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

                                   (Mark One)

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

                For the quarterly period ended March 31, 2006

                                       or

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

                        Commission File Number: 000-51789

                       US ENERGY INITIATIVES CORPORATION
                            ------------------------
             (Exact name of registrant as specified in its charter)

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



            2701 North Rocky Point Drive, Suite 325, Tampa, Florida 33607
            -------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (813) 287 5787
                                 --------------
              (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  [XX]  No  [__]

     APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
                              PRECEDING FIVE YEARS:

Indicate  by  check  mark  whether  the  registrant  has filed all documents and
reports  required  to  be  filed  by  Sections 12, 13 or 15(d) of the Securities
Exchange  Act  of 1934 subsequent to the distribution of securities under a plan
confirmed  by  a  court.  Yes  [__]  No  [__]

Indicate  by check mark whether the registrant is a shell company (as defined in
Rule  12b-2  of  the  Exchange  Act).  Yes  |_|  No  |X|

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. At April 30, 2006, the Company
had  42,215  Series  A  Preferred  Shares  and 195,209 Series B Preferred Shares
outstanding  and  110,143,319 of its $0.001 par value common shares outstanding.

                                        1
<PAGE>

                               HYBRID FUEL SYSTEMS
                              Report on Form 10QSB
                     for the period ended March 31, 2006

                                     PART I

Item  1  -  Financial  Statements

Consolidated  Balance  Sheet  for the three month period ended March 31,
2006  and  the  annual  period  ended  December  31,  2005

Statement  of  Operations  for  the  three  month  period ended
March 31, 2006  and 2005

Statement  of  Cash  Flows  for  the  three month period ended
March 31, 2006 and 2005

Notes  to  Financial  Statements

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

Item  3  -  Controls  and  Procedures

                                     PART II

Item  1.  Legal  Proceedings

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

Item  3.  Defaults  Upon  Senior  Securities

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

Item  5.  Other  Information

Item  6.  Exhibits

                                        2
<PAGE>

<TABLE>
<CAPTION>
                       US ENERGY INITIATIVES CORPORATION
                           CONSOLIDATED BALANCE SHEET
        For the Three Months Period Ended March 31, 2006 (unaudited) and
                annual period ended December 31, 2005 (audited)

<S>                                                            <C>            <C>
                                                               MARCH 31,      DECEMBER 31,
                                                                       2006            2005
                                                                 (UNAUDITED)       (AUDITED)
ASSETS
Current Assets
Cash                                                           $    393,803   $     818,557
Accounts Receivable, net of $12,000 allowance
in 2006 and 2005, respectively                                      304,257         370,777
Other receivables                                                     2,200               -
Prepaid expenses and deposits                                        84,751          32,286
Inventories                                                         136,381         162,690
Deferred consulting                                                 422,259         576,258
Deferred debt costs                                                 659,006         397,671
                                                               -------------  --------------

Total current assets                                              2,002,657       2,358,239

Property plant & equipment, net                                     564,250         565,415
Goodwill                                                             61,820          61,820
Intellectual property certifications, net                           850,360         873,342
                                                               -------------  --------------

Total Assets                                                      3,479,087       3,858,816
                                                               =============  ==============



LIABILITIES AND SHAREHOLDERS' DEFICIT

Accounts Payable                                               $    457,688   $     526,001
Debt in litigation                                                  109,868         109,868
Advanced deposits                                                    58,633          58,133
Due to related parties                                               26,540         176,540
Due to related parties, convertible debt                          1,148,752       1,080,752
Notes payable                                                     2,196,639       1,630,293
Discount on Debt                                                   (563,360)       (650,630)
Derivative liability                                              1,464,335         841,010
Debt in default                                                     106,593         106,593
Convertible debt in default                                          75,700          75,700
Sales and payroll taxes payable                                     109,428         113,552
Other current liabilities                                            62,361          62,581
                                                               -------------  --------------

Total current liabilities                                         5,253,177       4,130,393
                                                               -------------  --------------

Total Liabilities                                                 5,253,177       4,130,393

SHAREHOLDERS DEFICIT

Shareholders' deficit

Preferred A stock (.01 par value; 42,215 shares authorized;             422             422
42,215 shares issued and outstanding)

Preferred B stock (.01 par value; 954,563 shares authorized;          1,952           1,952
195,209 shares issued and outstanding)

Common stock (.001 par value; 150,000,000 shares authorized         109,854         105,905
respectively;  109,854,116 and 105,905,433 shares issued and
outstanding, respectively)

Additional paid-in capital                                       17,447,663      16,997,922
Deferred Compensation                                              (125,000)       (200,000)
Accumulated deficit                                             (19,208,981)    (17,177,778)
                                                               -------------  --------------

