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 September 30, 2004

          [_]  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 Identification No.)
      incorporation or organization)


         237 Main Street, Box 880, Niverville, Manitoba         R0A 1E0
           (Address of principal executive offices)           (Zip 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 [_]

The number of issued and outstanding shares of the registrant's common stock as
of November 10, 2004 was 23,679,733.

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


                                       1
<PAGE>

                                TABLE OF CONTENTS



PART-I     FINANCIAL INFORMATION                                            PAGE

Item 1     Financial Statements............................................... 3

Item 2     Plan of Operation................................................. 12

Item 3     Controls and Procedures........................................... 16


PART-II    OTHER INFORMATION                                                PAGE

Item 1     Legal Proceedings................................................. 17

Item 2     Unregistered Sales of Equity Securities and Use of Proceeds ...... 17

Item 3     Defaults Upon Senior Securities................................... 17

Item 4     Submission of Matters to a Vote of Security Holders............... 17

Item 5     Other Information................................................. 17

Item 6     Exhibits and Reports on Form 8-K.................................. 17

           Signature......................................................... 17


                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION
                         ------------------------------


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

Hybrid Fuels, Inc.
(A Development Stage Company)


September 30, 2004
                                                                           Index


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




                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                      September 30,        June 30,
                                                                                          2004               2004
                                                                                           $                   $
                                                                                      (unaudited)          (audited)
<S>                                                                                   <C>                  <C>
ASSETS

Current Assets

  Cash                                                                                       291                7,907
                                                                                      ----------           ----------

Total Assets                                                                                 291                7,907
                                                                                      ==========           ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

  Accounts payable                                                                        48,296               50,265
  Accrued liabilities                                                                      5,550                3,250
  Note payable and other advances (Note 3)                                                41,742               39,432
  Amounts owing to related parties (Note 4)                                              209,309              205,050
  Amounts owing to a former director (Note 5)                                            326,701              326,701
                                                                                      ----------           ----------

Total Liabilities                                                                        631,598              624,698
                                                                                      ----------           ----------

Redeemable and Restricted Common Stock (Note 7(c))                                       223,000              223,000
                                                                                      ----------           ----------

Commitments and Contingencies (Notes 1 and 7)

Stockholders' Deficit

Common Stock: $0.001 par value (Note 6)
  50,000,000 shares authorized
  23,446,980 and 23,371,980 shares issued and outstanding respectively                    23,447               23,372

Additional Paid-in Capital                                                               631,450              625,828

Donated Capital                                                                          356,781              329,554

Deferred Compensation                                                                    (13,649)             (27,299)

Deficit Accumulated During the Development Stage                                      (1,852,336)          (1,791,246)
                                                                                      ----------           ----------

Total Stockholders' Deficit                                                             (854,307)            (839,791)
                                                                                      ----------           ----------

Total Liabilities and Stockholders' Deficit                                                  291                7,907
                                                                                      ==========           ==========
</TABLE>



    (The Accompanying Notes are an Integral Part of the Financial Statements)
                                       F-1


                                       4
<PAGE>

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

<TABLE>
<CAPTION>



                                                                   Accumulated from
                                                                   February 16, 1960          Three Months Ended
                                                                  (Date of Inception)   ------------------------------
                                                                   to September 30,     September 30,    September 30,
                                                                        2004                2004             2003
                                                                         $                   $                $
<S>                                                                 <C>                     <C>            <C>

Revenue                                                                     --                     --              --
                                                                    ----------             ----------      ----------

