United States
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

(Mark One)

|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 for the quarterly period ended March 31, 2005

                                       or

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 For the transition period from _______ to________

Commission File Number:  333-33134

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


            Georgia                                      58-2267238
            -------                                      ----------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                    12409 Telecom Drive, Tampa, Florida 33637
                    -----------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (813)-979-9222
                                 --------------
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the 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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

At May 12, 2005, the Company had 42,215 Series A Preferred Shares and 195,209
Series B Preferred Shares outstanding. At May 12, 2005, the Company had
83,241,230 of its $0.001 par value common shares outstanding.


<PAGE>

                            HYBRID FUEL SYSTEMS, INC.
                      Quarterly Report For The Period Ended
                                 March 31, 2005

                                    Contents

Part I - Financial Information
Item 1 - Financial Statements
            Consolidated Balance Sheet for the three months ended March 31, 2005
            and fiscal year ended December 31, 2004
            Statement of Operations for the three month periods ended March 31,
            2005 and 2004
            Statement of Cash Flows for the three months ended March 31, 2004
            and 2005
            Notes to unaudited financial statements

Item 2      Management's Discussion and Analysis of Financial Condition and
            Results of Operations

Item 3      Controls and Procedures

Part II Other Information
Item 1      Litigation

Item 6      Exhibits

            Signatures


<PAGE>

                         PART I - FINANCIAL INFORMATION
                            HYBRID FUEL SYSTEMS, INC.
                           Consolidated Balance Sheets
           For the three month period ended March 31, 2005 (unaudited)
             and the annual period ended December 31, 2004 (audited)

<TABLE>
<CAPTION>
                                                   March 31, 2005   December 31, 2004
                                      ASSETS        (Unaudited)         (Audited)
                                                    -------------------------------
<S>                                                 <C>                <C>
Current Assets
Cash-Operating                                      $      3,831       $      2,025
Accounts Receivable                                       33,760       $     27,005
Prepaid expenses and deposits                             83,287       $      7,845
Inventory                                                 42,694       $     36,623
                                                    -------------------------------

Total current assets                                     163,572       $     73,498

Property Plant & Equipment, net                           68,019       $      8,507
Deferred Compensation                                    425,000       $    500,000
                                                    -------------------------------

Total assets                                        $    656,591       $    582,005
                                                    ===============================

                                   LIABILITIES

Accounts Payable                                    $    133,417       $    120,980
Accounts Payable in Settlement                           121,956       $    121,956
Debt in Litigation                                       109,868       $    109,868
Due to Related Parties                                     7,000       $      7,197
Due to Related Parties - Convertible Debt                510,958       $     18,866
Debt in Default                                          103,272       $    123,272
Convertible Debt in Default                               78,200       $     78,200
Sales and Payroll taxes payable                          122,427       $    130,094
Other current Liabilities                                 41,940       $     42,824
                                                    -------------------------------

Total current liabilities                           $  1,229,039       $    753,257

                              SHAREHOLDERS' DEFICIT

Preferred Stock - A (.01 par value) 42,215
  shares authorized; 42,215 issued and
  outstanding (liquidation preference $8,021)                422       $        422
Preferred Stock - B (.01 par value) 954,563
  shares authorized; 195,209 shares issued
  and outstanding.  (liquidation preference
  $1,002,291)                                              1,952       $      1,952
Common Stock ( .001 par value) 150,000,000
  shares authorized; 68,774,843 and 12,163,646
  shares issued and outstanding, respectively             68,910       $     65,510
Additional Paid-in Capital                             7,830,871       $  7,582,270
Accumulated Deficit                                   (8,453,752)      $ (7,821,406)
    Total Shareholders' Deficit                     $   (572,448)      $   (171,252)
                                                    -------------------------------
Total liabilities and Shareholders' Equity          $    656,591       $    582,005
                                                    ===============================
</TABLE>


<PAGE>

                            HYBRID FUEL SYSTEMS, INC.
                             Statement of Operations
                        For the three months period ended
                        March 31, 2005 and March 31, 2004
                                   (unaudited)

                                             March 31, 2005   March 31, 2004
                                               (Unaudited)      (Unaudited)
                                             -------------------------------
      REVENUES

