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 December 31, 2000

      [] 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
          (State or other jurisdiction of incorporation or organization)

                                    88 0384399
                       (I.R.S. Employer Identification No.)


                PO Box 41118 RPOS Winfield, B.C., Canada, V4V 1Z7
              (Address of principal executive offices)    (Zip Code)

         Registrant's telephone number, including area code: 250-868-0600

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                No [X]

The number of shares outstanding of the registrant's common stock as of
November 5, 2001 was 20,853,600.

The number of shares issued of the registrant's common stock as of November 5,
2001 was 21,286,353.

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



















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Page -2-

                                HYBRID FUELS, INC.

                                   FORM 10-QSB
                     For the quarter ended December 31, 2000

INDEX

Part I	Financial Information							Page

Item 1. Financial Statements...........................F3-F10

        Balance Sheet as of December 31, 2000..........F3

        Statement of Operations for the quarter and
        six months ended December 31, 2000.............F4

        Statement of Cash Flows for six months
        ended December 31, 2000........................F5

        Notes to Financial Statements..................F6

Item 2. Management's Discussion and Analysis or
        Plan of Operation..............................11

PART II - Other Information..........................  14


Item 6. Exhibits and Reports on Form 8-K.............. 14


































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F-3-

Hybrid Fuels, Inc.
(formerly Polo Equities, Inc.)
(A Development Stage Company)

Consolidated Balance Sheets


					    December 31, June 30,
					       2000       2000
					        $           $
                                            (unaudited) (audited)
ASSETS

Current Assets

Cash 	             				550         485
-------------------------------------------------------------------------------
Total Assets 					550         485
===============================================================================

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

Accounts payable 			      6,743       3,111
Accrued liabilities                          13,000         -
Note payable (Note 4)                        33,638         -
Advances payable (Note 5)                    88,156      42,013
Shareholder loan payable (Note 6(a))        193,105     163,748
Amounts owing to a Director (Note 6(b))     112,047      74,432
-------------------------------------------------------------------------------
Total Current Liabilities 		    446,689     283,304
-------------------------------------------------------------------------------
Temporary Equity (Note 6(d))		    223,000     223,000
-------------------------------------------------------------------------------
Stockholders' Deficit
Common Stock (Note 7): $0.001 par value;
50,000,000 shares authorized 19,523,600
shares are issued and outstanding            19,524      19,524

Additional Paid-in Capital 		    162,474     162,474
Donated Capital - Imputed Interest
(Notes 5 and 6) 	                     82,510      56,735
Deficit Accumulated During the
Development Stage 	                   (933,647)   (744,552)
-------------------------------------------------------------------------------
Total Stockholders' Deficit 		   (669,139)   (505,819)
Total Liabilities and Stockholders' Deficit	550         485
===============================================================================

Nature of Operations and Continuance of Business (Note 1)
Contingency - Disputed Compensation (Note 8)

(See Accompanying Notes to the Consolidated Financial Statements)








===============================================================================

F-4-

Hybrid Fuels, Inc.
(formerly Polo Equities, Inc.)
(A Development Stage Company
Consolidated Statements of Operations
(unaudited)

                       Accumulated from
                       February 26,
                       1960            Three months ended Six months ended
                      (Date of
                      Inception)         December 31,       December 31,
                      to December 31,
                          2000	       2000        1999   2000      1999
                          $              $           $      $         $
Revenue                   -              -           -      -         -
===============================================================================