Expenses

Deposits and advances written-off                                      255,512                     --              --
Consulting fees                                                        171,066                 13,649           3,750
Donated services (Note 4)                                               15,000                  7,500              --
Executive compensation (Note 5)                                        337,670                     --          18,000
Filing and regulatory fees                                              26,662                    532              60
General and administration                                              72,625                  3,958              18
Imputed interest (Notes 4 and 5)                                       341,781                 19,727          19,076
Interest and bank charges                                               15,302                    925           1,098
Investor relations                                                      80,716                 11,044              --
Disputed compensation (Note 7(b))                                      243,463                     --              --
Professional fees                                                      200,421                  3,300             534
Rent and telephone                                                      45,736                    441             131
Research and development                                                16,925                     --              --
Travel and promotion                                                    29,457                     14              --
                                                                    ----------             ----------      ----------
                                                                     1,852,336                 61,090          42,667
                                                                    ----------             ----------      ----------
Net Loss for the Period                                             (1,852,336)               (61,090)        (42,667)
                                                                    ==========             ==========      ==========
Net Loss Per Share - Basic and Diluted                                                             --              --
                                                                                           ==========      ==========

Weighted Average Shares Outstanding                                                        23,397,000      21,978,000
                                                                                           ==========      ==========

</TABLE>


    (The Accompanying Notes are an Integral Part of the Financial Statements)
                                       F-2


                                       5
<PAGE>

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

<TABLE>
<CAPTION>

                                                                                           Three Months Ended
                                                                                      -----------------------------
                                                                                      September 30,  September 30,
                                                                                          2004            2003
                                                                                            $              $
<S>                                                                                    <C>              <C>
Cash Flows Used In Operating Activities

  Net loss                                                                             (61,090)         (42,667)

  Adjustments to reconcile net loss to net cash
    Common shares issued for services                                                       --            3,750
    Deferred executive compensation                                                         --           18,000
    Imputed interest                                                                    19,727           19,076
    Donated services                                                                     7,500               --
    Deferred compensation                                                               13,650               --

  Change in operating assets and liabilities
    Accounts payable and accrued liabilities                                               331             (766)
                                                                                       -------          -------
Net Cash Used In Operating Activities                                                  (19,882)          (2,607)
                                                                                       -------          -------
Cash Flows From Financing Activities

    Proceeds from advances                                                               2,310               --
    Advances from related parties                                                        4,259            2,256
    Proceeds from issuance of common stock                                               5,697               --
                                                                                       -------          -------
Net Cash Provided By Financing Activities                                               12,266            2,256
                                                                                       -------          -------
Net Decrease in Cash                                                                    (7,616)            (351)
Cash - Beginning of Period                                                               7,907            1,247
                                                                                       -------          -------
Cash - End of Period                                                                       291              896
                                                                                       =======          =======
Non-Cash Financing Activities

    Common shares issued for services                                                       --            3,750
    Common shares issued to settle debt                                                     --           10,000
                                                                                       =======          =======
Supplemental Disclosures

  Interest paid                                                                             --               --
  Income taxes paid                                                                         --               --
                                                                                       =======          =======

</TABLE>


    (The Accompanying Notes are an Integral Part of the Financial Statements)
                                       F-3



                                       6
<PAGE>

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 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". 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". The Company was re-listed on the OTC Bulletin Board in
     March 2003 and received "active" status in April 2003.

     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 involves 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 attain profitable operations. There is no guarantee that
     the Company will be able to complete any of the above objectives. At
     September 30, 2004, the Company had a working capital deficit of $631,307
     and an accumulated deficit of $1,852,336. These factors 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 material
         assets, liabilities or operations, other than the verbal agreement as
         disclosed in Note 7(d).


                                       7
<PAGE>

2.   Summary of Significant Accounting Policies (continued)

     (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.

     (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). SFAS 128 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 currency is the Canadian dollar. Foreign
         currency transactions are primarily undertaken in Canadian dollars and
         are translated into United States dollars using exchange rates at the
         date of the transaction. Monetary assets and liabilities denominated in
         foreign currencies are re-measured at each balance sheet date at the
         exchange rate prevailing at the balance sheet date. Foreign currency
         exchange gains and losses are charged to operations. The Company has
         not, to the date of these financial 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 September 30, 2004, 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 values of cash, accounts payable, accrued liabilities, notes
         and advances payable, and amounts due to related parties approximate
         their carrying values due to the immediate or short-term maturity of
         these financial instruments.

