UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 FORM 10-KSB/A
                                (Amendment # 3)

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

                    For The Fiscal Year Ended June 30, 2001

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

              For The Transition Period from _______ to__________

                        Commission File Number  0-29351

                               HYBRID FUELS, INC.
          (Name of small business issuer as specified in its charter)

              NEVADA                                   88-0384399
       -------------------------------          ------------------------
      (State of incorporation)          (IRS Employer Identification No.)

            PO Box 41118, Winfield B.C.,                     V4V 1Z7
        ------------------------------------------       --------------
         (Address of Principal Executive Offices)           (Zip Code)

Issuer's Telephone Number (250) 868-0600

Securities registered pursuant to section 12 (b) of the Act: None

Securities registered pursuant to section 12(g) of the Act:  None

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 last 90 days.      Yes [ ]  No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or
information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.      [X]

The number of shares issued of the registrant's common stock as of
October 5, 2001 is 20,623,600

The number of shares outstanding of the registrant's common stock as of
October 5, 2001 is 21,056,353

Amount of revenue for most recent fiscal year   $0.00

DOCUMENTS INCORPORATED BY REFERENCE The Articles of Incorporation, Bylaws
specimen stock certificate and filed Forms 8-K are incorporated by
reference in Part III, Item 13.
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TABLE OF CONTENTS

PART I...........................................................Page 3

 Item 1.   DESCRIPTION OF BUSINESS...............................Page 3

 Item 2.   DESCRIPTION OF PROPERTY...............................Page 18

 Item 3.   LEGAL PROCEEDINGS.....................................Page 19


PART II .........................................................Page 20

 Item 5.   MARKET FOR REGISTRANT'S COMMON
           EQUITY AND RELATED STOCKHOLDER MATTERS................Page 20

 Item 6.   MANAGEMENT DISCUSSION AND ANALYSIS OR
           PLAN OF OPERATION.....................................Page 21

 Item 7.   FINANCIAL STATEMENTS..................................Page 28

 Item 8.   CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS..........Page 39


PART III ........................................................Page 39

 Item 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
           AND CONTROL PERSONS...................................Page 39

 Item 10.  EXECUTIVE  COMPENSATION...............................Page 41

 Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
           OWNERS AND MANAGEMENT.................................Page 42

 Item 12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS....Page 42


 Item 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
           AND REPORTS ON FORM 8-K...............................Page 43

















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PART I

ITEM  1.  DESCRIPTION  OF  BUSINESS.

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

Except for disclosures that report the Company's historical results, the
statements in this document are forward-looking statements. Actual results may
differ materially from those projected in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof. The Company assumes no
obligation to update forward-looking statements or comments or the reasons why
actual results may differ therefrom.

(a) BUSINESS DEVELOPMENT

The Company is a developmental stage company that has had no income since the
acquisition of the hybrid fuels technology in June 1998. Until such time as the
Company sells an ethanol plant or otherwise earns revenue, necessary financing
will be obtained from loans or the sale of securities. If the Company is unable
to obtain funds from external sources, it is unlikely that it will be able to
pursue its program and it may not be able to continue to operate in the long
term. It is uncertain if and when it will develop any significant cash flow.

The Company was originally incorporated in the state of Florida on February 16,
1960 as Fiberglass Industries Corporation of America.  On September 3, 1966,
the Company changed its name to Rocket-Atlas Corp. It changed its name again on
December 1, 1966 to Rocket Industries, Inc.  On January 28, 1994, the Company
changed its name to Polo Investment Corp. of Missouri, Inc., and on October 7,
1995 the name changed to Medical Advanced Systems, Inc. Then, on June 3, 1993,
the Company changed its name to Polo Equities, Inc., and increased its
authorized capital to 50,000,000 shares with a par value of $0.001.  In May
1998, the Company changed its domicile to Nevada and changed to its current
name, Hybrid Fuels, Inc., on June 10, 1998.

In May of 1998, the Company recalled 12,000,000 shares held by 3 individuals:
Justeen Blankenship, Shane Duffin, and Danni Uyeda, 4M shares each. So far as
the Company is aware, no consideration was paid to those three individuals in
return for the cancellation of the shares. Then, in a stock for stock exchange,
the Company issued 12,000,000 shares to Donald Craig to acquire all of the
issued and outstanding shares of Hybrid Fuels, U.S.A., Inc. and 330420 B.C.
Ltd., (which subsequently changed its name to Hybrid Fuels (Canada) Inc.) At
the time of the acquisition, Donald Craig held all of the issued and
outstanding shares of Hybrid Fuels, U.S.A., Inc., and Hybrid Fuels (Canada)
Inc., as Trustee for a group of individuals and companies that had contributed
to the development of the Hybrid technology. At the time of the acquisition,
Hybrid Fuels (Canada) Inc., owned the rights to the technology, with the result
that, as a part of the acquisition, the Company

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(a) BUSINESS DEVELOPMENT (con't)
acquired control over the technology necessary for the Company's intended
operations.

Prior to the acquisition of Hybrid Fuels, U.S.A., Inc. and Hybrid Fuels
(Canada) Inc., the Company had no significant operations and was seeking a
business opportunity.

(b) BUSINESS OF THE ISSUER

Hybrid Fuels intended business is to sell integrated farm scale facilities that
combine ethanol production with a beef finishing operation.  This integration
is achieved through certain procedures, process improvements and mechanical
devices the company has discovered or developed. The Company also expects to
act as the marketing agent for the hybrid fuel and the finished animals to
control quality and present a unified marketing presence as a way of generating
better returns from the sale of the products.

SOME CONCERNS ABOUT PRESENT FINISHING METHODS

The Company believes beef cattle do not do well using what may be referred to
as "factory farming methods". In "Diet For A New America", John Robbins
describes how, in most conventional beef feedlots, antibiotics are fed to the
animals daily to prevent them from becoming sick. In addition, growth hormones
are implanted or fed to increase weight gains and toxic chemicals are used to
kill flies and to protect the animals from parasites that might interfere with
weight gains. He also reviewed the evidence pointing to growing health concerns
that seem to be the result of those substances remaining in the meat, and being
ingested when consumers eat the end product.

Further, according to a report by noted security analyst, Edward Luttwalk,
recently published in the February 12, 2001 edition of the Toronto Globe and
Mail, factory farming involves the crowding, of thousands of animals, into an
area about the size of a city block. The report states, "to put it plainly,
nearly all beef cattle in North America and Europe survive in a chronic state
of low level sickness with the use of large amounts of antibiotics. Because
they are cheap and induce water retention that increases weight, antibiotics
are just the thing for feedlot operators whose animals could not survive a week
without them." Luttwalk goes on to say, "At a time when old diseases such a
tuberculosis are reappearing, along with bacteria strains that have become
highly resistant to antibiotics, their use in mass quantities by cattle raisers
is a real problem.  Until recently, it was thought that humans couldn't absorb
antibiotics from cooked meat, but research prompted by bovine spongiform
encephalopathy (BSE) has disproved all that "These findings are further
supported by recent research at the University of Illinois, according to a
Canadian Press report. This research has documented the transfer of antibiotic
resistant genes from large-scale hog facilities to surrounding water and soil.
These scientists are reported to have concluded that this is evidence to tie
antibiotic resistance in humans to widespread use of antibiotics in the
livestock industry. Rustam Aminov, one of the scientists, is reported to have
said, "Its' not an unreasonable conclusion with 75% of all the antibiotics in
the US finding their way into meat and poultry."

Typical beef operations produce manure and bedding which are expensive to
dispose of and cause tremendous groundwater contamination. See the cover story
from Macleans Online for June 12, 2000, which says in part, about the dangers
of factory farms: "The monstrous size of these profitable operations
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SOME CONCERNS ABOUT PRESENT FINISHING METHODS (con't)

has raised troubling questions about water quality and threats to public health
from coast to coast. Manure from factory farms often contains a variety of
heavy metals, lake-choking nutrients and deadly pathogens such as e coli 0157."
This article says, in describing the resulting groundwater pollution problem in
great detail: "In the US, the EPA estimates that agricultural runoff from
animal factories and traditional farms is the leading source of water pollution
in that country." The article then quotes Les Klapatiuk, who runs a firm
specializing in water treatment, that there isn't a single government in Canada
with adequate legislation to deal with these volumes of animal waste. The
article says: "The leakage from lagoons is incredible, and when you spread
millions of gallons of waste on a field it just runs into the surface water. If
a city or oil company operated in this way, they would be shut down."

These concerns and others about:
1. declining farm income and the number of family farms;
2. declining fossil fuel reserves;
3. increasing ground water contamination from animal finishing operations;
4. the increase in antibiotic resistant "super bugs" as a result of over- use
of antibiotics; and
5. threats of global warming from use of fossil fuels; led the development of
this "farm integration" plan.

This business is intended to be proactive in reducing air pollution and
conserving fossil fuels, reducing ground pollution through the destruction of
animal waste, producing cleaner food, and perhaps reducing some of the cause
behind the spread of auto-immune diseases. At the same time, it is intended to
create a new source of income for farmers.

SOME HISTORY

The technology was developed over more than a decade. Pilot testing of the
first proprietary developments relating to fermentation techniques and
distillation procedures of ethanol were carried out in Kelowna, B. C., Canada
in the early 1990's. After initial tests, a confinement type barn and adjoining
buildings were leased at Dalum, Alberta in 1994 for full- scale testing. These
facilities were utilized for animal feed test trials, fermentation testing, and
other associated full-scale research and testing on all aspects of the system
for a period of two and a half-years. The Company does not have written records
of the test results, as those records were lost when that plant was shut down.
However, those test results persuaded us to begin commercialization of the
process.

The hybrid fuels technology was acquired by the Company in a reverse takeover
in June 1998 as described above, and a plant that was intended to be the first
commercial plant was constructed near Cardston, Alberta. Improvements to the
technology installed in that plant included an innovative separation column
that added a Company developed, vegetable based emulsifier and diesel fuel at
the point of condensation of the ethanol vapor.

