__________________________________________


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

                                   FORM 10-QSB

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

                For the Quarterly Period Ended September 30, 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

The number of shares outstanding of the registrant's common stock as of
November 13, 2001 was 21,053,600.

The number of shares issued of the registrant's common stock as of November
13, 2001 was 21,286,353.

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











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

                                HYBRID FUELS, INC.

                                   FORM 10-QSB

                     For the quarter ended September 30, 2001

INDEX


Part I - Financial Information

    Item 1.  Financial Statements                                         Page

             Balance sheet as of September 30, 2001                       F-3

             Statements of operations for the quarters
             and the nine months ended September 30, 2001 and 2000        F-4

             Statements of cash flows for the three months
             ended September 30, 2001 and 2000                            F-5

Notes to Financial Statements	  			       	          F-6

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

Part II - Other Information                                               17

          Signature                                                       17




































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

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

                                                 September 30,   June 30,
                                                     2001          2001
                                                      $             $
                                                 (unaudited)     (audited)
------------------------------------------------------------------------------

ASSETS

Current Assets

Cash                                                       5             2
------------------------------------------------------------------------------
Total Assets                                               5             2
------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Accounts payable                                      22,692        14,807
Accrued liabilities (Note 6(d))                        6,600        15,000
Note payable (Note 4)                                 33,638        33,638
Shareholder loan payable (Note 6(a))                 197,745       196,255
Amounts owing to a Director (Note 6(b))              168,106       152,111
------------------------------------------------------------------------------
Total Current Liabilities                            428,781       411,811
------------------------------------------------------------------------------
Temporary Equity (Note 7(d))                         223,000       223,000
------------------------------------------------------------------------------
Stockholders' Deficit

Common Stock (Note 7): $0.001 par value;
50,000,000 shares authorized
20,823,600 and 20,623,600 shares are issued
and outstanding respectively                          20,824        20,624

Additional Paid-in Capital                           295,642       285,842

Common Stock paid for but unissued
(representing 130,000 shares)                          6,300          -

Donated Capital - Imputed Interest (Notes 5 and 6)   123,249       115,937

Deficit Accumulated During the Development Stage  (1,097,791)   (1,057,212)
------------------------------------------------------------------------------
Total Stockholders' Deficit                         (651,776)     (634,809)
------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                 5             2


Nature of Operations and Continuance of Business (Note 1)
Other Contingencies (Note 8)

(See Accompanying Notes to the Consolidated Financial Statements)




===============================================================================
F-4

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



                                   Accumulated from Three Months Three Months
                                   February 26, 1960    Ended        Ended
                                                      September     September
                                                         30,           30,
                                   (Date of Inception)
                                   to September 30,
                                         2001           2001          2000
                                           $              $             $
------------------------------------------------------------------------------
Revenue                                    -              -             -
------------------------------------------------------------------------------

Expenses

Advances written-off (Note 3)            84,951           -           42,076
Consulting fees                           5,473         5,473           -
Deposit on plant written-off (Note 3)   170,561           -             -
Disputed compensation (Note 8(b))       243,463           -             -
Executive compensation (Note 6(b))      162,000        18,000         18,000
Filing and regulatory fees               17,091         1,561          2,242
General and administration               58,982            33            240
Imputed interest (Notes 5 and 6)        123,249         7,312         12,102
Interest                                  4,173         2,044            110
Investor relations                       16,698           -            1,518
Professional fees                       147,170         5,802         17,250
Rent and telephone                       42,059           137          1,641
Research and development                  8,000           -             -
Travel and promotion                     13,921           217            486
------------------------------------------------------------------------------
                                      1,097,791        40,579         95,665
------------------------------------------------------------------------------
Net Loss                             (1,097,791)      (40,579)       (95,665)
------------------------------------------------------------------------------
Net Loss Per Share                                       (.01)          (.01)
------------------------------------------------------------------------------
Weighted Average Shares Outstanding                 20,657,000     19,524,000
------------------------------------------------------------------------------