Total shareholders' deficit                                      (1,774,090)       (271,577)
                                                               -------------  --------------

Total liabilities and shareholders' deficit                    $  3,479,087   $   3,858,816
                                                               =============  ==============
</TABLE>


                                        3
<PAGE>

<TABLE>
<CAPTION>
                       US ENERGY INITIATIVES CORPORATION
                            STATEMENT OF OPERATIONS
         For the Three Months Ended March 31, 2006 and 2005(unaudited)
<S>                                              <C>            <C>
                                                 MARCH 31       MARCH 31
                                                         2006          2005
                                                   (UNAUDITED)     (AUDITED)
                                                 -------------  ------------


REVENUES
Revenues from product sales and related income   $    168,100   $    18,163

Cost of product sales                                (159,091)      (10,832)
                                                 -------------  ------------

GROSS PROFIT                                            9,009         7,331
                                                 -------------  ------------

EXPENSES
Operating expenses
Consulting and professional fees                      360,397       168,187
Research & development                                  9,469        41,647
Compensation                                          414,213       362,830
Amortization & Depreciation                            44,918         3,107
Rent                                                   28,380        15,171
Insurance                                              65,278           710
Other operating expenses                               88,520        48,436
                                                 -------------  ------------

 Total expenses                                     1,011,175       640,088
                                                 -------------  ------------

Loss from operations                               (1,002,166)     (632,757)

Other Expenses (income)
Interest expense                                      330,051       513,182
Other income                                             (529)       (2,637)
Derivative Expenses                                   699,430             -
                                                 -------------  ------------

(Income) loss from other expenses                   1,028,952       510,545

Net loss                                            2,031,118    (1,143,302)

Basic and diluted loss per share                 $       0.02   $     (0.02)

Basic and diluted weighted average number of
common shares outstanding                         106,709,351    75,893,482
</TABLE>

                                        4
<PAGE>

<TABLE>
<CAPTION>
                       US ENERGY INITIATIVES CORPORATION
                            STATEMENT OF CASH FLOWS
         For the Three Months Ended March 31, 2006 and 2005 (unaudited)

<S> <C>                                                     <C>          <C>
                                                           MARCH 31,    MARCH 31,
                                                             2006         2005
                                                          -----------  -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                  (2,031,118)  (1,143,302)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
  Depreciation                                                21,935        3,106
  Amortization of deferred consulting expense                153,999
  Amortization of deferred debt costs                       (111,165)
  Amortization of debt discount                               78,296      510,957
  Amortization of intangibles                                 22,983
  Common stock issued for professional services               52,813      151,000
  Conversion benefit on related party advance                 68,000
  Amortization of deferred compensation related party         75,000       75,000
  Derivative Income or expense                               914,509

Change in operating assets and liabilities
  Accounts receivable                                         66,494       (6,755)
  Inventory                                                   26,310       (6,071)
  Accounts payable                                           (57,450)      (4,112)
  Related party payable                                     (150,000)
  Sales and payroll taxes payable                             (4,122)
  Prepaid and deposits                                       (57,385)     (75,442)
  Other current liabilities                                142,522      (8,553)
                                                          -----------  -----------

Net cash provided (used) by operating activities          (851,093)    (504,172)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                         (20,771)     (46,067)
                                                          -----------  -----------

Net cash provided (used) by investing activities             (20,771)     (46,067)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Loans to employees                                          (2,200)
  Loans from related party                                    68,000      551,895
  Payments on notes payable                                 (852,537)
  Payments on settlement
  Payments on tax settlement
  Proceeds from convertible debt - Dutchess                1,040,000
  Proceeds from sale of common stock                         223,847
  Proceeds from exercise of warrants                              --          150
                                                          -----------  -----------

Net cash provided (used) by financing activities             447,110      552,045

Net decrease in cash and cash equivalents                   (424,754)       1,806

Beginning cash and cash equivalents                          818,557        2,025
                                                          -----------  -----------

Ending cash and cash equivalents                             393,803        3,831

  Supplemental Disclosure of Cash Flow Information

  Cash Paid during the year for interest                      30,900


  Amortization of common stock issued for deferred            75,000       75,000
  compensation

  Amortization of Debt Discount                               78,296      510,987

  Common Stock issued for discount on debt                   366,026

  Common Stock issued for conversion of convertible note     341,765
</TABLE>

                                        5
<PAGE>

                        US ENERGY INITIATIVES CORPORATION
                     Notes to Unaudited Financial Statements
            For the Three Month period ended March 31, 2006 and 2005

NOTE  1  BASIS  OF  PRESENTATION

The  accompanying unaudited consolidated financial statements have been prepared
in  accordance  with  U.S.  generally accepted accounting principles for interim
financial  information and with the instruction to Form 10-QSB and Article 10 of
Regulation  S-X.  Accordingly,  they  do  not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete
consolidated  financial  statements.  In  the  opinion  of  management,  all
adjustments  (consisting  only of those of a normal recurring nature) considered
necessary for a fair presentation have been included.  Operating results for the
three month periods ended March 31, 2006 and 2005 are not necessarily indicative
of  the  results  that  may  be  expected for the year ending December 31, 2006.