Before the plant near Cardston could begin operating, the farmer sold the land
and improperly removed the buildings and equipment. Although the plant never
operated, much was learned from the construction. That information has been
used to refine the design which is expected to reduce construction costs and
improve operating efficiency. As a consequence of the Cardston plant being
dismantled, there are no prototypes in existence at this time.
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THE PROPOSED FACILITIES

he proposed plants are planned to consist of a barn in which the cattle
are kept, a second building housing the ethanol making equipment and the
gasifier, which will be set up next to the barn and ethanol plant. The
ethanol making equipment consists of feedstock handling and preparation
tanks, water tanks, fermentation tank, separation columns, a spin dryer,
necessary pumps and the tanks to hold the ethanol. It is expected to cost
about $500,000 CDN ($350,000 US) for all anticipated development costs and
to complete construction of a plant (including the barn, the ethanol making
plant, the gasifier and all related equipment) and to provide working
capital to operate it until it begins to generate cash flow. This does not
include the cost of the cattle or the consumables such as grain, bedding,
water, etc.

In the Company's intended facilities, approximately 200 animals are kept in a
warm, dry and clean barn during the finishing process of approximately 100 to
120 days. The farm operator supplies the feedstock, which is to be used first
to make the ethanol and then to feed the animals. The operator is to supply the
cattle, straw or other bedding, electricity, diesel, emulsifier and about 2500
gallons of water per day. These barns have been designed to raise beef cattle
under controlled atmospheric conditions. The buildings are prefabricated metal,
insulated sufficiently to keep them warm in cold weather and cool in warm
weather. Each barn is to be divided into eight pens, 20 feet by 30 feet, 1 of
which is empty and 7 of which have animals in them. This means that there will
be approximately 29 animals per pen, depending on the size of the animals.

These barns are intended to include air to air heat exchangers that, in cold
weather, exchange the warm, heavily moisture-laden barn air with fresh outside
air, that is heated and dried as it passes through a heat exchanger.  Del Air
Systems, Humbolt, Saskatchewan, manufacture the heat exchanger equipment we
plan to use. Their calculations estimate heat losses from the barn at a total
of 404,052 BTU per hour with gain from animal heat production of 407,078 BTU
per hour at -17 Degrees F outside temperature. At this outside temperature, the
inside building temperature should remain around 50 Degrees F. Management
believes that these heat exchangers will keep the barn warm and dry in winter
and that simple "swamp type" coolers common to the greenhouse industry will be
adequate to provide summer cooling.

The barns are to be equipped with Ultra Violet (UV) type fly control units -
Johnson Wax Co. Model 200A or 601T that are designed to control flies under the
worst conditions, according to the manufacturer. The Company believes that
regular removal and burning of the waste will also help to control flies and
other parasites and thus eliminate the need for toxic chemicals to control
those pests.

Cattle being finished generally average about 12 pounds of manure and urine
each day, containing about 80% moisture. (See Saskatchewan Agriculture 1988,
ISBN 0-88656-475-1) Moisture content in the waste is controlled by spreading
bedding, in the form of chopped straw, wood shavings, or sawdust (depending on
price and availability) into the pens to soak up moisture from the manure and
urine. The amount of bedding is adjusted so that one weeks accumulation of
manure and urine in the bedding will generate waste with moisture content of
approximately 45%, which is ideal for the gasifier, according to the
manufacturer.


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THE PROPOSED FACILITIES (con't)

Each day the empty pen is cleaned and new bedding is placed in the clean pen.
Then the animals from the next occupied pen are moved into the newly cleaned
pen. When the manure and used bedding is removed, it is shoveled into a central
waste removal system which carries it into a gasifier/burner to be transformed
into heat.

This commercially available gasifier unit is rated by its manufacturer at
900,000 BTU per hour and daily waste removal from one pen is estimated by the
company to yield +/- 6.5MM BTU.  Estimated energy need for distillation and
cooking totals +/- 4MM BTU leaving a surplus for other uses, including a
greenhouse if desired. This gasifier has five burning stages and, according to
the manufacturer, is expected to burn waste such as manure and bedding
virtually free of emissions and residual waste to cause pollution.

The plants are designed to run in a balanced state, producing 200 Imperial (240
US) gallons of ethanol per day. The amount of feedstock that is necessary to
make 200 gallons of ethanol results in the production of enough distillers
grains to supply enough food for 200 cattle.

The cattle are expected to be started between 600 and 1000 pounds and finished
to about 1100 to 1400 pounds. Not all of the cattle are brought in to the barn
at the same time and so are at various weights and stages of finishing; the
lighter ones eat less and the heavier ones eat more, generating an average that
achieves a balance that management believes will average out over the whole
operation.

These plants are expected to be operated manually by 2 people, which would
usually be the operator and one employee. Thus trained people are expected to
be in contact with the animals several times a day, while they are being fed,
or moved from one pen to another. These operators should be able to detect any
illness or disease early, separate any ill animal from the rest of the herd,
and treat it for that specific illness, rather than giving a general course of
antibiotics to all the animals as a precautionary measure. As a result, Company
intends to have a policy that permits antibiotics only as required on any sick
animal.

In the proposed facilities, grains, which will be referred to as feedstocks,
are to be used for the dual purpose of ethanol production and as livestock
feed. Grains such as barley, wheat, rye, corn, etc., are all suitable. Barley
is most attractive because of its abundance and high starch content. It
ferments well and has long been used for alcohol production.

GENERAL ETHANOL INFORMATION

The history of ethanol production for fuel worldwide is well documented, and
covers a period of more than 75 years.  The term "energy balance" associated
with ethanol production, means the relationship between the energy used to
produce ethanol and the energy recovered in the ethanol and is generally
expressed in British Thermal Units or BTU's.

According to the publication "Advances in Biochemical Engineering - Alcohol
Production and Recovery" by Maiorella, Wilke, and Blanch, of Lawrence Berkley
Laboratory and Department of Chemical Engineering, University of California,
Berkley, CA 94720:  "Distillation until now has been considered to be very
inefficient - utilizing as much energy as is produced in the alcohol product."
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GENERAL ETHANOL INFORMATION (con't)

The Peoria, IL pilot plant built by the US Department of Agriculture
illustrates that energy consumed for distillation is only 30% of the product
energy.  The commercial Peoria plant indicates a more favorable energy balance
in the range of 2:1. Management believes that a ratio of around 4:1 is probably
fairly representative of newly built ethanol making facilities.

Aside from the capital costs of the plant, the two major costs of ethanol
production are the feedstocks and the input energy for production. For ethanol
to be accepted as a fuel extender, it must be available in a practical price
range. By using the grain for the dual purpose of making ethanol and feeding
cattle, the process creates the ethanol at very little cost and also generates
another stream of income, thereby making the operation more economical. Also,
by using the heat from burning the waste as an energy source for the
fermentation and distillation processes, the Company believes it will
significantly reduce the input energy cost. Because of the small amount of
energy from outside sources required to operate these plants, we have called
them Micro Energy Food Facilities or MEFFs for short.

HYBRID FUELS ETHANOL PRODUCTION

The Hybrid Fuels process starts with the feedstock grain being soaked in water
overnight, crushed and then heated to prepare it for fermentation. An enzyme
reaction is then started, using commercially available enzymes. The entire
fermentation process is carried out in the feedstock preparation tanks, which
are part of the ethanol plant. A proprietary, trade secret process is then used
to promote rapid fermentation. This process, which is not patented, will be
protected by non-disclosure agreements that each operator will be required to
sign. The total cost of all the enzymes and other fermentation additives are
expected to cost the operator about $500.00 per month.

At the completion of fermentation, the "beer" is drained off for distillation
and the solids mash is passed through a centrifugal type separator or
"spinner", which dries these "distiller grains" to a satisfactory moisture
level appropriate for feeding, and they are then conveyed to the animal feed
troughs.

Distillation of the ethanol from the "beer" is the next step in the process.
The Company uses a proprietary separation column that is inexpensively produced
and has no moving parts. The beer from the fermentation is run through this
column and heat from the gasifier is used to separate, or "distill", the
ethanol from the stillage water. This ethanol, containing approximately five
percent (5%) water, is hydrous.  To produce anhydrous (dry) ethanol, either
molecular sieves or azeotropic distillation equipment is required. This
equipment, and the energy costs associated with operating it are expensive, and
are not necessary for the Hybrid Fuels process, because we use the ethanol wet.

The combination of the proprietary fermentation process and the distillation
column, results in completion of the whole process in about 12 to 15 hours. In
most typical distillation operations, the process takes around 60 hours. See
"Biomass Energy Monograph" published by Texas Engineering Station, Texas A & M
University System, page 121, or "Saccharification and Fermentation of Barley",
by Drs. M.Wayman, R.S.Parekh, O.Trass, and E.Gondolfi, Dept of Chemical
Engineering, University of Toronto, Canada.


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HYBRID FUELS ETHANOL PRODUCTION (con't)

The distillers grains that are left over from the ethanol making process have a
low moisture content around 5% and are fed as wet distillers grains (WDGs). In
more typical ethanol producing plants, these WDGs are dried so that they can be
transported without becoming mouldy. The energy and other costs of drying the
WDGs to make dry distillers grains, (DDGs) and then transporting them elsewhere
are eliminated in the hybrid process by using the wet distillers grains onsite.
Using such "co-products" onsite are important in reducing costs and improving
the economics of the operations.

At the completion of distillation, the de-alcoholized liquid (called stillage
water) is recovered and stored for delivery to appropriate feed containers for
the animals in the barn. According to the research described below under the
heading "Feeding Wet Distillers Grains and Stillage Water", the feeding of
stillage water to cattle promotes weight gains. In addition, feeding the
distillers grains and stillage water to the animals in the adjacent barn is
very important because it uses another co-product on-site, eliminates transport
and drying costs and addresses the challenge of stillage disposal.  The Biomass
Energy Monograph by Edward Hiler and Bill Strout of Texas A. & M. University,
states: "If the nation were to replace 10 percent of its gasoline consumption
with ethanol, the liquid stillage from ethanol fuel production would constitute
a biochemical oxygen demand (BOD) load equivalent to all its domestic sewage.
Therefore, expensive water pollution controls must be major goals of the
emerging fuel-alcohol industry." These "expensive water pollution controls" are
not necessary in our process, as the stillage becomes a valuable animal feed
supplement, not a by-product destined for disposal.