(See Accompanying Notes to the Consolidated Financial Statements)














===============================================================================
F-5

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



                                               Three Months Three Months
                                                   Ended       Ended
                                               September 30, September 30,
                                                   2001         2000
                                                    $            $
------------------------------------------------------------------------------
Cash Flows To Operating Activities

Net loss                                            (40,579)      (95,665)

Non-cash item
Imputed interest                                      7,312        12,102

Adjustment to reconcile net loss to cash
Accounts payable and accrued liabilities              9,485         7,034
------------------------------------------------------------------------------
Net Cash Used In Operating Activities               (23,782)      (76,529)
------------------------------------------------------------------------------
Net Cash Used By Investing Activities                   -             -
------------------------------------------------------------------------------
Cash Flows From Financing Activities

Common stock subscribed for                           6,300           -
Proceeds from notes payable                             -          33,638
Advances payable                                        -           9,733
Amounts owing to a Director                          15,995        18,808
Shareholder loans payable                             1,490        14,350
------------------------------------------------------------------------------
Net Cash Provided By Financing Activities            23,785        76,529
------------------------------------------------------------------------------
Net Increase (Decrease) in Cash                           3           -

Cash - Beginning of Period                                2           485
------------------------------------------------------------------------------
Cash - End of Period                                      5           485
------------------------------------------------------------------------------
Non-Cash Financing Activities

Value of common shares issued for settlement of debt 10,000           -
------------------------------------------------------------------------------
Supplemental Disclosures

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



(See Accompanying Notes to the Consolidated Financial Statements)







===============================================================================
F-6
Notes to Financial Statements

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

   In May 1998, the Company caused a Nevada corporation to be formed under the
   name Polo Equities, Inc., (Polo) (a Nevada corporation), with authorized
   capital of 50,000,000 common shares of $.001 par value. The two companies
   then merged pursuant to Articles of Merger adopted May 28, 1998 and filed
   with the State of Nevada on June 10, 1998, which changed its domicile to
   Nevada.

   On May 28, 1998, the Company acquired, by issuing 12,000,000 shares, Hybrid
   Fuels, USA, Inc. and 330420 B.C. Ltd., which changed its name to Hybrid
   Fuels (Canada) Inc. This acquisition was accounted for as a reverse merger
   whereby the shareholder of Hybrid Fuels, USA, Inc. and Hybrid Fuels
   (Canada) Inc. gained control of Polo Equities Inc. which changed its name
   to Hybrid Fuels, Inc. As part of the acquisition, three shareholders
   representing 12,000,000 previously issued shares returned their shares for
   cancellation. For accounting purposes the acquisition was treated as a
   business purchase by Hybrid Fuels, Inc. of Hybrid Fuels, USA, Inc. and
   Hybrid Fuels (Canada) Inc. No amount was allocated to the intellectual
   asset as it was acquired from a related party and the transfer had no cost
   basis associated with it. There was no public market for the shares of Polo
   Equities, Inc. at the time of the reverse merger. The Company operates
   through these two wholly-owned subsidiaries.

   On May 29, 1998 the Company changed its name to Hybrid Fuels, Inc., herein
   "the Company". On June 10, 1998 the Company began trading on the OTC
   Bulletin Board under the symbol "HRID" and in December, 1999 was moved to
   the "Pink Sheets". From May 1998 to June 1999 the Company operated out of
   an office in California which was set up for investor relations and to
   raise additional capital. This office was shut down in June and the new
   President and directors are operating out of Kelowna, BC, Canada after the
   Calgary, Alberta, Canada office was shut down on May 3, 2001.

   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.

   Pursuant to a letter of intent and subject to a definitive agreement being
   consummated, the Company plans to sell a license to use its proprietary
   technology in a specified territory. The agreement contemplates a 50% up
   front non-refundable fee which will be recognized as revenue when received
===============================================================================
F-7

Notes to Financial Statements (con't)

   and the balance will be paid over time. The Company will also need to rely
   on the forbearance of some creditors and related parties have agreed to
   continue to fund working capital as needed. The Company has entered into
   discussions with third parties to directly finance a facility in which the
   Company will then commence with its business plan.


