<PAGE>
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                ----------------

                                   FORM 10-QSB

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

                For the Quarterly Period Ended December 31, 2003

 [ ] 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                 (I.R.S. Employer
      of incorporation or organization)           Identification No.)



                     Box 1349 Grenfell, Saskatchewan S0G 2B0
               (Address of principal executive offices) (Zip Code)

                                 (306) 697 3090
               --------------------------------------------------
               Registrant's telephone number, including area code




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 shares outstanding of the registrant's common stock as of December
31, 2003 was 21,950,600.

The number of shares issued of the registrant's common stock as of December 31,
2003 was 22,005,600.

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



                                       1
<PAGE>



                                TABLE OF CONTENTS
<TABLE>

                                                                                                          Page
<S>                <C>                                                                                    <C>
PART 1             Financial Information


Item 1             Financial Statements

                           Consolidated Balance Sheets                                                       3

                           Consolidated Statements of Operations                                             4

                           Consolidated Statements of Cash Flows                                             5

                           Notes to Consolidated Financial Statements                                        6


Item 2                     Management Discussion and Analysis of Financial Condition and Operations

                           Plan of Operation                                                                11

                           Results of Operations                                                            12

                           Plan of Operation - Background                                                   12

                           Strategy to Raise Capital                                                        13

                           Plan of Operation Assuming Adequate Capital Raised                               13

                           Plan of Operation Assuming Establishment of Facility Feasibility                 15


Item 3             Controls and Procedures                                                                  17


PART 2             Other Information


Item 6             Exhibits and Reports on Form 8K                                                          17

                   Signatures                                                                               17

</TABLE>



                                       2
<PAGE>



                         PART 1 - Financial Information

ITEM 1.  Financial Statements

Hybrid Fuels, Inc.
Consolidated Balance Sheets
(Unaudited)

<TABLE>
<CAPTION>
                                                                                December 31,     June 30,
                                                                                   2003           2003
                                                                               (Unaudited)      (Audited)
                                                                                  $                 $
<S>                                                                            <C>             <C>
ASSETS

Current Assets

Cash                                                                                   365         1,247
                                                                                ----------    ----------

Total Assets                                                                           365         1,247
                                                                                ==========    ==========


LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

Accounts payable                                                                    37,221        35,695
Accrued liabilities                                                                  1,061        12,500
Note payable (Note 3)                                                               37,106        37,106
Shareholder loan payable (Note 4(a))                                               203,561       201,305
Amounts owing to a `Director (Note 4(b))                                           326,701       290,701
                                                                                ----------    ----------
                                                                                   605,650       577,307
                                                                                ----------    ----------
Redeemable & Restricted Common Shares (Note 5(c))                                  223,000       223,000
                                                                                ----------    ----------
Contingencies & commitments (Notes 1 & 5)
Stockholders' Deficit

Common Stock: $0.001 par value; 50,000,000 shares authorized 22,005,600 and
21,950,600 shares are issued and outstanding respectively                           22,005        21,950

Additional Paid-in Capital                                                         428,080       414,385

Donated Capital - Imputed Interest (Notes 4(a) and (b))                            282,429       243,602

Deficit Accumulated During the Development Stage                                (1,560,799)   (1,478,997)
                                                                                ----------    ----------
Total Stockholders' Deficit                                                       (828,285)     (799,060)
                                                                                ----------    ----------
Total Liabilities and Stockholders' Deficit                                            365         1,247
                                                                                ==========    ==========
</TABLE>

Nature of Operations and Continuance of Business (Note 1)
Other Contingencies (Note 5)

(See Accompanying Notes to the Consolidated Financial Statements)


                                       3
<PAGE>


Hybrid Fuels, Inc.
Consolidated Statements of Operations
(Unaudited)

<TABLE>
<CAPTION>

                                                Accumulated
                                                  from
                                                February 26,
                                                   1960
                                                 (Date of
                                                Inception)            Three months ended            Six months ended
                                                to December              December 31,                  December 31,
                                                 31, 2003             2003           2002           2003        2002
                                                     $                   $              $              $           $
<S>                                           <C>                               <C>             <C>        <C>
Revenue                                              -                    -              -              -           -
                                              -------------    ----------- -------------- -------------- -----------

