated (Deficit)
              
              
              (2,136,889
              )
              
              
              (1,536,496
              )Total Stockholders' Deficit
              
              
              (440,503
              )
              
              
              (443,380
              )Total
      Liabilities and Stockholders' Equity (Deficit)
              
              $
              180,416
              
              
              $
              3,644


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


3
 Table of Contents


HYBRID
DYNAMICS CORPORATION


And
Subsidiaries


Condensed
Consolidated Statements of Operations


(Unaudited)





For
      the Three Month Period
              
              
              For
      the Six Month PeriodEnding
      June 30,
              
              
              Ending
      June 30,2008
              
              
              2007
              
              
              2008
              
              
              2007(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Revenues
              
              $
              4,473
              
              
              $
              -
              
              
              $
              4,473
              
              
              $
              224Cost
      of Goods Sold
              
              
              6,971
              
              
              
              -
              
              
              
              6,971
              
              
              
              64Gross
      Profit (Loss)
              
              
              (2,498
              )
              
              
              -
              
              
              
              (2,498
              )
              
              
              160Operating
      ExpensesGeneral
      and Administrative
              
              
              286,496
              
              
              
              172,890
              
              
              
              413,371
              
              
              
              271,929Share
      based compensation
              
              
              110,333
              
              
              
              -
              
              
              
              177,333
              
              
              
              -Depreciation
      and Amortization
              
              
              3,014
              
              
              
              492
              
              
              
              3,014
              
              
              
              984Total
      Operating Expenses
              
              
              399,843
              
              
              
              173,382
              
              
              
              593,718
              
              
              
              272,913Other
      ExpensesGain on sale of equipment
              
              
              309
              
              
              
              -
              
              
              
              309
              
              
              
              -Interest Expense
              
              
              (1,654
              )
              
              
              2,624
              
              
              
              (4,486
              )
              
              
              3,391Total
      Other Expenses
              
              
              (1,345
              )
              
              
              2,624
              
              
              
              (4,177
              )
              
              
              3,391Net
      (Loss)
              
              $
              (403,686
              )
              
              $
              (176,006
              )
              
              $
              (600,393
              )
              
              $
              (276,144
              )Long-Term
      Portion of Note PayableNet
      (Loss) Per Common Share
              
              $
              (0.05
              )
              
              $
              (0.71
              )
              
              $
              (0.09
              )
              
              $
              (1.10
              )Weighted
      Average Common Shares Outstanding
              
              
              8,269,653
              
              
              
              247,896
              
              
              
              6,808,977
              
              
              
              251,040


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


4
 Table of Contents


HYBRID
DYNAMICS CORPORATION


And
Subsidiaries


Condensed
Consolidated Statements of Cash Flows


(Unaudited)




For
      the Six Month PeriodEnding
      June 30,2008
              
              
              2007(Unaudited)
              
              
              (Unaudited)Cash
      Flows from Operating ActivitiesNet
      (Loss)
              
              $
              (600,393
              )
              
              $
              (276,144
              )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Depreciation & Amortization
              
              
              3,014
              
              
              
              984Stock based compensation expenses
              
              
              67,000
              
              
              
              -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
              
              
              -
              
              
              
              220Accrued officer's compensation
              
              
              118,666
              
              
              
              144,671Long-Term Portion of Note Payable
              
              
              58,310Accounts payable and accrued expenses
              
              
              (41,290
              )
              
              
              89,666Net
      cash used by Operating Activities
              
              
              (306,818
              )
              
              
              (40,603
              )Cash
      Flows from Investing Activities:Proceeds from sale of assets
              
              
              4,000
              
              
              
              -Proceeds
      from subsidiary acquisition
              
              
              151,178
              
              
              
              -Capitalized
      patent costs
              
              
              -
              
              
              
              (1,380
              )Purchase
      of fixed assets
              
              
              (5,000
              )
              
              
              -Net
      cash used by Investing Activities
              
              
              1,394,827
              
              
              
              (1,380
              )(2,136,889
              )Cash
      Flows from Financing Activities:Proceeds from sale of securities
              
              
              231,959
              
              
              
              -Payment of officer advances
              
              
              (5,598
              )Loans from shareholders and investors
              
              
              -
              
              
              
              50,000Payment on notes payable
              
              
              (1,165
              )
              
              
              (1,205
              )Net
      cash from Financing Activities
              
              
              225,196
              
              
              