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 amount and operate it as a
===============================================================================
F-8

Notes to Financial Statements (con't)

   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
   $4,148 has been accrued at September 30, 2001 and is included in accounts
   payable.


5. Advances Payable

   A non-related company coordinated 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 in June 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 $Nil
   (2001-$13,326) 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
       $64,276 on behalf of the Company. The balance of $197,745 is currently
       owing without interest or specific repayment terms. Imputed interest of
       $3,950 (2001 - $29,041) 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 $14,799 of
       which $8,693 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 $162,000 at September 30, 2001. These amounts are
       unsecured, non-interest bearing and due on demand. Imputed interest of
       $3,362 (2001 - $16,835) was charged to operations and treated as
       donated capital.

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

   (d) Pursuant to a directors' consent, dated June 11, 2001, a total of
       200,000 shares was issued on September 19, 2001 to a director/officer
       of the Company to settle a $10,000 debt.


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

7. Stockholders' Equity (a)(continued)


       gained control of Polo Equities Inc. As part of the acquisition three
       shareholders representing 12,000,000 previously issued shares returned
       their shares for cancellation. For accounting purposes the acquisition
       was treated as a business purchase by Hybrid Fuels USA Inc. of Polo
       Equities, Inc. No amount was allocated to the intellectual asset as it
       was acquired from a related party and the transfer had no cost basis
       associated with it. There was no public market for the shares of Polo
       Equities, Inc. at the time of the reverse merger.

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

   (c) On May 17, 2000 the Company issued 1,500,000 shares pursuant to a
       subscription agreement for $150,000 dated February 17, 2000. On
       February 17 and 18, 2000, the Company accepted subscription agreements
       and notes whereby the Company would receive $300,000 for 3,000,000
       shares. The 3,000,000 shares were issued and were then held in escrow .
       These shares were subsequently released from escrow to the investors to
       facilitate financing. The notes were to bear interest at 8% and were to
       be paid within 60 days or at the discretion of the President. In June
       2000 the President extended the time for repayment to one week of the
       Company being re-listed on the Over-The-Counter Bulletin Board or other
       suitable exchange. When it became apparent there were going to be long
       delays the notes were demanded to be repaid by February 21, 2001. The
       notes were not paid as demanded, and the 3,000,000 shares have since
       been sold by the investors to innocent third parties. The investors did
       not and have not paid the Company for these shares, despite demands.
       Since these shares have been resold to innocent third parties they must
       be considered outstanding. The Company intends to sue the investors for
       the balance due on the notes, however the Company believes the balance
       is uncollectible.

   (d) Between October 1998 and June 1999, the previous administration sold a
       total of 361,120 common shares of the Company to 34 subscribers on the
       basis of an Offering Memorandum that contained a significant number of
       inaccuracies. A total of $223,000 was raised pursuant to this Offering.
       The current administration has concerns regarding possible
===============================================================================
F-10

7. Stockholders' Equity (d)(continued)


       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 237,753 shares,
       representing $158,000. These shares are issued but not considered
       outstanding. The remaining 11 subscribers, who paid $65,000 for 123,367
       shares, have not responded to the offer. These subscriptions are
       recorded as temporary equity until rescission rights have been revoked.


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

   (f) 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. (g) On September 19, 2001, 200,000
       shares were issued to settle debt referred to in Note 6(d).


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. Actions of the previous
           administration have been reported to the Securities and Exchange
           Commission. At such time as Company resources permit, the Company
           will seek legal advice to determine whether or not it is possible
           to recover all such disputed and unauthorized amounts from the
           previous administration.

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


9.	Subsequent Events
        On October 18, 2001 130,000 shares were issued for cash proceeds of
        $6,300 and 100,000 shares were issued to settle debt of $5,000.