Expenses

Consulting Fees                                      98,270              -         78,000          3,750       78,000
Deposits & Advances written-off                     255,512              -              -              -            -
Disputed compensation (Note 5(c))                   243,463              -              -              -            -
Executive compensation (Note 4(b))                  324,000         18,000         18,000         36,000       36,000
Filing and regulatory fees                           18,804            100            434            160          691
General and administration                           63,391             33              -             51           41
Interest                                             12,153          1,115          1,348          2,213        2,118
Imputed interest (Notes 4(a) & (b))                 282,429         19,751         16,937         38,827       33,873
Investor relations                                   16,698              -              -              -            -
Professional fees                                   180,677              -          8,883            534       10,480
Rent and telephone                                   43,409            135            226            267          353
Research and development                              8,000              -              -              -            -
Travel and promotion                                 13,993              -              -              -            5
                                                -----------    -----------    -----------    -----------  -----------

                                                  1,560,799         39,134        123,828         81,802      161,561
                                                -----------    -----------    -----------    -----------  -----------
Net Loss                                         (1,560,799)       (39,134)      (123,828)       (81,802)    (161,561)
                                                ===========    ===========    ===========    ===========  ===========
Net Loss Per Share                                                    (.01)          (.01)          (.01)        (.01)
                                                ===========    ===========    ===========    ===========  ===========

Weighted Average Shares Outstanding                             22,005,600     21,345,600     21,982,700  21,325,600
                                                ===========    ===========    ===========    ===========  ===========


</TABLE>

(See Accompanying Notes to the Consolidated Financial Statements)


                                       4
<PAGE>


Hybrid Fuels, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

<TABLE>
<CAPTION>

                                                                                                 Six Months ended
                                                                                                   December 31,
                                                                                                 2003         2002
                                                                                              $                 $
<S>                                                                                          <C>            <C>
Cash Flows To Operating Activities

Net loss                                                                                         (81,802)    (161,561)

     Non-cash items
     Imputed interest                                                                             38,827       33,873
     Common shares issued for services                                                             3,750            -
     Accrued Director remuneration                                                                36,000            -
Adjustment to reconcile net loss to cash
Accounts payable and accrued liabilities                                                              87       85,160
                                                                                             -----------  -----------

Net Cash Used In Operating Activities                                                             (3,138)     (41,528)
                                                                                             -----------  -----------

Net Cash Used By Investing Activities

Cash Flows From Financing Activities
Common Stock issued                                                                                    -        5,673
Amounts owing to a Director                                                                            -       36,019
Shareholder loans payable                                                                          2,256         (630)
                                                                                             -----------  -----------

Net Cash Provided By Financing Activities                                                          2,256       41,062
                                                                                             -----------  -----------

Net Increase (Decrease) in Cash                                                                     (882)      (1,471)

Cash - Beginning of Period                                                                         1,247        1,796
                                                                                             -----------  -----------

Cash - End of Period                                                                                 365          325
                                                                                             ===========  ===========
Non-Cash Financing Activities
Value of common stock issued for settlement of debt                                               10,000            -
Value of common stock issued for services                                                          3,750            -

</TABLE>

(See Accompanying Notes to the Consolidated Financial Statements)


                                       5
<PAGE>



Notes to the Consolidated Financial Statements

1.   Nature of Operations and Continuance of Business

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

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

     On May 28, 1998, the Company acquired, by issuing 12,000,000 shares, Hybrid
     Fuels, USA, Inc. and 330420 B.C. Ltd., which changed its name to Hybrid
     Fuels (Canada) Inc. This acquisition was accounted for as a reverse merger
     whereby the shareholder of Hybrid Fuels, USA, Inc. and Hybrid Fuels
     (Canada) Inc. gained control of Polo Equities Inc., which changed its name
     to Hybrid Fuels, Inc. 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. 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". 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 Dec
     31, 2003, the Company had a working capital deficit of $605,285 and an
     accumulated deficit of $1,560,799.



                                       6
<PAGE>


     The Company will need to rely on the forbearance of some creditors and
     related parties have agreed to continue to fund working capital as needed.
     There is no written agreement that obligates these parties to fund working
     capital on a continuing basis. 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. No assurance can be given that
     arrangements can be worked out with creditors or that any third party
     financing will be completed.


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.

     (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 antidilutive.

     (e) Foreign Currency Translation

         The Company's functional and reporting currency is the United States
         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 financials
         statements, entered into derivative instruments to offset the impact of
         foreign currency fluctuations.


                                       7
<PAGE>


     (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, 2003, 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 and equivalents, accounts payable and accrued
         liabilities, note 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.