Expenses
Advances written-off
(note 3)                 56,953       14,877         -    56,953      -
-------------------------------------------------------------------------------
Deposit on plant
written-off (Note 3)     170,561         -           -       -        -
-------------------------------------------------------------------------------
Disputed compensation
(Note 8(b))              243,463         -           -       -        -
-------------------------------------------------------------------------------
Executive compensation
(Note 6(b))              108,000      18,000     18,000   36,000   36,000
-------------------------------------------------------------------------------
Filing and regulatory
fees                      14,105       1,425      1,915    3,667    1,915
-------------------------------------------------------------------------------
General and
administration            57,047         831        764    1,071      954
-------------------------------------------------------------------------------
Interest                     783         673         -       783      -
-------------------------------------------------------------------------------
Imputed interest
(Notes 5 and 6)           82,510      13,673      7,347   25,775   13,244
-------------------------------------------------------------------------------
Investor relations        16,698       2,574      3,481    4,092    3,481
-------------------------------------------------------------------------------
Professional fees        125,449      39,250     13,127   56,500   13,254
-------------------------------------------------------------------------------
Rent and telephone        38,505       1,641      1,912    3,282    2,708
-------------------------------------------------------------------------------
Research and development   8,000         -           -       -        -
-------------------------------------------------------------------------------
Travel and promotion      11,573         486         95      972      190
-------------------------------------------------------------------------------
                         933,647      93,430     46,641  189,095   71,746
Net Loss                (933,647)    (93,430)   (46,641)(189,095) (71,746)
-------------------------------------------------------------------------------
Net Loss Per Share                      (.01)    (.01)      (.01)    (.01)
-------------------------------------------------------------------------------
Weighted Average
Shares Outstanding           -     19,524,000 15,024,000 19,524,000 15,024,000
===============================================================================

(See Accompanying Notes to the Consolidated Financial Statements)

===============================================================================

F-5-

Hybrid Fuels, Inc.
(formerly Polo Equities, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
(unaudited)

                                                Six Months ended
                                                  December 31,
                                                2000 	      1999
                                                  $	       $
===============================================================================
Cash Flows To Operating Activities

Net loss             			     (189,095)      (71,746)

Non-cash items
Imputed interest 	 		       25,775        13,244

Adjustment to reconcile net loss to cash
Accounts payable and accrued liabilities       16,632 	        -
-------------------------------------------------------------------------------
Net Cash Used In Operating Activities  	     (146,688)      (58,502)
-------------------------------------------------------------------------------
Net Cash Used By Investing Activities 	         -              -
-------------------------------------------------------------------------------
Cash Flows From Financing Activities

Proceeds from note payable 		       33,638 	        -
Advances payable                               46,143        20,087
Amounts owing to a Director                    37,615        37,215
Shareholder loans payable                      29,357         1,200
-------------------------------------------------------------------------------
Net Cash Provided By Financing Activities     146,753        58,502
-------------------------------------------------------------------------------
Net Increase (Decrease) in Cash                    65           -

Cash - Beginning of Period 		          485           -
-------------------------------------------------------------------------------
Cash - End of Period                              550           -
-------------------------------------------------------------------------------
Non-Cash Financing Activities                    -              -
-------------------------------------------------------------------------------
Supplemental Disclosures
Interest paid in cash                            -              -

Taxes paid in cash                               -              -
-------------------------------------------------------------------------------

(See Accompanying Notes to the Consolidated Financial Statements)













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F-6-
Notes to the Consolidated Financial Statements

1.	Nature of Operations and Continuance of Business
The Company was originally incorporated in the State of Florida on February 16,
1960. After a number of name changes the Company changed its name to Polo
Equities, Inc. on June 3, 1993. Prior to May, 1998 the Company had no business
operations.

In May 1998, the Company caused a Nevada corporation to be formed under the
name Polo Equities, Inc., (Polo) (a Nevada corporation), with authorized capital
of 50,000,000 common shares of $.001 par value. 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, which changed its domicile to Nevada.

On May 28, 1998, the Company acquired, by issuing 12,000,000 shares, Hybrid
Fuels, USA, Inc. 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. As
part of the acquisition, three shareholders representing 12,000,000 previously
issued shares returned their shares for cancellation. For accounting purposes
the acquisition was treated as a business purchase by Hybrid Fuels, Inc. of
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. The
Company operates through these two wholly-owned subsidiaries.

On May 29, 1998 the Company changed its name to Hybrid Fuels, Inc., herein
"the Company". On June 10, 1998 the Company began trading on the OTC Bulletin
Board under the symbol "HRID" and in December, 1999 was moved to the "Pink
Sheets". From May 1998 to June 1999 the Company operated out of an office in
California which was set up for investor relations and to raise additional
capital. This office was shut down in June and the new President and directors
are operating out of Kelowna, BC, Canada and Calgary, Alberta, Canada.

