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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 March 31, 2001

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

For the Transition Period From _______ to _________________________

Commission File Number 0-29351

HYBRID FUELS, INC.
(Exact name of registrant as specified in its charter)

NEVADA
(State or other jurisdiction of incorporation or organization)

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

#214-2791 Hwy. 97 N., Kelowna, B.C., Canada, V1X 4J8
(Address of principal executive offices)       (Zip Code)

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

Indicate by check mark whether registrant (1)  has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or shorter period that registrant was
required to file such reports), and (2) has been subject to filing
requirements for the past 90 days.

Yes                No X

The number of shares outstanding of the registrant's common stock as of
March 31, 2001 was 16,523,600

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

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HYBRID FUELS, INC.

FORM 10-QSB

For the quarter ended March 31, 2001

INDEX


Part I - Financial Information

 Item 1. Financial Statements		                        Page

         Balance sheet as of March 31, 2001...................3

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


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

         Notes to Financial Statements........................6

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


Part II - Other Information...................................16

 Item 6. Exhibits and Reports on Form 8-K

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Hybrid Fuels, Inc.
(formerly Polo Equities, Inc.)
(A Development Stage Company)
                                        Consolidated Balance Sheets
                                      ------------------------------
                                      March 31, 2001   June 30, 2000
                                          $               $
                                      (unaudited)     (unaudited)
                                      ------------------------------
        ASSETS
        --------------
        Current Assets
        --------------
        Cash                                    15             485
        Other Assets
        --------------
        Deposit on Plant (Note 3) -          170,561
        Note Receivable (Note 4)
                                                 15         171,046

        LIABILITIES AND STOCKHOLDERS' EQUITY
        ------------------------------------
        Current Liabilities
        -------------------
        Accounts payable                       8,416           3,111
        Accrued liabilities                    2,000             -
        Note payable (Note 4)                 33,638             -
        Shareholder loan payable
        (Note 5(a))                          197,956        163,748
        Amounts owing to a Director
        (Note 5(b))                          130,316         74,432
        Loan Payable
        (Note 6(e))                          30,240             -
                                           -------------------------
                                            402,566         241,291
        Temporary Equity and
        Redeemable Shares
        (Note 6(d))                         223,000         223,000

        Stockholders' Equity (Deficit)
        ------------------------------
        Common Stock: $0.001 par value;
        50,000,000 shares authorized
        16,523,600, shares are issued
        and outstanding
        (Note 6(b), (c) and (d))             16,524          16,524

        Additional Paid-in
        Capital                             165,474         165,474

        Deficit Accumulated
        During the
        Development Stage                  (807,549)       (475,243)
                                           -------------------------
                                           (625,551)       (293,245)
                                                 15         171,046

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

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

                        Consolidated Statements of Operations
                  ------------------------------------------------------------
                  Accumulated from        Three Months    Nine Months
                  February 26, 1960          Ended           Ended
                 (Date of Inception)       March 31,       March 31,
                  to March 31, 2001     2001    2000     2001    2000
                  ------------------------------------------------------------
                         $               $        $       $        $
                    (unaudited)   (unaudited)(unaudited)(unaudited)(unaudited)
                  ------------------------------------------------------------
Revenue                 -               -          -        -         -
General and
Administrative Expenses
Disputed compensation
(Note 7(b))            243,463          -          -        -         -