NOTE  2  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

US  Energy  Initiatives  Corporation (formerly Hybrid Fuel Systems, Inc.) (the "
Company.")  manufactures  systems  for  the  conversion  of  diesel  engines  to
non-petroleum  based  fuels  such  as  compressed  natural  gas.  The  Company
manufactures  and  sells  systems  to  customers pursuant to a license agreement
originally  acquired on June 1, 1996 and again on August 31, 2004 with a related
party.  The  Company  has exclusive world-wide rights to all things which result
from  five  issued  and  one  pending  U.S.  Patent.

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.

Intangible  Assets

Intangible  assets  consist  primarily  of  goodwill  and intellectual property.
Effective  April  1, 2002 with the adoption of Statement of Financial Accounting
Standards  No.  142,  "Goodwill  and  Other  Intangibles" (SFAS 142), intangible
assets  with an indefinite life, namely goodwill, are not amortized.  Intangible
assets  with  a  definite life are amortized on a straight-line basis over their
estimated  useful  lives  of ten years.  Intangible assets with indefinite lives
will  be  tested  for  impairment  annually  and when an event occurs that would
indicate  that  the  carrying  amount  may  be  impaired.

                                        6
<PAGE>

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  non discounted 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.

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  at March 31, 2006 and 2005, as well as the
reported  amounts  of revenues and expenses for the years 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 SFAS No. 123R, "Accounting for Stock Based Compensation"
as  of  January  1,  2006.   For  the  period  ended March 31, 2005, the Company
applied  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 March
31,  2005  and 2006, 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:

                                        7
<PAGE>

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.

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 March 31, 2006 and 2005, the Company did not have any long-term
obligations.

Accounting  For  Financial  Instruments

In  May  2003,  the  FASB issued Statement of financial Accounting Standards No.
150,  "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities  and  Equity"  (SFAS 150).  SFAS 150 requires that certain financial
instruments,  which  under  previous guidance were accounted for as equity, must
now be accounted for as liabilities.  The financial instruments affected include
mandatory  redeemable  stock,  certain financial instruments that require or may
require  the issuer to buy back some of its shares in exchange for cash or other
assets  and  certain obligations that can be settled with shares of stock.  SFAS
150  is  effective  for all financial instruments entered into or modified after
May  31,  2003, and otherwise is effective at the beginning of the first interim
period  beginning  after  June  15,  2003.

Recently  issued  Accounting  Standards

Below  is  a listing of the most recent accounting standards and their effect on
the  Company.

In  December  2004,  the  Financial Accounting Standards Board ("FASB") issued a
revision  to SFAS No. 123, SFAS 123R Share-Based Payment. SFAS No. 123R requires
all  companies  to  measure  compensation  costs  for  all share based payments,
including  stock  options,  at  fair  value  and  expense such payments over the
service  period.  SFAS  No.  123R  specifies  that  companies  must  use  an
option-pricing  model  to estimate fair value, although it does not specifically
require the use of a particular model.  The new standard is effective for annual
periods  beginning after December 15, 2005 and, therefore, was effective for the
Company  beginning  with the first quarter of 2006.  Under the provisions of FAS
123R,  companies can select from three transition methods for the implementation
of  this standard.  The modified prospective method would require all new awards
that  are  granted  after  the effective date to use the provisions of FAS 123R.
Under  this method, for vested awards that are outstanding on the effective date
of  FAS  123R,  a  company  would not have to record any additional compensation
expense.  For  unvested awards that are outstanding on the effective date of FAS
123R  and  were previously included as part of pro forma net income and earnings
per  share  under the provisions of FAS 123 would be charged to expense over the
remaining  vesting  period,  without  any  changes  in  measurement.  The second
alternative is a variation of the modified prospective method, which would allow
companies  to  restate  earlier  interim  periods  in  the year that FAS 123R is
adopted  using  the  applicable  FAS  123  pro  forma  amounts.  Under the third
alternative,  the  modified  retrospective  method,  companies  would  apply the
modified prospective method and also restate their prior financial statements to
include  the  amounts  that  were  previously  recognized  in  their  pro  forma
disclosures  under  the  original  provisions of FAS 123.  As of the adoption of
SFAS 123R, on January 1, 2006, the company did not have any unvested outstanding
options  and therefore did not need to select or apply a transition method as of
March  31,  2006.