     (h)  Income Taxes

         Potential benefits of income tax losses are not recognized in the
         accounts until realization is more likely than not. The Company has
         adopted SFAS No. 109 as of its inception. Pursuant to SFAS No. 109 the
         Company is required to compute tax asset benefits for net operating
         losses carried forward. Potential benefit 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.



                                       8
<PAGE>

2.   Summary of Significant Accounting Policies (continued)

     (i) Stock-Based Compensation

         The Company has elected to apply the intrinsic value principles of
         Accounting Principles Board Opinion No. 25, "Accounting for Stock
         Issued to Employees" ("APB 25"), and related interpretations in
         accounting for its stock options granted to employees and directors.
         Under APB 25, compensation expense is only recorded to the extent that
         the exercise price is less than the market value of the underlying
         stock on the measurement date, which is usually the date of grant.
         Stock-based compensation for employees is recognized on an accelerated
         basis over the vesting period of the individual options. Stock options
         granted to non-employees are accounted for under SFAS No. 123
         "Accounting for Stock-Based Compensation" and are recognized as
         compensation expense based on the fair market value of the stock award
         or fair market value of the goods and services received, whichever is
         more reliably measurable.

     (j) 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.

     (k) Recent Accounting Pronouncements

         In December 2003, the United States Securities and Exchange Commission
         issued Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB
         104"), which supersedes SAB 101, "Revenue Recognition in Financial
         Statements." The primary purpose of SAB 104 is to rescind accounting
         guidance contained in SAB 101 related to multiple element revenue
         arrangements, which was superseded as a result of the issuance of EITF
         00-21, "Accounting for Revenue Arrangements with Multiple
         Deliverables." While the wording of SAB 104 has changed to reflect the
         issuance of EITF 00-21, the revenue recognition principles of SAB 101
         remain largely unchanged by the issuance of SAB 104. The adoption of
         SAB 104 did not have a material impact on the Company's financial
         statements.

3.       Note Payable and Other Advances

     (a) On September 15, 2000, the Company issued a note for CAD $50,000
         (US$33,638) payable on or before September 15, 2001 plus 8% interest.
         The Company extended repayment of the note until the completion of a
         financing arrangement. Interest expense of $901 has been accrued for
         the quarter ended September 30, 2004 (2003 - $833). Accrued interest
         of $12,323 is included in accounts payable. The note payable was
         $39,380 after translation into US dollars at September 30, 2004. The
         Company incurred a foreign currency translation loss of $2,180 that
         was charged to operations.

     (b) A cash advance of CAD$3,000 from an unrelated party is non-interest
         bearing, unsecured and due on demand.

4        Related Party Transactions/Balances

     (a) The controlling shareholder is owed $199,371 (2003 - $197,115) for
         payment of rent, office expenses and professional fees on behalf of
         the Company. This amount is non-interest bearing, unsecured and
         without specific terms of repayment. Imputed interest of $7,476 (2003
         - $7,500), calculated at a rate of 15% per annum, was charged to
         operations and treated as donated capital. An amount of $1,890 is
         owing to another shareholder. This amount is unsecured, non-interest
         bearing, with no specific terms of repayment.




                                       9
<PAGE>

4.   Summary of Significant Accounting Policies (continued)

     (b) The current President loaned the Company $2,300 and is also due $1,576
         for office and other expenses paid for on behalf of the Company. These
         amounts are unsecured, non-interest bearing and due on demand. During
         the quarter ended September 30, 2004, the Company recognized a total
         of $7,500 for donated services provided by the President of the
         Company.

     (c) The current Vice-President is due $4,172 for office and other expenses
         paid for on behalf of the Company. These amounts are unsecured,
         non-interest bearing and due on demand.