FEEDING WET DISTILLERS GRAINS AND STILLAGE WATER

There is a considerable body of literature which indicates that the feed value
of the distillers grains is superior to that of ordinary grain. For example,
see Dr. T. J. Klopfenstein of the University of Nebraska, reporting to the 31st
Distillers Feed Conference on the "Digestibility of Distillers Grains", and G.
M. Erickson and G. R. Tisher, writing in a Beef Science article #72-980 in
1989; "Barley Distillers Grains As Supplements For Beef Cattle". These articles
generally indicate a significantly higher feed value of dried distillers grains
(DDG) over ordinary grain, and higher still for wet distillers grains (WDG),
which our process uses, over DDG.

The Company believes the results mentioned in the last paragraph, related to
feeding wet distillers grains, are born out in the results of Cargill's kill
record dated September 23, 1994, for 123 heifers from the Dalum facility. The
kill record is a record of the number of animals processed, and the weight and
grade of the carcass. In addition, we have the Slaughter Sale Summary for these
animals dated September 13, 1994 which shows the price paid for the animals and
their average weight, along with the information for all of the other animals
sold at that auction on that day. Those documents show that these animals
brought the highest price of the day at that auction and by comparing the
average weight at auction to the carcass weight from the kill record, we can
calculate the average live weight to carcass ratio.

These animals, that were fed wet distillers grain at the Dalum facility, had a
packout grade of 62% AAA, 34% AA and 4% A. This categorization represents a
meat grading system which helps the consumer distinguish the quality of the
meat. AAA represents a superior grade of meat based on a variety of factors
including the amount of back fat, the color of the fat, the marbling of fat in
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FEEDING WET DISTILLERS GRAINS AND STILLAGE WATER(con't)
the meat, and the size of the rib eye. AA is a lower level of these factors, A
is less desirable still, and B is less desirable than A.

Processors, like Cargill, and consumers, pay higher prices for the superior
grades because they are generally more tender and taste better.

The packout grade for these 123 animals was higher than average in the AAA
category according to statistics published by The Canadian Cattleman's
Association. Their figures typically show industry average of about 48% AAA,
48% AA and 4% A.  From those same records, the conversion rate from live weight
to carcass was 60%, meaning there was more edible meat per carcass, and
therefore also less waste, than the industry average of 57 to 58%, according to
the Canadian Cattleman's Association. Both these figures mean higher returns to
those who raised the animals because they represent more meat at higher grades
which means higher prices.

The same kill report showed there was no death loss, no liver damage and none
were condemned. Industry average for death loss and rejected animals is about
1% according to the Canadian Cattleman's Association. Because of these
processing results, Cargill offered a premium of $0.10 per pound FOB the plant
for all animals that could be produced using this process, which eliminates
trucking and auction costs. The Company sees no reason why operators should not
be able to achieve similar results using this system, or better results if good
beef cattle are used.

HORMONE FREE BEEF

There are a growing number of stores that are offering hormone free beef. For
example, Laura's Lean Beef is now available in 3000 grocery stores in 33 states
in the US, according to their website, www.laurasleanbeef.com. Consumers
generally pay higher prices for this beef, and the cattle raiser receives a
higher price per pound as well. The Company wishes to have its operators use
the process to raise hormone free beef for this market, partly because of these
higher prices.

In order to access the hormone free beef market, the Company intends to require
that when the operators bring animals in for finishing they be certified
hormone free in accordance with an existing certification protocol.  This
program requires that calves be registered and ear-tagging records be kept of
the ancestry, ranch of origin and every inoculation, injection and implant. The
Company anticipates accessing such animals in order to assure our operators of
receiving the type and quality of beef we require. Company policy will also
require compliance with the hormone-free protocol and that antibiotics not be
used generally on the animals, although use on an ill animal as prescribed by a
vet will be allowed.

The operator selection process will seek to ensure that prospective operators
are in favor of producing hormone free animals. In addition, random drug tests
are anticipated to detect any use of hormones and those who violate this policy
may be subject to penalties. It is also expected to be in the operators best
interests to market hormone and antibiotic free beef as it commands higher
prices. Hormones are generally used to reduce the cost of weight gains. The
Company believes that feeding the wet distillers grains and stillage water will
result in lower cost weight gains without resorting to hormones. The Company
intends to seek out markets for these animals as a way of generating higher
returns for the operators, which is also expected to generate an incentive
revenue for the Company.
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MISCELLANEOUS NEW TECHNOLOGIES
During the period between the loss of the Cardston-area facility and the
present time, the Company has developed a simple to operate, hydroponics-
growing system that will be tested for internal housing purposes in the
cattle-feeding barn. This technology has the potential to produce daily rations
of fresh feed grasses for the cattle regardless of outside weather conditions.
Based on current experimental growth results, the Company believes each system
will yield about 1.5 tons of fresh, green barley grass per day. Assuming this
sustained yield volume, a feed ration of 15 pounds per day per animal can be
maintained.

Analyses of the green feed performed by Norwest Labs of Lethbridge, Alberta in
May, 2001, indicates that with a barley grass feed ration of fifteen (15)
pounds per day for each animal, the company could eliminate the use of feeding
hay. When fed along with brewer's mash and stillage water, the

Company believes this green feed will increase daily weight gains in the
cattle. The Company also has a feed enrichment process that has been described
in reports previously filed with the SEC. As the green grass from this system
is expected to be more beneficial to the cattle at less cost than the feed
enrichment process, that process will no longer be included in each plant. The
equipment to produce this green feed is expected to cost around $15,000 and to
fit into the barn so that feeding the green grass is relatively easy.

THE HYBRID FUEL

The ethanol is "de-natured" by mixing about 2% emulsifier and diesel into the
ethanol in the vaporization column so there is no pure ethanol accessible in
the plant. 200 gallons are intended to be produced each day, and this chemical
mixture is stored in an appropriate tank (3500 to 5000 gallons) on site until
it is picked up, similar to bulk milk pickup, and delivered to a mixing plant
to be further mixed into the final ratio.

In June of 1996, the Company contracted with The British Columbia Institute of
Technology (BCIT) to test the hybrid fuel for a fee. The tests were conducted
using a 1994 Dodge diesel truck with 215,717 kilometers (134,176 miles) on the
odometer. The truck was first tested using regular diesel, then run on the
hybrid fuel for 2 days and re-tested. The tests of this fuel showed opacity
(black smoke) readings reduced by 65.5% and NOx emissions by 22.2%. These test
indicated that this fuel is more effective in reducing particulate and nitrogen
oxide emissions from diesel than any other diesel mixture of which the Company
is aware. For example, diesel/water mixtures are being independently developed
and tested by Elf Acquitane and retired MIT Professor, Keith Johnson, according
to an article in the March 13, 1999 edition of New Scientist. The article
reports that these mixtures reduce particulate emissions by 45% and NOx by 15%.
On its website, The University of Illinois reports similar reductions regarding
the use of a mixture of diesel and dry ethanol. Compared to both of those
mixtures, Hybrid's mixture showed greater reduction of emissions at 65.5% and
22.2% respectively in the BCIT tests.

In addition to reducing pollution from diesel engines, this hybrid fuel helps
to extend our known reserves of fossil fuels. The tests that were conducted at
BCIT used a mixture of 80% diesel, 10% emulsifier and 10% ethanol. Further
tests are planned using various ratios. The end ratio is expected to be 70%
to 80% diesel, 10% to 15% ethanol, and 10% to 15% emulsifier. This is
consistent with the University of Illinois E-Diesel research referred to
below.
=========================================================================== ==
Page-12

THE HYBRID FUEL (con't)
In the beginning, with the small quantities of the fuel from the first plant,
the plan is to mix locally and use the fuel for testing and evaluation by local
users. Two local firms have agreed to evaluate the fuel made by the first plant
as soon as we produce it. This evaluation is expected to generate $1.00 to
$1.40 per gallon in revenue from the sale of the ethanol to the local firms
that have agreed to conduct the evaluation. Although we have not yet agreed on
benchmarks, the price is expected to gradually increase over time as the
evaluation progresses. Handling and mixing costs are expected to be minimal, in
the range of 5 to 7 cents per gallon.

After the first plant is operating, subsequent facilities are expected to be
built in the vicinity of commercial mixing plants that have the capacity to
handle the production from the MEFFs on a contract basis. The plan is for the
Company to purchase the resulting chemical mixture from each plant, and
transport it to mixing plants for further mixing to achieve the appropriate
ratio. This is designed to ensure control over all of the ethanol produced to
ensure the over all best price and equitably distribute that amongst the
operators. The Company expects to earn revenue for providing this service.

When a larger number of plants are operating and producing sufficient
quantities, the Company intends to sell the mixed fuel to end users and diesel
fuel distributors encompassing all industries.  Ultimately the Company may
consider building and operating its own mixing facilities, if that becomes
economically feasible.

Because the hybrid fuel can be used in an unaltered diesel engine, it can be
used economically where it is available and no modifications or changes need be
made to engines to switch back to regular diesel fuel when the hybrid fuel is
not available.

There is research by others which reviews the environmental and other benefits
of ethanol-diesel mixes similar to the Company's. For example, see the report
of the University of Illinois Agricultural Engineering Department's E-diesel
research project written for the 2001 ASEA Annual International Meeting in
Sacramento on July 30 & August 1, 2001. This report reviews in detail the
findings of scientists working with diesel- ethanol blends starting in 1980,
and indicates that there is generally a small loss of power, in the order of
3.5% to 5%, using these blends.

Our fuel is different because it contains a small amount of water, and it will
therefore require separate evaluation. The Company believes that the small
amount of water in the mix will reduce the power loss from using the blend. The
testing that was done at BCIT in June 1996, did not disclose any significant
power loss, but further evaluation is required.

Some potential users will be concerned about using this product.  Ethanol-
diesel mixes are presently being evaluated by Archer Daniels Midland, The
Chicago Transit Authority, and The University of Illinois. Their reports either
are or are expected to be available on The University of Illinois website. The
Company plans to provide end users with copies of these and subsequent
evaluation reports in order to help alleviate potential users concerns about
the safety and performance of the fuel. As a result of these evaluations and
the testing done at BCIT, the Company believes the fuel is safe for use. As
regulators work to decrease engine emissions and users look for cleaner
burning, less expensive fuels, the Company believes it will be able to attract
users for the hybrid fuel.
===============================================================================
Page-13-

EMPLOYEES

Since his appointment on June 28, 1999, Clay Larson has been the President, a
Director and the only employee of the Company. He is entitled to a salary of
$6000.00 per month which is deferred until the Company has money to pay him.
The Company does not have a written employment contract with Mr. Larson. The
Company does not intend to hire any other employees for the immediate future.
For the short term, until resources permit, services we need to hire, will be
supplied by paid consultants, contractors or commissioned salespeople.

