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

                                ----------------

                                   FORM 10-QSB

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

                  For the Quarterly Period Ended March 31, 2006

     [_]  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 0-29351

                               HYBRID FUELS, INC.
                           --------------------------
             (Exact name of registrant as specified in its charter)

                NEVADA                                    88 0384399
     (State or other jurisdiction of                  (I.R.S. Employer
      incorporation or organization)                 Identification No.)



         237 Main Street, Box 880, Niverville, Manitoba          R0A1E0
             (Address of principal executive offices)         (Postal Code)

       Registrant's telephone number, including area code: (888) 550-2333


Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or shorter period that registrant was required to file
such reports), and (2) has been subject to filing requirements for the past 90
days. Yes [X] No [ ]

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

The number of issued and outstanding shares of the registrant's common stock as
of May 19, 2006 was 26,332,933

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]


<PAGE>

<TABLE>

                                TABLE OF CONTENTS


<S>                <C>                                                                                   <C>

PART-I             FINANCIAL INFORMATION                                                                   PAGE

Item 1             Financial Statements......................................................................F-1

Item 2             Plan of Operation.........................................................................3

Item 3             Controls and Procedures...................................................................8


PART-II  OTHER INFORMATION                                                                                 PAGE

Item 1            Legal Proceedings..........................................................................8

Item 2            Unregistered Sales of Equity Securities and Use of Proceeds ...............................8

Item 3            Defaults Upon Senior Securities............................................................9

Item 4            Submission of Matters to a Vote of Security Holders........................................9

Item 5            Other Information..........................................................................9

Item 6            Exhibits and Reports on Form 8-K...........................................................9

                  Signature..................................................................................9

</TABLE>



                                       2
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)

March 31, 2006

<TABLE>
                                                                                                               Index

<S>                                                                                                               <C>
Consolidated Balance Sheets.....................................................................................F-1

Consolidated Statements of Operations...........................................................................F-2

Consolidated Statements of Cash Flows...........................................................................F-3

Notes to the Consolidated Financial Statements..................................................................F-4
</TABLE>




<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
                                                                                      March 31,        June 30,
                                                                                         2006            2005
                                                                                          $               $
                                                                                     (unaudited)
<S>                                                                                        <C>                <C>
ASSETS

Current Assets

  Cash                                                                                     14,459             946
--------------------------------------------------------------------------------------------------------------------

Total Assets                                                                               14,459             946
====================================================================================================================


LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

  Accounts payable                                                                         74,606          52,084
  Accrued liabilities                                                                      18,122          62,136
  Note payable and other advances (Note 3)                                                 45,410          93,153
  Due to related parties (Note 4)                                                         202,537         204,099
  Due to a former director (Note 5)                                                       326,701         326,701
--------------------------------------------------------------------------------------------------------------------

Total Current Liabilities                                                                 667,376         738,173

Redeemable and Restricted Common Shares (Note 7(b))                                       222,767         223,000
--------------------------------------------------------------------------------------------------------------------

Total Liabilities                                                                         890,143         961,173
--------------------------------------------------------------------------------------------------------------------

Commitments and Contingencies (Note 7)

Stockholders' Deficit

Common Stock (Note 6): $0.001 par value; 50,000,000 shares authorized
26,033,933 and 25,174,980 shares issued and outstanding, respectively                      26,034          25,175

Additional Paid-in Capital                                                                956,779         847,311

Common Stock Subscribed (Note 8)                                                           23,689               -

Donated Capital                                                                           520,147         438,464

Deferred Compensation                                                                    (38,750)        (78,500)

Deficit Accumulated During the Development Stage                                      (2,363,583)     (2,192,677)
--------------------------------------------------------------------------------------------------------------------

Total Stockholders' Deficit                                                             (875,684)       (960,227)
--------------------------------------------------------------------------------------------------------------------

Total Liabilities and Stockholders' Deficit                                                14,459             946
====================================================================================================================
</TABLE>


                  (The Accompanying Notes are an Integral Part
                   of the Consolidated Financial Statements)


                                      F-1
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(expressed in U.S. dollars)
(unaudited)

<TABLE>
<CAPTION>
                                                   Accumulated from
                                                   January 28, 1998        For the Three                For the Nine
                                                 (Date of Inception)       Months Ended                Months Ended
                                                    to March 31,              March 31,                   March 31,
                                                        2006            2006          2005          2006          2005
                                                          $               $             $             $             $
<S>                                                    <C>                <C>          <C>           <C>           <C>
  Revenue                                                      -               -             -             -             -
  ---------------------------------------------------------------------------------------------------------------------------

  Expenses

    Deposits and advances written-off                    305,512               -             -             -             -
    Foreign exchange loss (gain)                          12,121            (77)         (235)         2,875         4,779
    General and administrative (Note 4)                1,579,378          35,261       102,254       119,348       181,443
    Imputed interest (Notes 4 and 5)                     460,147          19,727        19,728        59,183        59,183
    Research and development                              16,925               -             -             -             -
  ---------------------------------------------------------------------------------------------------------------------------
  Total Operating Expenses                             2,374,083          54,911       121,747       181,406       245,405
  ---------------------------------------------------------------------------------------------------------------------------
  Operating Loss                                     (2,374,083)        (54,911)     (121,747)     (181,406)     (245,405)