5.   Amounts Owing to a Former Director

     The former President, who was also a Director of the Company, was paid
     office and related expenses from personal funds in the amount of $16,486 of
     which $13,785 has been reimbursed with cash. Effective July 1, 1999 the
     President was entitled to a deferred salary of US$6,000 per month or
     $324,000 in total and was owed a total of $326,701 at September 30, 2004.
     These amounts are unsecured, non-interest bearing and due on demand.
     Imputed interest of $12,251 (2003 - $11,596), calculated at a rate of 15%
     per annum, was charged to operations and treated as donated capital. The
     Company does not have a written employment contract with the former
     President.

6.   Common Shares

     (a) During the year ended June 30, 2003, 40,000 shares were issued for
         cash of $3,793 at an average price of $0.095 per share and 10,000
         shares were issued for cash of $1,890 at an average price of $0.19 per
         share.

     (b) On January 23, 2003, 600,000 shares of common stock were issued to
         settle debt referred to in note 4(c).

     (c) On September 10, 2003, 40,000 shares of common stock were issued at a
         price of $0.25 per share to settle outstanding debt.

     (d) On September 10, 2003, 7,500 shares of common stock were issued at a
         price of $0.25 per share in consideration of services rendered.

     (e) On September 23, 2003, 7,500 shares of common stock were issued at a
         price of $0.25 per share in consideration of services rendered.

     (f) On October 23, 2003, 7,500 shares of common stock were issued at a
         price of $0.14 per share in consideration of services rendered.

     (g) On March 29, 2004, 27,778 shares of common stock were issued at a
         price of $0.14 per share to settle outstanding debt.

     (h) On March 29, 2004, 600,000 shares of common stock were issued to two
         directors at a price of $0.14 per share in consideration of services
         rendered. 400,000 of these shares relate to future services for the
         period from January 1 - December 31, 2004. As a result $27,299 has
         been charged to operations and the remaining balance of $27,299 has
         been set up as deferred compensation.

     (i) On March 29, 2004, 431,106 shares of common stock were issued for cash
         at a price of $0.14 per share.

     (j) On April 1, 2004, 133,333 shares of common stock were issued at $0.23
         per share in consideration of services rendered.

     (k) On April 1, 2004, 166,663 shares of common stock were issued for cash
         at a price of $0.14 per share.

     (l) On September 1, 2004, 25,000 shares of common stock were issued for
         cash at a price of $0.08 per share.

     (m) On August 31, 2004, 50,000 shares of common stock were issued for cash
         at a price of $0.08 per share.

                                       10
<PAGE>

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, 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.

     (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 President of the Company during that time. All
         amounts that were unauthorized by the Board of Directors at the time
         or amounts that were 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) Between October 1998 and June 1999, the administration 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. 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. These shares are issued but not considered
         outstanding. 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.

     (d) The Company's subsidiary, Hybrid Fuels (Canada) Inc., entered into a
         verbal agreement with an independent third party that will construct a
         fully operational facility at Oyama, B.C. Part of the agreement will
         make the facility availability to the Company for training and
         demonstration purposes, through a lease or an operating agreement. The
         terms under which this facility will be operated are to be finalized
         when the construction is complete and all of the construction and
         start-up costs are known.

                                       11
<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 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, 2004. Actual
results could differ materially from the results discussed in the
forward-looking statements. 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, nor is it likely to
have any significant cash flow until after the end of its current quarter ending
December 31, 2004.

In their opinion on our June 30, 2004 financial statements, our independent
auditors raised doubt regarding our ability to continue as a going concern
because we have not generated any revenues and have conducted operations at a
loss since inception.

Management recognizes the importance of not only developing existing
technologies but creating new opportunities as well. The current Board, together
with several members of the Technical Advisory Committee, has been aggressively
pursuing the expansion of the Hybrid Fuels technology to meet the changing
demands of the agricultural industry and to create additional economic and
renewable energy opportunities.

Although the Company is in the developmental stages, the process behind Hybrid
Fuels' intended business has been researched and developed over more than a
decade. A facility that integrated the process described below was constructed
and operated near Dalum, Alberta from 1994 to 1996. That facility was designed
to prove the concepts and included all of the ethanol-producing and
cattle-feeding features of a full-scale commercial operation. That operation is
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, development and
construction enabled us to modify the construction material requirements and
facility layout to improve the buildings and equipment and refine the process,
which is now ready for market.