SIGNIFICANT CONSULTANTS

Sir Donald Craig is the individual who is most responsible for the development
of the concepts and invention of much of the equipment or improvements to the
equipment. Mr. Craig is expected to supervise the building of the first plants,
and the preparation of the training and operations manuals. He has agreed to
donate his time without remuneration until the first plant is generating cash
flow. Thereafter, he may provide consulting service as needed at mutually
agreeable prices, and the Company intends to pay his Company related expenses.
The Company does not have a written employment contract with Mr. Craig.

SUPPLIERS

The Company is not dependent on a limited number of suppliers as most of the
equipment and materials required for the plants are readily available in all
areas where the Company expects to be operating. The Company plans to contract
for the supply of raw materials, and with independent contractors, who have a
verbal arrangement with the Company, for the manufacture the columns and
separators as necessary. These contracts are expected to be on the basis that
the Company will supply the raw materials for each item, and the contractor
will fabricate them, to the Company's specifications at an agreed upon price,
that may change over time.  These independent contractors work from their own
premises and management believes they have the capacity to supply all of the
items required by the Company for the next 12 to 24 months. These contractors
are not material and can readily be replaced.

The Company intends to seek quotes from independent contractors to supply and
install the buildings, the flooring materials, pumps, tanks and other
"off-the-shelf" items required for each plant.  As the Company develops a
history of operations and experience with particular sources of supply, the
Company may enter into exclusive supply contracts in the future if it is
advantageous to the Company and its operators. No such arrangements are being
negotiated at this time.

GOVERNMENTAL REGULATION

Each plant will require some form of government permit in order to operate. In
the United States, the Bureau of Alcohol Firearms and Tobacco is the
appropriate agency and they have verbally indicated to the Company that it
would be able to obtain the appropriate permits. In Canada, the appropriate
agency is Excise Canada which has taken the position that since the plants
produce ethanol, each will require a distillers license.  This would
require the installation of equipment in each plant which is designed to
measure the amount of alcohol.



=========================================================================== ==
Page-14-

GOVERNMENTAL REGULATION (con't)

Unfortunately that equipment will not work because the ethanol is denatured by
the addition of diesel and the emulsifier in the column which means that it is
impossible to detect, access or measure any pure ethanol in the process. The
Company is therefore seeking an exemption for its operations and has enlisted
the assistance of a number of people and politicians to assist in persuading
Excise Canada to issue the necessary exemption. Until such an exemption is
made, the plants may be built without the ethanol equipment. The operators of
these plants would pay lower royalties until their ethanol equipment was
installed. If there are significant delays in obtaining the desired exemption,
the Company anticipates that it will commence building plants in the U.S. The
prototype plant will have the ethanol making equipment and is expected to
operate with a special permit.

COST AND EFFECTS OF GOVERNMENTAL REGULATION

Governmental regulation will affect the Company most in the areas of compliance
with environmental regulations and those regarding the production of ethanol.
Each jurisdiction will require the Company to obtain the appropriate permits to
comply with its specific set of regulations. The Company plans to initially
build in those jurisdictions where the process for obtaining the necessary
permits to produce the hybrid fuel and to operate in accordance with these
regulations, are the easiest and least expensive to comply with. The Company
anticipates it will have little difficulty in complying with environmental
regulations as the process does not create any pollution. In fact, the Company
believes that its process may significantly reduce many of the pollution
problems that are associated with beef finishing operations. The Company does
not anticipate any significant delays in obtaining the necessary permits for
the production of the hybrid fuel in the Province of British Columbia and in
most states of the US. The necessary permit has already been issued for the
first plant.

During the last two years the Company has spent zero dollars on compliance with
environmental regulations. The Company believes that the impact of the cost and
effects of the Company's compliance with environmental laws should be minimal
as the Company's process is believed to be very environmentally friendly.

TARGET MARKET AND ADVERTISING

The Company's target market for the sale of the MEFFs is the farming
communities. The Company intends to advertise its MEFFs in trade journals,
local newspapers, on radio and television programs, and through seminars and
presentations at trade shows.  The Company is also in contact with a number of
government agencies and industry organizations whose role it is to locate and
promote new opportunities for the economic benefit of farmers.

There appears to be very strong interest in the Company's project from the
farming community. Even though we have not been advertising, to date the
Company has received applications from more than fifty farmers, and we receive
more phone calls each month.






==============================================================================
Page-15-

The Company is expecting to have a screening process in place and at least four
candidates approved by the time the first MEFF is ready to operate. These
individuals will need to qualify for financing in accordance with the
requirements of the particular financial institution. Financing will have to be
committed before the Company would start construction. It is anticipated that
the first operators will be fully trained and qualified by the time the second
MEFF is finished and ready to operate.

COMPETITION

The production of food and fuel are both highly competitive. Giant companies
compete in both markets with significant competitive advantages. Many
competitors of the Company have significantly greater resources and experience
than the Company.  Additionally, competitors of the Company may have better
access to financial and marketing resources superior to those available to the
Company. With the resources and name recognition that competitors possess, the
Company may face severe adversity entering the markets it is pursuing.  There
is no assurance the Company will be able to overcome the competitive
disadvantages it will face as a small, start-up company with limited capital.

Major oil and petroleum companies as well as alternate energy companies will
all be competitors of the Company. The Company is not aware of any competitors
who offer farm scale feedlot-fuel plants, although there are several
competitors who produce ethanol on a very large scale basis. Generally
speaking, they produce dry ethanol for the gasahol market. The tests being done
by Archer Daniels Midland suggest they are looking for ways to expand their
ethanol production into use in the diesel fuel business. The Company believes
it has a competitive advantage because of the quality of its hybrid fuel
combined with the potential of significantly reduced environmental impact in
both producing and using the hybrid fuel.

According to John Robbins in "Diet For A New America", the production of beef,
pork, poultry and dairy products has become focused on giant facilities. In
these "factories", antibiotics are used to prevent the animals from becoming
sick, growth hormones are implanted or fed to force weight gains and toxic
chemicals are used to kill flies and to protect the animals from other pests
that might interfere with productivity.

Robbins makes the case for consumers who are becoming concerned about the
adverse effects on their immune systems of consuming meat and poultry that has
been raised using antibiotics and growth hormones. He also refers to evidence
that suggests links between the increasing incidence of a number of diseases to
the consumption of meat, dairy products and other foods which contain
antibiotics, hormones and toxic chemicals.

The Company plans to promote the beef as being free of antibiotics and
hormones.  As consumers become more selective about eating "clean" meat, the
Company anticipates capitalizing on these products being free of these
substances. The Company also intends to "brand" the finished product with a
name, trade marks and logos (not yet selected) to make the product more easily
recognizable in order to generate consumer loyalty and capitalize on brand
quality.





===========================================================================
Page-16-

TRENDS THAT MAY EFFECT THE COMPANY'S BUSINESS

The Company has identified the following trends as potentially having an impact
on the business of the Company.

Trend toward supporting businesses which have a positive environmental impact.
The Company seeks to take advantage of this trend by providing technology that
produces a hybrid fuel which reduces diesel engine emissions.  In addition, the
animal finishing operation will be promoted as having an environmentally
positive impact in that it produces no groundwater pollution and virtually no
odor.

Over the last three decades, there has been a trend toward reducing consumption
of meat generally and beef in particular.  Continuation of this trend could
have an adverse effect on the Company. However, in January 2000, Successful
Farming Online reported the first increase in consumer spending on beef since
the early 1970s.  This was an increase of 4%.  This report further says that
consumers will pay more for beef that is guaranteed good quality.  The Company
believes that it will be able to take advantage of this, and a trend toward
consumption of healthier foods.

Management is of the view that if overall beef consumption declines, it should
have little or no adverse effect on the Company's business as the MEFFs are
expected to produce exceptional quality beef which we anticipate marketing as
guaranteed quality beef which is hormone and antibiotic free.

As a result of environmental and fuel price concerns in both Canada and the US,
there is a push to increase the production of ethanol. One example is former
President Clinton's announcement in August 1999 of incentives to triple the use
of ethanol in fuels in the US within 10 years. More recently, a press release
issued by Agriculture Canada reads, "Ottawa Has Big Plans For Ethanol."  The
release says in part that, "government officials state that as part of Canada's
commitment to reducing emissions from vehicle exhaust, Ottawa will soon
announce a package that includes extension and expansion of a plan to guarantee
loans for ethanol plant construction or expansion.  There will be provision for
direct government aid to build new facilities. Recommending a goal of
increasing ethanol production capacity to close to one billion liters by 2005,
(250,000,000 US gallons) Agriculture Minister Vanclief said producing alcohol
from grain would be "the main ticket" for future rural incomes.

The Company believes that initiatives such as these create a more favorable
climate for the expansion of the Company's business, even though the Bush
administration seems to have much less enthusiasm for ethanol than the previous
administration.

The United States and Canada are signatories to the Kyoto Emission Standards
Agreement which requires them to adhere to the Kyoto Protocol commitments to
reduce pollution by the year 2010, although the Bush administration has been
balking at complying with those commitments. In addition, many states, such as
California, have or are considering legislation to eliminate the use of MTBE as
an octane enhancer and "clean air" additive. This should work to the advantage
of the Company, as most media reports indicate that ethanol appears to have the
edge as the product to reduce the use of fossil fuels and the "clean air"
additive of choice to replace MTBE.

Also, the Company expects to be able to produce ethanol relatively
inexpensively, as the proprietary emulsifier allows the mixing of wet
==============================================================================
Page-17-

TRENDS THAT MAY EFFECT THE COMPANY'S BUSINESS (con't)

ethanol and diesel which reduces emissions, without incurring drying costs.
Even if there is no market for the hybrid diesel fuel, the ethanol should still
be valuable for use in other products such as windshield washer fluid or
gasohol.