      Product Sales
      Revenue                                $     18,163       $     80,092
      Cost of sales                          $    (10,832)      $    (19,487)
                                             -------------------------------

      Gross Profit                           $      7,331       $     60,605

      EXPENSES
      Operating Expenses
      Consulting                             $    168,187       $     43,457
      Research and Development               $     41,647       $     16,090
      Compensation                           $    362,830       $     70,199
      Other                                  $     67,424       $     36,086
                                             -------------------------------

      Total expenses                         $    640,088       $    165,832
                                             -------------------------------

      Loss from operations                   $   (653,196)      $   (105,227)
                                             ===============================

      Other expenses (income)
        Interest expense                     $      2,226       $      2,315
        Other income                         $     (2,637)      $          0
      Loss from other expenses               $       (411)      $      2,315
                                             -------------------------------

      Net (loss)                             $   (632,757)      $   (107,542)

      Preferred stock dividends              $          0       $          0

      Net loss available to common shares    $   (632,346)      $   (107,542)

      Basic and diluted weighted
      average common shares outstanding        68,401,310         12,163,646

      Basic and diluted (loss) per share     $      (0.01)      $      (0.01)
                                             ===============================

<PAGE>

                            HYBRID FUEL SYSTEMS, INC.
                             Statement of Cash Flows
                        For the three months period ended
                  March 31, 2005 and March 31, 2004 (unaudited)
<TABLE>
<CAPTION>

                                                                                 March 31, 2005       March 31, 2004
                                                                                   (Unaudited)         (Unaudited)
                                                                                  ---------------------------------
<S>                                                                               <C>                  <C>
                CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss                                                                          $   (632,346)        $   (107,542)
     Adjustments to reconcile net income to net
     cash provided (used) by operating activities
                Common stock issued for services                                  $    151,000         $          0
                Depreciation                                                      $      3,106         $      2,404

change in operating assets and liabilities
                Accounts Receivable                                               $     (6,755)        $    (58,346)
                Inventory                                                         $     (6,071)        $     (6,555)
                Prepaid expenses                                                  $    (75,442)        $         --
                Deferred compensation                                             $     75,000         $         --
                Accounts payable                                                  $     (4,112)        $    (29,805)
                Accrued liabilities                                               $     (8,552)        $     (5,661)

                                                                                  ---------------------------------
                          Net cash provided (used) by operating activates         $   (504,172)        $   (205,505)

                CASH FLOWS FROM INVESTING ACTIVITIES
                Purchase of Equipment                                             $    (46,067)        $         --

                                                                                  ---------------------------------
                          Net cash provided (used) by investing activities        $    (46,067)        $         --

                CASH FLOWS FROM FINANCING ACTIVITIES
                Loans from related parties                                        $    551,895         $    249,052
                Proceeds from exercise of warrants                                $        150         $         --

                                                                                  ---------------------------------
                          Net cash provided (used) by financing activities        $    552,045         $    249,052

                Cash Balance End of Period                                        $      3,831         $     43,553
                Cash Balance at Beg of Period                                     $      2,025         $          6
                                                                                  ---------------------------------

                Net increase (decrease) in cash                                   $      1,806         $     43,547

</TABLE>


<PAGE>

                            HYBRID FUEL SYSTEMS, INC.
                     Notes to Unaudited Financial Statements
                        for the three months period ended
                        March 31, 2005 and March 31, 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Hybrid Fuel Systems, Inc. (the "Company") licenses the worldwide exclusive
rights to a combustion engine fuel delivery system embodied in five US patents
and one patent pending. The Company's current commercial application of the
licensed technology is referred to as Fuel 2(TM), a device for the conversion of
medium and heavy duty diesel engines to non-petroleum based fuels such as
natural gas.

Cash and Cash Equivalents

      For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

Accounts Receivable

      Accounts receivable, are stated at estimated net realizable value.
Accounts receivable are comprised of balances due from customers. In determining
collectibility, historical trends are evaluated and specific customer issues are
reviewed to arrive at appropriate allowances.

      Inventories

      Inventories, are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method. Inventories consist of component parts
used in the manufacture and assembly of retrofit systems for the conversion of
gasoline and diesel engines to non-petroleum based fuels such as compressed
natural gas.