  Other Income

    Gain on settlement of debt                            10,500               -             -        10,500             -
  ---------------------------------------------------------------------------------------------------------------------------

  Net Loss                                           (2,363,583)        (54,911)     (121,747)     (170,906)     (245,405)
  ===========================================================================================================================

  Net Loss Per Share - Basic and Diluted                                       -        (0.01)        (0.01)        (0.01)
  ===========================================================================================================================

  Weighted Average Shares Outstanding                                  26,014,000    24,326,000   25,829,000    23,759,000
  ===========================================================================================================================
</TABLE>


                  (The Accompanying Notes are an Integral Part
                   of the Consolidated Financial Statements)

                                      F-2
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
(unaudited)

<TABLE>
<CAPTION>
                                                                                               For the Nine
                                                                                                Months Ended
                                                                                                 March 31,
                                                                                          2006             2005
                                                                                            $                $
<S>                                                                                       <C>             <C>
  Operating Activities

    Net loss                                                                              (170,906)       (245,405)

    Adjustments to reconcile net loss to net cash used in operating activities
      Amortization of deferred compensation                                                 39,750         100,549
      Donated services                                                                      22,500          22,500
      Imputed interest                                                                      59,183          59,183
      Gain on settlement of debt                                                           (10,500)              -

    Change in operating assets and liabilities
      Accounts payable and accrued liabilities                                              21,508           4,973
  -------------------------------------------------------------------------------------------------------------------
  Net Cash Used In Operating Activities                                                    (38,465)        (58,200)
  -------------------------------------------------------------------------------------------------------------------
  Investing Activities                                                                           -               -
  -------------------------------------------------------------------------------------------------------------------

  Financing Activities

    Advances to related parties                                                             (1,562)            (19)
    Common stock subscribed                                                                 23,689               -
    Proceeds from issuance of common stock                                                  27,594          46,622
  -------------------------------------------------------------------------------------------------------------------

  Net Cash Provided By Financing Activities                                                 49,721          46,603
  -------------------------------------------------------------------------------------------------------------------

  Effect of Exchange Rate Changes on Cash                                                    2,257               -
  -------------------------------------------------------------------------------------------------------------------

  Increase (Decrease) in Cash                                                               13,513          (7,463)

  Cash - Beginning of Period                                                                   946           7,907
  -------------------------------------------------------------------------------------------------------------------
  Cash - End of Period                                                                      14,459             444
  ===================================================================================================================
  Non-cash Investing and Financing Activities

    Common shares issued to settle debt                                                     82,500               -
  ===================================================================================================================

  Supplemental Disclosures

    Interest paid                                                                                -               -
    Income taxes paid                                                                            -               -
  ===================================================================================================================
</TABLE>

                  (The Accompanying Notes are an Integral Part
                   of the Consolidated Financial Statements)


                                      F-3
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)


1.   Nature of Operations and Continuance of Business

     In May 1998, the Company caused a Nevada corporation to be formed under the
     name Polo Equities, Inc. The two companies then merged pursuant to Articles
     of Merger adopted May 28, 1998 and filed with the State of Nevada on June
     10, 1998.

     On May 28, 1998, the Company acquired, by issuing 12,000,000 shares, Hybrid
     Fuels, USA, Inc., with an inception date of January 28, 1998, and 330420
     B.C. Ltd., which changed its name to Hybrid Fuels (Canada) Inc. This
     acquisition was accounted for as a reverse merger whereby the shareholder
     of Hybrid Fuels, USA, Inc. and Hybrid Fuels (Canada) Inc. gained control of
     Polo Equities Inc., which changed its name to Hybrid Fuels, Inc. All
     historical financial statements are those of Hybrid Fuels, USA, Inc. and
     Hybrid Fuels (Canada) Inc. As part of the acquisition, three shareholders
     holding 12,000,000 previously issued shares returned their shares for
     cancellation. For accounting purposes, the acquisition was treated as a
     reverse merger business purchase of Polo Equities Inc. by Hybrid Fuels,
     USA, Inc. and Hybrid Fuels (Canada) Inc. No amount was allocated to the
     intellectual asset as it was acquired from a related party and the transfer
     had no cost basis associated with it. There was no public market for the
     shares of Polo Equities, Inc. at the time of the reverse merger.

     On May 29, 1998 the Company changed its name to Hybrid Fuels, Inc., herein
     "the Company". The Company trades on the OTC Bulletin Board under the
     symbol HRID.

     Pursuant to the above acquisition, the Company acquired a number of
     proprietary technologies with the primary objective of the business being
     to build small farm-scale ethanol facilities that involve a number of
     proprietary technologies exclusively owned by the Company. Other
     proprietary technology involves the use of a bio-gas burner that burns
     manure and bedding straw. This technology eliminates ground and
     ground-water contamination and produces most of the energy required for the
     facility by supplying heat for fermentation and vaporization and for the
     operation of a greenhouse, if desired. Another exclusive proprietary
     technology is a vegetable-based formula that allows diesel and ethanol to
     emulsify. This hybrid fuel reduces particulate emissions without reduction
     in power when used in an unaltered diesel engine.