Another trend that may work to our advantage is the trend of governments and
health regulators to mandate environmental clean-ups and reduce pollution. In
California and other states, local authorities are implementing stricter
environmental clean-up requirements, in particular tighter restrictions on the
handling of dairy waste which has been found to contaminate ground water.
According to a Press-Enterprise report written by Leslie Berkman, in 1999, the
Santa Ana Regional Water Quality Control Board, which enforces state and
federal water quality standards in the Santa Ana River watershed, mandated
dairy farmers remove stockpiled manure by December 31, 2001. They also
established a new 180 day limit for new manure to be cleared from the dairies.
The Company's use of gasifier technology and the fuel/feed facilities may
assist farmers to comply with this type of regulation.

Another factor is that beef prices are especially volatile as a result of the
"mad cow" scare sweeping Europe.  Management believes that as a result, prices
for hormone free beef, particularly from North America, which is still BSE
free, will rise in the short term even though demand is likely to decline. This
should work to the benefit of the Company.

In addition, with fuel prices as high as they are, the price of ethanol has
increased over the last year. This trend should work to the advantage of the
operators and the Company.

RESEARCH AND DEVELOPMENT

Since 1998, the Company has spent $8,000 on research and development. The
majority of funds were spent on perfecting the formula for the emulsifier. The
balance of the funds were spent on testing at the British Columbia Institute of
Technology to quantify the effects of the use of the hybrid fuel in an
unaltered diesel engine.

During the next twelve months, the Company anticipates conducting further
research and development with respect to the following:

1. Researching the long-term use of the hybrid fuel, particularly in extreme
temperatures; plus testing and refinement to obtain the optimum hybrid fuel
mixture.

With respect to further testing of the hybrid fuel, the Company has had
preliminary discussions with manufacturers of diesel engines and several
companies that operate large fleets of diesel powered equipment. This research
is expected to cost the Company very little as several local operators such as
Oyama Forest Products Ltd., and Mark Tarasewich Trucking Ltd., have expressed
interest in using the fuel in their operations and providing testing and
evaluation services at no charge to the Company. As of this date, no contracts
have been entered into.

The Company is also investigating the availability of grants from various
government agencies for support in further testing of the hybrid fuel.

==============================================================================
Page-18-

RESEARCH AND DEVELOPMENT (con't)

2. Researching efficiencies in plant construction and operation;

3. Research of training methods and development of training and operations
manuals.

The research contemplated in 2 & 3 is not expected to cost much as most of it
will be conducted in conjunction with the day to day operations of the plant.
No money has been allocated to this research as it will have to be done out of
operating revenues when the Company begins to generate those.

PRODUCT PROTECTION

The Company has not patented any of it's proprietary technologies, on the
advice of legal counsel. Their reasoning is that obtaining patents tends to
publish the discoveries which others can then copy and a small company will
have difficulty protecting itself from infringement. As a consequence, the
Company has determined that it will protect it's trade secrets and proprietary
technologies by careful screening of potential operators and then having them
sign non-disclosure agreements. All operators will be well briefed on
protecting the proprietary information in their own best interests and all
reasonable steps will be taken to ensure that they take all reasonable
precautions. Also, the column and the spinner will be manufactured elsewhere,
delivered and installed, without the operators knowing how the are constructed.
They would essentially have to destroy the column to find out how it was made
and how it works. While the Company intends to take all appropriate measures to
protect secrecy, as far as the Company is aware, we are the only ones that are
developing small scale plants. All of the other ethanol plants that are being
considered, of which we are aware, are large operations that will produce
millions of gallons per year. Our technology is useless to those operations.
Management therefore believes that the risk of not having patent protection is
reasonably acceptable.

Item 2.  DESCRIPTION  OF  PROPERTY

The President maintains an office in his home at 740 Westpoint Court, Kelowna,
British Columbia, Canada at no cost to the Company and Donald Craig maintains
an office at his home in Winfield, B.C., 15 miles north of Kelowna and about 5
miles from the proposed location of the first plant, also at no cost to the
Company.

On May 31st, 2001, the office located at #214-2791 Hwy. 97N, Kelowna, British
Columbia, Canada was closed. The intention is to have an office in the first
plant once it is operating.

The office at #302-855 8th Avenue S.W., Calgary, Alberta, Canada was also
closed, as operations will be consolidated in Kelowna for the foreseeable
future.

The Company has a verbal agreement with the owner of a 6 acre parcel of bare
farm land on which the first plant is to be situated in Oyama. The owner is not
related to the Company. Prior to commencement of construction of the plant, the
Company is expecting to complete a written agreement by which the land owner
will own the plant and lease it back to the Company for operation as a training
and demonstration facility. The terms of that arrangement are not expected to
be finalized until the terms of the financing are agreed.
==============================================================================
Page-19-

Item 3.  LEGAL PROCEEDINGS

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

Although the Company is not involved in any legal proceedings, the following
issues may eventually lead to legal action:

(a) On August 4, 1998 and March 23, 1999, the Company's former President
authorized the issuance of 1,000,000 and 900,000 shares respectively to
individuals without consideration and without Board of Directors resolutions.
On August 21, 1999, the then only Director resolved that the share certificates
representing ownership of these 1,900,000 shares were issued without adequate
consideration being paid to the Company and were therefore not fully paid and
non-assessable. The Company first determined that these shares had not been
transferred out of the names of the original recipients and then resolved to
cancel the share certificates. The Company indemnified the transfer agent, for
any costs or liability it may incur in any way arising out of the cancellation
of such shares and the transfer agent removed the 1,900,000 shares from the
stockholder list effectively reversing the issuance. Six of the cancelled
certificates, totalling 550,000 shares, have been endorsed and returned to the
Company for cancellation. No formal legal demand for the return of the shares
has been made as the former administration has failed to provide addresses
despite a number of requests.

The contingencies regarding the cancelled shares relate to anyone who may have
subsequent holder rights, and possibly the individuals who were issued those
shares who may claim that they were issued for due consideration. The Company
has determined that there is no amount to be accrued for future liabilities
associated with these shares. The first reason is that all of the shares were
still in the names of the original holders when they were cancelled and some of
the holders and previous directors were informed verbally of the cancellation.
The second reason is that there were no directors resolution issuing the shares
and the individuals to whom those shares were originally issued gave no
consideration to the Company for those shares. In addition, to date, when a
broker has received these shares for possible resale, the broker has phoned the
Company or the transfer agent to confirm the status of the shares. Once
informed the shares were issued without consideration, the brokers have refused
to deal further with the shares.

(b) Unauthorized and/or unsupported payments in the amount of $243,463 were
made from Company funds by the past President of the Company during the period
May, 1998 to June, 1999. The Company has had no response to requests that the
past president provide a full accounting of these amounts. All amounts that
were unauthorized by the board of directors or amounts that are not properly
documented with invoices and receipts have been accounted for as disputed
executive compensation. When the Company has the money available to do so,
Company will seek legal advice to determine whether or not it is possible to
recover these amounts from the previous administration.

(c) In May and June 2000, the Company issued 3,000,000 shares in return for
promissory notes for $300,000. The 3,000,000 shares were released from escrow
to the investors to facilitate financing. We believe the 3,000,000 shares have
since been sold by the investors to innocent third parties, and the Company has
not been paid for these shares, despite demands.  Since these shares have been
=========================================================================== ==
Page-20-

Item 3.  LEGAL PROCEEDINGS (c)(con't)

resold to innocent third parties they must be considered outstanding. When the
Company has the funds available, it intends to seek legal advice to collect the
balance due on the notes. However the Company believes the balance is probably
uncollectible.

PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company has authorized capital of 50,000,000 share of common stock with a
par value of $0.001, of which 20,623,600 were issued and 20,053,363 were
outstanding as at June 30, 2001 and the Company had 246 shareholders of record.

During the quarter ended June 30, 2000, 3,000,000 shares were issued to
investors in return for promissory notes. As those notes had not been paid, the
shares were treated as issued but not outstanding. During the quarter ended
June 30, 2001, Management learned that that the investors had sold the shares
to innocent third parties and not paid the Company. Because those shares have
now been sold to innocent third parties, they must be considered issued and
outstanding, and are so reflected in the financial statements. For more
information regarding the stock, see the Consolidated Statement of Change of
Stockholders Equity and Note 7, in the Financial Statements.

The Company's common stock is traded in the National Quotation Bureau's "Pink
Sheets" under the symbol "HRID."

The following table sets forth the high and low closing bid prices for the
periods indicated, as reported by the National Quotation Bureau.

                              HIGH            LOW
                              ----            ---
                                      1999
                                      ----
                       3rd Quarter  2.00      0.50
                       4th Quarter  0.75      0.125

                                      2000
                                      ----
                       1st Quarter  3.00      0.50
                       2nd Quarter  1.875     0.50
                       3rd Quarter  0.75      0.275
                       4th Quarter  0.40      0.15

                              HIGH            LOW
                              ----            ---
                                      2001
                                      ----
                       1st Quarter  0.28      0.05
                       2nd Quarter  0.14      0.045

The Company has never paid cash dividends.  The Directors of the Company
currently anticipate that it will retain all available funds for use in the
operation of the business and does not anticipate paying any cash dividends in
the foreseeable future.

==============================================================================
Page-21-

RECENT  SALES  OF  UNREGISTERED  SECURITIES.

Date, title and amount of securities sold

           Date                     Title                 Amount
           ----                     -----                 ------
           August 10, 2000      Common Stock            10,700 shares
           August 31, 2000      Common Stock            20,100 shares
           November 28, 2000    Common Stock            42,000 shares
           June 26, 2001        Common Stock            25,733 shares
           June 11, 2001        Common Stock            1,300,000 shares

1. The shares issued August 10, 2000, August 31, 2000, November 28, 2000 and
June 26, 2001 were all made in consideration of shareholders not exercising
their right of rescission which arose from an Offering Memorandum issued in
December 1998 that required a rescission offer as it contained information that
appeared inaccurate. As the Company had no funds to complete a rescission, the
Company offered restricted stock in lieu of such an offer, and these
individuals accepted that offer. The individuals who accepted the offer were
also given an undertaking that they would receive a rescission offer when the
Company had the funds available and they would then have the right to return of
their money plus reasonable interest or they could keep the stock. The money
paid is shown as temporary equity and the stock is shown as issued but not
outstanding until the rescission rights are revoked. The Company relied upon
Section 4(2) of the Securities Act of 1933 to effect the issuance of the
shares. All shares were issued in isolated private transactions not involving
any public solicitation or offering.