Property, Plant and Equipment

      Depreciation is provided for using the straight-line method, in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives (asset categories range from three to seven years).
Leasehold improvements are amortized using the straight-line method over the
lives of the respective leases or the service lives of the improvements,
whichever is shorter. Leased equipment under capital leases is amortized using
the straight-line method over the lives of the respective leases or over the
service lives of the assets for those leases that substantially transfer
ownership. Accelerated methods are used for tax depreciation.

Impairment of Assets

      The Company's policy is to evaluate whether there has been a permanent
impairment in the value of long-lived assets, certain identifiable intangibles
and goodwill when certain events have taken place that indicate that the
remaining balance may not be recoverable. When factors indicate that the
intangible assets should be evaluated for possible impairment, the Company uses
an estimate of related undiscounted cash flows. A deficiency in these cash flows
relative to the carrying amounts is an indication of the need for a write-down
due to impairment. The impairment write-down would be the difference between the
carrying amounts and the fair value of these assets. Losses on impairment are
recognized by a charge to earnings. Factors considered in the valuation include
current operating results, trends and anticipated undiscounted future cash
flows.


<PAGE>

Income Taxes

      The Company utilizes the guidance provided by Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). Under the
liability method specified by SFAS 109, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities as measured by the enacted tax rates which will be in
effect when these differences reverse. Deferred tax expense is the result of
changes in deferred tax assets and liabilities. Valuation allowances are
provided if necessary to reduce deferred tax assets to the amount expected to be
realized.

Earnings (Loss) Per Common Share

      Earnings (loss) per share are computed using the basic and diluted
calculations on the face of the statement of operations. Basic earnings (loss)
per share are calculated by dividing net income (loss) by the weighted average
number of shares of common stock outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of shares of common stock outstanding for the period, adjusted
for the dilutive effect of common stock equivalents, using the treasury stock
method. The warrants outstanding were determined to be antidilutive and
therefore do not affect earnings per share.

Use of Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities, as well as the reported
amounts of revenues and expenses for the period then ended. The actual outcome
of the estimates could differ from the estimates made in the preparation of the
financial statements.

Revenue Recognition

      Revenues are recognized when the merchandise is shipped to the customer,
which is when title and risk of loss has passed to the customer.

Stock Based Compensation

      The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock Based Compensation, but applies Accounting Principles Board
Opinion No. 25 and related interpretations in accounting for options issued to
employees. Under Opinion No. 25, the intrinsic method is used to determine
compensation expense when the fair market value of the stock exceeds the
exercise price on the date of grant. As of the date of this report, no options
had been granted under the plan and therefore no compensation expense has been
recognized.

Research and Development Costs

      The Company charges research and development costs to expense as incurred.

Fair Value of Financial Instruments

      The Company, in estimating its fair value disclosures for financial
instruments, uses the following methods and assumptions:

Cash, Accounts Receivable, Accounts Payable and Accrued Expenses:

      The carrying amounts reported in the balance sheet for cash, accounts
receivable, accounts payable and accrued expenses approximate their fair value
due to their relatively short maturity.


<PAGE>

Long-Term Obligations:

      The fair value of the Company's fixed-rate long-term obligations is
estimated using discounted cash flow analyses, based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements. At
December 31, 2003 and 2002, the Company did not have any long-term obligations.

NOTE 2 - DEBT IN DEFAULT

      The Company did not meet the payment terms on the note payable to
Peachtree National Bank through March 31, 2005. On April 1, 2005, we paid
$20,000 to begin a payment plan with Peachtree National Bank which requires us
to remit approximately $10,000 a month until the debt is fully repaid.

NOTE 3 - COMMITMENTS AND CONTINGENCIES

      The Company is delinquent in the payment of payroll and state sales taxes.
The Company is currently following payment schedules, developed after
negotiations with the taxing authorities. Amounts in arrears for delinquent
taxes, along with estimated penalties and interest assessed by the taxing
authorities are as follows, as of March 31, 2005 and 2004.