     The Company is a development stage company with management devoting most of
     its activities in investigating business opportunities and further
     advancing its technologies. The ability of the Company to emerge from the
     development stage with respect to any planned principal business activity
     is dependent upon its successful efforts to raise additional equity
     financing and/or generate significant revenue. There is no guarantee that
     the Company will be able to complete any of the above objectives. At March
     31, 2006, the Company had a working capital deficit of $652,917 and an
     accumulated deficit of $2,363,583. These factors, among others, cause
     substantial doubt about the continuance of the Company as a going concern.

     The Company expects that future capital requirements for developing and
     expanding technologies will be met through stock offerings by way of
     private placements.


2.   Summary of Significant Accounting Policies

     (a)  Consolidated Financial Statements

          These consolidated financial statements represent the consolidation of
          the Company and its wholly owned subsidiary, Hybrid Fuels (Canada)
          Inc. The Company's subsidiary is currently inactive and has no assets,
          liabilities or operations. The Company's fiscal year end is June 30.

     (b)  Cash and Cash Equivalents

          The Company considers all highly liquid instruments with a maturity of
          three months or less at the time of issuance to be cash equivalents.

     (c)  Use of Estimates

          The preparation of financial statements in conformity with accounting
          principles generally accepted in the United States requires management
          to make estimates and assumptions that affect the reported amounts of
          assets and liabilities and disclosure of contingent assets and
          liabilities at the date of the financial statements and the reported
          amounts of revenues and expenses during the periods. Actual results
          could differ from those estimates.




                                      F-4
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)


2.   Summary of Significant Accounting Policies (continued)

     (d)  Basic and Diluted Net Income (Loss) per Share

          The Company computes net income (loss) per share in accordance with
          SFAS No. 128, "Earnings per Share" (SFAS 128) which requires
          presentation of both basic and diluted earnings per shares (EPS) on
          the face of the income statement. Basic EPS is computed by dividing
          net income (loss) available to common shareholders (numerator) by the
          weighted average number of common shares outstanding (denominator)
          during the period. Diluted EPS gives effect to all dilutive potential
          common shares outstanding during the period including stock options,
          using the treasury stock method, and convertible preferred stock,
          using the if-converted method. In computing diluted EPS, the average
          stock price for the period is used in determining the number of shares
          assumed to be purchased from the exercise of stock options or
          warrants. Diluted EPS excludes all dilutive potential common shares if
          their effect is anti-dilutive.

     (e)  Foreign Currency Translation

          The Company's functional and reporting currency is the United States
          dollar. Monetary assets and liabilities denominated in foreign
          currencies are translated in accordance with SFAS No. 52 "Foreign
          Currency Translation", using the exchange rate prevailing at the
          balance sheet date. Gains and losses arising on settlement of foreign
          currency denominated transactions or balances are included in the
          determination of income. Foreign currency transactions are primarily
          undertaken in Canadian dollars. The Company has not, to the date of
          these financials statements, entered into derivative instruments to
          offset the impact of foreign currency fluctuations.

     (f)  Comprehensive Loss

          SFAS No. 130, "Reporting Comprehensive Income," establishes standards
          for the reporting and display of comprehensive loss and its components
          in the financial statements. As at March 31, 2006 and 2005, the
          Company has no items that represent a comprehensive loss and,
          therefore, has not included a schedule of comprehensive loss in the
          financial statements.

     (g)  Financial Instruments

          The fair value of financial instruments, which include cash, accounts
          payable, accrued liabilities, notes and advances payable, due to
          related parties and due to a former director approximate their
          carrying values due to the immediate or short-term maturity of these
          financial instruments.

     (h)  Income Taxes

          The Company has adopted SFAS No. 109 "Accounting for Income Taxes" as
          of its inception. Pursuant to SFAS No. 109 the Company is required to
          compute tax asset benefits for net operating losses carried forward.
          The potential benefits of net operating losses have not been
          recognized in these financial statements because the Company cannot be
          assured it is more likely than not it will utilize the net operating
          losses carried forward in future years.

     (i)  Stock-based Compensation

          Prior to January 1, 2006, the Company accounted for stock-based awards
          under the recognition and measurement provisions of Accounting
          Principles Board Opinion No. 25, "Accounting for Stock Issued to
          Employees" using the intrinsic value method of accounting, under which
          compensation expense was only recognized if the exercise price of the
          Company's employee stock options was less than the market price of the
          underlying common stock on the date of grant. Effective January 1,
          2006, the Company adopted the fair value recognition provisions of
          SFAS No. 123R "Share Based Payments", using the modified retrospective
          transition method. The Company has not issued any stock options or
          share based payments since its inception. Accordingly, there was no
          effect on the Company's reported loss from operations, cash flows or
          loss per share as a result of adopting SFAS No 123R.



                                      F-5
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)


2.   Summary of Significant Accounting Policies (continued)

(j)  Recent Accounting Pronouncements

          In May 2005, the Financial Accounting Standards Board (FASB) issued
          SFAS No. 154, "Accounting Changes and Error Corrections - A
          Replacement of APB Opinion No. 20 and SFAS No. 3". SFAS 154 changes
          the requirements for the accounting for and reporting of a change in
          accounting principle and applies to all voluntary changes in
          accounting principle. It also applies to changes required by an
          accounting pronouncement in the unusual instance that the
          pronouncement does not include specific transition provisions. SFAS
          154 requires retrospective application to prior periods' financial
          statements of changes in accounting principle, unless it is
          impracticable to determine either the period-specific effects or the
          cumulative effect of the change. The provisions of SFAS No. 154 are
          effective for accounting changes and correction of errors made in
          fiscal years beginning after December 15, 2005. The adoption of this
          standard is not expected to have a material effect on the Company's
          results of operations or financial position.