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

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

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, 2002. 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 intended business has been researched and developed over more than a
decade.  A plant that integrated the process described below was constructed
and operated near Dalum, Alberta from 1994 to 1996. That facility was designed
to prove the concepts and included all of the ethanol-making 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 that plant was closed in 1996, further research, development and
construction enabled us modify construction materials and layout to improve
the buildings and equipment and refine the process, which is now ready for
market.

The Company's intended business is to sell and build farm scale plants that
produce ethanol 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 contain nutrients
and are therefore used as feed and water for livestock. In addition, the
fermentation process frees a higher percentage of the total food value from
the feedstock and makes it more "available" to the animals digestive system.
The result is higher than average weight gains for the animals without the use
of hormones. By using the distillers grain and stillage water on site the
animals get the benefit of the nutrients in these byproducts. In addition, the
plants do not incur the costs of drying the distillers grain and transporting
it as would be necessary if it was to be used at another site. A further
benefit is that no costs are incurred to dispose of the stillage water. Rather
than it being something that is costly to be disposed of, it 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. They are 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 there
will be sufficient heat leftover to operate a greenhouse, if the operator so
desires.

The ethanol is mixed with a proprietary emulsifier and diesel. 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)
===============================================================================
Page-12-
Item 2. Plan of Operation (continued)


emissions by over 62% and the NOx emissions by over 22%, without any loss of
power.

For a more detailed description of the entire process, plus sources of
information and references, the reader is referred to the Company's Form
10-KSB for the year ended June 30, 2001, which was filed with the SEC on
October 12, 2001 and amended October 29, 2001.

These plants are referred to as "micro energy food facilities" or "MEFFs",
because of the small amount of energy from outside sources that is necessary
to operate them. Although there are no operating plants at the moment, the
Company is expecting to have the first one operating in the spring of 2002, as
described below.

The Company intends to sell these facilities (except the column and spinner)
to farm operators, preferably those who grow or have access to sufficient
grain to supply the plant. Management believes this would be about 40,000
bushels of barley or other suitable grain for a plant which would feed 200
head of cattle on a continually rotating basis. Hybrid plans to earn revenue
from the sale and operation of these facilities in the following manner:

    1. profit on the sale of each MEFF;

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

    3. the lease of the column and spinner to each operator;

    4. the marketing of the finished animals and 5. the purchase of the
       ethanol mixture from the operator at 80% of wholesale value and the
       sale to distributors or end-users.

The Company expects to earn a profit and recognize revenue on the sale of each
plant. The Company intends to sell each MEFF at a profit that is sufficient to
cover overhead and operating costs and the costs of screening applicants,
training them and assisting them until they are able to operate on their own.
The profit on the sale of each plant is expected to be sufficient to cover all
of the operating expenses the Company will incur until revenues are received
from royalties.

Once they are operating, it is intended that each operator will pay royalties
for the license to use the technology. Initially this royalty is expected to
be $2500US per month starting when each MEFF begins operation. The Company is
considering offering incentives in the form of reduced royalties to the first
operators who make early commitments to purchase plants.

In addition, the Company anticipates that it will charge each operator a
service fee to cover the Company's costs of regular visits for ongoing
training, service, technical support, and quality control. These fees are
expected to be in the $150 to $250 US per month range.

The column and spinner, which are the most sensitive parts of the technology,
will not be sold. The Company will lease these parts of the technology to the
operators on a permanent basis to protect the secrecy of the design and
operation of these most vital pieces of the technology. These leases are
expected to create another source of revenue for the Company.

Other revenue for the Company is expected to come from obtaining premium
prices for the beef. The Company anticipates entering into an agreement with
its operators to 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.
===============================================================================
Page-13-

Item 2. Plan of Operation (continued)

The Dalum test trials demonstrated the quality of the beef produced by this
process. As a result, Cargill Foods, which purchased the first lot, agreed to
pay a premium of $0.10 per pound for all of the beef that could be produced by
this process. They also agreed to pick up subsequent lots at the plant, which
eliminated freight and auction costs. The Company anticipates that the beef
produced by the process will be top quality, which the Company will be able to
market at premium prices.