Pursuant to the acquisition, the Company acquired a number of proprietary
technologies with the primary objective of the business being to build small
farm scale ethanol facilities which involves a number of proprietary
technologies exclusively owned by the Company. Other proprietary technology
involves the use of a bio-gas burner which 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 which 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 in the early development stage. In a development stage company,
management devotes most of its activities in investigating business
pportunities and further advancing its technologies. Because of a deficiency
in working capital and other current commitments and significant operating
losses, there is substantial doubt about the ability of the Company to
continue in existence unless additional working capital is obtained.

Pursuant to a letter of intent and subject to a definitive agreement being
consummated, the Company plans to sell a license to use its proprietary
technology in a specified territory. The agreement contemplates a 50% up front
non-refundable fee which will be recognized as revenue when received and the
balance will be paid over time. The Company will also need to rely on the
forbearance of some creditors and related parties have agreed to continue to
fund working capital as needed. The Company has entered into discussions with
third parties to directly finance a facility in which the Company will then
commence with its business plan.
===============================================================================
F-7-

2. Summary of Significant Accounting Policies

   (a) Consolidated Financial Statements

   These consolidated financial statements represent the consolidation of the
   Company and its two subsidiaries Hybrid Fuels, U.S.A., Inc, and Hybrid
   Fuels (Canada) Inc.

   (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 statement in conformity with generally
   accepted accounting principles requires management to make estimates and
   assumptions that effect certain reported amounts and disclosures.
   Accordingly, actual results could differ from those estimates.

   (d) Accounting for Stock-Based Compensation

   SFAS No. 123, "Accounting for Stock-Based Compensation," requires that
   stock awards granted be recognized as compensation expense based on fair
   values at the date of grant. Alternatively, a company may account for stock
   awards granted under Accounting Principles Board Opinion (APB) No. 25,
   "Accounting for Stock Issued to Employees," and disclose pro forma income
   amounts which would have resulted from recognizing such awards at their
   fair value. The Company has elected to account for stock-based compensation
   for employees under APB No. 25 and make the required pro forma disclosures
   for compensation expense. Stock based compensation for non-employees are
   accounted for using SFAS No. 123.

3. Deposit on Plant
   The Company deposited Cnd$250,000 ($170,561), with Mega Holdings, Inc.,
   pursuant to an option agreement to purchase a beef processing plant owned
   by Mega Holdings, Ltd. The Company agreed to purchase the beef processing
   plant facility including land, buildings and equipment for Cnd$3,000,000
   which was below appraised value. The purchase agreement required an
   additional payment of Cnd$150,000 on June 24, 2000, the parties agreed to
   extend the deadline for the payment until March 15, 2001. This payment was
   not made and the deposit was forfeited and the option agreement terminated.
   Upon anticipated completion of the purchase, this beef processing plant was
   to be operated by Blue Mountain Packers, Ltd. (a related company). The
   Company intended to acquire the issued and outstanding common shares of
   Blue Mountain Packers, Ltd. for a nominal amount and operate it as a
   wholly-owned subsidiary. Blue Mountain Packers, Ltd. had recently received
   certification by the Canadian Food Inspection Agency of the Government of
   Canada, Department of Agriculture for the processing of Canadian beef. Blue
   Mountain Packers is a related party due to having one common director.
   During the six months ended December 31, 2000 the Company advanced $56,953
   to Blue Mountain Packers Ltd. and subsequent to December 31, 2000 the
   Company advanced $27,999 to Blue Mountain Packers Ltd., all for plant
   refurbishing. These advances bear interest at 8%. Due to the termination of
   the option agreement these advances are considered uncollectible and have
   been charged to operations.