                                                     2005          2004
                                                  ----------    ----------
      Payroll and sales taxes                     $   92,537    $  162,739
      Penalties and interest                          29,890        82,506
                                                  ----------    ----------
      Total                                       $  122,427    $  245,245

      During June, 2004, the Company entered a negotiated settlement with the
IRS and began making monthly payments including an initial payment of $15,000
plus $5,000 a month through such date as the obligation is repaid in full.

NOTE 4 - SHAREHOLDERS' EQUITY

Preferred Stock

      Effective February 1, 2002, the Company designated 999,779 shares of
previously undesignated preferred stock as Series A Preferred Stock, for which
45,216 shares are authorized and Series B Preferred Stock, for 954,563 shares
are authorized.

      Series A Preferred Stock is convertible, at the option of the holder, at
any time, into shares of the Company's common stock as determined by dividing
$.19 by a conversion price determined on the date the related certificate is
surrendered. The conversion price is subject to periodic adjustment and is
initially established at $.01632. Series A Preferred Stock is automatically
convertible into shares of the Company's common stock upon (i) the date
specified by vote or written consent or agreement of holders of at least three
quarters of the shares of Series A Preferred outstanding, or (ii) upon the
closing of the sale of the company's common stock in a firm commitment,
underwritten public offering registered under the Securities Act in which the
Company receives gross proceeds of no less than $20 million. Series A Preferred
Stock has a liquidation preference of the greater of $.19 per share or the
amount that such share would be entitled to upon liquidation or distribution.
The Series A Preferred Stock has voting rights, except as to the election of
debtors, equal to the number of shares of common stock into which the Series A
Preferred Stock is convertible. The Series A preferred Stockholders have the
right to elect one director of the Company.


<PAGE>

      Series B Preferred Stock is convertible, at the option of the holder at
any time, into shares of the Company's common stock as determined by dividing
the lower of $.09 or the price per share paid by the holder of the Series B
Preferred Stock by a conversion price determined on the date the related
certificate is surrendered. The conversion price is subject to periodic
adjustment and is initially established at $.00773. Series B Preferred Stock is
automatically convertible into shares of the Company's common stock upon (i) the
date specified by vote or written consent or agreement of holders of at least
three quarters of the shares of Series B Preferred Stock outstanding, or (ii)
upon the closing of the sale of Company's common stock in a firm commitment,
underwritten public offering registered under the Securities Act in which the
Company receives gross proceeds of no less than $20 Million. Series B Preferred
Stock has a liquidation preference of the greater of $.09 per share or the
amount that such share would be entitled to upon liquidation or distribution.
The Series B Preferred Stock has voting rights, except as to the election of
directors, equal to the number of shares of common stock into which the Series B
Preferred Stock is convertible. The Series B Preferred Stockholders have the
right to elect one director of the Company.

NOTE 5 - SUBSEQUENT EVENTS

      On April 1, 2005, we held our first closing pursuant to a Subscription
Agreement we entered into with several accredited investors dated as of March
31, 2005, pursuant to which the investors subscribed to purchase an aggregate
principal amount of $1,200,000 in secured convertible promissory notes, and
Class A common stock purchase warrants which would be issued on each closing
date assuming full conversion of the convertible notes issued on each such
closing date. We issued the aforementioned securities to the investors pursuant
to Rule 506 of Regulation D as promulgated under the Securities Act of 1933, as
amended (the "Act"), and/or Section 4(2) of the Act.

      $600,000 of the purchase price was paid to us by the investors on the
initial closing date of April 1, 2005 and $600,000 of the purchase price will be
paid to us pursuant to the second closing, which will take place on the 5th day
after the actual effectiveness of the registration statement which we are
required to file with the Securities and Exchange Commission registering the
shares of our common stock, par value $.001 per share, issuable upon conversion
of the convertible notes and exercise of the warrants.