     (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 May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
         Financial Instruments with Characteristics of both Liabilities and
         Equity". SFAS No. 150 establishes standards for how an issuer
         classifies and measures certain financial instruments with
         characteristics of both liabilities and equity. It requires that an
         issuer classify a financial instrument that is within its scope as a
         liability (or an asset in some circumstances). The requirements of SFAS
         No. 150 apply to issuers' classification and measurement of
         freestanding financial instruments, including those that comprise more
         than one option or forward contract. SFAS No. 150 does not apply to
         features that are embedded in a financial instrument that is not a
         derivative in its entirety. SFAS No. 150 is effective for financial
         instruments entered into or modified after May 31, 2003, and otherwise
         is effective at the beginning of the first interim period beginning
         after June 15, 2003, except for mandatorily redeemable financial
         instruments of non-public entities. It is to be implemented by
         reporting the cumulative effect of a change in an accounting principle
         for financial instruments created before the issuance date of SFAS No.
         150 and still existing at the beginning of the interim period of
         adoption. Restatement is not permitted. The adoption of this standard
         is not expected to have a material effect on the Company's results of
         operations or financial position.


                                       8
<PAGE>

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
         Stock-Based Compensation - Transition and Disclosure", which amends
         SFAS No. 123 to provide alternative methods of transition for a
         voluntary change to the fair value based method of accounting for
         stock-based employee compensation. In addition, SFAS No. 148 expands
         the disclosure requirements of SFAS No. 123 to require more prominent
         disclosures in both annual and interim financial statements about the
         method of accounting for stock-based employee compensation and the
         effect of the method used on reported results. The transition
         provisions of SFAS No. 148 are effective for fiscal years ended after
         December 15, 2002. The disclosure provisions of SFAS No. 148 are
         effective for financial statements for interim periods beginning after
         December 15, 2002. The transition provisions do not currently have an
         impact on the Company's financial position and results of operations
         as the Company currently has no stock-based employee compensation.

         In June 2002, FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities". The provisions of this
         Statement are effective for exit or disposal activities that are
         initiated after December 31, 2002, with early application encouraged.
         This Statement addresses financial accounting and reporting for costs
         associated with exit or disposal activities and nullifies Emerging
         Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
         Certain Employee Termination Benefits and Other Costs to Exit an
         Activity (including Certain Costs Incurred in a Restructuring)". This
         Statement requires that a liability for a cost associated with an exit
         or disposal activity be recognized when the liability is incurred. The
         adoption of this standard did not have a material effect on the
         Company's results of operations or financial position.

         FASB has also issued SFAS No. 147 and 149 but they will not have any
         relationship to the operations of the Company therefore a description
         of each and their respective impact on the Company's operations have
         not been disclosed.


3.       Note Payable

         On September 15, 2000, the Company issued a note for $50,000 CND
         ($33,638 US) 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 $850 has been accrued for
         the period ended December 31, 2003. The note payable was $37,106 after
         translation into US dollars at year end. The Company incurred a foreign
         currency translation loss of $3,468 that was charged to operations.
         Accrued interest from September 15, 2000 of $9,672 is included in
         accounts payable as of December 31, 2003.

4        Related Party Transactions/Balances

     (a) The controlling shareholder is owed $199,371 for payment of rent,
         office expenses and professional fees on behalf of the Company. Amounts
         owing are unsecured, non-interest bearing, with no specific terms of
         repayment. For the period ended December 31, 2003 this major
         shareholder advanced a further $2,256 to the Company. Imputed interest
         of $15,000 (2002 - $14,973), calculated at a rate of 15% per annum, was
         charged to operations and treated as donated capital.


                                       9
<PAGE>

     (b) The President who is also a Director of the Company has 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 is entitled to a deferred salary of US$6,000 per month and
         was owed a total of $326,701 at December 31, 2003. These amounts are
         unsecured, non-interest bearing and due on demand. Imputed interest of
         $23,827 (2002 - $18,299), 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 President.

