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, 2004

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

                For the Transition Period From _______ to _______

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

                         Commission File Number 0-29351

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


           NEVADA                                    88 0384399
           ------                                    ----------
  (State or other jurisdiction of        (I.R.S. Employer Identification No.)
   incorporation or organization)



         237 Main Street, Box 880, Niverville, Manitoba            R0A 1E0
             (Address of principal executive offices)           (Postal Code)

       Registrant's telephone number, including area code: (888) 550-2333



Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or shorter period that registrant was required to file
such reports), and (2) has been subject to filing requirements for the past 90
days. Yes [X] No [_]

The number of issued and outstanding shares of the registrant's common stock as
of February 22, 2005 was 24,829,733.

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



                                       1
<PAGE>


                                TABLE OF CONTENTS


<TABLE>
<S>                <C>                                                                               <C>

PART-I            FINANCIAL INFORMATION                                                             PAGE

Item 1            Financial Statements............................................................. F-0

Item 2            Plan of Operation.................................................................  3

Item 3            Controls and Procedures...........................................................  5


PART-II           OTHER INFORMATION                                                                 PAGE

Item 1            Legal Proceedings.................................................................  5

Item 2            Unregistered Sales of Equity Securities and Use of Proceeds.......................  5

Item 3            Defaults Upon Senior Securities...................................................  6

Item 4            Submission of Matters to a Vote of Security Holders...............................  6

Item 5            Other Information.................................................................  6

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

                  Signature.........................................................................  7

</TABLE>


                                       2
<PAGE>

Hybrid Fuels, Inc.
(A Development Stage Company)

<TABLE>
                                                                                                    Index


<S>                                                                                                  <C>
Consolidated Balance Sheets..........................................................................F-1

Consolidated Statements of Operations................................................................F-2

Consolidated Statements of Cash Flows................................................................F-3

Notes to the Consolidated Financial Statements.......................................................F-4
</TABLE>

<PAGE>


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

                                                                                        December 31,      June 30,
                                                                                            2004            2004
                                                                                             $               $
                                                                                        (unaudited)      (audited)
<S>                                                                                             <C>           <C>
ASSETS

Current Assets

  Cash                                                                                          548           7,907
--------------------------------------------------------------------------------------------------------------------

Total Assets                                                                                    548           7,907
====================================================================================================================


LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

  Accounts payable                                                                           60,456          50,265
  Accrued liabilities                                                                         2,500           3,250
  Note payable and other advances (Note 3)                                                   44,006          39,432
  Amounts owing to related parties (Note 4)                                                 207,708         205,050
  Amounts owing to a former director (Note 5)                                               326,701         326,701
--------------------------------------------------------------------------------------------------------------------
Total Current Liabilities                                                                   641,371         624,698

Redeemable and Restricted Common Shares (Note 7(b))                                         223,000         223,000
--------------------------------------------------------------------------------------------------------------------
Total Liabilities                                                                           864,371         847,698
--------------------------------------------------------------------------------------------------------------------

Commitments and Contingencies (Notes 1 and 7)

Stockholders' Deficit

Common Stock: $0.001 par value; 50,000,000 shares authorized
23,596,980 and 23,371,980 shares issued and outstanding, respectively                        23,597          23,372

Additional Paid-in Capital                                                                  643,475         625,828

Donated Capital                                                                             384,009         329,554

Deferred Compensation                                                                             -         (27,299)

Deficit Accumulated During the Development Stage                                         (1,914,904)     (1,791,246)
--------------------------------------------------------------------------------------------------------------------
Total Stockholders' Deficit                                                                (863,823)       (839,791)
--------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit                                                     548           7,907
====================================================================================================================
</TABLE>



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


                                      F-1
<PAGE>


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

<TABLE>
<CAPTION>

                                         Accumulated from
                                         February 26, 1960
                                        (Date of Inception)          Three Months Ended           Six Months Ended
                                          to December 31,                December 31,                December 31,
                                               2004                  2004          2003          2004          2003
                                                 $                     $             $             $             $
<S>                                             <C>              <C>           <C>           <C>           <C>
Revenue                                               -               -             -             -             -
-------------------------------------------------------------------------------------------------------------------

