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

                                FORM 10-QSB/A/2

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

                 For the Quarterly Period Ended March 31, 2001

           []      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.,                  V1V 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]







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

                               HYBRID FUELS, INC.

                                  FORM 10-QSB

                      For the quarter ended March 31, 2001

INDEX


Part I - Financial Information

      Item 1.  Financial Statements                             Page

      Consolidated Balance Sheets as of March 31, 2001...........F-3

      Statements of operations for
      the quarters and the nine months
      ended March 31, 2001 and 2000..............................F-4

      Statements of cash flows for the
      nine months ended March 31, 2001 and 2000..................F-5

      Notes to Financial Statements..............................F-6

      Item 2.   Management's Discussion and
                Analysis or Plan of Operation....................12


Part II - Other Information

      Item 5.   Other Information................................16

      Item 6.   Exhibits and Reports on Form 8-K.................16

























==============================================================================
                                      F-3


Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Balance Sheets


                                        (Restated -        (Restated -
                                        See Note 9)        See Note 9 )
                                         March 31,          June 30,
                                           2001              2000
                                            $                  $
                                        (unaudited)         (audited)
------------------------------------------------------------------------------
ASSETS

Current Assets
Cash                                           15                485
Total Assets                                   15                485
------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable                            9,872              3,111
Accrued liabilities (Note 6(d))            14,000                -
Advances payable (Note 5)                 119,356             42,013
Note payable (Note 5)                      33,638                -
Shareholder loan payable (Note 6(a))      195,751            163,748
Amounts owing to a Director (Note 6(b))   130,326             74,432

Total Current Liabilities                 502,943            283,304
------------------------------------------------------------------------------
Temporary Equity (Note 7(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)                            98,817             56,735
------------------------------------------------------------------------------
Deficit Accumulated During
the Development Stage                  (1,006,743)          (744,552)
------------------------------------------------------------------------------
Total Stockholders' Deficit              (725,928)          (505,819)
------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Deficit                          15                485
------------------------------------------------------------------------------

Nature of Operations and Continuance of Business (Note 1)
Contingencies (Note 8)
(See Accompanying Notes to the Consolidated Financial Statements)


==============================================================================
                                      F-4
Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(unaudited)

                                            Three months       Nine Months
                                                Ended             Ended
                       Accumulated from     March 31,          March 31,
                       February 26, 1960
                       (Date of Inception (Restated------------- See Note 9)
                       to March 31, 2001     2001    2000    2001    2000
                              $                $       $       $       $
------------------------------------------------------------------------------
Revenue                       -                -       -       -       -

General and Administrative Expenses
------------------------------------------------------------------------------
Advances to Blue Mountain Packers
Ltd. written-off (Note 4)     84,951        27,999     -    84,951     -
Deposit on plant written-off
(Note 3)                     170,561           -       -       -       -
Other compensation
(Note 8(b))                  243,463           -       -       -       -
Executive compensation
(Note 6(b))                  126,000        18,000  18,000  54,000  54,000
Filing and regulatory fees    14,246           141     -     3,808   1,915
General and administration    57,345           298     765   1,369   1,719
Imputed interest
(Notes 5 and 6)               98,817        16,307   8,192  42,082  21,436
Interest                       1,456           673     -     1,456     -
Investor relations            16,698           -     6,188   4,092   9,669
Professional fees            133,174         7,725     127  64,225  13,381
Rent and telephone            40,304         1,798   1,913   5,080   4,621
Research and development       8,000           -       -       -        -
Travel and promotion          11,728           155      95   1,128     285
------------------------------------------------------------------------------
                           1,006,743        73,096  35,280 262,191 107,026
------------------------------------------------------------------------------
Net Loss                  (1,006,743)      (73,096)(35,280)(262,191)(107,026)
------------------------------------------------------------------------------
Net Loss Per Share                           (.01)  (.01)    (.01)   (.01)
------------------------------------------------------------------------------
Weighted Average
Shares Outstanding            -    19,457,000 19,100,000 19,457,000 15,609,000
------------------------------------------------------------------------------