                                       12
<PAGE>

Currently, the Company's intended principal business is to market farm-scale
facilities that integrate beef operations with the production of ethanol. The
main source of revenue for the Company is expected to come from the resale of
the fuel and from a portion of any premium that the Company can obtain from the
sale of the beef.

An operating facility includes the cattle barn, the ethanol-producing equipment,
the bio-furnace or gasifier, "Greener Pastures" grass growing system, and the
right to use the proprietary information and technology.

In these facilities, grain, corn or other feedstock is fermented and then
distilled to make the ethanol. The ethanol production process also generates a
high protein mash, called "distillers grain" and water, called "stillage water".
These contain nutrients and are used as feed and water for livestock. By using
the distillers grain and stillage water on site the animals receive the benefit
of the nutrients in these byproducts. In addition, the facilities do not incur
the costs of drying the distillers grain and transporting it as would be
necessary if it were to be used at another site. A further benefit is that no
costs are incurred to dispose of the stillage water. Rather than the stillage
water being something that is costly to be disposed of, it instead becomes a
valuable feed product.

The manure and used bedding straw are cleaned up frequently, thus removing the
media in which disease would otherwise grow. This waste material will be burned
in a gasifier and the heat produced is used in the fermentation and distillation
processes. From discussions with the gasifier manufacturer, management believes
that a surplus of sufficient heat will enable the operation of a greenhouse, if
the operator so desires.

The ethanol is intended to be mixed with a proprietary emulsifier and diesel
fuel. When this emulsion was tested at The British Columbia Institute of
Technology in June, 1996, 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 engine power.

The cost of building this facility is anticipated to be approximately $350,000.
Approximately $220,000 of this cost is for foundations and flooring, buildings,
the gasifier, the ethanol-producing equipment, 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 $60,000. We
estimate we will also spend approximately $70,000 for construction labour and
supervision.

The completion and operation of the first beef and ethanol facility will enable
the Company to demonstrate to potential operators and investors that the
technology works as described. The ability of the Company to emerge from the
development stage with respect to any planned principal business activity is
dependent upon raising capital through private placements and achieving
profitable operations. We do not have any long-term commitments for financing at
this time.

In the quarter ending September 30, 2003 our subsidiary, Hybrid Fuels (Canada)
Inc., entered into a verbal agreement with an independent third party to
construct a fully operational facility at Oyama, B.C. Part of the agreement will
make the facility available to the Company for training and demonstration
purposes, through a lease or an operating agreement. The terms under which this
facility will be operated are to be finalized when the construction is complete
and all of the construction and start-up costs are known.

After the end of the most recent quarter, the concrete flooring and the building
exterior for both the ethanol facility and cattle barn had been completed at
Oyama, BC, Canada. This site at Oyama, on approximately six acres of farmland,
was chosen because it provides the company with good site control and
supervisory ability that is important to the completion of the first facility.

                                       13
<PAGE>

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

The primary goal of placing the first facility in service is to demonstrate the
economic feasibility of the system. Once this first facility is operating, we
plan to use it as a demonstration and training facility and to earn revenue from
its operation. Assuming that it will be necessary to pay market price for grain,
bedding and other supplies and that we will receive no more than market price
for the finished animals, our projections indicate that the facility should
generate sufficient revenue to pay all of our operating costs, plus a small
surplus that may be used toward development of operating activities. Third
parties that have expressed interest in financing subsequent facilities through
private placements want to see this firstfacility generate sufficient cash flow
to pay all operating costs and debt service. We anticipate that the facility
will show sufficient cash flow to make it possible for us to finance subsequent
facilities.