Expenses

Consulting fees                                  97,820               -             -             -             -
Deposit and advances written-off                255,512               -             -             -             -
Donated services (Note 4)                        22,500           7,500             -        15,000             -
Executive compensation                          573,466               -        18,000             -        36,000
General and administrative                      261,888          19,164         1,383        36,078         2,691
Imputed interest (Note 4 and 5)                 361,509          19,728        19,751        39,455        38,827
Professional fees                               202,947           2,526             -         5,826           534
Research and development                         16,925               -             -             -             -
Stock-based compensation (1)                    122,337          13,650             -        27,299         3,750
-------------------------------------------------------------------------------------------------------------------
Total Expenses                                1,914,904          62,568        39,134       123,658        81,802
-------------------------------------------------------------------------------------------------------------------
Net Loss                                     (1,914,904)        (62,568)      (39,134)     (123,658)      (81,802)
===================================================================================================================
Net Loss Per Share                                                    -             -        (0.01)             -
===================================================================================================================

Weighted Average Shares Outstanding                          23,553,000    22,006,000    23,475,000    21,983,000
===================================================================================================================


(1) Stock-based compensation is
    excluded from the following:

     Consulting fees                             86,896          13,650             -        27,299         3,750
     Executive compensation                       7,667               -             -             -             -
     General and administrative                  27,774               -             -             -             -
-------------------------------------------------------------------------------------------------------------------
                                                122,337          13,650             -        27,299         3,750
===================================================================================================================
</TABLE>


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


                                      F-2
<PAGE>



Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
                                                                                            Six Months Ended
                                                                                              December 31,
                                                                                          2004            2003
                                                                                            $              $
<S>                                                                                       <C>             <C>
  Cash Flows To Operating Activities

    Net loss                                                                              (123,658)       (81,802)

    Adjustments to reconcile net loss to net cash used in
    operating activities
      Accrued executive compensation                                                             -         36,000
      Amortization of deferred compensation and other
      stock-based compensation                                                              27,299          3,750
      Donated services                                                                      15,000              -
      Imputed interest                                                                      39,455         38,827

    Change in operating assets and liabilities
      Accounts payable and accrued liabilities                                               9,441             87
  -----------------------------------------------------------------------------------------------------------------
  Net Cash Used In Operating Activities                                                    (32,463)        (3,138)
  -----------------------------------------------------------------------------------------------------------------
  Net Cash Used In Investing Activities                                                          -              -
  -----------------------------------------------------------------------------------------------------------------
  Cash Flows From Financing Activities

    Advances from related parties                                                            2,658          2,256
    Proceeds from issuance of common stock                                                  17,872              -
  -----------------------------------------------------------------------------------------------------------------
  Net Cash Provided By Financing Activities                                                 20,530          2,256
  -----------------------------------------------------------------------------------------------------------------
  Effect of Exchange Rate Changes on Cash                                                    4,574              -
  -----------------------------------------------------------------------------------------------------------------
  Net Decrease in Cash                                                                      (7,359)          (882)
  Cash - Beginning of Period                                                                 7,907          1,247
  -----------------------------------------------------------------------------------------------------------------
  Cash - End of Period                                                                         548            365
  =================================================================================================================
  Non-cash Investing and Financing Activities

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

    Interest paid                                                                                -              -
    Income taxes paid                                                                            -              -
  =================================================================================================================
</TABLE>



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


                                      F-3
<PAGE>

Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)

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 $0.001 par value. The two companies
     then merged pursuant to Articles of Merger adopted May 28, 1998 and filed
     with the State of Nevada on June 10, 1998, which changed its domicile to
     Nevada.

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

     On May 29, 1998 the Company changed its name to Hybrid Fuels, Inc., herein
     "the Company". On June 10, 1998 the Company began trading on the OTC
     Bulletin Board under the symbol "HRID" and in December 1999 was moved to
     the "Pink Sheets". The Company was re-listed on the OTC Bulletin Board in
     March 2003 and received "active" status in April 2003.

     Pursuant to the above acquisition, the Company acquired a number of
     proprietary technologies with the primary objective of the business being
     to build small farm-scale ethanol facilities that involves a number of
     proprietary technologies exclusively owned by the Company. Other
     proprietary technology involves the use of a bio-gas burner that burns
     manure and bedding straw. This technology eliminates ground and
     ground-water contamination and produces most of the energy required for the
     facility by supplying heat for fermentation and vaporization and for the
     operation of a greenhouse, if desired. Another exclusive proprietary
     technology is a vegetable-based formula that allows diesel and ethanol to
     emulsify. This hybrid fuel reduces particulate emissions without reduction
     in power when used in an unaltered diesel engine.