(See Accompanying Notes to the Consolidated Financial Statements)











==============================================================================
                                      F-5
Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(unaudited)

                                                      Nine Months
                                                         Ended
                                                       March 31,
                                                  (Restated - See Note 9)
                                                    2001        2000
                                                     $           $
------------------------------------------------------------------------------
Cash Flows To Operating Activities

Net loss                                         (262,191)    (107,026)
------------------------------------------------------------------------------
Non-cash items
Imputed interest                                   42,082        21,436
Advances written-off                               84,952          -
------------------------------------------------------------------------------
Adjustment to reconcile net loss to cash
Accounts payable and accrued liabilities           20,761          -
------------------------------------------------------------------------------
Net Cash Used In Operating Activities            (114,396)      (85,590)
------------------------------------------------------------------------------
Cash Flows To Investing Activities

Advances to Blue Mountain Packers Ltd.            (84,952)         -
------------------------------------------------------------------------------
Net Cash Used By Investing Activities             (84,952)         -
------------------------------------------------------------------------------
Cash Flows From Financing Activities
Advances payable                                   77,343        27,967
Amounts owing to a Director                        55,894        55,823
Shareholder loans payable                          32,003         1,800
Proceeds from note payable                         33,638          -
------------------------------------------------------------------------------
Net Cash Provided By Financing Activities         198,878        85,590
------------------------------------------------------------------------------
Net Decrease in Cash                                 (470)         -
------------------------------------------------------------------------------
Cash - Beginning of Period                            485          -
------------------------------------------------------------------------------
Cash - End of Period                                   15          -
------------------------------------------------------------------------------
Non-Cash Financing Activities                         -            -
------------------------------------------------------------------------------
Supplemental Disclosures
Interest paid in cash                                 -            -
Taxes paid in cash                                    -            -
------------------------------------------------------------------------------

(See Accompanying Notes to the Consolidated Financial Statements)





==============================================================================
                                      F-6

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. All historical financial statements are those of Hybrid Fuels, USA, Inc.
and Hybrid Fuels (Canada) 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 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. 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, AB, 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
opportunities 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.


==============================================================================
                                      F-7
1. Nature of Operations and Continuance of Business.(con't)

The Company will 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.


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.

   (e)Interim Financial Statements
   These interim unaudited financial statements have been prepared on the same
   basis as the annual financial statements and in the opinion of management,
   reflect all adjustments, which include only normal recurring adjustments,
   necessary to present fairly the Company's financial position, results of
   operations and cash flows for the periods shown. The results of operations
   for such periods are not necessarily indicative of the results expected for
   a full year or for any future period.

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

==============================================================================
                                      F-8
3. Deposit on Plant (con't)
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. The Company advanced $84,951 to Blue Mountain Packers 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 included in the accounts payable.

5. Advances Payable
A non-related company co-ordinated investor relations services for the Company
and paid expenses of $69,248 on behalf of the Company and loaned the Company
Cnd$78,000 ($50,220) for a total amount owing of $119,468. 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 $8,856 (2000 - $1,654) ), calculated
at a rate of 15% per annum, was charged to operations and treated as donated
capital.

6. Related Party Transactions/Balances
   (a) Cash loans of $499,059 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 $62,786
   on behalf of the Company. The balance of $196,255 is owing without interest
   or specific repayment terms. Imputed interest of $21,691 (2000 - $15,600) ),
   calculated at a rate of 15% per annum, 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 $10,626 of which
   $6,300 has been reimbursed with cash. Effective July 1, 1999 the President
   is entitled to a deferred salary of US$6,000 per month and was owed a total
   of $126,000 at March 31, 2001. These amounts are unsecured, non-interest
   bearing and due on demand. Imputed interest of $11,535 (2000 - $4,182),
   calculated at a rate of 15% per annum, was charged to operations and treated
   as donated capital.