5.       Commitments and Contingencies


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

     (a) On August 4, 1998 and March 23, 1999, the Company's former Board of
         Directors authorized the issuance of 1,000,000 and 900,000 shares
         respectively to individuals without consideration. On August 21, 1999,
         the current Board of Directors resolved that share certificates
         representing ownership of these 1,900,000 shares were issued without
         adequate consideration being paid to the Company and were therefore
         not fully paid and non-assessable. The Company cancelled the share
         certificates and indemnified the transfer agent, for any costs or
         liability that may incur arising out of the cancellation of such
         shares. The transfer agent removed the 1,900,000 shares from the
         stockholder list effectively reversing the issuance. Six of the
         cancelled certificates, totaling 550,000 shares, have been endorsed
         and returned to the Company for cancellation. The contingencies
         regarding the cancelled shares relate to anyone who may have
         subsequent holder rights, and possibly the individuals who were issued
         those shares who may claim that they were issued for due
         consideration. The Company has determined that there is no amount to
         be accrued for future liabilities associated with claims by subsequent
         shareholders. To date when these shares 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 past president. All amounts that were unauthorized
         by the board of directors or amounts that are not properly documented
         with invoices and receipts have been accounted for as disputed
         executive compensation. At such time as Company resources permit, the
         Company will seek legal advice to determine whether or not it is
         possible to recover all such disputed and unauthorized amounts from
         the previous administration.

     (c) 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 ("Offering") of which a total of
         $223,000 was raised. The current administration 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.


                                       10
<PAGE>

     (d) The Company's subsidiary, Hybrid Fuels (Canada) Inc., has entered into
         a verbal agreement with an independent third party that will construct
         a fully operational facility at Oyama, B.C. This third party will then
         operate that facility as a training and demonstration facility for
         Hybrid Fuels (Canada) Inc. 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.

ITEM 2.  Management's Discussion and Analysis of Operations and Financial
         Condition

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, 2003. 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.

Plan of Operation

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, 2004.

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
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-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 the Dalum facility was closed in 1996, further research, development and
construction enabled us to 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 facilities that
integrate beef operations with the production of ethanol. In these facilities,
grain, corn or other feedstock is fermented and then distilled to make the
ethanol. Left over from the ethanol production process is 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. 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 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.


                                       11
<PAGE>

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 sufficient
heat will be left over to operate a greenhouse, if the operator so desires.

The ethanol is intended to be 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) 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, 2003, as amended and filed with the SEC.

Although there are no operating facilities at the moment, the Company is
expecting to have the first facility operating early in 2004, as described
below.

The Company intends to sell these facilities (except the column and spinner
which we intend to lease) to farm operators, preferably those who grow or have
access to sufficient grain to supply the facility. Management believes this
would be approximately 40,000 bushels of barley (or other suitable grain) per
year for a facility that would feed 200 head of cattle on a continuous rotating
basis.

Results of Operations

The loss for the present quarter is $39,134 compared to $123,828 for the
comparable quarter last year. This difference is mainly attributable to $78,000
in consulting fees that were claimed in the same quarter last year. The loss for
this quarter includes amounts of $18,000, which is deferred salary for the
President, and $19,751 imputed interest, which do not represent a cash outlay.
These non-cash items total $37,751. At the end of the quarter, the Company had
cash of $365 down from $896 at the end of the previous quarter. Meanwhile, the
Company continues to keep its operating expenses to a very minimum. In the
absence of operating activities, the Company's general and administrative
expenses for the next 12 months that require a cash outlay are expected to be
less than $100 per month, exclusive of executive compensation, which is
deferred, and professional fees, which have been paid by related parties in the
past.

Plan of Operation - Background

We are a development stage company that has not yet proved the economic
feasibility of its planned principal operations. In their opinion on our June
30, 2003 financial statements, our independent auditors raised a substantial
doubt about our ability to continue as a going concern because we have not
generated any revenues and have conducted operations at a loss since inception.
Until such time as we prove the economic feasibility of our planned principal
operations, we are likely to continue to experience a cash shortage. Because we
are a developmental stage company, we are 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 concern to management.

Our ability to continue to operate in the future depends on our being able to
raise money to commence operations, and we therefore continue to concentrate our
efforts on raising money to complete the first facility and commence operations.
In the previous quarter Hybrid Fuels (Canada) Inc., a wholly owned subsidiary,
entered into a verbal agreement with an independent group of the Company's
shareholders to finance the construction of the first facility. The verbal
understanding that has been reached is that when the facility is operational and
the construction and start-up costs are known, the group that built it will
enter into an agreement with Hybrid Fuels (Canada) Inc., by which the facility
will be operated. Part of the agreement will make the facility available to the
Company for training and demonstration purposes, through a lease or an operating
agreement. We anticipate this first facility will be operational early in 2004.


                                       12
<PAGE>

Management recognizes that to generate long-term cash flow, we need to develop
operating activities. Once the first facility is operating, we plan to use it to
demonstrate to potential operators, lenders and investors that the technology
works as described. Prospective operators and those who will approve the
financing for the construction of subsequent facilities want to see a facility
in operation before they commit themselves.