     The Company is a development stage company with management devoting most of
     its activities in investigating business opportunities and further
     advancing its technologies. The ability of the Company to emerge from the
     development stage with respect to any planned principal business activity
     is dependent upon its successful efforts to raise additional equity
     financing and/or attain profitable operations. There is no guarantee that
     the Company will be able to complete any of the above objectives. At
     December 31, 2004, the Company had a working capital deficit of $640,823
     and an accumulated deficit of $1,914,904. These factors, among others,
     cause substantial doubt about the continuance of the Company as a going
     concern.

     The Company expects that future capital requirements for developing and
     expanding technologies will be met through stock offerings by way of
     private placements.

2.   Summary of Significant Accounting Policies

     (a) Consolidated Financial Statements

         These consolidated financial statements represent the consolidation of
         the Company and its wholly owned subsidiary, Hybrid Fuels (Canada) Inc.
         The Company's subsidiary is currently inactive and has no material
         assets, liabilities or operations.


                                      F-4
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)


2.   Summary of Significant Accounting Policies (continued)

     (b) Cash and Cash Equivalents

         The Company considers all highly liquid instruments with a maturity of
         three months or less at the time of issuance to be cash equivalents.

     (c) Use of Estimates

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States requires management
         to make estimates and assumptions that affect the reported amounts of
         assets and liabilities and disclosure of contingent assets and
         liabilities at the date of the financial statements and the reported
         amounts of revenues and expenses during the periods. Actual results
         could differ from those estimates.

     (d) Basic and Diluted Net Income (Loss) per Share

         The Company computes net income (loss) per share in accordance with
         SFAS No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires
         presentation of both basic and diluted earnings per shares (EPS) on the
         face of the income statement. Basic EPS is computed by dividing net
         income (loss) available to common shareholders (numerator) by the
         weighted average number of common shares outstanding (denominator)
         during the period. Diluted EPS gives effect to all dilutive potential
         common shares outstanding during the period including stock options,
         using the treasury stock method, and convertible preferred stock, using
         the if-converted method. In computing diluted EPS, the average stock
         price for the period is used in determining the number of shares
         assumed to be purchased from the exercise of stock options or warrants.
         Diluted EPS excludes all dilutive potential common shares if their
         effect is anti-dilutive. At December 31, 2004, the redeemable and
         restricted shares disclosed in Note 7(b) have not been included in
         either basic or diluted EPS.

     (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 financial
         statements, entered into derivative instruments to offset the impact of
         foreign currency fluctuations.

     (f) Comprehensive Loss

         SFAS No. 130, "Reporting Comprehensive Income," establishes standards
         for the reporting and display of comprehensive loss and its components
         in the financial statements. As at December 31, 2004 and 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.


                                      F-5
<PAGE>


Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)


2.   Summary of Significant Accounting Policies (continued)


     (g) Financial Instruments

         The fair values of cash, accounts payable, accrued liabilities, notes
         and advances payable, and amounts due to related parties approximate
         their carrying values due to the immediate or short-term maturity of
         these financial instruments.

     (h) Income Taxes

         Potential benefits of income tax losses are not recognized in the
         accounts until realization is more likely than not. The Company has
         adopted SFAS No. 109 as of its inception. Pursuant to SFAS No. 109 the
         Company is required to compute tax asset benefits for net operating
         losses carried forward. Potential benefit of net operating losses have
         not been recognized in these financial statements because the Company
         cannot be assured it is more likely than not it will utilize the net
         operating losses carried forward in future years.

     (i) Stock-based Compensation

         The Company accounts for stock-based awards using the intrinsic value
         method of accounting in accordance with Accounting Principles Board
         Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25).
         Under the intrinsic value method of accounting, compensation expense is
         recognized if the exercise price of the Company's employee stock
         options is less than the market price of the underlying common stock on
         the date of grant.

         Statement of Financial Accounting Standards No. 123, "Accounting for
         Stock-Based Compensation," (SFAS 123), established a fair value based
         method of accounting for stock-based awards. Under the provisions of
         SFAS 123, companies that elect to account for stock-based awards in
         accordance with the provisions of APB 25 are required to disclose the
         pro forma net income (loss) that would have resulted from the use of
         the fair value based method under SFAS 123.