Principles  of  Consolidation

The  consolidated  financial  statements  for  the  quarter ended March 31, 2006
include  the  accounts  of  the  principally  wholly-owned subsidiary DRV Energy
(collectively  the  "Company").  Significant  intercompany  balances  and
transactions  have been eliminated in consolidation.  The period ended March 31,
2005 did not include the accounts of the principally wholly-owned subsidiary DRV
Energy,  as  the  Company  had  not  acquired  the  subsidiary  at  that  time.

Going  Concern:

The  accompanying  financial  statements have been prepared assuming the Company
will  continue  as  a  going  concern for a reasonable period, not to exceed one
year. As reflected in the financial statements, the Company has negative working
capital  for  the  period ended March 31, 2006 and a loss from operations. These
conditions  raise substantial doubt about the Company's ability to continue as a
going  concern.  The  Company  has adequate financing in place and subsequent to
December  31,  2005  has completed significant trials on its new conversion kits
and has received initial potential orders for sales so as to provide funding for
the  continued  operations  of  the  Company.

In  addition,  the Company has entered into an agreement with certain accredited
investor  relating  to  a  $5,000,000  equity line which was registered with the
Securities  and Exchange Commission and declared effective during December 2005.
Under the terms of the equity line, the Company may draw down up to $100,000 per
Put.

                                        8
<PAGE>

NOTE  3  RELATED  PARTY  TRANSACTIONS

White  Knight  (WK)  is  a  major  stockholder  and  has  officers  who serve in
management  positions  for  the company.  Per our agreement with WK, any funding
provided  by  WK is to be repaid in common shares of stock at a conversion price
of  $0.04  per  share.  The  conversion price was agreed upon in December, 2003,
when  the  Company's  stock  was  at  $0.03  per  share.

As  of  the  period ended March 31, 2006 , $1,148,752 is outstanding debt due to
WK.  Through  the  quarter  ended March 31, 2006 WK advanced a total of $68,000.

The  company  has  an  employment  agreement with White Knight SST, Inc. (WK) to
provide  executive  management  services  to  the  company. Compensation is paid
exclusively  through  the  issuance  of  restricted common stock equal to a cash
value  of  $25,000  per  month  total  for the services of both executives.  The
common  stock  is issued pursuant to the agreement vests on a quarterly basis in
advance.  During  the  year  ended  December  31,  2004,  the  company  issued
approximately  12,000,000  shares  of  common  stock  for  the  total  $600,000
compensation  due.  As  of  March 31, 2006, the Company had amortized $75,000 of
the  deferred  related  party  compensation  to  compensation  expense.

License  Agreement

The  Company entered into a licensing agreement collectively with Frank Davis (a
significant stockholder and consultant) and Engine Control Technology LLC (ECT).
The  license  gives  the Company the exclusive world-wide rights, to utilize and
exploit  five  issued  and  one  pending patents including marketing and selling
products.  The underlying patents were developed by Frank Davis and other family
members  who  are  employees of the Company and have since been assigned to ECT,
the  owner of which is Patricia Davis. Patricia Davis is the wife of Frank Davis
our  Chief  Technical  Consultant.

In  addition, the Company has a consulting agreement with Frank Davis to provide
various  technical  consulting  services.  The  agreement expires in 2009 but is
automatically  renewable  annually  thereafter,  if  not  terminated  by written
notice.  During  the  term of the agreement, the consultant shall receive health
and  dental  insurance  for  himself and his immediate family which includes his
wife,  the  use  of  a  vehicle  and  reimbursement of certain related expenses.

NOTE  4  GOODWILL,  NET

At  March  31,  2006  and  2005,  goodwill,  net,  consists  of  the  following:

                                     3/31/2006                         3/31/2005
                                     ---------                         ---------
Goodwill                             $  61,820                         $      -

Less  accumulated  amortization             -                                 -
                                     ---------                         ---------

Total                                $ 61,820                          $   0.00
                                     =========                         =========

As of March 31, 2006 goodwill represented an intangible asset resulting from the
acquisition  of  DRV  Energy.  Goodwill  was  analyzed  on  March  31,  2006 for
impairment  as  it  has  an indeterminant life.  Based on the Company's analysis
performed,  no impairment loss was required to be recorded during the period
ended  March  31,  2006.  For  income  tax  purposes,  no  deductible expense is
anticipated  for  the  acquisition  Goodwill.