In the meantime we are seeking a private placement to finance the commencement
of operating activities. We do not have any commitments for financing at this
time.

Although we do not have significant cash reserves, related parties have
indicated a willingness for the time being to continue to pay operating expenses
and advance funds to pay legal and accounting fees. The Company therefore
believes that it can continue as a going concern in the near term. These related
parties are not obligated to pay Company operating costs, and therefore, no
assurances can be given that they will continue to do so.


Strategy to Raise Capital

We are aware of a class of investors who will invest money in companies whose
stocks are traded on the OTC Bulletin Board. Since our stock is now trading on
the OTC Bulletin Board, we are in the process of contacting prospective
investors to raise $500,000 to $1,000,000 in capital through the sale of shares.
This planned offering and sale of our common stock will not be registered under
the Securities Act of 1933 and may not be offered or sold in the United States
absent registration or an applicable exemption from the registration
requirement. This disclosure is not an offer of securities or a solicitation of
an offer to buy securities. Placements will be made only to investors with
preexisting contacts with Hybrid Fuels and its authorized representatives.

Plan of Operation Assuming Adequate Capital Raised

The discussion in this section assumes that we will succeed in raising $500,000
to $1,000,000 that will be used to build the second facility and develop
operating activities. The major goal of placing the first facility in service is
to demonstrate the economic feasibility of the system. Once this first facility
is operating, we expect 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 operating costs, plus
a small surplus. The financial institutions that have expressed interest in
financing subsequent facilities want to see this first facility 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
get approval for financing subsequent facilities.

After the end of the quarter, the foundation, concrete slabs and approximately
75% of the ethanol facility's exterior were completed at Oyama, BC, Canada on
approximately six acres of farmland. This location 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>

An operating facility includes the barn and a second building housing the
ethanol making equipment, plus the bio-furnace or gasifier, "Greener Pastures"
grass growing system, and the right to use the proprietary information and
technology. The cost of building a facility is anticipated to be approximately
$350,000. Approximately $220,000 of this cost is for foundations and flooring,
buildings, the gasifier, the ethanol making equipment, tanks and machinery. Soft
costs, for such items as permits, engineering and other professional fees,
survey and layout, site preparation, delivery of buildings and materials,
rentals, small tools and miscellaneous, are estimated at $60,000. We estimate we
will spend approximately $70,000 for construction labor and supervision.

Each facility is expected to accommodate 200 head of cattle. As we near the end
of testing the first facility, we plan to begin the finishing operation for the
cattle with an initial group of 20 to 25 head. 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 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 40 to 50 at a time on
three to five week intervals to take maximum advantage of the size of the trucks
used to transport the cattle.

The cattle will begin the finishing operation in quieting pens where they spend
approximately two weeks being transitioned from their prior diet to the wet
distillers grains diet. After completing the diet transition, the cattle are
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. 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 be able to prepare pro forma information that will
demonstrate the financial fundamentals of the facility for purposes of
demonstrating cash flows to prospective financiers and prospective purchasers of
future facilities.

We plan to add, on average, between 400 and 500 pounds per head 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 begin being 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 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, that we finish it 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.

We expect that as sale prices move close to or exceed purchase prices, the
facility's cattle finishing operation will make a profit. Cattle prices are
volatile, however, so there is a distinct risk that sale prices for finished
cattle could be below the pricing threshold, resulting in a loss on cattle
finishing. The greater the price spread, the more important ethanol sales become
to the overall profitability of the facility. 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.


                                       14
<PAGE>

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 with a
local owner of a sawmill and trucking company giving him the ethanol for this
two-to-three-month period, with a view toward charging him in the future once he
has determined that he can use the ethanol economically without harm to his
equipment. Once the facility is at full capacity, we project that the facility
will produce approximately 240 US gallons of ethanol per day, which 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. 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 a basis to prepare pro forma financial information projecting the economic
feasibility of the facility. By establishing 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, or, in the worst case, we may not be able to establish the economic
feasibility of the facility and may have to abandon the business and liquidate
the company.