Executive compensation
(Note 5(b))            126,000       18,000     18,000    54,000     54,000
Filing and regulatory
fees                    10,979          120       -        3,372      2,607
General and
administration          55,275          209       -        1,023      1,321
Professional
fees                    86,536        6,930       -       39,087        508
Rent and telephone      34,456          948       -        2,585      3,183
Travel and  promotion   11,672          154       -        1,071      1,216
                       --------------------------------------------------------
                       568,381       26,361    18,000    101,138     62,835
                       --------------------------------------------------------
Research and Development
Expenses Consulting
and research             8,000         -         -         -            -
Net Loss              --------------------------------------------------------
Before Other Items    (576,381)     (26,361)  (18,000)  (101,138)   (62,835)
                      --------------------------------------------------------
Deposit on Plant Written-off
(Note 3)              (170,561)     (170,561)    -      (170,561)      -
                      --------------------------------------------------------
Note and Advances Written-off
(Note 4)               (60,607)      (60,607)    -       (60,607)      -
                      --------------------------------------------------------
Net Loss For the Period(807,549)     (257,529) (18,000)  (332,306)      -
                      --------------------------------------------------------
Net Loss Per Share                   (.016)     (.001)    (.020)     (.004)
                      ---------------------------------------------------------
Weighted Average Shares
Outstanding           --------------------------------------------------------
                         16,457,000    16,100,000   16,457,000    14,609,000
                      --------------------------------------------------------
(See Accompanying Notes to the Consolidated Financial Statements)

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

                         Consolidated Statements of Cash Flows
                         -------------------------------------
                                    Nine Months
                                       Ended
                                     March 31,
                              2001             2000
                         -------------------------------------
                               $                 $
                           (unaudited)      (unaudited)
                         -------------------------------------
Cash Flows To Operating Activities
Net loss                    (332,306)        (62,835)
Non-cash items
Deposit on plant
written-off                  170,561             -
Note and advances
written-off                   60,607             -

Adjustment to reconcile net
loss to cash Accounts payable
and accrued liabilities        7,305            3,111

Net Cash Used In Operating
Activities                   (93,833)         (59,724)
                         -------------------------------------

Cash Flows To Investing Activities
----------------------------------

Note receivable and deposit on
plant                        (60,607)        (170,561)

Net Cash Used By Investing
Activities                   (60,607)        (170,561)
                         --------------------------------------

Cash Flows From Financing Activities
------------------------------------
Amounts owing to a Director   55,884           56,432

Shareholder loans payable     34,208           24,338

Proceeds from note payable    33,638             -

Proceeds from Loan            30,240            -

Issuance of common stock        -              150,000

Net Cash Provided
By Financing Activities      153,970           230,770

Net Increase (Decrease)
in Cash                        (470)              485

Cash -
Beginning of Period             485                 -

Cash -
End of Period                    15               485

Non-Cash Financing Activities     -                 -

Supplemental Disclosures

Interest paid in cash             -                 -

Taxes paid in cash                -                 -

(See Accompanying Notes to the Consolidated Financial Statements)

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

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. 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.  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

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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.

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.  One proprietary technology
permits the conversion of straw or other low-grade cellulositics to a high
grade food, with a food value equal to high-grade oats.  Other proprietary
technology involves the design 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.  The
Company currently has plans to raise working capital through an equity
financing.

2. Summary of Significant Accounting Policies

(a)	Consolidated Financial Statements

These consolidated financial statements represent the consolidation of the
Company both 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.


2.	Summary of Significant Accounting Policies (continued)

(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.

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(d)	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 has agreed to purchase the beef processing
plant facility including land, buildings and equipment for Cnd$3,000,000
which is below appraised value.  The purchase agreement required an
additional payment of Cnd$150,000 on June 24, 2000, the parties agreed to
extend the deadline for the payment until March 15, 2001.  This payment was
not made and the deposit was forfeited and the option agreement terminated.

Upon anticipated completion of the purchase, this beef processing plant was
to be operated by Blue Mountain Packers, Ltd. (a related company).  The
Company intended to acquire the issued and outstanding common shares of Blue
Mountain Packers, Ltd. for a nominal amount and operate it as a wholly-owned
subsidiary.  Blue Mountain Packers, Ltd. had recently received certification
by the Canadian Food Inspection Agency of the Government of Canada,
Department of Agriculture for the processing of Canadian beef.  Blue Mountain
Packers is a related party due to having one common director.