          In December 2004, the FASB issued SFAS No. 153, "Exchanges of
          Nonmonetary Assets - An Amendment of APB Opinion No. 29". The guidance
          in APB Opinion No. 29, "Accounting for Nonmonetary Transactions", is
          based on the principle that exchanges of nonmonetary assets should be
          measured based on the fair value of the assets exchanged. The guidance
          in that Opinion, however, included certain exceptions to that
          principle. SFAS No. 153 amends Opinion No. 29 to eliminate the
          exception for nonmonetary exchanges of similar productive assets and
          replaces it with a general exception for exchanges of nonmonetary
          assets that do not have commercial substance. A nonmonetary exchange
          has commercial substance if the future cash flows of the entity are
          expected to change significantly as a result of the exchange. The
          provisions of SFAS No. 153 are effective for nonmonetary asset
          exchanges occurring in fiscal periods beginning after June 15, 2005.
          Early application is permitted and companies must apply the standard
          prospectively. The adoption of this standard did not have a material
          effect on the Company's results of operations or financial position.

          The FASB has also issued SFAS No. 155 "Accounting for Certain Hybrid
          Financial Instruments" and SFAS No. 156 "Accounting for Servicing of
          Financial Assets", but they will not have any relationship to the
          operations of the Company. Therefore, a description and its impact for
          each on the Company's operations and financial position have not been
          disclosed.

     (k)  Reclassifications

          Certain reclassifications have been made to the prior period's
          financial statements to conform to the current period's presentation.

3.   Note Payable and Other Advances

     (a)  In fiscal 2001, the Company issued a note for $42,840 (Cdn$50,000)
          payable which bears interest at 8% per annum, is unsecured and due on
          demand.

     (b)  Cash advances totalling $2,570 (Cdn$3,000) from unrelated parties are
          non-interest bearing, unsecured and due on demand.

4.   Related Party Transactions

     (a)  A shareholder is owed $199,371 (June 30, 2005 - $199,371) for payment
          of rent, office expenses and professional fees on behalf of the
          Company. Imputed interest of $22,429 (2005 - $22,429), calculated at a
          rate of 15% per annum, was charged to operations and treated as
          donated capital. This amount owing is unsecured, non-interest bearing
          and due on demand.

     (b)  During the nine month period ended March 31, 2006, the Company
          recognized a total of $22,500 (2005 - $22,500) for donated services
          provided by the President of the Company.

     (c)  At March 31, 2006, the Vice-President of the Company is owed $3,166
          (June 30, 2005 - $4,728) for expenses paid on behalf of the Company.
          This amount is unsecured, non-interest bearing and due on demand.


                                      F-6
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)


5.   Amounts Owing to a Former Director

     The former President, who was also a director of the Company, is owed
     $326,701 as at March 31, 2006. This amount is unsecured, non-interest
     bearing and due on demand. For the nine-month period ended March 31, 2006,
     imputed interest of $36,754 (2005 - $36,754), calculated at a rate of 15%
     per annum, was charged to operations and treated as donated capital.

6.   Common Shares

     (a)  Private Placements

          (i)   In April 2006, the Company issued 299,000 shares of common
                stock at a price of $0.17 per share for proceeds of $50,460
                (Cdn$58,486). The Company received proceeds of $23,689 prior
                to March 31, 2006.

          (ii)  On February 23, 2006, the Company issued 30,000 shares of
                common stock at a price of $0.15 per share for cash proceeds
                of $4,506 (Cdn$5,192).

          (iii) On February 8, 2006, the Company issued 12,000 shares of
                common stock at a price of $0.14 per share for cash proceeds
                of $1,734 (Cdn$1,990).

          (iv)  On January 6, 2006, the Company issued 6,600 shares of common
                stock at a price of $0.13 per share for cash proceeds of $863
                (Cdn$1,000).

          (v)   On January 6, 2006, the Company issued 15,500 shares of common
                stock at a price of $0.14 per share for cash proceeds of
                $2,153 (Cdn$2,500).

          (vi)  On December 13, 2005, the Company issued 30,000 shares of
                common stock at a price of $0.08 per share for cash proceeds
                of $2,539 (Cdn$3,000), and 20,000 shares of common stock at a
                price of $0.13 per share for cash proceeds of $2,585
                (Cdn$3,000).

          (vii) On December 9, 2005, the Company issued 50,400 shares of
                common stock at a price of $0.10 per share for cash proceeds
                of $5,051 (Cdn$5,990).

          (viii)On October 5, 2005, the Company issued 30,000 shares of
                common stock at a price of $0.08 per share for proceeds of
                $2,532 (Cdn$3,000), and 56,700 shares of common stock at a
                price of $0.10 per share for proceeds of $5,631 (Cdn$6,590).