4. Note Payable
   On September 15, 2000, the Company issued a note for Cnd$50,000 ($33,638)
   due and payable on or before September 15, 2001 plus 8% interest. Repayment
   of the note has been extended until completion of a financing. Interest of
   $2,129 has been accrued at June 30, 2001 and is included in accounts
   payable.
===============================================================================
F-8-

5. Advances Payable
   A non-related company coordinated investor relations services for the
   Company and paid expenses of $68,954 on behalf of the Company and loaned
   Cnd$30,000 ($19,315). Subsequent to December 31, 2000 this company paid
   additional expenses of $294 and loaned the Company Cnd$48,000 ($30,905) for
   a total amount owing of $119,468 as at June 30, 2001. This debt was settled
   on June 29, 2001 by the issuance of 1,000,000 restricted common shares of
   the Company. These advances were non-interest bearing and unsecured until
   the settlement date. Imputed interest of $4,380 was charged to operations
   and treated as donated capital.

6. Related Party Transactions/Balances

   (a) Cash loans of $499,099 were advanced to the Company by the major
   shareholder. A total of $365,590 was repaid with cash. The controlling
   shareholder also paid office, rent and professional fees totalling $59,596
   on behalf of the Company. The balance of $193,105 is owing without interest
   or specific repayment terms. Imputed interest of $14,400 (1999 - $10,400)
   was charged to operations and treated as donated capital.

   (b) The President who is also a Director of the Company, has paid office
   and related expenses from personal funds in the amount of $2,432. Effective
   July 1, 1999 the President is entitled to a deferred salary of US$6,000 per
   month and was owed a total of $108,000 at December 31, 2000. These amounts
   are unsecured, non-interest bearing and due on demand. Imputed interest of
   $6,995 (1999 - $2,091) was charged to operations and treated as donated
   capital.

   (c) See Note 3 for subsequent advances to Blue Mountain Packers Ltd.


7.  Stockholders' Equity

   (a) On May 28, 1998, the Company acquired, by issuing 12,000,000 shares,
   Hybrid Fuels, USA, Inc. 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. gained control of
   Polo Equities Inc. As part of the acquisition three shareholders
   representing 12,000,000 previously issued shares returned their shares for
   cancellation. For accounting purposes the acquisition was treated as a
   business purchase by Hybrid Fuels USA Inc. of Polo Equities, 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.

   (b) 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 it may incur in
   any way arising out of the cancellation of such shares and the transfer
   agent removed the 1,900,000 shares from the stockholder list effectively
   reversing the issuance. Six of the cancelled certificates, totalling
   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
===============================================================================
F-9-

7. Stockholders' Equity (b)(con't)
   shareholders. To date when these shares are delivered to a broker for
   possible resale the broker phones 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 the former administration has failed
   to provide addresses despite a number of requests.

   (c) On May 17, 2000 the Company issued 1,500,000 shares pursuant to a
   subscription agreement for $150,000 dated February 17, 2000. On February 17
   and 18, 2000, the Company accepted subscription agreements and notes
   whereby the Company would receive $300,000 for 3,000,000 shares. The
   3,000,000 shares were issued and were then held in escrow. These shares
   were subsequently released from escrow to the investors to facilitate
   financing. The notes were to bear interest at 8% and were to be paid within
   60 days or at the discretion of the President. In June 2000 the President
   extended the time for repayment to one week of the Company being re-listed
   on the Over-The-Counter Bulletin Board or other suitable exchange. When it
   became apparent there were going to be long delays the notes were demanded
   to be repaid by February 21, 2001.

   The notes were not paid as demanded, and the 3,000,000 shares have since
   been sold by the investors to innocent third parties. The investors did not
   and have not paid the Company for these shares, despite demands. Since
   these shares have been resold to innocent third parties they must be
   considered outstanding. The Company intends to sue the investors for the
   balance due on the notes, however the Company believes the balance is
   uncollectible.

   (d) Between October 1998 and June 1999, the previous administration sold a
   total of 361,120 common shares of the Company to 34 subscribers on the
   basis of an Offering Memorandum that contained a significant number of
   inaccuracies. A total of $223,000 was raised pursuant to this Offering. The
   current administration has 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. 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.
   As at June 30, 2000 79,820 shares were issued and subsequently a further
   152,933 shares were issued for a total subscription price of $158,000. The
   remaining subscribers, who paid $65,000 for 123,367 shares, have not
   responded to the offer. Shares issued will not be considered outstanding
   and received subscriptions are recorded as temporary equity until
   rescission rights have been revoked. (e) See Note 4 for 1,000,000
   restricted common shares issued to a non-related company to settle debt of
   $119,468.