Plan of Operation Assuming Establishment of Facility Feasibility

The discussion in this section assumes that we will succeed both in raising
$500,000 to $1 million that will be used to place the first facility in service
and in demonstrating the economic feasibility of the facility. Once these
milestones are achieved, we intend to enter into contracts with others who will
build, own and operate additional facilities, while we earn revenues from a
variety of sources related to the facilities. We plan to earn revenue from:

1.   operating the demonstration facility;
2.   profit on the sale of subsequent facilities;
3.   the lease of the column and spinner to each operator;
4.   the royalties and service fees that each operator will pay;
5.   the purchase of the ethanol mixture from the operator at a percentage of
     wholesale value that will permit us to earn a profit from the sale of the
     ethanol to distributors or end-users;
6.   an incentive from premiums from marketing the finished animals.

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

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. The sale price of each facility is
expected to be sufficient to cover the costs the Company will incur to sell,
plan and supervise the construction of the facility and train the operator. Our
plan is that earnings from the sale of the facilities will 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.

To date, we have received applications from more than 50 farmers who have
expressed interest in constructing a facility. We are currently developing a
screening process to select suitable candidates, and we expect to assist them in
obtaining financing for facility construction. Once we have demonstrated our
demonstration facility's economic feasibility for purposes of obtaining
financing of subsequent facilities, we expect to have selected four candidates
for training as operators. After candidates have been selected and have
qualified for financing, we plan to train them and assist in constructing the
facility.


                                       15
<PAGE>

We intend to lease to the operators, on a permanent basis, the separation
column, which is used to distill the ethanol, and the spinner, which 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 also expect to charge each operator service fees to cover the cost of ongoing
training, service, technical support, and quality control. It is expected that
these fees would be in the $150 to $250 per month range.

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
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. We expect revenue for
Hybrid 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.

Based on the results of the test trials at the Dalum facility, we believe we
will be able to generate premium prices for the beef because of its high quality
and it is free of added hormones. At the Dalum facility, the purchaser of the
123 heifers agreed to pick up subsequent lots at the facility and pay a premium
of $0.10 per pound for all of the beef that could be produced using our process.
We do not have commitments from any buyers to purchase the beef at premium
prices at this time.

We believe that ultimately the best way to obtain the best premium is to control
the processing, marketing and distribution of the finished beef. To that end we
continue to search for financing to purchase the packing facility known as Blue
Mountain Packers, near Salmon Arm, B.C. This purchase is not likely to happen
before our next fiscal year end, but it remains part of our long-term plan. No
commitment will be made to purchase the packing facility until sufficient money
is committed to pay the purchase price and cover operating expenses until
positive cash flow is achieved.

We have had preliminary discussions with CIBC, Scotiabank, Leaseline, Dominion
Leasing and a Swiss broker with connections to several European "ECO" funds, all
of whom have expressed interest in providing financing for facilities. We have
been told that our project should qualify for "ECO" fund financing once we can
demonstrate its' economic viability. Once the first facility is operating the
plan is for the Swiss broker to arrange to have the appropriate representatives
of these "ECO" funds inspect the facility and if it qualifies, to use them as a
source of financing for facility construction, thereby permitting us to expand
our operations.


                                       16
<PAGE>

ITEM 3.  Controls and Procedures

Based on their evaluation as of a date within 90 days of the filing date of this
report, the Company's Principal Executive Officer and Principal Financial
Officer have concluded that the Company's disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act 1934
(the "Exchange Act") are effective to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.

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



                           PART 2 - Other Information


ITEM 6.  Exhibits and Reports on Form 8-K

a. Exhibits

Exhibit 31.1   Principal Executive Officer Certification (section 302 of the
               Sarbanes-Oxley Act of 2002)
Exhibit 31.2   Principal Financial Officer Certification (section 302 of the
               Sarbanes-Oxley Act of 2002)
Exhibit 32.1   Principal Executive Officer Certification (section 906 of the
               Sarbanes-Oxley Act of 2002)
Exhibit 32.2   Principal Financial Officer Certification (section 906 of the
               Sarbanes-Oxley Act of 2002)

b. Reports on Form 8-K

On December 10, 2003 Alan Urschel and David Krahn were appointed to the Board of
Directors of Hybrid Fuels Inc. (incorporated by reference to Form 8K filed
December 24, 2003).

On January 22, 2004 the Company issued a press release announcing a change in
its Directors and Officers (incorporated by reference to Form 8K filed January
22, 2004).


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.

HYBRID FUELS, INC.

By: /s/ Alan Urschel                            By: /s/ Gordon Colledge
-------------------------                       --------------------------
Alan Urschel                                    Gordon Colledge
President/CEO/Director                          Vice President/CFO/Director

Dated: February 16, 2004