     (b)  Non-cash Consideration

          All transactions in which goods or services are the consideration
          received for the issuance of equity instruments are accounted for
          based on the fair value of the consideration received or the fair
          value of the equity instrument issued, whichever is more reliably
          measurable. Equity instruments issued to employees and the cost of the
          services received as consideration are measured and recognized based
          on the fair value of the equity instruments issued.

          On August 16, 2005, the Company issued 375,000 shares of common stock
          at a fair value of $82,500 to settle an outstanding debt of $50,000
          and accrued interest of $43,000, resulting in a gain on debt
          settlement of $10,500.



                                      F-7
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)


7.   Commitments and Contingencies

     Although the Company is not involved in any legal proceedings, several
     issues may eventually lead to the Company instituting legal action as
     follows:

     (a)  On August 4, 1998 and March 23, 1999, the Company's former Board of
          Directors authorized the issuance of 1,000,000 and 900,000 shares
          respectively to individuals without consideration. On August 21, 1999,
          the current Board of Directors resolved that share certificates
          representing ownership of these 1,900,000 shares were issued without
          adequate consideration being paid to the Company and were therefore
          not fully paid and non-assessable. The Company cancelled the share
          certificates and indemnified the transfer agent, for any costs or
          liability that may incur arising out of the cancellation of such
          shares. The transfer agent removed the 1,900,000 shares from the
          stockholder list effectively reversing the issuance. Six of the
          cancelled certificates, totaling 550,000 shares, have been endorsed
          and returned to the Company for cancellation. The contingencies
          regarding the cancelled shares relate to anyone who may have
          subsequent holder rights, and possibly the individuals who were issued
          those shares who may claim that they were issued for due
          consideration. The Company has determined that there is no amount to
          be accrued for future liabilities associated with claims by subsequent
          shareholders. To date when these shares have been delivered to a
          broker for possible resale, the broker has informed the Company or the
          transfer agent and the shares are kept and cancelled. The Company will
          continue to monitor this issue. No other contingent liabilities have
          been included, as some of the previous directors have been informed
          verbally of the cancellation. No formal legal demand has been made as
          former management has failed to provide addresses despite a number of
          requests.

     (b)  Between October 1998 and June 1999, the management at that time sold a
          total of 361,120 common shares of the Company to 34 subscribers on the
          basis of an Offering Memorandum ("Offering") that contained a
          significant number of inaccuracies. A total of $223,000 was raised
          pursuant to this Offering. Management had concerns regarding possible
          misstatements, omissions and misleading statements. On the advice of
          legal counsel, the Company offered these 34 subscribers the option of
          receiving restricted stock as the Company did not and does not have
          the funds to repay these subscribers. Restricted shares must be owned
          and fully paid for at least one year. After the one-year holding
          period, the number of shares non-affiliates may sell during any
          three-month period cannot exceed 1% of the outstanding shares of the
          same class being sold. If the shares have been owned for two years or
          more, no volume restrictions apply to non-affiliates. Those who opted
          to receive restricted stock were also given an undertaking that they
          would receive a rescission offer when the Company was in a position to
          repay their money plus appropriate interest, in return for a return of
          the restricted stock, or they could elect to retain the stock. To
          date, 23 subscribers, have, pursuant to this offer received 232,753
          shares, representing $158,000. The remaining 11 subscribers, who paid
          $65,000 for 128,367 shares, have not responded to the offer. These
          subscriptions are recorded as redeemable and restricted common shares
          until rescission rights have been revoked.


8.   Subsequent Event

     In April 2006, the Company issued 299,000 shares of common stock at a price
     of $0.17 per share for proceeds of $50,460 (Cdn$58,486). The Company
     received proceeds of $23,689 prior to March 31, 2006.


                                      F-8
<PAGE>


ITEM 2.  Plan of Operation
--------------------------

This Form 10-QSB contains forward-looking statements. The words "anticipate",
"believe", "expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and other similar expressions identify forward-looking statements
that involve risks and uncertainties. The reader should not place undue reliance
on forward-looking statements in this Form 10-QSB because of their inherent
uncertainty. The following discussion and analysis should be read in conjunction
with the Financial Statements and Notes thereto and other financial information
included in this Form 10-QSB and our Form 10-KSB for the fiscal year ended June
30, 2005. Actual results could differ materially from the results discussed in
the forward-looking statements. Hybrid Fuels Inc. ("the Company") assumes no
responsibility to correct or update the forward looking statements as
circumstances change and therefore, the forward looking statements should be
assumed to speak only as at the date of the filing of this report.

Hybrid Fuels Inc. is a developmental stage company and has had no income since
the acquisition of the hybrid fuels technology in June 1998. The Company is
unlikely to have any significant cash flow until after the fiscal year ending
June 30, 2006.

As at June 30, 2005, our independent auditors raised a substantial doubt about
our ability to continue as a going concern because we have not generated any
revenues and have conducted operations at a loss since inception. As of March
31, 2006, the Company has a working capital deficit of $(652,917).

Although the Company is in the developmental stages, the process behind Hybrid
Fuels' intended business has been researched and developed for more than a
decade. A facility that integrated the process described below was constructed
and operated near Dalum, Alberta from 1994 to 1996. The Dalum facility was
designed to prove the concepts and included all of the wet ethanol-producing and
cattle-feeding features of a full-scale commercial operation. The Dalum project
was also the source of the actual operating results that are referred to later
in this report.