8. Legal Issues

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

   (a) See Note 7(b) for contingencies relating to improperly issued
   shares that were later cancelled.

   (b) Unauthorized and/or unsupported payments in the amount of $243,463 were
   made from Company funds by past officers of the Company during the period
   May, 1998 to June, 1999. The Company has requested a full accounting from
===============================================================================
F-10-

8. Legal Issues (b)(con't)
   the past president. All amounts that were unauthorized by the board of
   directors or amounts that are not properly documented with invoices and
   receipts have been accounted for as disputed executive compensation.
   Actions of the previous administration have been reported to the Securities
   and Exchange Commission. At such time as Company resources permit, the
   Company will seek legal advice to determine whether or not it is possible
   to recover all such disputed and unauthorized amounts from the previous
   administration.

   (c)	See Note 7(d) for temporary equity and related rescission rights for
   subscribers of 361,120 shares of the Company.

9. Subsequent Events

   (a) See Note 3 for forfeiture of the deposit on plant and advances to Blue
   Mountain Packers.

   (b) See Note 5 for further advances from a non-related company and issuance
   of 1,000,000 restricted common shares to settle debt of $119,468.

   (c) On June 29, 2001, 100,000 restricted common shares, valued at $5,000,
   were issued to a non-related consultants for plant refurbishing work to
   March 15, 2001.

   (d) On September 19, 2001, 200,000 restricted common shares valued at
   $10,000 were issued to a director and officer of the company for
   professional services rendered.



































===============================================================================
Page-11-


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

This Form 10-QSB contains forward-looking statements. The words "anticipate",
"believe", "expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and similar expressions identify forward-looking statements that
involve risks and uncertainties.  You 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
year ended June 30, 2000 and our Form 10-QSB for the quarter ended September
30, 2000.  Actual results could differ materially from the results discussed
in the forward-looking statements.

Except for disclosures that report the Company's historical results, the
statements in this document are forward-looking statements. Actual results may
differ materially from those projected in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof. The Company assumes no
obligation to update forward-looking statements or comments or the reasons why
actual results may differ therefrom.

The Company is a developmental stage company and has had no income since the
acquisition of the Hybrid Fuels technology in June 1998, nor is it likely to
have any significant cash flow until after the end of its current fiscal
period ending June 30, 2001. If the Company is unable to obtain funds from
external sources, it is probable that it will be unable to continue to operate
in the long term.

Although the Company is in the developmental stages, the process behind
Hybrid's business has been researched and developed over more than a decade. A
plant that integrated the process described below was constructed and operated
near Dalum, Alberta during 1994 through 1996.  That operation is the source of
the actual operating results that are referred to later in this report.

After that plant was closed in 1996, further research, development and
construction helped us discover ways to improve the buildings and equipment
and refine the process, which is now ready for market.

The Company's business plan is to sell and build farm scale plants that
produce ethanol and are integrated with a cattle finishing operation. Grain,
corn or other feedstock is fermented and then distilled to make the ethanol.
Left over from the ethanol production process are a high protein mash, called
"distillers grain" and water, called "stillage water".  These are used as feed
and water for beef animals because they contain nutrients. In addition, the
fermentation process frees a higher percentage of the total food value from
the feedstock and makes it more "available" to the animals digestive system.
The result is higher than average weight gains for the animals without the use
of hormones.  By using the distillers grain and stillage water on site the
animals get the benefit of the nutrients in these byproducts and the plants
save the energy it would otherwise require to dry and transport the distillers
grain and the cost of disposing of the stillage water.