              48,795Net
      (Decrease) Increase in Cash
              
              $
              1,313,205
              
              
              $
              6,812Cash
      at Beginning of Period
              
              
              4
              
              
              
              1,912Cash
      at End of Period
              
              $
              1,313,209
              
              
              $
              8,724
   5
 Table of Contents
  Six
      Months Ended June 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
              
              
              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


6
 Table of Contents




Notes to the Condensed Consolidated Financial
Statements


For the
Six Months Ended June 30, 2008


(Unaudited)





Note 1 -
Unaudited Financial Information





The
unaudited financial information included for the six-month interim periods ended
June 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 six-month period ended June 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 June 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 $600,393 and $755,376 for the
six months ended June 30, 2008 and year ended December 31, 2007, respectively,
and as of June 30, 2008 the Company has an accumulated deficit of $2,136,889 and
a working capital deficit of $477,917.  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


7
 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 June 30, 2008 consists of the
following:





June
      30, 2008Motorcycles
      prototypes
            
            $
            68,080Parts
      and supplies
            
            
            17,650Valuation
      allowance
            
            $
            (17,898
            )$
            67,832





Note 6 –
Property, Plant and Equipment





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





June
      30, 2008Machinery,
      office furniture and equipment
            
            $
            69,415Accumulated
      depreciation
            
            
            (25,391
            )$
            44,024





Depreciation
expense was $3,014 for the three and six months ended June 30,
2008.





Note 7 –
Accounts and Notes Payable





The
Company had outstanding accounts payable of $165,623 and $132,955 as of June 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%.





The
Company has $192,745 and $127,046 as of June 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 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.  The
accompanying


8
 Table of Contents


financial
statements include a current liability due of $43,808 as of June 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 $750 of
interest expense for each of the three and six months ended June 30, 2008 and a
total current liability due of $27,232 as of June 30, 2008.  The
Company is in default on its payment of this note.





The
Company had outstanding notes payable of $22,740 as of June 30,
2008.  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% and (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%.  The Company’s president
(the former sole owner and founder of DAMLLC) is personally obligated on these
loans.





Note 8 –
Accrued Officer’s Compensation





The
Company has employment agreements with its three former executive
officers.  The agreements provide for the payment of monthly
compensation in the aggregate amount of $27,451.  The accompanying
financial statements include $93,435 and $82,353 of officer compensation expense
for the three and six months ended June 30, 2008, respectively and $179,399 of
accrued and unpaid compensation and payroll taxes as of June 30,
2008.





The
Company has an Employment Agreement with its president.  The agreement
provides for the payment of monthly compensation in the aggregate amount of
$9,975.  The accompanying financial statements include $21,679 of
accrued officer compensation and payroll tax expense for the three months ended
June 30, 2008 and $21,679 of accrued and unpaid compensation and payroll taxes
as of June 30, 2008.





The
Company has entered into an Employment Agreement with its chief executive
officer effective July 15, 2008.  The agreement provides for the
payment of monthly compensation in the aggregate amount of
$9,000.  The agreement included a grant of incentive stock options
vesting 350,000 on June 23, 2008, 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.





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 June 30, 2008.





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


9
 Table of Contents





AmountAnnual
      Rent for the period July to December, 2008
            
            $
            15,000Annual
      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
            
            $
            82,500





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 serve as the platform for which a commercially viable scooter will be built
upon.  The accompanying financial statements for the period ending
June 30, 2008 include $4,744 of prototype product familiarization
expense.





Note 11 –
Capital Stock





Common
Stock





As of
June 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 first fiscal quarter 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 six months ended June 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 three months ended
June 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.


10
 Table of Contents


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”.  The private placement offering has
been extended until May 31, 2008, and the Company is continuing to offer Units
for sale thereunder up to a maximum of $600,000 (including the $300,000 closed
as of January 31, 2008).  The Offering has been extended by the
Company to August 31, 2008.





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 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 June 30, 2008 there are
600,000 Class A Warrants issued and outstanding.





11
 Table of Contents


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 June 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 three months ended June 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 June
30, 2008 there are 670,000 shares unissued and there are no options granted or
outstanding.