After the Dalum facility was closed in 1996, further research enabled us to
modify the facility's material requirements, improve the building designs,
select the latest equipment, and refine the process.

Currently, the Company's intended principal business is to integrate cattle
feeding-to-finish with the production of wet ethanol. The main source of revenue
for the Company is expected to come from the sale of finished cattle and a blend
of wet ethanol and diesel fuel.

Our subsidiary, Hybrid Fuels (Canada), has entered into a verbal agreement with
a group of Hybrid Fuels Inc. shareholders to construct a fully operational
facility at Oyama, B.C., Canada on 12 acres of farmland. This group is bearing
the financial burden of constructing this commercial facility and retains legal
ownership. Once the facility has been completed, the Company intends to
negotiate with this group to acquire or lease the facility on mutually agreeable
terms. The land on which the facility is being constructed is owned by an
unrelated third party.

The Company expects to lease or acquire the completed facility before the fiscal
year ends June 30, 2006.

The commercial facility being built by the shareholder group is to include all
items necessary for a fully operational facility utilizing the Company's
technology. The Company has not incurred any costs pertaining to the facility to
date and will not be obligated financially until the facility has been completed
and the Company enters into a formal agreement to acquire the facility.

                                       3
<PAGE>

An operating facility includes the cattle barn, ethanol-producing plant,
gasifier/burner (manure burning unit), and a hydroponics barley-grass growing
system.

In these facilities, barley is fermented and then distilled to produce the wet
ethanol. The ethanol production process also generates a high protein product,
called "distillers mash" and a liquid byproduct called "stillage water." The
mash and liquid is supplemented by barley grass and creates an excellent feed
for the cattle. The expected weight gain is an average of four pounds a day per
head during the planned 100-120 day feeding cycle.

The barn at the Oyama facility has been designed to accommodate 200 head of
cattle and the hydroponics barley-grass growing system. Once the facility is
operational, we expect to begin feeding cattle starting with 50 head and adding
another 50 approximately every four weeks until the barn is at full capacity. As
we gain experience with the facility, we intend to operate the barn continuously
at full capacity during the subsequent 100-day feeding cycles. At the end of
each feeding cycle, it is intended that the cattle will be sold at auction.

The barn includes floor space for six individual pens - five occupied pens and
one pen remaining empty and free of manure and bedding waste. Cattle are to be
moved to a clean pen every five days on a rotational basis. The manure and
bedding straw is removed from the pens and destroyed in the gasifier/burner that
provides heat energy for the ethanol production and the hydroponics feed system.

Ethanol produced by the first facility in the first two to three months of its
operation is expected to be used for testing purposes. Once the facility is
operating at full capacity, we project that the ethanol production will be
approximately 200 US gallons per day.

It is intended that the wet ethanol will be blended with a proprietary
emulsifier and diesel fuel. When this newly created fuel was tested in an
unaltered diesel engine at the British Columbia Institute of Technology in June
1996, it reduced particulate emissions (black smoke) by over 62% and the
smog-causing nitrogen oxide (NOx) emissions by more than 22%. Researchers also
noted no measurable loss of engine power when testing this fuel blend.

The hydroponics barley-grass growing system is expected to produce a ration of
10-15 pounds per day of fresh grass per animal, year round, regardless of
climate. We believe each grass unit represents approximately the equivalent of
400 acres of grass-growing land.

Current estimates have the final cost of building this facility to be
approximately $930,000. An estimated $630,000 of this cost is for foundations
and flooring, buildings, the gasifier/burner, the ethanol-producing equipment,
the hydroponics unit, tanks and machinery. Soft costs, for such items as
permits, engineering and other professional fees, survey and layout costs, site
preparation, delivery of buildings and materials, equipment rentals, tools and
miscellaneous items, are estimated to cost $150,000. Approximately $150,000 is
expected to cover construction labour and supervision expenses.

The Company has no immediate funding source except through private sources and
until one facility is fully operational and demonstrates cash flow Hybrid Fuels
Inc., and our wholly-owned subsidiary Hybrid Fuels (Canada), will have limited
access to banks, trust companies, and other traditional lending sources.

                                       4
<PAGE>

The aforementioned builders group has encountered delays in completing the
facility that are largely attributable to ongoing financial requirements and
testing of various components of the facility including the hydroponics unit,
air exchange system and the gasifier/burner(manure burning unit).

Additional financing has been required from the shareholder group in order to
complete the testing process and implement necessary improvements to the
facility. This process is time consuming and has contributed to the delay in
completing the facility and commencing operations.

Operations are expected to commence once the initial testing of the facility's
gasifier/burner, air exchange and feed system are completed and ready for the
first delivery of cattle. Management currently anticipates that this will be
completed before or during the second half of calendar year 2006. However, any
delay in the completion of these tasks will also delay commencement of our
operations. It is difficult to establish the start date of operations since we
are relying on third parties to complete the facility which includes work by
testing consultants and timely provision of equipment and installation.
Therefore, completion of these tasks is not entirely under our control.