   (c) See Note 3 for 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.

==============================================================================
                                      F-9

7.Stockholders' Equity (a)(continued)
   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 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 for $150,000 cash
  pursuant to a subscription agreement 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 351,053 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
==============================================================================
                                      F-10
7. Stockholders' Equity (d)(continued)
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 237,853 shares,
representing $158,000. These shares are issued but not considered outstanding.
The remaining 11 subscribers, who paid $65,000 for 113,200 shares, have not
responded to the offer. These subscriptions are recorded as temporary equity
until rescission rights have been revoked.

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 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. 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 351,053 shares of the Company.

9. Restatements
   The Company has restated its financial statements for the period ended March
   31, 2001 and March 31, 2000. The nature of the restatements and the effect
   on net income and earnings per share are as follows:

                                 Three Months Ended     Nine Months Ended
                                      March 31,             March 31,
                                 2001        2000       2001        2000
                                  $           $           $           $
------------------------------------------------------------------------------
Net loss for the year as previously reported
                              (257,529)   (18,000)    (332,306)   (62,835)
Corrections effecting net income:
(a) Inclusion of imputed interest at a rate of 15% per annum on non-interest
bearing loans                  (16,307)    (8,192)     (42,082)   (21,436)
(b) Deposit on plant written-off in a prior period
                               170,561       -         170,561        -
(c) Advances to Blue Mountain Packers written off
                                32,608       -         (24,344)       -
(d) Recognition of a liability owing to a non-related company for expenses paid
on behalf of the Company        (2,429)    (9,088)     (34,020)   (22,755)
Net loss for the year as restated
                               (73,096)   (35,280)    (262,191)  (107,026)
Loss per share as previously reported
                                  (.02)       -           (.02)      (.01)
Loss per share on restatements     .01        -             -          -
Loss per share as restated        (.01)       -           (.02)      (.01)
==============================================================================
                                      F-11
9. Restatements (con't)
In addition to the restatements noted above certain other financial statement
note disclosures were provided to improve the overall presentation of the
Company's financial statements.

10. Subsequent Events
    (a)	On September 19, 2001 a total of 200,000 shares were issued to a
    director/officer of the Company to settle $10,000 owing as at June 30,
    2001.

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

    (c) A total of 100,000 restricted common shares, valued at $5,000, were
    issued to the plant manager of Blue Mountain Packers Ltd. for plant
    refurbishing work to March 15, 2001.










































==============================================================================
Page-12-

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. Actual results could differ materially from the results
discussed in the forward-looking statements.

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 Dalem, Alberta during 1994 and 1995. That operation is the source of the
actual operating results that are referred to later in this report.

After that plant was closed in 1995, 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 plus an enrichment process that is used free a higher percentage of the
total food value from the feedstock and make 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.

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 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 loss of power.

These plants are referred to as "micro energy food factories" or "MEFFs",
because of the small amount of energy from outside sources that is necessary to
operate them.

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

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

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.

Royalties and service fees will 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 are expected to 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. 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 believes that it
will be able to generate premium prices for the beef because of its high
quality and taste. 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.

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
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Page-14-

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

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 mid-October 2000 the plant was approved by CFIA and ready to operate.
However, the investors failed to deliver the balance of money as promised.  The
result was that we were unable to commence operations and create the cash flow
that would have enabled us to raise the money to purchase the plant.

During the quarter ended March 31st, 2001, the deadline for purchasing the meat
packing plant expired. As the Company was unable to obtain the financing to
close the purchase, the deposit was forfeited and the money which was loaned to
Blue Mountain Packers Ltd., and spent on preparing the plant for operations is
unlikely to be recovered. As such the deposit has been removed as an asset, and
the amounts loaned to Blue Mountain Packers Ltd., have been classified as bad
debts, in the financial statements. See Notes 3 & 4 to the financial statements.