We have designed the barn to accommodate 200 head of cattle. As we near the end
of testing the facility, we plan to begin the finishing operation for the
cattle, with an initial group of 20 to 25 head of cattle. The finishing
operation is designed to function on a staggered basis, so that every two weeks
(initially) we will bring in an additional 20 to 25 head of cattle. We will sell
the cattle on the same staggered basis as they complete the finishing process.
As we gain experience with the facility, we intend to bring cattle in at the
rate of 40 to 50 head at a time on three to five-week intervals to take maximum
advantage of the size of the trucks that will be used to transport the cattle.

The cattle will begin the finishing operation in quieting pens where they will
spend approximately two weeks being transitioned from their prior diet to the
wet distillers grains diet. After completing the diet transition, the cattle
will be moved into the barn, where, on average, they will spend approximately
100 days being fed the finishing diet. At the end of the finishing operation,
our plans for this demonstration facility call for the cattle to be sold at
auction. As one group of cattle is sold, another takes its place, as both the
finishing operation and our staggered acquisition scheme are scheduled to take
approximately three to four months, depending on the duration of the finishing
process. As a result of using this staggered acquisition scheme, we will not run
the facility at full capacity until approximately four months have passed from
the facility becoming operational. As a result the cattle we begin selling
during the fourth month, which will generate our initial revenues, will bear a
disproportionate amount of fixed costs compared to cattle sold beginning in the
eighth month. We believe, however, that at the end of the fourth month, when we
sell the first group of finished cattle, we will have an initial set of data
from which to prepare pro forma information for purposes of estimating cash
flows to prospective financiers of future facilities, rather than having to wait
until the end of the eighth month, to present this information.

We plan to add, on average, between 400 and 500 pounds per head of cattle during
the finishing operation. The weight per head when we acquire the cattle will
vary, principally due to the time of year when the cattle are acquired (most
calves are born in the spring and are ready to be sold as feeder cattle seven
months to a year later). One of our fundamental assumptions is that the facility
will have the potential to break even if we can sell finished cattle at prices
per pound that are less than the prices per pound at which we purchase them.
Generally, in the cattle industry, feeder cattle sell at a higher price per
pound than finished cattle. The increase in weight during the finishing
operation provides the potential for generating a profit or at least breaking
even when selling finished cattle at a lower price per pound. For example,
assume we purchase a 600-pound animal for $0.90 per pound (or $540) and that we
finish the animal to 1000 pounds and sell at $0.85 per pound, or $850. The $310
difference between our purchase price and the sale price would have to cover the
consumables purchased to prepare wet distillers grains for the animal and a pro
rata share of the facility's operating costs, including debt service.

At this time we do not have financial data to support the breakeven pricing
spread for the facility. Developing this relationship between the facility's
cost structure and tolerable price differentials will provide critical
information for prospective financiers of future facilities.

                                       14
<PAGE>

Farmers with integrated operations who grow their own consumables could have
greater price flexibility on the cattle finishing operation if their cost of
producing the consumables is less than the market price for consumables. We do
not plan to have an integrated operation at the first facility, so we will have
to pay market prices for our consumables.

We do not plan to sell the ethanol produced by the first facility during at
least the first two to three months of its operation. We have discussed an
arrangement with a local owner of a sawmill and trucking company to give him the
ethanol during this two to three-month period, with a view toward charging him
for the ethanol in the future once he has determined that he can use the ethanol
economically without harm to his equipment. Once the ethanol facility is
operating at full capacity, we project that the facility will produce
approximately 240 US gallons of ethanol per day, that could be sold at market
prices slightly below the price of the diesel fuel with which it will be
blended. The price of ethanol will vary, usually in tandem with the price of
diesel. For example, assuming a price of $0.70 per gallon for ethanol, monthly
sales of ethanol would be approximately $5,000.

Once we have operated the facility for four months, we believe that the actual
financial results for the finishing operation and ethanol sales will provide us
with the data needed to prepare pro forma financial information assessing the
economic feasibility of the facility. If the data establishes the economic
feasibility of the facility, we will then be able to implement our business
plan, which is based on identifying third parties who will work with us to
construct and operate their own facilities. If our assumptions prove wrong or we
encounter unforeseen obstacles, our ability to demonstrate the facility's
economic feasibility may be delayed.