                                        9
<PAGE>

NOTE  5  INTANGIBLE  ASSETS,  NET

As of March 31, 2006 and 2005, intangible assets, net, consist of the following:


                                                3/31/2006          3/31/2005
                                                ---------          ---------

Intellectual Property - Certifications         $1,146,925          $       -

Less  accumulated  amortization                  (296,565)                 -
                                                ---------          ---------

Total                                           $ 850,360          $    0.00
                                                =========          =========

Amortization  expense  charged  to  operations was $22,982 and $0 for the period
ended  March  31,  2006  and  2005,  respectively.

Based  on  the  Company's  year end analysis for impairment losses of $2,724,738
were  required  to  be  recorded  as  of  December 31, 2005.  The impairment was
determined  based  on  the  loss of a significant contract related to one of the
certifications.

NOTE  6  -  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.

Series B Preferred Stock is convertible, at the option of the holder at anytime,
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.

                                       10
<PAGE>

NOTE  7  DEBT  IN  DEFAULT

The  Company  did  not  meet  the payment terms on the note payable to Peachtree
National  Bank  through March 31, 2006.  The note is secured by the common stock
owned  by  Robby  Davis  and  Ricky  Davis,  both  employees of the Company. The
provisions  of  the  note  allow  for  the  note to become immediately and fully
payable  upon  default  of payments. While the bank had not initiated any remedy
actions  for  the default as of March 31, 2006, the full balance of the note has
been  reclassified  as  a  current  liability  for  both  years.  The  remaining
principal  balance  as  of  03/31/06  was  approximately  $44,000.

The  Company  is  delinquent  in  the  payment  of payroll 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,  2006  and  2005


                                   2006            2005
                               -----------     -----------
Payroll  and  sales
 taxes                         $   51,410      $   92,537
Penalties  and
 interest                      $    8,388      $   29,890
                               -----------     -----------
                               $   59,798      $  122,427

NOTE  8  LITIGATION

The  Company  is,  from  time to time, involved in litigation relating to claims
arising  out  of  its operations in the ordinary course of business. The Company
believes  that none of the claims that were outstanding as of March 31, 2006 and
2005 should have a material adverse impact on its financial condition or results
of  operations.

NOTE  9  STOCK  OPTIONS  AND  WARRANTS

The Company's Stock Option Plan (" SOP.") was adopted in 2001 to provide for the
grant to employees up to 2,000,000 incentive stock options within the meaning of
Section  422 of the Internal Revenue Code. The SOP, which is administered by the
Company's  Board  of  Directors, is intended to provide incentives to directors,
officers,  and  other key employees and enhance the Company's ability to attract
and  retain  qualified  employees. Stock options are granted for the purchase of
common  stock  at  a  price  not  less than the 100% of fair market value of the
Company's  common  stock on the date of the grant (110% for holders of more than
10%  of  the  total  combined  voting power of all classes of capital stock then
outstanding).  As  of  December  31,  2005 and 2004, no options had been granted
under  the  plan.

Warrants

The  Company  grants  warrants  for  purchase  of  shares  of  common  stock  to
consultants  and  other non employees. The Company uses the Black Scholes option
pricing  model  to  value warrants issued to non employees.  During the quarters
ended  March  31,  2006  and  2005,  no  warrants  were  granted.

NOTE 10 DERIVATIVE FINANCIAL INSTRUMENTS

The  captions  derivative  financial  instruments  consist  of  (a) the embedded
conversion  feature bifurcated from the Convertible Debentures, (b) the Warrants
issued  in  connection  with the Convertible Debts, (c) interest rate index, and
(d)  put  options.  These  derivative  financial  instruments  are indexed to an
aggregate  of  6,921,991 shares at March 31, 2006 and are carried at fair value.

At  March  31, 2006 the following derivative liabilities related to common stock
options  and  warrants  and  embedded  derivative  instruments were outstanding:

<TABLE>
<CAPTION>
<S>          <C>             <C>                            <C>                  <C>                 <C>
                                                             Exercise             Value               Value
             Expiration                                     Price Per            at Issue               at
Issue Date      Date          Instrument                      Share                Date              03/31/06

10/15/2005     10/5/2010     1,200,000 warrants issued to
                             Membrado                         $0.40              $330,000            $216,000

3/05/2005       3/5/2010     1,600,000 warrants issued to
                             Alpha Capital                    $0.19              $928,000            $298,199

11/4/2005      11/4/2010     314,815 warrants issued to
                             Dutchess Private Equities        $0.27              $ 85,000            $ 59,815
                                                                                                    ----------
Fair value of freestanding derivative instrument liabilities for options and warrants               $ 574,014
                                                                                                    ----------
                                                                                                    ----------