2. On June 11, 2001, resolutions were passed to issue 200,000 shares to John
Morrison, Director and CFO in return for services rendered to the Company.
However, the Transfer Agent did not issue the actual share certificate until
September 2001. On June 11, 2001, 100,000 shares were issued to the manager of
the packing plant for services rendered to March 15, 2001. A further 1,000,000
shares were issued to an unrelated company which had made payments of $119,468
of Company related expenses. See Note 7 to the Financial Statements.  The
Company claims exemption from registration pursuant to Sec 4(2), in that the
shares were issued in isolated private transactions not involving any public
offering.

Item 6.   MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Historical Results

The loss for the year ended June 30, 2001, was $312,660, compared to $324,144
for the comparable period the previous year. The largest items making up those
losses were the deposit of $170,561 on the packing plant which was written off
in 2000 and the advances of $84,951 to Blue Mountain which were in written off
in 2001. As the deposit was paid in the period ended June 30, 2000, and the
audit for that year was completed after the deposit was forfeited, the removal
of the deposit as an asset is disclosed as effective the June 30, 2000 year
end. The advances to Blue Mountain were written off as of this year end when it
became clear in June 2001 that commitments from investors to advance money to
the Company, which could have allowed Blue Mountain to begin operating, were
unlikely to be fulfilled.

The largest increase in expenses in 2001 was the increase in professional fees
to $72,419 from $22,008 over the June 30, 2000 year end. This increase
==============================================================================
Page-22-

Historical Results (con't)
resulted from the Company filing a registration statement in February 2000, and
becoming fully reporting in April 2000. The accounting and legal fees
associated with responding to comments from the SEC and filing the quarterly
and annual reports were incurred subsequent to the June 2000 year end. These
fees are likely to decline to about $20,000 in the next fiscal period as we are
now caught up on all of the filings, although we have comments to which we will
be responding.

Imputed interest increased from $30,735 in 2000 to $59,202 in 2001. This is
interest that is imputed on non-interest bearing amounts that are advanced to,
or paid on behalf of the Company, plus deferred executive compensation. The
increase results from of increases in deferred executive compensation, plus
advances to, or on behalf of the Company. Executive compensation shown is the
salary for the President, which is deferred until funds are available.

To date we do not have any operations that generate revenue and have been
unable to raise money to begin operations. Until such time as the Company gets
the first plant operating, sells and constructs more plants and recognizes
revenue, the Company is likely to continue to experience a cash shortage.
Because the Company is a developmental stage company, it is unlikely to be able
to borrow money from banks and other traditional financial institutions. The
lack of long term, adequate financing continues to be of great concern to
management. The Company will require additional capital soon in order to
continue as a going concern in the long term.

PLAN OF OPERATION

Management recognizes that to generate long-term cash flow, we need to develop
operating activities. For this, we need to build and begin operating the first
bio-fuel and beef facility. This is essential to create cash flow and to
demonstrate to potential operators, lenders and investors that the technology
works as described. Prospective operators and those who will approve the
financing for the construction of subsequent plants, want to see a facility in
operation before they commit themselves.

The Company is concentrating on raising the money to build its first commercial
plant and start commercial operations. In an attempt to raise money to build
the first plant, the Company, in April, 2001, agreed in principle to sell a
license to use the technology in a specified territory. This was done by a
combination of letters and telephone discussions. The proposed Licensee is to
pay an initial license fee in non-refundable installments, plus a continuing
royalty based on the number of plants operating and is to lease all of the
columns and spinners from the Company. There would also be a performance
requirement. Although negotiations continue as the proposed licensee continues
organizational activities, no definitive agreement has been reached and no
money has changed hands. If we successfully conclude this deal, the license
would be accounted for as having a life span of 10 years and the fee would be
recognized proportionately over that period.

Sale of a license is expected to be a one-time event, although the Company may
choose to make other such sales in the future to develop territories more
quickly. Entering into this license is not expected to have any materially
adverse long term effect on the Company's ability to expand its operations
because of the relatively small size of the proposed territory. In addition,
the Company will receive revenue from a continuing royalty and from leasing the
columns and spinners to operators in that territory.
===============================================================================
Page-23-

It appears there is a reasonable possibility that we will be able to complete
the sale of a license before our fiscal year end in June 2002. If we are able
to consummate an agreement as presently being discussed, the first installment
of the fee would be sufficient to pay the Company's payables and operating
costs for the next 12 months.

Management would prefer to build the first plant at Oyama, on farmland just
north of Kelowna, British Columbia. This location provides the company the best
supervisory ability and site control. This facility is to be a full- scale
commercial enterprise, as well as a demonstration and training center for the
operators of subsequent facilities.

In June, 2001, an arrangement was made with HF1 Fuels Inc., an independent,
arms length contractor, to build a complete facility, designed to our
specifications, on a cost plus 10% basis, in Oyama and then lease it to the
Company's subsidiary, Hybrid Fuels (Canada) Inc. All of the required government
approvals and building permits have been obtained. HF1, which built the
Cardston plant, owns and has, by court order, recovered most of the production
and holding tanks and other equipment required for ethanol production and has
delivered them to the Oyama building site. At year end, 2001, HF1 Fuels Inc.,
had agreements in principle with a leasing company to finance, and with a
contractor to build, the plant and commence operations. Subsequent to year-end,
before the final agreements were signed, the contractor was forced to withdraw
from the arrangement due to circumstances beyond his control. As of the date of
this report, HF1 Fuels Inc., (HF1) is negotiating with another contractor to
construct the plant. HF1 is also negotiating with a commercial leasing company
to obtain a written commitment to pay out the contractor when construction is
complete. The contractor has stipulated that he requires a written commitment
from the leasing company, before commencing construction.

Assuming this arrangement is finalized, construction is complete, and the plant
operating, the leasing company is expected to pay out the contractor and then
lease the plant directly to Hybrid (Canada), which will operate it as a
commercial plant, generating revenue from those operations. If this arrangement
can be concluded, it should give us an operational facility in the near future.

An operating facility includes the barn, the ethanol making equipment, the
bio-furnace or gasifier, "Greener Pastures" grass growing system, and the right
to use the proprietary information and technology, as more fully described
under "Proposed Facilities" on page 6 above. The cost of building this plant is
anticipated to be approximately $350,000. Soft costs are estimated at $60000,
approximately $70000 for construction labor and supervision. The balance is for
foundations and flooring, buildings, ethanol making equipment, tanks and
machinery. Labor for operating is not included as that is the responsibility of
the operator and is expected to be paid out of operating revenues.

We anticipate it will take approximately two to four months from the start of
construction until the plant is operational and four to five more months before
it is generating positive cash flow. The lease is being negotiated to cover all
construction costs. Lease payments are to begin when cash flow is achieved. HF1
and the contractor are to pay all costs in connection with the construction and
start-up. Hybrid Fuels, Inc., and Hybrid Fuels (Canada) Inc., have no financial
obligation to HF1 or the contractor, other than to provide technical oversight,
until the plant is actually operating.

Once this first plant is operating, Hybrid expects to use it as a demonstration
and training facility and to earn revenue from its operation.
===============================================================================
Page-24-

Our projections, based on present operating and financing costs compared to the
revenue from the sale of beef at going market prices, plus the projected
revenue from the sale of the ethanol, indicate the plant should generate
positive cash flow. We estimate that positive cash flow will begin in the fifth
or sixth month of operation, as it will take that long to bring the first
animals to market. The financial institutions that have expressed interest in
financing subsequent plants want to see that this first plant will generate
sufficient cash flow to pay all operating costs and service the debt to build
the plant. We anticipate that the plant will show sufficient cash flow to make
it possible for us to get approval for financing subsequent plants. By the time
we receive approval for financing of subsequent plants, the Company expects to
have selected four operators and once they have been selected and have
qualified for financing, they will be trained.

Once the first plant is in production, it is anticipated that it will take
approximately 6 months to build the second plant and get it operating. Within
18 to 24 months of the first plant beginning production, we expect to have  15
to 20 plants operating.

To date, the Company has received applications from more than fifty farmers who
are interested in acquiring our facilities. The Company is currently developing
a screening process to select suitable candidates and expects to assist them in
obtaining financing for plant construction.

After the first plant is operating, the Company is expecting to sell future
plants to farm operators. We expect that many of these operators will require
financing in order to purchase a plant. We have had preliminary discussions
with CIBC, Scotiabank, Leaseline, Dominion Leasing and a Swiss broker with
connections to several European "ECO" funds, all of whom have expressed
interest in providing financing to build these facilities, once we are able to
demonstrate sufficient cash flow. We are especially interested in the "ECO"
funds which invest in projects that benefit the environment and we have been
told that our project should qualify. Again, the operation needs to be
demonstrated. Once the first plant is operating the plan is for the Swiss
broker to arrange to have the appropriate representatives of these ECO funds
inspect the plant and if it qualifies, to use them as a source of funding for
financing the plants for the operators.

The Company expects to earn a profit and recognize revenue on the sale of each
plant. The profit on the sale of each plant is expected to be based on the
value to the operator of having the Company organize and supervise the
construction of the plant and train the operator. The profit from the sale of
the plants is expected to be sufficient to cover all of the operating costs the
Company will incur in qualifying candidates, training operators, supervising
construction and start-up, etc., until royalties are received.

The Company expects to receive a royalty for the use of the trade secrets and
proprietary information. The royalty, which is expected to be $2500US per
month, based on the projected benefits of the use of trade secrets to the
operator, will begin when each plant begins operation. Incentives in the form
of reduced royalties may be offered to the first 10 to 20 operators who make
early commitments to purchase plants.

Another source of revenue for the Company is expected to be from service fees
payable by each operator to cover the cost of ongoing training, service,
technical support, and quality control. It is expected that these fees will
be in the $150 to $250 per month range.
===============================================================================
Page-25-

In addition, the Company intends to lease to the operators, on a permanent
basis, the separation column, which is used to distill the ethanol, and the
spinner, which is used to separate the mash from the water after the
fermentation process. These two items are integral parts of these plants and
leasing them is designed to protect the secrecy of these most vital pieces of
the technology. The lease payments will generate revenue for the Company and
will be payable monthly in amounts yet to be finalized.