We intend to license our technology and provide our expertise to third parties
that want to construct facilities. We expect to earn a profit and recognize
revenue on the sale of each facility. We plan to charge fees in connection with
the sale of each facility, based on the value to the operator of having us
organize and supervise the construction of the facility and train the operator.
We expect the fees from the sale of the facilities to be sufficient to cover all
of the operating costs we will incur in qualifying candidates, training
operators, supervising construction and start-up, etc., until royalties are
received. It should be recognized that once the first facility is operational,
that may lead to modifications of the planned methods of operation.

Once we have demonstrated our demonstration facility's economic feasibility for
purposes of obtaining financing for subsequent facilities, we expect to have
selected four operators. After operators have been selected, based on a
screening process to select suitable candidates, we plan to train them and
assist in constructing facilities.

We intend to lease to the operators, on a permanent basis, the separation
column, that is used to distill the ethanol, and the spinner, that is used to
separate the mash from the water after the fermentation process. These two items
are integral parts of the facilities, and leasing them is designed to protect
the secrecy of these most vital pieces of the technology. The lease payments
will generate revenue for us and will be payable monthly in amounts yet to be
finalized.

We plan to charge a royalty for the use of the trade secrets and proprietary
information. The royalty, which is expected to be $2500US per month, per
facility, based on the projected benefits of the use of trade secrets to the
operator, will begin when each facility begins operation. Incentives in the form
of reduced royalties may be offered to the first 10 to 20 operators who make
early commitments to purchase facilities.

We expect to enter into contracts with our operators to act as their marketing
arm for the beef and fuel. We expect this arrangement to generate revenue for us
and give us control over greater quantities of both products than any individual
operator would have. We believe this arrangement will provide us with the


                                       15
<PAGE>


ability to make better deals with, and provide more secure delivery to,
distributors and other purchasers. We believe that operators will appreciate
being relieved of these marketing responsibilities, particularly if beef sales
at premium prices generate greater revenue for them.

For a more detailed description of the entire process, including sources of
information and references, the reader is referred to the Company's Form 10-KSB
for the year ended June 30, 2004. Although there are no operating facilities at
the moment, the Company is expecting to have the first facility operating in
fiscal year 2004/2005.

Results of Operations For The Three Months Ended September 20, 2004
-------------------------------------------------------------------

The loss for the present quarter is $61,090 compared to $42,667 for the
comparable quarter last year. This difference is mainly attributable to an
increase in consulting fees of $9,899 to $13,649 from $3750 in the comparable
quarter last year and investor relations expenses of $11,044 which was nil in
the comparable quarter last year.

Executive compensation was nil as compared to $18,000 for the comparable quarter
last year. The monthly accrual of $6,000 in deferred salary for the quarter
ended September 30, 2003 was attributed to former CEO Clay Larson who resigned
in January 2004. Imputed interest, a non-cash item, on the amount owing to the
former President totaled $12,251 for the current quarter compared to $11,596 for
the comparable quarter last year.

Donated services in the amount of $7,500, which also does not represent a cash
outlay, was attributed to CEO Paul Warkentin for the current quarter.

At the end of the quarter, the Company had cash of $291 down from $7,907 at the
end of the previous quarter. During the quarter we received $2,310 from a
non-related party, $4259 from a related party and $5,697 from the issuance of
common stock. A total of $19,882 was used to fund our operations.

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.

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


Based on an evaluation as of the end of the period, the Company's Principal
Executive Officer and Acting Principal Financial Officer have 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.



                                       16
<PAGE>

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

On September 23, 2004 the Company issued 75,000 shares of restricted common
stock to two investors for operating capital. The common stock was issued at a
value of $.10 per share (Cdn Funds).

The foregoing issuances 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. No underwriters were
engaged in connection with the foregoing issuances of securities.

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

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


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.

By: /s/ Paul Warkentin
----------------------

Name:   Paul Warkentin
Title:  President/CEO/Acting CFO



Dated:  February 16, 2005



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