4.	Note Receivable

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 and passed the
funds to Blue Mountain Packers Ltd., which executed a note payable for the
same terms.  On January 5, 2001, a further Cnd$35,000 (US$22,050) was loaned
without interest or fixed terms of repayment.  A total of $4,919 of plant
refurbishing expenses were paid on behalf of Blue Mountain.  These notes and
advances, totalling $60,607 were written-off on March 15, 2001 when the
option agreement was terminated.  These funds were used by Blue Mountain
Packers Ltd. to refurbish the plant.


5.	Related Party Transactions/Balances

(a) Cash loans of $530,759 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 $33,788
on behalf of the Company.  The balance of $199,956 is currently owing without
interest or specific repayment terms.

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(b) The President and Director of the Company, has paid office and related
expenses from personal funds in the amount of $4,316, net of $10,000 repaid.
Effective July 1, 1999 the President is entitled to a deferred salary of
US$6,000 per month and is owed a total of $126,000 at December 31, 2000.
These amounts are unsecured, non-interest bearing and due on demand.

(c) See Note 3 and Note 4 for transactions with Blue Mountain Packers Ltd.


6.	Stockholders' Equity

(a) On May 28, 1998, the Company acquired, by issuing 12,000,000 shares,
Hybrid Fuels, USA, Inc. and 330420 B.C. Ltd., which changed its name to
Hybrid Fuels (Canada) Inc.  This acquisition was accounted for as a reverse
merger whereby the shareholder of Hybrid Fuels, USA, Inc. gained control of
Polo Equities Inc.  As part of the acquisition three shareholders representing
12,000,000 previously issued shares returned their shares for cancellation.

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.  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 .  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.

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When it became apparent there were going to be long delays the notes were
demanded to be repaid by February 21, 2001.


The Company has requested these shares be returned for cancellation.  The
notes are disclosed as a reduction of shareholders' equity.

(d) Between October 1998 and June 1999, the previous administration sold
common stock of the Company to 34 subscribers on the basis of an Offering
Memorandum that contained a significant number of inaccuracies.  A total of
$223,000 was raised pursuant to this Offering.  The current administration
has concerns regarding possible misstatements, omissions and misleading
statements.  On the advice of legal counsel, the Company offered these 34
subscribers the option of receiving restricted stock as the Company did not
and does not have the funds to repay these subscribers.  Those who opted to
receive restricted stock were also given an undertaking that they would
receive a rescission offer when the Company was in a position to repay their
money plus appropriate interest, in return for a return of the restricted
stock, or they could elect to retain the stock.  To date, 21 subscribers,
have, pursuant to this offer received 211,020 shares, representing $138,000.
Two other subscribers, each representing 13,400 shares and $10,000, have
requested shares that have not yet been issued.  11 subscribers, who paid
$65,000 for 123,300 shares, have not responded to the offer.

(e)On January 5, 2001, the Company received Cnd$48,000 (US$30,240) from a
non-related company.  The Company has agreed to issue shares subject to board
resolution.  The loan is non-interest-bearing, unsecured and due on demand.

7.	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 6(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 6(d) for temporary equity and related rescission rights for
subscribers of 361,120 shares of the Company.

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

This Form 10-QSB contains forward-looking statements. The words "anticipate",
"believe", "expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and similar expressions identify forward-looking statements that
involve risks and uncertainties.  You should not place undue reliance on
forward-looking statements in this Form 10-QSB because of their inherent
uncertainty.  The following discussion and analysis should be read in
conjunction with the Financial Statements and Notes thereto and other
financial information included in this Form 10-QSB and our Form 10-KSB for
the year ended June 30, 2000.  Actual results could differ materially from
the results discussed in the forward-looking statements.

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

Although the Company is in the developmental stages, the process behind
Hybrid's business has been researched and developed over more than a decade.
A plant that integrated the process described below was constructed and
operated near Dalem, Alberta during 1994 and 1995.  That operation is the
source of the actual operating results that are referred to later in this
report.