         The Company follows the disclosure requirements of Statement of
         Financial Accounting Standards No. 148, "Accounting for Stock-Based
         Compensation -- Transition and Disclosure an Amendment of FASB
         Statement No. 123" (SFAS 148), which requires more prominent
         disclosures in both annual and interim financial statements regarding
         the method of accounting for stock-based employee compensation and the
         effect of the method used on reported results. As of December 31,
         2004, the Company has not issued any stock options.

     (j) Interim Financial Statements

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

     (k) Recent Accounting Pronouncements

         In December 2004, the Financial Accounting Standards Board (FASB)
         issued Statement of Financial Accounting Standard (SFAS) No. 123R,
         "Share Based Payment". SFAS 123R is a revision of SFAS No. 123
         "Accounting for Stock-Based Compensation", and supersedes APB Opinion
         No. 25, "Accounting for Stock Issued to Employees" and its related
         implementation guidance. SFAS 123R establishes standards for the
         accounting for transactions in which an entity exchanges its equity
         instruments for goods or services. It also addresses transactions in
         which an entity incurs liabilities in exchange for goods or services

                                      F-6
<PAGE>
Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)

2.   Summary of Significant Accounting Policies (continued)

         that are based on the fair value of the entity's equity instruments or
         that may be settled by the issuance of those equity instruments. SFAS
         123R focuses primarily on accounting for transactions in which an
         entity obtains employee services in share-based payment transactions.
         SFAS 123R does not change the accounting guidance for share-based
         payment transactions with parties other than employees provided in
         SFAS 123 as originally issued and Emerging Issues Task Force Issue No.
         96-18, "Accounting for Equity Instruments That Are Issued to Other
         Than Employees for Acquiring, or in Conjunction with Selling, Goods or
         Services". SFAS 123R does not address the accounting for employee
         share ownership plans, which are subject to AICPA Statement of
         Position 93-6, "Employers' Accounting for Employee Stock Ownership
         Plans". SFAS 123R requires a public entity to measure the cost of
         employee services received in exchange for an award of equity
         instruments based on the grant-date fair value of the award (with
         limited exceptions). That cost will be recognized over the period
         during which an employee is required to provide service in exchange
         for the award - the requisite service period (usually the vesting
         period). SFAS 123R requires that the compensation cost relating to
         share-based payment transactions be recognized in financial
         statements. That cost will be measured based on the fair value of the
         equity or liability instruments issued. The scope of SFAS 123R
         includes a wide range of share-based compensation arrangements
         including share options, restricted share plans, performance-based
         awards, share appreciation rights, and employee share purchase plans.
         Public entities that file as small business issuers will be required
         to apply SFAS 123R in the first interim or annual reporting period
         that begins after December 15, 2005. The adoption of this standard is
         not expected to have a material effect on the Company's results of
         operations or financial position.

         In December 2004, FASB issued SFAS No. 153, "Exchanges of Nonmonetary
         Assets - An Amendment of APB Opinion No. 29". The guidance in APB
         Opinion No. 29, "Accounting for Nonmonetary Transactions", is based on
         the principle that exchanges of nonmonetary assets should be measured
         based on the fair value of the assets exchanged. The guidance in that
         Opinion, however, included certain exceptions to that principle. SFAS
         No. 153 amends Opinion No. 29 to eliminate the exception for
         nonmonetary exchanges of similar productive assets and replaces it
         with a general exception for exchanges of nonmonetary assets that do
         not have commercial substance. A nonmonetary exchange has commercial
         substance if the future cash flows of the entity are expected to
         change significantly as a result of the exchange. The provisions of
         SFAS No. 153 are effective for nonmonetary asset exchanges occurring
         in fiscal periods beginning after June 15, 2005. Early application is
         permitted and companies must apply the standard prospectively. The
         adoption of this standard is not expected to have a material effect on
         the Company's results of operations or financial position.

         FASB has also issued SFAS No. 151 and 152, but they will not have any
         relationship to the operations of the Company therefore a description
         and its impact for each on the Company's operations have not been
         disclosed.

     (l) Reclassifications

         Certain reclassifications have been made to the prior year's financial
         statements to conform to the current period's presentation.