                                                             Exercise             Value               Value
             Expiration                                     Price Per            at Issue               at
Issue Date      Date          Instrument                      Share                Date              03/31/06

11/4/2005    11/4/2010       Dutchess $340,000 term note     $0.27              $340,000             $83,068
12/20/2005   12/21/2006      Dutchess $1,362,500 term note   $0.27            $1,647,000            $336,420
3/23/2006    3/23/2007       Dutchess $1,412,500 term note   $0.27            $1,778,526            $470,833

Fair value of freestanding derivative instrument liabilities for term notes                        $ 890,321
</TABLE>
                                       11
<PAGE>

NOTE  11  DEBT  FINANCING

On  March  28, 2006, we completed an offering of our $1,412,500 principal amount
one-year promissory note (the "Note") to Dutchess Private Equity Fund, L.P. (the
"Investor")  for  aggregate  gross  proceeds  of  $1,130,000.  The Note bears no
interest.  Payments  made  by  us in satisfaction of the Note shall be made from
each  put  from  the  Equity Line of Credit with the Investor given by us to the
Investor  under  that  certain Investment Agreement dated as of November 4, 2005
which  we entered into with the Investor (the "Investment Agreement").  We shall
make  payments  to the Investor in an amount equal to the greater of (1) 100% of
each  put  to  the Investor from us, or (2) $117,708.33 until the face amount is
paid in full.  Our initial payment will be due on May 1, 2006 and all subsequent
payments  will  be  made  at the closing of every put to the Investor thereafter
until  the Note is paid in full, with a minimum amount of $117,708.33 per month.
In  the  event that on the maturity date we have any remaining amounts unpaid on
the Note, the Investor can exercise its right to increase the face amount by 10%
and  an  additional  2.5%  per  month, pro rata for partial periods, as liquated
damages. In addition, our obligation to repay the principal and accrued interest
under  the  Note, as well as our $1,362,500 principal amount one-year promissory
note  which  we  issued  to the Investor and Dutchess Private Equities Fund, II,
L.P. on December 20, 2005, is secured by all of our assets pursuant to a certain
Security  Agreement  which  we  entered  into  with the Lender on March 23,2006.

We  used a portion the proceeds from the Note to repay our outstanding principal
amount promissory notes, inclusive of accrued and unpaid interest and liquidated
damages  in  the  aggregate  amount of $541,542, issued pursuant to that certain
Subscription  Agreement  dated March 31, 2005 (the "Subscription Agreement"). In
addition,  we  entered  into a Settlement Agreement and Release (the "Settlement
Agreement")with  the  holders of the promissory notes on March 24, 2006 pursuant
to  which the holders and we agreed to release and discharge each other, and our
respective  officers,  directors,  principals, control persons, past and present
employees,  insurers,  successors,  agents and assigns from any and all actions,
damages, judgments, claims, and demands existing or claimed to exist between the
parties  in  connection with the promissory notes or the Subscription Agreement.

We  claim  an  exemption  from  the registration requirements of the Act for the
private placement of these securities pursuant to Section 4(2) of the Act and/or
Regulation  D promulgated there under since, among other things, the transaction
did  not  involve  a  public  offering,  the investors were accredited investors
and/or  qualified  institutional buyers, the investors had access to information
about  the  company  and their investment, the investors took the securities for
investment  and  not  resale,  and  we took appropriate measures to restrict the
transfer  of  the  securities.

On  March  28,  2006,  the  Company  rendered full satisfaction of the Remaining
Debentures  with  ALPHA  CAPITAL  AKTIENGESELLSCHAFT,  WHALEHAVEN  CAPITAL  FUND
LIMITED,  and  ELLIS  INTERNATIONAL  LTD.through the payment of $541,542.00 (the
"Funds")  by  wire transfer to the bank and account.  The agreement also reduces
the  exercise  price  to  $0.19  per  share  for  the  warrants.  Each Investor,
individually,  hereby  agrees  that  they  will  not  exercise or sell more than
sixty-seven  thousand five hundred (67,500) shares underlying the Warrant in any
thirty  (30) day period unless the Company's common stock is trading above forty
cents  ($0.40) per share. Upon receipt of the Funds, the Investors shall return,
via  overnight  delivery,  the Remaining Debentures to the company.  The Company
agrees  to  file  all  necessary  paperwork  with  the  SEC,  including  any
post-effective  amendments,  for  the  Investors  within  seven  (7)  days.  The
Company  shall agree to abide by  all  terms  and  conditions  in  the  original
Warrant with respect to registration  and  issuance  of  shares  underlying  the
Warrant.