      The convertible notes bear simple interest at rate equal to the "prime
rate" as published in the Wall Street Journal from time to time plus 3% per
annum, provided however that the interest shall not be less than 8% per annum.
Interest is calculated on the basis of a 360 day year and is payable monthly, in
arrears commencing on August 1, 2005. The principal amount of the convertible
notes shall be amortized over a two-year period with payments commencing on
August 1, 2005. Each investor shall have the right to convert the convertible
notes after the date of issuance and at any time, until paid in full, at the
election of the investor into fully paid and nonassessable shares of our common
stock at a conversion price of $0.55 per share. The conversion price is
adjustable in the event of any stock split or reverse stock split, stock
dividend, reclassification of common stock, recapitalization, merger or
consolidation. In addition, the conversion price of the convertible notes will
be adjusted in the event that we spin off or otherwise divest ourselves of a
material part of our business or operations or dispose all or a portion of our
assets. The convertible notes are secured by all of our assets, pursuant to the
terms of a Security Agreement, dated as of March 31, 2005 between us and Barbara
Mittman, who is acting as collateral agent pursuant to the terms of a collateral
agent agreement dated as of March 31, 2005.

      We issued an aggregate of 1,636,364 Class A common stock purchase warrants
to the investors and will issue an additional 1,636,364 Class A common stock
purchase warrants at the second closing. The Class A warrants are exercisable
until five years from the initial closing date at an exercise price equal to the
lower of $0.81 per share or 101% of the closing bid price of our common stock on
the last trading day preceding the initial closing. The exercise price of the
Class A warrants will be adjusted in the event of any stock split or reverse
stock split, stock dividend, reclassification of common stock, recapitalization,
merger or consolidation. In addition, the exercise price of the warrants will be
adjusted in the event that we spin off or otherwise divest ourselves of a
material part of our business or operations or dispose all or a portion of our
assets.

      We filed a registration statement registering the shares of our common
stock issuable upon conversion of the convertible notes and exercise of the
Class A warrants on May 10, 2005 and we are obligated to cause it to be
effective within 90 days after the initial closing date or approximately August
1, 2005. If we do not meet the aforementioned filing and effectiveness
deadlines, we shall pay to each investor an amount equal to 1% for the first 30
days or part thereof of the pendency of such non-registration event and 2% for
each 30 days or part thereof, thereafter of the purchase price of the notes
remaining unconverted and purchase price of the shares of our common stock
issued upon conversion of the notes.

<PAGE>

      The above descriptions of the convertible note, the Class A common stock
purchase warrants, the Subscription Agreement and the Security Agreement are not
complete and are qualified in their entirety by the full text of such documents
which are included as exhibits to our Form 8-K Report filed April 5, 2005.

Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations

      This Report contains forward-looking statements, within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, which reflect
our expectation or belief concerning future events that involve risks and
uncertainties. Our actions and performance could differ materially from what is
contemplated by the forward-looking statements contained in this Report. Factors
that might cause differences from the forward-looking statements include those
referred to or identified under "Risk Factors" in our Annual Report on Form
10-KSB for the year ended December 31, 2004 and other factors that may be
identified elsewhere in this Report. Reference should be made to such factors
and all forward-looking statements are qualified in their entirety by the above
cautionary statements.

      The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
results of our operations and financial condition. The discussion should be read
in conjunction with the financial statements and notes thereto.

Overview

      Since 1996, we have sought to commercialize our dual-fuel technology with
limited success. Between 2001 and the year ended December 31 2003, we
experienced a substantial slow-down in our operational state due principally to
under capitalization. We engaged White Knight on December 23, 2003 as a crisis
finance and management company. Since that date, the principals of White Knight
have arranged for all the majority of our financing and our Chief Executive
Officer, Chairman of our Board of Directors and a Director serve similar
capacities with White Knight. White Knight's executives also served as our
interim Chief Financial Officer and financial administrator.

Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

      The following compares our financial statements for the three months
period ended March 31, 2004 and 2005. However, 2004 was a period of
reengineering our principal product as well as addressing a number of legal and
financial matters which had been created over a period from our inception in
1996 through December 2003. We therefore believe the following may not be
indicative of our future operating results.

      Our current assets increased 122% from $73,498 at the year ended December
31, 2003 to $163,572 for the three months period ended March 31, 2005 and during
this same period our total assets increased by approximately 13% from $582,005
to $656,591. Current and total liabilities during this period increased by 63%
from $758,257 at the year ended December 31, 2004 to $1,229,039 at March 31,
2005. The increase in liabilities in principally the result of an increase in
financing provided by White Knight which increased from $18,866 at the year
ended December 31, 2004 to $510,958 at March 31, 2005. Our Shareholders' Deficit
increased during this three month period from $(171,152) at the year ended
December 31, 2004 to $(572,448) at March 31, 2005 primarily due to a net loss of
$(632,346) of which approximately $(151,000) or approximately 24% was due to
one-time issuance of our common stock for services, consultants and settlements.