3.   Note Payable and Other Advances

     (a) On September 15, 2000, the Company issued a note for CAD$50,000
         (US$33,638) payable on or before September 15, 2001 plus 8% interest.
         The Company extended repayment of the note until the completion of a
         financing arrangement. Interest expense of $1,820 has been accrued for
         the six months ended December 31, 2004 (2003 - $1,688). The note
         payable was $41,515 after translation into U.S. dollars at December
         31, 2004. For the six months ended December 31, 2004, the Company
         incurred a foreign currency translation loss of $4,315 that was
         charged to operations. Accrued interest from September 15, 2000 of
         $13,242 is included in accounts payable as of December 31, 2004.

     (b) Cash advances totalling CAD$3,000 from unrelated parties is
         non-interest bearing, unsecured and due on demand.

                                      F-7
<PAGE>

4.   Related Party Transactions/Balances

     (a) The controlling shareholder is owed $199,371 (June 30, 2004 -
         $199,371) for payment of rent, office expenses and professional fees
         on behalf of the Company. This amount is non-interest bearing,
         unsecured and without specific terms of repayment. Imputed interest of
         $14,953 (2003 - $15,000), calculated at a rate of 15% per annum, was
         charged to operations and treated as donated capital. An amount of
         $1,890 (June 30, 2004 - $1,890) is owing to another shareholder. This
         amount is unsecured, non-interest bearing, with no specific terms of
         repayment.

     (b) The President of the Company is owed $5,509 (June 30, 2004 - $3,789)
         for advances and expenses paid for on behalf of the Company. This
         amount is unsecured, non-interest bearing and due on demand. During
         the six months ended December 31, 2004, the Company recognized a total
         of $15,000 for donated services provided by the President of the
         Company.

     (c) The Vice-President of the Company is owed $184 for expenses paid on
         behalf of the Company. This amount is unsecured, non-interest bearing
         and due on demand.

     (d) Two directors are owed a total of $754 for expenses paid on behalf of
         the Company. This amount is unsecured, non-interest bearing and due on
         demand.

5.   Amounts Owing to a Former Director

     The former President, who was also a director of the Company, is owed
     $2,701 for office and related expenses paid for on behalf of the Company.
     Effective July 1, 1999 the former President was entitled to a salary of
     US$6,000 per month or $324,000 in total and was owed a total of $326,701 at
     December 31, 2004. These amounts are unsecured, non-interest bearing and
     due on demand. Imputed interest of $24,502 (2003 - $23,827), calculated at
     a rate of 15% per annum, was charged to operations and treated as donated
     capital. The Company did not have a written employment contract with the
     former President.

6.   Common Shares

     (a) On October 28, 2004, 120,000 shares of common stock were issued for
         cash at a price of $0.08 per share for total proceeds of $9,788
         (CAD$12,000).
     (b) On October 20, 2004, 30,000 shares of common stock were issued for
         cash at a price of $0.08 per share for total proceeds of $2,387
         (CAD$3,000).
     (c) On September 1, 2004, 25,000 shares of common stock were issued for
         cash at a price of $0.08 per share for total proceeds of $1,905
         (CAD$2,500).

     (d) On August 31, 2004, 50,000 shares of common stock were issued for cash
         at a price of $0.08 per share for total proceeds of $3,792
         (CDN$5,000).

     (e) All transactions in which goods or services are the consideration
         received for the issuance of equity instruments are accounted for
         based on the fair value of the consideration received or the fair
         value of the equity instrument issued, whichever is more reliably
         measurable. Equity instruments issued to employees and the cost of the
         services received as consideration are measured and recognized based
         on the fair value of the equity instruments issued.

7.   Commitments and Contingencies

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


                                      F-8
<PAGE>

7.   Commitments and Contingencies (continued)

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

     (b) Between October 1998 and June 1999, the administration at that time
         sold a total of 361,120 common shares of the Company to 34 subscribers
         on the basis of an Offering Memorandum ("Offering") that contained a
         significant number of inaccuracies. A total of $223,000 was raised
         pursuant to this Offering. Management had concerns regarding possible
         misstatements, omissions and misleading statements. On the advice of
         legal counsel, the Company offered these 34 subscribers the option of
         receiving restricted stock as the Company did not and does not have
         the funds to repay these subscribers. Those who opted to receive
         restricted stock were also given an undertaking that they would
         receive a rescission offer when the Company was in a position to repay
         their money plus appropriate interest, in return for a return of the
         restricted stock, or they could elect to retain the stock. To date, 23
         subscribers, have, pursuant to this offer received 232,753 shares,
         representing $158,000. These shares are issued but not considered
         outstanding. The remaining 11 subscribers, who paid $65,000 for
         128,367 shares, have not responded to the offer. These subscriptions
         are recorded as redeemable and restricted common shares until
         rescission rights have been revoked.