Summary
of Warrants and Options Outstanding





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





For
      the Six Months
            
            
            For
      the Twelve MonthsEnded
      June 30, 2008
            
            
            Ended
      December 31, 2007Shares
            
            
            Weighted
      Average Exercise Price
            
            
            Shares
            
            
            Weighted
      Average Exercise PriceOutstanding
      at beginning of period
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -Granted
            
            
            1,062,500
            
            
            
            0.87
            
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Outstanding
      at end of period
            
            
            1,062,500
            
            
            $
            0.87
            
            
            
            -
            
            
            $
            -Weighted
      average fair value of warrants granted during the period
            
            
            1,062,500
            
            
            $
            0.50
            
            
            
            -
            
            
            $
            -





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


12
 Table of Contents





Warrants
      Outstanding
            
            
            Warrants
      ExercisableExercise
      Prices
            
            
            Number
      Outstanding
            
            
            Weighted-Average
      Remaining Contractual Life
            
            
            Weighted
      Average Exercise Price
            
            
            Number
      Exercisable
            
            
            Weighted-Average
      Exercise Price0.30
            
            
            
            350,000
            
            
            
            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
            
            
            
            1.200.79
            
            
            
            1,062,500
            
            
            
            6.38
            
            
            
            0.79
            
            
            
            1,062,500
            
            
            
            0.79





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 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 June 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 June 30,
2008.





Registration
Rights





The
Company has granted registration rights to the holders of 158,042 shares of
common stock under the terms of a Registration Rights Agreement dated June 7,
2006.  The Company is also obligated to register within 120 days after
the final closing of its January 31, 2008 private placement offering, 60,000
shares of Series A Preferred Stock, 150,000 shares of Common Stock, 600,000
shares of Common Stock issuable upon conversion of the Preferred Stock, 600,000
shares of Common Stock upon exercise of the Class A Warrants and 112,500 shares
of Common Stock issuable upon exercise of the selling agent
warrants.





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


13
 Table of Contents


$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





None.


























14
 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





Second
Quarter 2008 Compared To Second Quarter 2007





Revenues
and Cost of Sales





The
Company had total revenue of $4,473 for the three months ended June 30, 2008
compared to $0.00 for the same period in 2007 which is an increase of
$4,473.   Cost of goods for 2008 was $6,971.





Selling,
General and Administrative Expenses





For the
three months ended June 30, 2008 selling, general and administrative costs were
$286,496 compared to $172,890 in 2007. This increase is primarily a reflection
of the change in our strategy from a reliance on wholesale business to our
investment to expenses associated with the development of new
products.





Our
expenses for the three months ended June 30, 2008 include $110,333 which was
non-cash stock based compensation expense and $3,014 of Depreciation and
Amortization compared to no non-cash stock based compensation expenses and $492
of Depreciation and Amortization for the same period in 2007.





Product
Familiarization Expenses





For the
three months ending June 30, 2008 the Company incurred $4,744 in direct product
familiarization expenses compared to no product familiarization expenses for the
same period in 2007.





15
 Table of Contents




Net
Income




The
company had a loss of $403,686 for the three months ended June 30, 2008 compared
to net loss of $176,006 for the same period in 2007. The 2008 loss was due
primarily to expenditures for salaries, consulting and professional fee
expenses, share based compensation and for product development related to our
investment in new products.





Liquidity
and Capital Resources





As of
June 30, 2008, we had $68,560 of cash on hand, $67,832 in inventory and $620,919
in liabilities of which $201,018 is payable to officers and $219,977 is payable
to shareholders.  To continue operations 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. 
There is no assurance that additional capital will be available to us, or if
available, will be made available on suitable terms.





Net cash
used by operating activities for the six months ended June 30, 2008 was $306,818
which was primarily the result of the net loss of $600,393.  This compared
to net cash used by operating activities of $40,603 for the six months ended
June 30, 2007.   Net cash from financing activities for the six months
ended June 30, 2008 of $225,196 was due to the private placement sale of
investment units and advances and credit extended to us by certain of our
shareholders.





As of the
date of this filing we have received short-term investment from current
shareholders.  This investment will serve as general working
capital.  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 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 no significant recent developments.





Item 3.    Quantitative and Qualitative
Disclosures About Market Risk





The
Company has no market risk sensitive instruments.


16
 Table of Contents


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.





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 each year (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


17
 Table of Contents


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.
            
            Exhibit31.1 *
            
            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.





18
 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
            September
      16, 2008
            
            /s/
      STEVEN RADTSteven
      Radt, CEOPrincipal
      Executive OfficerDate
            September
      16, 2008
            
            /s/
      MARK S. KLEINMark
      S. Klein, TreasurerPrincipal
      Accounting Officer





















19