                                       12
<PAGE>

NOTE  12  SUBSEQUENT  EVENTS

-     On  March  28,  2006, we issued a Term Sheet and May 15th we drafted final
closing  documents to acquire a custom electronic manufacturing enterprise.  The
most expensive component in our dual fuel system is the electronic control unit.
Through  this acquisition, we will realize a meaningful reduction in our cost of
goods  as  well  as  a heighten degree of control over timing and quality.  This
acquisition, if successful, would also allow us to keep exclusively in-house all
of our proprietary codes and confidential information.  We will also engage this
enterprise  in  assignments  outside  of our needs thereby expanding our overall
revenue  model  with  a  business  highly  complimentary  to  our  core purpose.

-     On March 27, 2006, we were notified that our dual fuel technology has been
awarded  an  annual  contract by a significant international automotive original
equipment manufacturer (OEM) for initial use of our system in Asian markets.  On
May 18th we finalized components of the final contracting agreement.  We believe
this annual contract will begin to impact our revenues during the fourth quarter
2006.

-     On  March  26,  2006,  we announced completion of a dual fuel system for a
major  Chinese  OEM.  During  April we completed a field installation in western
China  and  during  May,  we  began  fuel  consumption  trials.

-     During April  2006, we finalized  a  dual  fuel  system  and  finalized an
installation in Korea for an international automotive OEM. This OEM has informed
us they are developing an after-treatment system so that our dual fuel kit, when
used on their engine platform, can meet or exceed EU 3 and 4 emission standards.

-     On  May  17th  2006,  we  finalized  a new dual fuel system for a domestic
governmental  entity in Ohio and conducted training at our facility in PeachTree
City,  Georgia.   The  finalized  system  will now undergo a minimum three month
field  trial.

-     On  May 10, 2006, we acquired a world wide non-exclusive license agreement
for  the  Catalytic  Activated  Vacuum  Distillation  (CAVD)  technology  from
EarthFirst  Technologies, Inc., (OTCBB: EFTI) Under the terms of the license, US
Energy  shall  issue  1,000,000  restricted  common shares to be held by EFTI or
distributed  amongst  the  EFTI  shareholders  of record. In addition, US Energy
shall  pay  a  fee  of  5%  of  revenues  of  all  sales related to the licensed
technology.  The  license  grants  to  HYFS  a world-wide non-exclusive right to
commercialize  the  CAVD  technology  and  to manage the previous agreement with
Internal  Hydro  International.  In  our  opinion, the CAVD technology has shown
great promise in the biofuel space.  For example, we have completed initial runs
of Dried Distillers Grains with Solids (DDGS) producing a gas with over 700 Btus
per  cubic foot. DDGS is a coproduct of the ethanol production process also used
as  a  high  nutrient  feed  valued by the livestock industry. We believe we can
employ  this  technology  to  launch  our  biofuels  initiative  to  develop our
signature  biofuel which, when used in conjunction with our dual-fuel conversion
systems,  allows  a diesel engine to exceed Environmental Protection Agency 2010
emission  standards.  A  second  aspect to our development path is to render the
equipment  scaleable  so that a fleet can locate a small production unit on-site
and  produce  their  own  biofuel  using  our  feedstock.

-     On  May  10,  2006  we received the second installment from Internal Hydro
International, Inc. (OTCBB: IHDR) ("Hydro") relating to sub-licensing rights for
the  Catalytic  Activated Vacuum Distillation (CAVD) technology. A final payment
due  relating  to the licensing of two US states is payable in approximately ten
days.  Under  the  terms  of  the sub-license Internal Hydro has agreed to enter
into  a  definitive agreement, pursuant to which it shall pay a one-time license
fee  of  $500,000  for  exclusive  rights  to  deploy the CAVD technology in the
European  Union.  A  $100,000 down payment on the initial licensing fee has been
paid  by  Internal  Hydro.  The payment received today marks the second of three
payments  relating  to  one-time  licensing fees for the States of Minnesota and
Iowa.  The agreement will also provide for HYFS to be paid a royalty of $100,000
for  each  European  country  in  which  Internal  Hydro intends to establish an
operational  CAVD  plant.  In  addition, Internal Hydro will pay HYFS a one-time
license fee of $250,000 per state for rights to deploy the technology as well as
a royalty stream equal to 5% of gross revenue per plant excluding carbon credits
and  tire tipping fees. Further, Internal Hydro will maintain the right of first
refusal  to  Tennessee,  Illinois,  Louisiana  and  Minnesota at a predetermined
license  arrangement  of  $250,000  per  state.