The Company has investigated a number of possible sources of premium prices,
including markets in the Far East and Europe, high-end restaurants, cruise
ships and specialty meat markets that sell organic and hormone free meat. As a
result of making these contacts, the Company believes that it will be able to
generate premium prices from that sale of the beef and earn revenue from doing
so.

Management has recognized that premium prices would be most likely if the
Company were 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. At the date of this report, the packing
plant is still available.

The Company also believes that it has a workable business plan to operate the
packing plant profitably by custom processing finished beef and bison until
the MEFFs begin producing. We are in contact with an Alberta company that
deals in hormone free beef and bison and they have assured us that they are
able to supply the packing plant with sufficient animals for custom processing
to keep it operating at full capacity until sufficient MEFFs are operating. If
we are able to acquire the packing plant, the Company's intention is to sell
enough MEFFs to be built in close proximity to the packing plant to keep it
operating at full capacity. From discussions which we have had with ranchers,
cattle brokers and others that grow or market hormone free beef, the Company
believes that it will be able to obtain enough hormone free feeder cattle to
keep the MEFFs  and the packing plant running at full capacity.

As a consequence, the Company continues to search for money to acquire the
packing 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. The Company anticipates that
the packing plant would begin to produce cash flow within 30 to 60 days after
operations begin and is projected to achieve positive cash flow in six to nine
months.

A small amount of diesel is added to the ethanol in the distillation column to
"de-nature" it so that no pure ethanol is detectable or accessible in the
MEFF. This mixture is then stored on site in an appropriate tank and then
picked like bulk milk and transported to a mixing facility to be further mixed
into the appropriate ratio. The Company intends to generate revenue by
purchasing the fuel mixture from the operators at a discount from wholesale
value, and selling the end product to end users and distributors after mixing
is completed.


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Page-14-

Item 2. Plan of Operation (continued)

In the beginning, with the small quantities from the first MEFF, the plan is
to mix locally and use the fuel for testing and evaluation by local users. Two
local firms have agreed to evaluate the fuel made by the first plant as soon
as we produce it. This is expected to generate some revenue.

After the first plant is operating, the location of the next MEFFs will be
determined to some extent on being able to economically deliver the fuel
mixture to commercial mixing facilities that can handle the production from
the MEFFs on a contract basis. The plan is for the Company to purchase the
chemical mixture from each MEFF, and transport it to mixing plants for further
mixing to achieve the appropriate ratio. The availability of an end user to
take the finished fuel will be a consideration in choosing the mixing
facility.

When a larger number of plants are operating and are producing sufficient
quantities, the Company plans to sell the mixed fuel to end users and diesel
fuel distributors encompassing all industries. The Company estimates it will
be more than a year after completion of the second plant before we get to that
stage, at which time the Company intends to target the trucking and railway
industries. Ultimately the Company may consider building and operating its own
mixing facilities, if that becomes economically feasible.

Because the hybrid fuel can be used in an unaltered diesel engine, it can be
used economically where it is available and no modifications or changes need
be made to engines to switch back to regular diesel fuel when the hybrid fuel
is not available.

Some potential users may be concerned about using this product. Ethanol-diesel
mixes are presently being evaluated by Archer Midland Daniels, The Chicago
Transit Authority and The University of Illinois. Their reports either are or
are expected to be available on The University of Illinois website. In
addition, the City of Winnipeg Transit Authority and Husky Oil are conducting
an evaluation of an ethanol-diesel mix to see how it performs in very cold
weather. The Company plans to provide end users with access to all of these
and subsequent evaluation reports in order to help alleviate potential users
concerns about the safety and performance of the fuel.

As regulators work to decrease engine emissions and users look for less
expensive fuels that burn cleaner, the Company believes it will be able to
attract users for the hybrid fuel.