The manure and used bedding straw are cleaned up frequently, thus removing the
media in which disease would otherwise grow.  They are burned in a gasifier
and the heat produced is used in the fermentation and distillation processes,
with leftover heat being available to operate a greenhouse.  The ethanol is
mixed with a proprietary emulsifier and diesel.  When this emulsion was tested
in June 1996 at The British Columbia Institute of Technology, in an unaltered
diesel engine, it reduced the particulate (black smoke) emissions by over 62%
and the Nox emissions by over 22%, without any significant loss of power.
These plants are referred to as "micro energy food facilities" or "MEFFs",
===============================================================================

Page-12

Item 2.  Management's Discussion and Analysis or Plan of Operation (con't)

because of the small amount of energy from outside sources that is necessary
to operate them.

Hybrid plans to earn revenue from several streams:

1. profit on the sale of each MEFF;

2. the royalties and service fees that each operator will pay;

3. the purchase of the ethanol mixture from the operator at 80 % of wholesale
   value and the sale to distributors or end-users;

4. the marketing of the finished animals;

5. a premium on the sale of the beef.

Royalties and service fees are expected to be payable monthly in amounts yet
to be determined.  Incentives in the form of reduced royalties may be offered
to the first 10 to 20 operators who make early commitments to purchase plants.
Service fees to cover the cost of ongoing training, service, technical
support, and quality control will be in the $150 to $250 per month range.

Initially it is anticipated that most of the finished beef will be sold at
auction until the Company develops specialty markets. The Company believes
that it will be able to generate premium prices for the beef because of its
high quality and taste. In the test trials at the prototype plant, the
purchaser of the first lot of beef agreed to pick up subsequent lots at the
plant and pay a premium of $0.10 per pound for all of the beef that could be
produced by this process. The Company anticipates entering into an agreement
with its operators which will pay the Company an incentive for obtaining
premium prices for the sale of the beef.  We anticipate this will be in the
form of a percentage of the premium realized.

Possible sources of premium prices that the Company has investigated include
markets in Europe and the Far East, high-end restaurants, cruise ships and
specialty meat markets that sell organic and hormone free meat to concerned
consumers.

Management has recognized that it would be advantageous to be able to control
the processing, marketing and distribution of the finished beef.  A number of
possibilities have been considered with the most promising being Company
operated or sponsored retail outlets, development of foreign markets and
specialty markets.  The first, and perhaps the most important, obstacle
encountered was the lack of meat processing facilities that could and would
process the beef to our specifications.

In the second quarter of 2000, Hybrid found a packing plant that was within a
two-hour drive of our head office and was not operating.  This plant seemed to
be perfect for our needs because of its size and the fact that it was
constructed to meet the specifications necessary in order to process beef for
shipment to Europe and the Far East.  The Company negotiated an agreement with
the owners to take possession of the plant, get it operating and obtain an
operating certificate from the Canadian Food Inspection Agency (CFIA).   The
agreement contemplated the Company operating the plant for several months
before the balance of the purchase price was due to be paid.  That operating
period was necessary in order to satisfy the financial institutions who were
to advance the money to pay the balance of the purchase price of our ability
to generate cash flow from the operation.


===============================================================================
Page-13-

Item 2.  Management's Discussion and Analysis or Plan of Operation (con't)

Relying on written commitments of equity financing from investors, the Company
made the deposit on the packing plant just prior to the end of last fiscal
year. For financing reasons, a new company, Blue Mountain Packers LTD., was
incorporated.  This company was intended to be the operating company and it
did the work to get the plant operating.  It was further intended that Hybrid
would acquire all of the shares of Blue Mountain Packers LTD., for a nominal
amount and operate it as a wholly owned subsidiary. Hybrid borrowed money and
advanced it to Blue Mountain to pay start-up costs.

By the end of the quarter ended September 30, 2000, the plant was ready for
inspection by CFIA and an inspection had been scheduled for mid-October.
However, the investors failed to deliver the balance of money in a timely
manner and we were unable to commence operations until we receive money.
Therefore, as at the end of the quarter ended December 31, 2000, we have been
unable to commence operations as a result of the money shortage. This could
have a serious impact on future operations.