                                       13
<PAGE>

Item  2  -  Management's  Discussion  and  Analysis  or  Plan  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,  2005 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

US  Energy  Initiatives  Corporation  is  engaged  in the automotive aftermarket
principally  through developing and commercializing systems which convert diesel
engines  to  operate  on  natural  gas.  The  Company's  principal technology is
embodied  in  five US Patents and several foreign patents pending licensed to US
Energy on a world-wide exclusive basis.  We have sought to insert our technology
into  the  marketplace  through  original equipment manufacturers (OEM) parallel
with  expanding  our  direct-to-consumer  activities.

During the first quarter 2006 we changed our name from Hybrid Fuel Systems, Inc.
to  US  Energy  Initiatives  Corporation.  On February 22, 2006, we obtained the
written  consent  of a majority of our shareholders to change our corporate name
from Hybrid Fuel Systems, Inc. to US Energy Initiatives Corporation. On March 1,
2006,  we  filed  a certificate of amendment to our certificate of incorporation
with the Secretary of State of the State of Georgia, effective on March 6, 2006.
We  intend  to ratify the aforementioned actions taken by our Board of Directors
and  a  majority  of  our  shareholders  with  the  filing of a proxy statement.
Simultaneously  we  announced  the  formation  of  our Biofuels Division and our
Energy  Technology  Incubation  Division.

Three  Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005

Our current assets decreased approximately 15% from $2,358,239 at the year ended
December  31,  2005 to $2,002,657 for the period ended March 31, 2006 and during
this same period our total assets decreased by approximately 10% from $3,858,816
to  $3,479,087.  Total liabilities during this period increased by approximately
27%  from  $4,130,393 at the year ended December 31, 2005 to $5,253,177 at March
31,  2006.  Our  Shareholders'  Deficit increased during this three month period
from $(271,577) at the year ended December 31, 2005 to $(1,774,090) at March 31,
2006.

In  comparing profit and loss during the three month period ended March 31, 2005
and  2006, our revenue and gross profits increased by 826% and 23%, respectively
from  $18,163  and 7,331 to $168,100 and $9,009. The increase in revenues during
this  period  were  principally due to our acquisition of DRV Energy and the EPA
certified  systems  which were a part of that acquisition.   Comparing these two
periods,  our  operating  expenses  increased  58%  from $ 640,088 for the three
months  period ended March 31, 2005 to $1,011,175 for the period ended March 31,
2006.  Our net loss for the three months period increased approximately 78% from
$(1,143,302)  for  the three months ended March 31, 2005 to $(2,031,118) for the
three  month  period  ended  March  31,  2006.

Certain  expectations  for  2006

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.

                                       14
<PAGE>

Item  3  Controls  and  Procedures

(a)  Evaluation  of  Disclosure  Controls  and  Procedures. As of the end of the
period covered by this report, we conducted an evaluation, under the supervision
and  with  the  participation of our Chief Executive Officer and Chief Financial
Officer  of our disclosure controls and procedures (as defined in Rule 13a-15(e)
and  Rule 15d-15(e) of the Exchange Act).  Based upon this evaluation, our Chief
Executive  Officer  and  Chief  Financial  Officer concluded that our disclosure
controls  and procedures are effective to ensure that information required to be
disclosed  by us in the reports that we file or submit under the Exchange Act is
recorded,  processed, summarized and reported, within the time periods specified
in  the  Commission's  rules  and  forms.

(b)  Changes  in internal controls. There was no change in our internal controls
or  in  other  factors  that  could affect these controls during our last fiscal
quarter  that  has  materially  affected,  or is reasonably likely to materially
affect,  our  internal  control  over  financial  reporting.

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

None

Item  3  -  Defaults  Upon  Senior  Securities

The  Company  did  not  meet  the payment terms on the note payable to Peachtree
National  Bank  through March 31, 2006.  The note is secured by the common stock
owned  by  Robby  Davis  and  Ricky  Davis,  both  employees of the Company. The
provisions  of  the  note  allow  for  the  note to become immediately and fully
payable  upon  default  of payments. While the bank had not initiated any remedy
actions  for  the default as of March 31, 2006, the full balance of the note has
been  reclassified  as  a  current  liability  for  both  years.  The  remaining
principal  balance  as  of  March  31,  2006  was  approximately  $44,000.

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

None.

Item  5  -  Other  Information

None.

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

                                       15
<PAGE>
                                   SIGNATURES

     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.

                        US ENERGY INITIATIVES CORPORATION

                               By: /s/  MARK  CLANCY
                                   ----------------
                                   Mark  Clancy
                                   Chief  Executive  Officer
                                   (Principal Executive Officer),
                                   Chief  Financial  Officer
                                   (Principal Accounting Officer)

Date:  May  22,  2006

                                       16
<PAGE>