Until such time as the Company sells and constructs MEFFs and recognizes
revenue, the Company is likely to 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 develop operational activities and to continue as a going
concern in the long term. For the coming quarter, management anticipates
spending most of its energies on raising money for the purpose of developing
operating activities 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. 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. We continue to make
progress towards the sale of the license, 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.
===============================================================================
Page-15-

Item 2. Plan of Operation (continued)

Although the parties have signed a letter of intent, no definitive agreement
has been signed and no money has changed hands.  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, the Company may need to raise money in some other way. To do so,
the Company may 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 $500 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 so
that the Company can begin to develop operating activities.

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 MEFFs. 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.

The Company has found a suitable location for its first MEFF, which will be
located near Kelowna, B.C., Canada. This first MEFF was to be built by an
outside contractor who was to arrange all of the financing, complete the
construction and deliver an operational plant to our operating subsidiary,
Hybrid Fuels (Canada) Inc., to be used as a demonstration and training
facility. Neither we nor Hybrid (Canada) were to have any liability for the
MEFF until it was operational.

Unfortunately, the Contractor who was to do the building, ran into
difficulties on another project that had nothing to do with us, and was unable
to keep his commitment to build the MEFF for Hybrid Fuels (Canada) Inc. Hybrid
(Canada) has made preliminary contact with a new contractor to construct this
first MEFF. No agreement has been reached as of the date of this report.

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 sought is
expected to 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.

We have also approached Farm Credit Corporation, which has recently approved a
program to provide leasing to farmers for the acquisition or upgrading of
buildings and equipment. At this time we are in the very preliminary stages of
discussion to determine the best way to obtain approval for lease financing to
construct the first MEFF and subsequent MEFFs. As a result of slow-downs that
===============================================================================
Page-16-

Item 2. Plan of Operation (continued)

are showing up throughout the economy, there seems to be a willingness to
assist in the furthering of this new process which could contribute greatly to
farm income. It is likely to take two to three months to complete the "due
diligence" process with FCC.

The institution that finances the construction of each MEFF is expected to be
given security on the plant in return for the financing. No financing has been
committed as at the date of this report.

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.

During the quarter, the Company issued 200,000 shares to a Director and
Officer for services rendered to the end of June, 2001. These shares were
authorized at a Directors meeting on June 11, 2001. However, the transfer
agent failed to issue them due to misreading the resolution. Also during the
quarter, the Company sold 130,000 restricted shares in a private placement to
an accredited investor to raise money to pay professional fees and other
operating expenses. These shares were issued after the end of the quarter. In
addition, the Company authorized the issuance of 100,000 restricted shares to
pay an independent consultant for services rendered to the end of September,
2001. These shares were also issued after the end of the quarter.

The loss for the present quarter is $40,759 compared to $95,665 for the
comparable quarter last year. The loss for the same quarter last year was
higher largely due to advances written, which is not likely to reoccur, plus
higher imputed interest and professional fees. The loss for this quarter is
made up of consulting fees for filings with the SEC, which have been paid by
cash of $473 and  the issuance of shares for a value of $5,000. Another
$18,000 is salary for the President which is deferred until money is
available, and does not represent a cash outlay. Other items not requiring
cash are interest which is accrued and imputed interest. All of these non-cash
items total $32,829.

The working capital deficiency of roughly $8,000 was made up from cash from
the sale of shares and by a major shareholder or the President. If no revenue
is received from the sale of a license as discussed above, or from operating
activities, it is anticipated that a major shareholder or the President will
continue to fund the Company's working capital deficiency for the foreseeable
future. Operating expenses will be kept to a minimum until revenue is
generated.

















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Page-17-

PART II	Other Information

Item 6.	Exhibits and Reports on Form 8K

	(a)	Exhibits
		None

	(b)	Reports on Form 8-K
		On August 28, 2001 the Company filed a report on Form 8-K, to
                report the change of Independent Accountant that occurred July
                25, 2000, and had not previously been reported.

Signatures

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.


Dated: November 14, 2001

HYBRID FUELS, INC.

By:/s/ Clay Larson
Clay Larson, President


END