The completion and operation of the first facility is expected to enable the
Company to demonstrate to potential operators and investors that the technology
and processes work as described. We do not have any long-term commitments for
financing at this time.

Assuming operations can commence before the end of the fiscal year June 30,
2006, operating costs to the end of the fiscal year are estimated at $275,000.
This estimate includes $120,000 for cattle and feed, $60,000 for payables
(excluding related party loans and accrued executive salaries), $25,000 for
research and development, $40,000 for technical support and labor and $30,000
for contingencies and other operating expenses. These estimates are subject to
change based on conditions outside of management's control and actual experience
with operating the first facility.

The operating cost estimate of $275,000 would not adequately cover the cost of
acquiring an operating facility if the Company chooses and enters into a
purchase agreement as opposed to a lease agreement.

It is expected that the facility will not be run at full capacity until
approximately four months have passed from the facility becoming operational. We
believe that at the end of the fourth month of operations, when we expect to
sell the first group of finished cattle, we will have sufficient data to enable
us to estimate cash flows and generate a comprehensive business plan.

Until the end of the next fiscal year the Company anticipates conducting further
research and development with respect to the following:

1. Researching efficiencies in facility construction and operation;
2. Researching new technologies; consulting with various technical researchers
and agriculture officials.

Once we have a fully operational facility, and have proven the technology and
processes, we intend that our subsidiary, Hybrid Fuels (Canada) Inc., will
operate it and will earn revenue from the sale of the finished cattle and wet
ethanol.

It is intended that future facilities will be constructed, for the Company, by
independent contractors on privately-owned farms. The intention is for these
facilities to be operated by the farmer (s) under terms of an agreement that
will utilize data from operations of the first facility based in Oyama, BC.

                                       5
<PAGE>


Results of Operations For The Three Months Ended March 31, 2006
---------------------------------------------------------------

The net loss for the present quarter is $(54,911) compared to $(121,747) for the
comparable quarter last year. The decrease in the net loss is mainly
attributable to a decrease in stock-based compensation expense of $60,000
compared to the same period last year.

At the end of the quarter, the Company had cash of $14,459 compared to $205 at
the end of the previous quarter. During the quarter we received $32,082 in cash
pursuant to private placements of restricted common stock issued/to be issued.
As at March 31, 2006, the Company had a working capital deficit of $(652,917)
compared to $(737,227) as at June 30, 2005.

The President and CEO of the Company donated services in the amount of $7,500 in
the current quarter.

Although we currently do not have significant cash reserves, related parties
have indicated a willingness to provide operating capital in exchange for
restricted common shares. These related parties are under no obligation and no
assurances can be given that they will continue to do so.

Risk Factors
------------

The following factors have affected or could affect the Company's actual results
and could cause such results to differ materially from those expressed in any
forward-looking statements made by the Company. Investors should consider
carefully the following risks and speculative factors inherent in and affecting
the business of the Company and an investment in the Company's common stock.

1.   Our cash reserves may not be adequate to cover our costs of operations. To
     date, we have covered our operating losses by loans from shareholders or
     privately placing securities. We expect to fund our general operations and
     marketing activities in the near term with our current cash, that was
     obtained from loans from shareholders and/or the sale of securities.
     However, our cost estimates may not include enough provisions for any
     contingency, unexpected expenses or increases in costs that may arise.
2.   We will need to raise additional capital to develop operations and to pay
     ongoing expenses. If additional funds are raised through the issuance of
     equity, our shareholders' ownership will be diluted. There can be no
     assurance that additional financing will be available on terms favorable to
     us or at all. If funds are not available on terms acceptable to us, we may
     not be able to continue our business.
3.   We have not sought protection of our intellectual property through any
     patents, but have elected to protect it through non-disclosure agreements.
     Our intended business may be adversely affected if we are unable to
     adequately protect our intellectual property. Because our intellectual
     property is not protected by patents, others may seek to discover and use
     our intellectual property. We cannot provide assurance that our
     intellectual property rights will not be invalidated, circumvented or
     challenged. If we are found to infringe on the intellectual property rights
     of others, we may not be able to continue to market our process, or we may
     have to enter into costly license or settlement agreements. Third parties
     may allege infringement by us with respect to past, current or future
     intellectual property rights. Any claim of infringement, regardless of
     merit, could be costly, time consuming and require us to develop
     non-infringing technology or enter into royalty, licensing or settlement
     agreements. These agreements could be on terms unfavorable or unacceptable
     to us and could significantly harm the development of our business. In the
     future, we may also have to enforce our intellectual property rights
     through litigation. Any such enforcement could also result in additional
     costs and could materially affect our financial condition and our business.
4.   We have a history of operating losses and an accumulated deficit, as of
     March 31, 2006, of $2,363,583
5.   Our ability to begin operations and to generate revenues and profits is
     subject to the risks and uncertainties encountered by development stage
     companies. Our future revenues and profitability are unpredictable. We
     currently have no operating activities that will produce revenue.
     Furthermore, we cannot provide assurance that we will be successful in
     raising the money necessary to begin or expand operations.