      In comparing the periods ended March 31, 2004 and 2005, our revenue and
gross profits decreased by 77% and 88%, respectively from $80,092 and $60,605 to
$18,163 and $7,331. Comparing these two periods, our expenses increased 285%
from $165,832 for the three month period ended March 31, 2004 to $640,088 for
the period ended March 31, 2005. However, approximately $151,000 or 24% are
non-cash expenses relates to the issuance of shares for services, consultants
and settlements. Our net loss for the three months period increased
approximately 500% from $(105,227) for the three months ended March 31, 2004 to
$(632,346) for the three month period ended March 31, 2005.


<PAGE>

Certain expectations for 2005

      We believe our dual-fuel technology has immediate market potential outside
of the United States with particular emphasis on areas with a significant
differential between the cost of diesel and natural gas. We will continue our
primary objective to complete the EPA/CARB verification.

      The Company is also pursuing the use of its technology with stationary
diesel engines and on new vehicles manufactured after 2004. We are also
exploring the use of our technology in bio-diesel and synthetic field
applications.

Item 3 Controls and Procedures

Evaluation of disclosure controls and procedures.

      An evaluation was performed under the supervision and with the
participation of our management, including the Chief Executive Officer, of the
effectiveness of the design and operation of our disclosure procedures. Based on
management's evaluation as of the end of the period covered by this Quarterly
Report, our principal executive and financial officer concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) were
sufficiently effective to ensure that the information required to be disclosed
by us in the reports that the we file under the Exchange Act is gathered,
analyzed and disclosed with adequate timeliness, accuracy and completeness.

Changes in internal controls.

      There have been no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation referred to above, nor were there any significant
deficiencies or material weaknesses in our internal controls. Accordingly, no
corrective actions were required or undertaken.

                           PART II - OTHER INFORMATION

Item 1 - legal Proceedings

      On November 14, 2003, Ambac International Corporation ("Ambac.") filed a
lawsuit seeking $109,915.60 together with interest at the rate of 15% per annum.
The suits stems from a contract for delivery of certain parts for use in the
manufacturing of our kits. We maintain the parts were delivered substantially
past the date of anticipated delivery and that the parts when received were
defective. Subsequently we filed a response on December 22, 2003. Ambac
subsequently made a motion for default judgment because the statutory period to
file a response was 30 days and our response was filed in 35 days. Further, the
response was submitted by a " non-attorney." which is alleged to be a further
violation of South Carolina civil procedure. Our CFO filed the response during
2003 at the direction of our then-Chief Executive Officer.

      On August 3, 2004, we filed a Motion to Dismiss or, in the Alternative,
Motion to Compel Arbitration. During October 2004, the Court issued an order to
Compel Arbitration. We are now awaiting the scheduling of the arbitration. We
intend to vigorously defend our position and believe we will ultimately prevail.
However, there can be no assurance that we will prevail and in the event we were
to not prevail, we could be required to pay the amount of the suit, plus
interest and associated fees. We do not believe the loss of this litigation will
have a material effect on our ability to execute our business mission. The full
amount of the liability has been recorded as a payable in our financial
statements as of March 31, 2005.

<PAGE>

      There is no other pending litigation or other proceedings against the
Company.

Item 6. Exhibits

No.   Description of Exhibit

31.1  Chief Executive Officer and Chief Financial Officer Section 302
      Certification
32.1  Chief Executive Officer and Chief Financial Officer Certification


<PAGE>

                                    SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                            Hybrid Fuel Systems, Inc.
                                            -------------------------
                                                     registrant

                                              By:    /s/ MARK CLANCY
                                                    -----------------
                                                    Mark Clancy
                                             Chief Executive Officer,
                                             Chief Financial Officer

Date:  May 16, 2005


<PAGE>

                                Index to Exhibits

No.   Description of Exhibit

31.1  Chief Executive Officer and Chief Financial Officer Section 302
      Certification
32.1  Chief Executive Officer and Chief Financial Officer Certification