                                      F-9
<PAGE>


ITEM 2.  Plan of Operation
--------------------------

This Form 10-QSB contains forward-looking statements. The words "anticipate",
"believe", "expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and other similar expressions identify forward-looking statements
that involve risks and uncertainties. The reader should not place undue reliance
on forward- looking statements in this Form 10-QSB because of their inherent
uncertainty. The following discussion and analysis should be read in conjunction
with the Financial Statements and Notes thereto and other financial information
included in this Form 10-QSB and our Form 10-KSB for the year ended June 30,
2004. Actual results could differ materially from the results discussed in the
forward-looking statements. Hybrid Fuels Inc. ("the Company") assumes no
responsibility to correct or update the forward looking statements as
circumstances change and therefore, the forward looking statements should be
assumed to speak only as at the date of the filing of this report.

Hybrid Fuels Inc. is a developmental stage company and has had no income since
the acquisition of the hybrid fuels technology in June 1998. The Company is
unlikely to have any significant cash flow until after the end of the current
fiscal year ending June 30, 2005.

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

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

The Company anticipates conducting further research and development with respect
to the following:

1.   Researching efficiencies in facility construction and operation;
2.   Researching new technologies; consulting with various technical researchers
     and agriculture officials.

The amount we anticipate spending on research and development for the remainder
of the fiscal year ending June 30, 2005 is approximately $20,000.

Although the Company is in the developmental stages, the process behind Hybrid
Fuels' intended business has been researched and developed for more than a
decade. A facility that integrated the process described below was constructed
and operated near Dalum, Alberta from 1994 to 1996. The Dalum facility was
designed to prove the concepts and included all of the wet ethanol-producing and
cattle-feeding features of a full-scale commercial operation and it was also 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 enabled us to
modify the facility's material requirements, improve the building designs,
select the latest equipment, and refine the process.

Currently, the Company's intended principal business is to integrate cattle
feeding and finishing with the production of wet ethanol. The main source of
revenue for the Company is expected to come from the sale of finished cattle and
a blend of wet ethanol and diesel fuel.

An operating facility includes the cattle barn, ethanol-producing plant,
gasifier, and a hydroponic barley-grass growing system.

In these facilities, barley is fermented and then distilled to produce the wet
ethanol. The ethanol production process also generates a high protein product,
called "distillers mash" and a liquid byproduct called "stillage water." The
mash and liquid is supplemented by barley grass and creates an excellent feed
for the cattle. The expected weight gain is an average of four pounds a day per
head during the planned 100-day feeding cycle.

                                       3
<PAGE>

We have designed the barn to accommodate 200 head of cattle. When all the
mechanical systems are operating efficiently, we'll begin feeding cattle
starting with 50 head and adding another 50 every three to four weeks until the
barn is at full capacity of 200 head. As we gain experience with the facility,
we intend to operate the barn continuously at full capacity during the
subsequent 100-day feeding cycles. At the end of each feeding cycle, the cattle
will be sold at auction.

Cattle manure and bedding straw within the barn will be gathered daily, thus
removing the media where disease would otherwise grow. This waste material is
burned in a gasifier and the heat produced is transferred to the fermentation
and distillation processes.

The wet ethanol will be blended with a proprietary emulsifier and diesel fuel.
When this newly created fuel was tested in an unaltered diesel engine at the
British Columbia Institute of Technology in June 1996, it reduced particulate
(black smoke) emissions by over 62% and the smog-causing nitrogen oxide (NOx)
emissions by more than 22%. Researchers also noted no measurable loss of engine
power when testing this fuel blend.

The Company has no immediate funding source except through private sources and
until one facility is fully operational and demonstrates cash flow Hybrid Fuels
Inc., and our wholly-owned subsidiary Hybrid Fuels (Canada), has limited access
to banks, trust companies, and other traditional lending sources.

In the quarter ending September 30, 2003, our subsidiary entered into a verbal
agreement with a group of Hybrid Fuels Inc. shareholders to construct a fully
operational facility at Oyama, BC. The site at Oyama, on approximately six acres
of farmland, was chosen because it provides the Company with good site control
and supervisory ability.