The Company and Blue Mountain Packers Ltd., continue to search for money to
acquire the plant and commence operations.  No commitment will be made to
purchase the plant until sufficient money is committed to pay the purchase
price and cover operating expenses, until positive cash flow is achieved. Cash
flow is expected to begin within 30 to 60 days after operations begin and it
is anticipated that it would take about six to nine months to achieve positive
cash flow.

At the beginning of the quarter, the Company was the holder and payee of two
outstanding promissory notes from two investors for shares that had been
issued pursuant to an Offering under Rule 504.  At their request, the makers
of the notes were granted an extension of time to pay and the shares were
delivered to the Investors to facilitate the raising of money.

If the notes are not paid when the extension is to expire in the new year, the
Company may have difficulty collecting the balance that is due on the
promissory notes and legal proceedings may need to be commenced to recover the
shares.  At this time, the Company does not have the financial resources to
retain attorneys to commence those legal proceedings.

Until such time as the Company sells and constructs MEFFs and recognizes
revenue, the Company will continue to experience a cash shortage.  Because the
Company is a developmental stage company, it is unlikely to be able to borrow
money from banks and other traditional financial institutions.  The lack of
long term, adequate financing continues to be of great concern to management.

The Company will require additional capital in the near future in order for it
to continue as a going concern in the long term.  For the coming quarter,
management anticipates spending most of its energies on raising money.

If the investors fail to advance the balance of funds as promised, the Company
will need to raise money in some other way to continue operating for the next
12 months.  To do so, it is likely that the Company will sell additional
shares of its common stock to pay operating expenses for the next 12 months.
The Company's general and administrative expenses for the next 12 months are
expected to be less than $1500 per month, exclusive of executive compensation,
which is deferred, and professional fees for legal and accounting services.

It is anticipated that related parties will continue to pay these operating
expenses and advance funds to pay legal and accounting fees, but no assurances
can be given.

Management is convinced that an environmentally friendly project such as ours,
which produces cleaner food, cleaner air and cleaner water is a sound basis
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Page-14-

Item 2.  Management's Discussion and Analysis or Plan of Operation (con't)

for a successful business.  For this and other reasons, we believe that
building and operating the first MEFF is essential to create cash flow and to
demonstrate to potential operators that the technology works as advertised.

The prospective operators want to see it in operation before they commit
themselves and so do the people who will approve the financing for the
construction of plants.

The Company has made arrangements to locate its first MEFF, near Kelowna,
B.C., Canada, and continues looking for the funds to build the plant and
operate it until it begins to generate positive cash flow. The Company
anticipates that it will own this first MEFF and use it as a demonstration and
training facility. It is anticipated that the lender will be given security on
the plant in return for the loan.

We anticipate it will take from two to four months from the start of
construction until the plant is operational and five to six months before it
is generating positive cash flow.  The financing that we were negotiating has
been delayed as a result of circumstances beyond the control of the Company
and the investor. The Company is therefor looking for other sources of money
to build the first plant. The Company is not in a position to estimate
accurately when funds will be available and construction started.

We continue to make progress towards the sale of a license to operate in a
specified territory, as the prospective purchaser continues their "due
diligence" and organizational activities. At this stage, it appears that it
will take another several months to finalize a deal with a comprehensive
written agreement and payment of the license fee.

Until such time as we have succeeded in raising money, the Company will not
proceed with construction and will keep operating costs to a minimum. Once
money is available to pursue our program, operating costs will be kept to a
minimum by using paid consultants as necessary on an ad hoc basis and no new
employees will be hired until the Company has sufficient revenues.

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
    Exhibit No. 3.1* - Articles of Incorporation
                3.2* - Bylaws
                4.1~ - Specimen Stock Certificate

*Incorporated by reference from the registrant's Form 10-SB filed with the
Commission on February 4, 2000.

~ Incorporated by reference from the registrant's Form 10-KSB filed for the
period ended June 30, 2000 and filed with the Commission on June 12, 2001.

(b) Reports on Form 8-K. None.

SIGNATURE

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

HYBRID FUELS, INC.
/s/	Clay Larson		October 11, 2001
By Clay Larson			Date
Its President
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