                                       6
<PAGE>

6.   The production of ethanol is being strongly encouraged by governments and
     private parties as a way to reduce water and air pollution that could lead
     to rapidly changing technology. If we are unable to adapt to rapidly
     changing technologies, our intended business could be adversely affected.
7.   We have no operating history which makes an evaluation of our future
     prospects very difficult. Once we succeed in completing the construction of
     the first operating facility, there can be no assurances that we will be
     able to develop operations that are profitable or will operate as intended.
     If the market for our facilities fails to develop, or develops more slowly
     than anticipated, we may not be able to meet our expenses and may not
     achieve profitable results.
8.   Our common stock is not widely traded, and, as a result, the prices quoted
     for our stock may not reflect its fair market value. Because of the low
     volume of trading in our common stock, our stockholders may find it
     difficult to sell their shares.
9.   We currently have no insurance covering our operations, potential products,
     services or directors and officers.
10.  Future performance depends on the ability to attract, train, and retain
     management, technical and marketing personnel. In the future, loss of one
     or more key employees could negatively impact us, and there is no "key man"
     life insurance in force at this time. Competition for qualified personnel
     is intense, and there can be no assurance that we will attract or maintain
     key employees or other needed personnel.
11.  The production of beef and fuel are both highly competitive. Giant
     companies compete in both markets with significant competitive advantages.
     Many competitors of the Company have significantly greater resources and
     experience than the Company. Additionally, competitors of the Company may
     have better access to financial and marketing resources superior to those
     available to the Company. With the resources and name recognition that
     competitors possess, the Company may face severe adversity entering the
     markets it is pursuing. There is no assurance the Company will be able to
     overcome the competitive disadvantages it will face as a small, start-up
     company with limited capital.
12.  The continual shift in supply and demand factors create volatility in
     cattle pricing that could result in a loss on cattle finishing.
13.  Our subsidiary, Hybrid Fuels (Canada) has entered into a verbal agreement
     with a group of Hybrid Fuels Inc. shareholders to construct a fully
     operational facility at Oyama, B.C., Canada. No written contracts have been
     made. This group is bearing the financial burden of constructing this
     commercial facility and retains legal ownership. Once the facility has been
     completed, the Company will negotiate with this group to acquire or lease
     the facility on mutually agreeable terms.
14.  Since May 2003, the Canadian beef market has suffered as a consequence of
     the United States limiting imports from Canada because of an isolated case
     of Bovine Spongiform Encephalopathy (BSE). If beef sales do not return to
     earlier levels, this could have an adverse effect on the Company although
     the age of finished cattle raised within our controlled facilites are
     expected to be under the current 30-month age restriction on beef imported
     into the U.S..


                                       7
<PAGE>

ITEM 3.  Controls and Procedures
--------------------------------

Based on an evaluation as of the end of the period, the Company's Acting
Principal Executive Officer and Acting Principal Financial Officer has concluded
that the Company's disclosure controls and procedures as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act 1934 (the
"Exchange Act") are effective to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation. There were no significant deficiencies or material weakness,
and therefore there were no corrective actions taken.


                           PART II - OTHER INFORMATION
                           ---------------------------

Item 1. Legal Proceedings
-------------------------

No legal proceedings are threatened or pending against the Company or any of its
officers or directors. Further, none of the Company's officers or directors or
affiliates of the Company are parties against the Company or have any material
interest in actions that are adverse to the Company's interests.

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

Set forth below is information regarding the issuance and sales of our
securities without registration during the three months ended March 31, 2006. No
such sales involved an underwriter and no commissions were paid in connection
with the sale of any securities.

On January 6, 2006, 15,500 shares of restricted common stock were issued for
cash received January 5, 2006 at a price of $0.14 per share for total proceeds
of $2,153 (CAD$2,500).

                                       8
<PAGE>


On January 6, 2006, 6,600 shares of restricted common stock were issued for cash
received December 9, 2005 at a price of $0.13 per share for total proceeds of
$863 (CAD$1,000).

On February 8, 2006, 12,000 shares of restricted common stock were issued for
cash received January 31, 2006 at a price of $0.14 per share for total proceeds
of $1,734 (CAD$1,990).

On February 23, 2006, 30,000 shares of restricted common stock were issued for
cash received February 13, 2006 at a price of $0.15 per share for total proceeds
of $4,506 (CAD$5,192).

The foregoing issuance of common stock were made in reliance upon the exemption
from registration set forth in Regulation S promulgated under of the Securities
Act of 1933 for transactions not involving a US person.

Item 3. Defaults Upon Senior Securities
---------------------------------------

N/A

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

N/A

Item 5. Other Information
-------------------------

N/A

Item 6.  Exhibits
-----------------

Exhibit 31.1 Acting Principal Executive Officer Certification (section 302 of
the Sarbanes-Oxley Act of 2002)

Exhibit 31.2 Acting Principal Financial Officer Certification (section 302 of
the Sarbanes-Oxley Act of 2002)

Exhibit 32.1 Acting Principal Executive Officer Certification (section 906 of
the Sarbanes-Oxley Act of 2002)

Exhibit 32.2 Acting Principal Financial Officer Certification (section 906 of
the Sarbanes-Oxley Act of 2002)


Signature
---------

In accordance with the requirements of the Securities Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


HYBRID FUELS, INC.

By: /s/ Douglas Dickie
----------------------

Name:  Douglas Dickie
Title: Acting President/CEO/CFO


Dated: May 22,2006



                                       9