Current estimates have the final cost of building this facility to be
approximately $450,000. Approximately $275,000 of this cost is for foundations
and flooring, buildings, the gasifier, the ethanol-producing equipment, tanks
and machinery. Soft costs, for such items as permits, engineering and other
professional fees, survey and layout costs, site preparation, delivery of
buildings and materials, equipment rentals, tools and miscellaneous items, are
estimated to cost $75,000. Approximately $100,000 is expected to cover
construction labour and supervision expenses.

The private shareholder group is bearing the financial burden of construction
and retains legal ownership. Once the facility is completed and all systems are
operational the Company will negotiate with the shareholder group to acquire the
facility on mutually agreeable terms.

Construction of the facility is expected to be completed by March 31, 2005. The
feed system, including the growth cycle of the barley grass, would be prepared
during the following 30 days. Operations are expected to commence by April 30,
2005 once the feed system is ready for the first delivery of cattle.

Once we have a fully operational facility, and have proven the technology and
processes, our subsidiary, Hybrid Fuels (Canada) Inc., will operate it and will
earn revenue from the sale of the finished cattle and wet ethanol.

The facility will not be run at full capacity until approximately four months
have passed from the facility becoming operational. We believe that at the end
of the fourth month of operations, when we sell the first group of finished
cattle, we will have an initial set of data from which to prepare pro forma
information for purposes of estimating cash flows and generating a current
business plan.

Ethanol produced by the first facility during at least the first two to three
months of its operation will be used for testing purposes. Once the ethanol
facility is operating at full capacity, we project that the facility will
produce approximately 200 US gallons of ethanol per day that could be sold at
market prices slightly below the price of diesel fuel with which it will be
blended.

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


                                       4
<PAGE>

Results of Operations For The Three Months Ended December 31, 2004
------------------------------------------------------------------

The loss for the present quarter is $62,568 compared to $39,134 for the
comparable quarter last year. This difference is mainly attributable to an
increase of $18,000 in general and administrative expenses in the current
quarter compared to the comparable period last year. The Company has contracted
an investor relations consultant where no such consultant was utilized in the
comparable quarter last year.

There was no executive compensation during the quarter compared to $18,000 for
the comparable quarter last year. Stock-based compensation increased from 13,650
during the current quarter compared to nil for the comparable quarter. Shares
were issued in exchange for consulting services rendered.

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

At the end of the quarter, the Company had cash of $548 compared to $291 at the
end of the previous quarter. During the quarter we received $12,175 in operating
capital from the issuance of restricted common stock. As at December 31, 2004,
the Company has a working capital deficit of $(640,823) compared to $(616,791)
as at June 30, 2004.

Although we currently do not have significant cash reserves, related parties
have indicated a willingness to provide operating capital in exchange for
restricted common shares. These related parties are under no obligation and no
assurances can be given that they will continue to do so.

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

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

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



                           PART II - OTHER INFORMATION
                           ---------------------------

Item 1. Legal Proceedings
-------------------------

No legal proceedings are threatened or pending against the Company or any of its
officers or directors. Further, none of the Company's officers or directors or
affiliates of the Company are parties against the Company or have any material
interest in actions that are adverse to the Company's interests.

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

On October 20, 2004, 30,000 shares of restricted common stock were issued for
cash at a price of $0.08 per share for total proceeds of $2,387 (CAD$3,000).

On October 28, 2004, 120,000 shares of restricted common stock were issued for
cash at a price of $0.08 per share for total proceeds of $9,788 (CAD$12,000).

The foregoing issuances of common stock were made in reliance upon the exemption
from registration set forth in Regulation S promulgated under of the Securities
Act of 1933 for transactions not involving a US person. No underwriters were
engaged in connection with the foregoing issuances of securities.

                                       5
<PAGE>

Item 3. Defaults Upon Senior Securities
---------------------------------------

N/A

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

N/A

Item 5. Other Information
-------------------------

N/A

Item 6.  Exhibits
-----------------

Exhibit 31.1 Principal Executive Officer and Acting Principal Financial Officer
Certification (section 302 of the Sarbanes-Oxley Act of 2002)

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


                                       6
<PAGE>

Signature
---------

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

HYBRID FUELS, INC.

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

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


Dated:  February 22, 2005