The Company has discussed its failure to exercise the option with the owners of
the packing plant.  The owners have verbally agreed that they will sell the
plant to the Company at any time that we are able to pay the purchase price for
the plant, assuming that it has not already been sold.  There is no agreement
with the owners concerning whether or not the deposit would be subtracted from
the purchase price.

The meat packing plant is unlikely to sell quickly because of its size and
location.  Any prospective purchaser will need to have a supply of animals and
a market to make the plant profitable.  At present that is a problem because
meat prices have increased dramatically and finished animal supplies have been
committed much earlier than normal as a result of "mad cow" and hoof and mouth
disease.  The Company is satisfied that it has a workable business plan to make
the packing plant operate profitably by building the MEFFs in close proximity
to the packing plant. To ensure that a supply of enough hormone free feeders
for finishing are committed to keep the MEFFs and the packing plant running at
full capacity, a premium would be paid to the cow/calf ranchers. On the
marketing side, the Company believes it is possible to generate higher than
industry average returns because the process produces high quality meat which
the Company would market to high-end specialty restaurants, cruise ships and
markets in Europe and the far east.

As a consequence, the Company and Blue Mountain Packers Ltd., continue to
search for money to acquire the plant.  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 would
begin within 30 to 60 days after operations begin and 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 several extensions of time to pay and the shares were
delivered to the Investors to facilitate the raising of money. On February 6,
2001, the Company demanded payment of those notes by February 21, 2001. The
notes were not paid as demanded, and the shares have not been returned.  It is
unlikely that the Company will be able to collect the balance that is due on
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Page-15-

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

the promissory notes and that legal proceedings will 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. The money
owing pursuant to the promissory notes is disclosed as a reduction of
shareholders equity in the financial statements.

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 and
complying with public reporting requirements.

To solve the cash shortage problem, the Company is involved in discussions to
sell a license to use the technology in a specified territory.  Although the
parties have signed a letter of intent, no definitive agreement has been signed
and no money has changed hands.  The discussions contemplate payment of an
up-front fee plus royalties for the use of the technology.  In addition, the
licensee would be required to purchase certain items of equipment from the
Company on an ongoing basis. If the parties are able to reach an agreement as
presently being discussed, the license fee would be sufficient to pay the
Company's outstanding payables and operating costs for the next 12 months. The
sale of such a license is expected to be a one time event.

If the Company is unable to realize income by selling a license to use the
technology in a specified territory, 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 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 found a suitable location for its first MEFF, which will be
located near Kelowna, B.C., Canada. The Company will own this first MEFF and
use it as a demonstration and training facility. The Company is presently
negotiating with a private source to obtain the necessary financing to
construct this first MEFF and expects to have funding committed and
construction started in late May or early June 2001. The lender will be given
security on the plant in return for the loan.
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Page-16-

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

We anticipate it will take approximately two months from the start of
construction until the plant is operational and four to five months before it
is generating positive cash flow. The financing that is being negotiated will
be sufficient to cover all construction and operating expenses until positive
cash flow is achieved. Once the first MEFF is operating we expect to receive
approval for financing subsequent plants within two to three weeks. By that
time, the Company expects it will have qualified and trained two or more
operators.

The Company will lease parts of the technology to the operators on a permanent
basis to protect the secrecy of the most vital pieces of the technology. The
Company will earn a profit and recognize revenue on the sale of each plant. The
Company will also receive a royalty, which is initially expected to be $2500US
per month which will begin when each MEFF begins operation. The profit on the
sale of each plant will be sufficient to cover all of the operating expenses
the Company will incur until revenues are received from royalties.

To date, the Company has received applications from more than fifty farmers who
are interested in acquiring MEFFs.  The Company is currently developing a
screening process to select suitable candidates and assist them in obtaining
financing, if necessary, for plant construction. The intention is to have at
least four candidates approved for training by the time the demonstration MEFF
is operating.

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 obtaining financing, 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.

Date
March 5, 2002 		/s/ John Morrison

By: John Morrison, CFO