After that plant was closed in 1995, further research, development and
construction helped us discover ways to improve the buildings and equipment
and refine the process, which is now ready for market.

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

The manure and used bedding straw are cleaned up frequently, thus removing
the media in which disease would otherwise grow.  They are burned in a
gasifier and the heat produced is used in the fermentation and distillation
processes, with leftover heat being available to operate a greenhouse.  The
ethanol is mixed with a proprietary emulsifier and diesel.  When this
emulsion was tested at The British Columbia Institute of Technology,

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in an unaltered diesel engine, it reduced the particulate (black smoke)
emissions by over 62% and the Nox emissions by over 22%, without any loss of
power.

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

Hybrid plans to earn revenue from several streams:

1. profit on the sale of each MEFF;

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

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

4. the marketing of the finished animals.

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

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

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

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

In the second quarter of 2000, Hybrid found a packing plant that was within a
two-hour drive of our head office and was not operating.  This plant seemed
to be perfect for our needs because of its size and the fact that it was
constructed to meet the specifications necessary in order to process beef for
shipment to Europe and the Far East.  The Company negotiated an agreement

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with the owners to take possession of the plant, get it operating and obtain
an operating certificate from the Canadian Food Inspection Agency (CFIA).
The agreement contemplated the Company operating the plant for several months
before the balance of the purchase price was due to be paid.  That operating
period was necessary in order to satisfy the financial institutions who were
to advance the money to pay the balance of the purchase price of our ability
to generate cash flow from the operation.

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

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

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

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

The meat packing plant is unlikely to sell quickly because of its size and
location.  Any prospective purchaser will need to have a supply of animals
and a market to make the plant profitable.  At present that is a problem
because meat prices have increased dramatically and finished animal supplies
have been committed much earlier than normal as a result of "mad cow" and
hoof and mouth disease.  The Company is satisfied that it has a workable
business plan to make the packing plant operate profitably by building the
MEFFs in close proximity to the packing plant.  To ensure that a supply of
enough hormone free feeders for finishing are committed to keep the MEFFs and
the packing plant running at full capacity, a premium would be paid to the
cow/calf ranchers.

On the marketing side, the Company believes it is possible to generate higher
than industry average returns because the process produces high quality meat
which the Company would market to high-end specialty restaurants, cruise
ships and markets in Europe and the far east.

______________________________________________________________________________
______________________________________________________________________________

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

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

On February 6, 2001, the Company demanded payment of those notes by February
21, 2001.  The notes were not paid as demanded, and the shares have not been
returned.  It is unlikely that the Company will be able to collect the
balance that is due on the promissory notes and that legal proceedings will
need to be commenced to recover the shares.  At this time, the Company does
not have the financial resources to retain attorneys to commence those legal
proceedings.  The money owing pursuant to the promissory notes is disclosed
as a reduction of shareholders equity in the financial statements.

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

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

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

If the Company is unable to realize income by selling a license to use the
technology in a specified territory, the Company will need to raise money in
some other way to continue operating for the next 12 months.  To do so, it is
likely that the Company will sell additional shares of its common stock to
pay operating expenses for the next 12 months.  The Company's general and
administrative expenses for the next 12 months are expected to be less than
$1500 per month, exclusive of executive compensation, which is deferred, and

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

Management is convinced that an environmentally friendly project such as
ours, which produces cleaner food, cleaner air and cleaner water is a sound
basis for a successful business.  For this and other reasons, we believe that
building and operating the first MEFF is essential to create cash flow and
to demonstrate to potential operators that the technology works as advertised.

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

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

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

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

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

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.

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PART II - OTHER INFORMATION

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

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

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



SIGNATURE

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

HYBRID FUELS, INC.


/s/	Clay Larson		May 15, 2001
By Clay Larson			Date
	Its President

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END