The Company expects to enter into contracts with its operators to act as the
marketing arm for the beef and fuel. This is expected to generate revenue and
give the Company greater quantities of both products than each individual
operator would have. The Company believes this will provide us with the ability
to make better deals with, and provide more secure delivery to, distributors
and other purchasers. This is expected to relieve the operators of these
marketing responsibilities, generate greater revenue for them and revenue for
Hybrid. Revenue for Hybrid is expected to come from the handling of the fuel
and from a portion of any premium that the Company can obtain from the sale of
the beef.

Initially it is anticipated that most of the finished beef will be sold at
auction, until the Company has control of sufficient quantity to be able to
enter into supply contracts that will pay better prices. The Company intends to
market directly to retailers that wish to provide hormone free beef to their
customers.

The Company anticipates entering into an agreement with its operators to pay
the Company an incentive for obtaining premium prices for the sale of the beef.
We anticipate this will be in the form of a percentage of the premium realized,
in an amount yet to be determined.

Based on the results of the test trials at the Dalum plant, the Company
believes it will be able to generate premium prices for the beef because it is
hormone free and because of its high quality and taste. There, the purchaser of
the 123 heifers agreed to pick up subsequent lots at the plant and pay a
premium of $0.10 per pound for all of the beef that could be produced by this
process.

Management recognizes that the first step towards generating premium prices, is
to produce quality controlled beef. Based on the Dalum results, discussed on
pages 9 and 10 above, we believe the process will produce such beef, which we
intend to name brand and certify, although no decisions have been made on the
name brand or how certification will be accomplished.

Until we have several plants producing beef, our best chance of obtaining
premium prices is to ship the beef from the first few plants, to Cargill, which
offered a premium for the beef produced by the Dalum operation. Longer term,
which will probably take about a year after the first plant is operating, and
we have supplies from half a dozen or so plants, and resources such as
processing and handling facilities are available, the Company intends to market
direct to specialty markets, such as retail outlets that wish to handle hormone
free, "natural" beef. Based on discussions which we have had with local
retailers such as L & D Meats, and information we have gathered from articles
such as "Natural Beef Proves Viable" in the August 17, 2000 edition of Western
Producer, we believe such markets will generate premiums.



===============================================================================
Page-26-

Once the Company has sufficient quantities and resources, it intends to develop
foreign markets that are looking for natural beef and specialty markets like
the cruise ship lines. We have also been in contact with a European meat
broker, Van Aerde of Belgium, which has cold storage capacity of 84,000 tonnes.
Van Aerde has told the Company that they believe we would receive premium
prices but that they will need samples of the meat once produced to do quality
comparisons. The Company does not have any commitments to sell the beef at
premium prices at this time.

How long it will take to establish markets that will pay premium prices is
difficult to estimate as it will depend partly on how fast we can build enough
plants with sufficient capacity to satisfy the needs of these markets. It is
anticipated to be a gradual process. However, the Company anticipates that by
the end of the first full year of operations, it will control enough beef to be
able to secure markets that will pay premium prices.

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

In summary, Hybrid anticipates that it will earn revenue from:
1. operating the first facility;
2. profit on the sale of subsequent plants;
3. the lease of the column and spinner to each operator;
4. the royalties and service fees that each operator will pay;
5. the purchase of the ethanol mixture from the operator at 80 % of wholesale
value and the sale to distributors or end-users;
6. an incentive from premiums from marketing the finished animals.

Our ability to continue to operate in the future depends on us being able to
raise money to build the first plant. HF1 is working towards making
arrangements to build the first plant, and we are therefore concentrating our
efforts on raising money to build the first plant and commence operations. We
estimate we need to raise between $500,000 and $600,000 US to cover payables,
build the first plant and begin the development of operating activities. This
is $350,000 for construction, $110,000 for cattle, $25,000 for payables,
$70,000 for salaries, consumables and other operating expenses until the plant
begins to generate positive cash flow, and $45,000 for contingencies and to
start developing operating activities. Although we are negotiating with
potential investors to fund the construction of the first plant, we do not have
any commitments at this time. So far, all potential investors we have dealt
with have been reluctant to advance funds as long as we are on the "Pink
Sheets." We estimate that it may take six to nine months to obtain a commitment
for money so long as we are on the "pink sheets." Once money is available, we
estimate it will take three to four months to get the first plant operating and
another four months to begin to generate positive cash flow. Until such time as
financing is secured, the Company will not proceed with construction of the
ethanol/beef facilities and will keep operating costs to a minimum. Once money
is available to cover liquidity requirements to develop operating activities,
operating costs will be kept to a minimum by using paid consultants as
necessary on an ad hoc basis and no new employees will be hired until the
Company has sufficient revenues.
===============================================================================
Page-27-

In the absence of operating activities, the Company's general and
administrative expenses for the next 12 months are expected to be less than
$500 per month, exclusive of executive compensation, which is deferred, and
professional fees for legal and accounting services.  We do not have any cash
reserves and in the absence of cash flow from operating activities, it is
anticipated that related parties will continue to pay operating expenses and
advance funds to pay legal and accounting fees, but no assurances can be given.

For the coming quarter, management anticipates spending most of its energies on
complying with reporting requirements and negotiating agreements to build the
first plant and get it generating revenue.

Because of the low stock price, and the fact that we are on the "pink sheets",
the Company does not intend to sell any additional shares of its common stock
in the immediate future, however that may become necessary if there is no other
source of money to pay expenses. Once we can build the demonstration plant and
it begins to produce income the Company will need to operate within the
constraints of its cash flow. As this first plant is to be operated by Hybrid
(Canada), all of the profits will be available to the Company to cover
operating expenses. Assuming that it will be necessary to pay market price for
grain, bedding and other supplies and that we will receive no more than market
price for the finished animals, projections indicate that the plant should
generate sufficient revenue to pay all of our operating costs, plus a small
surplus which may be used toward development of operating activities.

Once the first plant is operating and generating positive cash flow, the
Company believes it will be able to obtain financing from previously identified
"ECO" funds to develop operating activities. Until the Company has received
money from the sale of a license, or is generating positive cash flow, or has
arranged financing, no operating activities are planned. The Company does not
anticipate making any commitments to borrow money within the next 12 months,
except as necessary to build the first plant.

























===============================================================================
Page-28

Item 7.  FINANCIAL STATEMENTS

Hybrid Fuels Inc.

Index to Consolidated Financial Statements


Report of Independent Auditors..........................F-1
Consolidated Balance Sheets ............................F-2
Consolidated Statements of Operations...................F-3
Consolidated Statements of Cash Flows...................F-4
Consolidated Statements of Stockholders' Equity.........F-5
Notes to Consolidated Financial Statements..............F-6-F-10












































===============================================================================
                                      F-1

INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of Hybrid Fuels, Inc.
(A Development Stage Company)

We have audited the accompanying consolidated balance sheet of Hybrid Fuels,
Inc. (A Development Stage Company) as of June 30, 2001 and 2000 and the related
statements of operations, stockholders' equity and cash flows accumulated for
the period from February 16, 1960 (Date of Inception) to June 30, 2001 and the
years ended June 30, 2001 and 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards used in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

We previously reported on the consolidated financial statements of Hybrid
Fuels, Inc. for the year ended June 30, 2000 in our audit report dated April
17, 2001. We expressed a qualified opinion with respect to the inability to
audit certain unauthorized payments to former directors. We subsequently
examined additional documentation to satisfy ourselves that these payments to
former directors were in fact unauthorized and unsupported. The Company
discusses these unauthorized payments in Note 7(b) to the consolidated
financial statements. Certain other adjustments came to light during our
subsequent review of the additional information. As discussed in Note 10 to
these financial statements certain income statement items have been restated.
We therefore reissue this audit report dated September 21, 2001.

In our opinion, the aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of Hybrid Fuels, Inc.
(A Development Stage Company), as of June 30, 2001 and 2000, and the results of
its operations and its cash flows accumulated for the period from February 16,
1960 (Date of Inception) to June 30, 2001 and the years ended June 30, 2001 and
2000 in conformity with generally accepted accounting principles used in the
United States.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has not generated any revenues
and has conducted operations at a loss since inception. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note 1.
These consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.

MANNING ELLIOTT
CHARTERED ACCOUNTANTS
Vancouver, Canada
September 21, 2001


===============================================================================
                                      F-2

Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
                                                    (Restated - See Note 10)
                                            June 30,      June 30,
                                             2001          2000
                                              $             $
-------------------------------------------------------------------------------
ASSETS

Current Assets

Cash                                               2           485
Total Assets                                       2           485
------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable                              14,807         3,111
Accrued liabilities (Note 6(d))               15,000          -
Note payable (Note 4)                         33,638        42,013
Shareholder loan payable (Note 6(a))         196,255       163,748
Amounts owing to a Director (Note 6(b))      152,111        74,432
------------------------------------------------------------------------------
                                             411,811       283,304
------------------------------------------------------------------------------
Temporary Equity (Note 7(d))                 223,000       223,000

Stockholders' Equity (Deficit)
Common Stock (Note 7): $0.001 par value;
50,000,000 shares authorized 20,623,600
and 19,523,600 shares are issued and
outstanding respectively                      20,624        19,524
------------------------------------------------------------------------------
Additional Paid-in Capital                   285,842       162,474
------------------------------------------------------------------------------
Donated Capital -
Imputed Interest (Notes 5 and 6)             115,937        56,735
------------------------------------------------------------------------------
Deficit Accumulated During
the Development Stage                     (1,057,212)     (744,552)
------------------------------------------------------------------------------
Total Stockholders' Equity (Deficit)        (634,809)     (505,819)
------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity         2           485



Nature of Operations and Continuance of Business (Note 1)
Other Contingencies (Note 8)

(See Accompanying Notes to the Consolidated Financial Statements)





===============================================================================
                                      F-3

Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statements of Operations



                            Accumulated from     (Restated -See Note 10)
                            February 26, 1960         Years ended
                            (Date of Inception)  June 30,       June 30,
                            to June 30, 2001        2001           2000
                                    $                 $              $
------------------------------------------------------------------------------
Revenue                               -               -              -
------------------------------------------------------------------------------
Expenses

Advances to Blue Mountain Packers
written-off (Note 3)                84,951         84,951            -
Deposit on plant written-off
(Note 3)                           170,561            -           170,561
Disputed compensation (Note 8(b))  243,463            -              -
Executive compensation (Note 6(b)) 144,000         72,000          72,000
Filing and regulatory fees          15,530          5,092           5,438
General and administration          58,949          2,973           3,045
Imputed interest (Notes 5 and 6)   115,937         59,202          30,735
Interest                             2,129          2,129            -
Investor relations                  16,698          4,092          12,606
Professional fees                  141,368         72,419          22,008
Rent and telephone                  41,922          6,699           6,535
Research and development             8,000            -              -
Travel and promotion                13,704          3,103           1,216
------------------------------------------------------------------------------
                                 1,057,212        312,660         324,144
------------------------------------------------------------------------------
Net Loss                        (1,057,212)      (312,660)       (324,144)
------------------------------------------------------------------------------
Net Loss Per Share                                   (.02)           (.02)
------------------------------------------------------------------------------
Weighted Average Shares Outstanding            19,524,000      14,609,000





(See Accompanying Notes to the Consolidated Financial Statements)












==============================================================================
                                      F-4
Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows

                                  Accumulated from    (Restated - See Note 10)
                                  February 26, 1960       Years ended
                                  (Date of Inception) June 30     June 30
                                  to June 30, 2001      2001        2000
                                         $                $           $
------------------------------------------------------------------------------
Cash Flows To Operating Activities
Net loss                             (1,057,212)     (312,660)    (324,144)
------------------------------------------------------------------------------
Non-cash items
Shares issued for services               12,000          -            -
Other adjustment                           (502)         -            -
Imputed interest                        115,937        59,202       30,735
Deposit on plant written-off            170,561          -         170,561
Advances written-off                     84,951        84,951         -
------------------------------------------------------------------------------
Adjustment to reconcile net loss to cash
Accounts payable and accrued liabilities 29,807        26,695        3,111
Net Cash Used In Operating Activities  (644,458)     (141,812)    (119,737)
------------------------------------------------------------------------------
Cash Flows To Investing Activities
Deposit on plant                       (170,561)         -         (170,561)
Advances to Blue Mountain Packers Ltd.  (79,951)      (79,951)         -
------------------------------------------------------------------------------
Net Cash Used By Investing Activities  (250,512)      (79,951)     (170,561)
------------------------------------------------------------------------------
Cash Flows From Financing Activities
Note payable                             33,638        33,638          -
Advances payable                        119,468        77,455        42,013
Amounts owing to a Director             152,111        77,679        74,432
Shareholder loans payable               196,255        32,508        24,338
Temporary equity and redeemable shares  223,000          -             -
Issuance of common stock                170,500          -          150,000
------------------------------------------------------------------------------
Net Cash Provided By
Financing Activities                    894,972       221,280       290,783
------------------------------------------------------------------------------
Net Increase (Decrease) in Cash               2          (483)          485
------------------------------------------------------------------------------
Cash - Beginning of Period                 -              485          -
------------------------------------------------------------------------------
Cash - End of Period                          2             2           485
------------------------------------------------------------------------------
Non-Cash Financing Activities
A total of 12,000,000 common shares were issued for services in 1993
                                         12,000          -             -
A total of 1,100,000 restricted common shares were issued to settle debt
                                        124,468       124,468          -
------------------------------------------------------------------------------
Supplemental Disclosures
Interest paid in cash                      -              -            -
Taxes paid in cash                         -              -            -

(See Accompanying Notes to the Consolidated Financial Statements)
==============================================================================
                                      F-5
Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Equity
                                                         Deficit
                                                         Accumulated
             # of                  Additional            During the
             Shares  Par           Paid-in     Donated   Development
             Issued  Value         Capital     Capital   Stage
             and
             Outstanding                                             Total
                       $              $           $         $          $
------------------------------------------------------------------------------
Cumulative from February 16, 1960 (Date of Inception) to June 30, 1997
          15,000,000  15,000         3,398        -      (18,398)      -
Shares returned to treasury for cancellation (Note 7(a))
         (12,000,000)(12,000)       12,000        -         -          -
Shares issued to effect a reverse merger (Note 7(a))
          12,000,000  12,000       (12,000)       -         -          -
Net loss for
the year      -          -           -            -      (93,633)    (93,633)
Balance at June 30, 1998
          15,000,000  15,000         3,398        -     (112,031)    (93,633)
Issuance of 1,900,000 shares (Note 7(b))
           1,900,000   1,900        (1,900)       -         -          -
Issuance of shares for cash
              23,600      24        13,576        -         -         13,600
Imputed Interest (Note 5)
                -        -             -        26,000      -         26,000
Net loss for the year                                   (308,377)   (308,377)
Balance at June 30, 1999
         16,923,600   16,924        15,074      26,000  (420,408)   (362,410)
Cancellation of shares previously issued (Note 7(b))
         (1,900,000)  (1,900)        1,900        -         -          -
Issuance of shares for no consideration (Note 7(c))
          3,000,000    3,000        (3,000)       -         -          -
Issuance of shares pursuant to a subscription agreement (Note 7(c))
          1,500,000    1,500       148,500        -         -        150,000
Imputed Interest (Notes 5 and 6)
               -        -            -          30,735      -         30,735
Net loss for the year (Restated - See Note 10)          (324,144)   (324,144)
Balance at June 30, 2000
         19,523,600   19,524       162,474      56,735  (744,552)   (505,819)
Issuance of shares in June 2001 to settle debt (Notes 7(e) and (f))
          1,100,000    1,100       123,368        -         -        124,468
Imputed Interest (Notes 5 and 6)
               -        -             -         59,202      -         59,202
Net loss for the year                                   (312,660)   (312,660)
Balance at June 30, 2001
         20,623,600   20,624       285,842     115,937 (1,057,212)  (634,809)

As at June 30, 2001 an additional 237,853 shares were issued but not
outstanding as these shares were issued with rescission rights
attached (Note 7(d)).




(See Accompanying Notes to the Consolidated Financial Statements)
==============================================================================
                                      F-6

1.	Nature of Operations and Continuance of Business The Company was
originally incorporated in the State of Florida on February 16, 1960. After a
number of name changes the Company changed its name to Polo Equities, Inc. on
June 3, 1993. Prior to May, 1998 the Company had no business operations. In May
1998, the Company caused a Nevada corporation to be formed under the name Polo
Equities, Inc., (Polo) (a Nevada corporation), with authorized capital of
50,000,000 common shares of $.001 par value. The two companies then merged
pursuant to Articles of Merger adopted May 28, 1998 and filed with the State of
Nevada on June 10, 1998, which changed its domicile to Nevada. On May 28, 1998,
the Company acquired, by issuing 12,000,000 shares, Hybrid Fuels, USA, Inc. and
330420 B.C. Ltd., which changed its name to Hybrid Fuels (Canada) Inc. This
acquisition was accounted for as a reverse merger whereby the shareholder of
Hybrid Fuels, USA, Inc. and Hybrid Fuels (Canada) Inc. gained control of Polo
Equities Inc. which changed its name to Hybrid Fuels, Inc. All historical
financial statements are those of Hybrid Fuels, USA, Inc. and Hybrid Fuels
(Canada) Inc. As part of the acquisition, three shareholders representing
12,000,000 previously issued shares returned their shares for cancellation. For
accounting purposes the acquisition was treated as a reverse merger business
purchase of Polo Equities Inc. by Hybrid Fuels, USA, Inc. and Hybrid Fuels
(Canada) Inc. No amount was allocated to the intellectual asset as it was
acquired from a related party and the transfer had no cost basis associated
with it. There was no public market for the shares of Polo Equities, Inc. at
the time of the reverse merger. The Company operates through these two
wholly-owned subsidiaries. On May 29, 1998 the Company changed its name to
Hybrid Fuels, Inc., herein "the Company". On June 10, 1998 the Company began
trading on the OTC Bulletin Board under the symbol "HRID" and in December, 1999
was moved to the "Pink Sheets". From May 1998 to June 1999 the Company operated
out of an office in California which was set up for investor relations and to
raise additional capital. This office was shut down in June and the new
President and directors are operating out of Kelowna, BC, Canada after the
Calgary, Alberta, Canada office was shut down on May 3, 2001. Pursuant to the
acquisition, the Company acquired a number of proprietary technologies with the
primary objective of the business being to build small farm scale ethanol
facilities which involves a number of proprietary technologies exclusively
owned by the Company. Other proprietary technology involves the use of a
bio-gas burner which burns manure and bedding straw. This technology eliminates
ground and ground-water contamination and produces most of the energy required
for the facility by supplying heat for fermentation and vaporization and for
the operation of a greenhouse, if desired. Another exclusive proprietary
technology is a vegetable based formula which allows diesel and ethanol to
emulsify. This hybrid fuel reduces particulate emissions without reduction in
power when used in an unaltered diesel engine. The Company is in the early
development stage. In a development stage company, management devotes most of
its activities in investigating business opportunities and further advancing
its technologies. Because of a deficiency in working capital and other current
commitments and significant operating losses, there is substantial doubt about
the ability of the Company to continue in existence unless additional working
capital is obtained. The Company will need to rely on the forbearance of some
creditors and related parties have agreed to continue to fund working capital
as needed. The Company has entered into discussions with third parties to
directly finance a facility in which the Company will then commence with its
business plan.





==============================================================================
                                      F-7

2. Summary of Significant Accounting Policies
(a) Consolidated Financial Statements These consolidated financial statements
represent the consolidation of the Company and its two subsidiaries Hybrid
Fuels, U.S.A., Inc, and Hybrid Fuels (Canada) Inc.

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

(c) Use of Estimates
The preparation of financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.

(d) Accounting for Stock-Based Compensation

SFAS No. 123, "Accounting for Stock-Based Compensation," requires that stock
awards granted be recognized as compensation expense based on fair values at
the date of grant. Alternatively, a company may account for stock awards
granted under Accounting Principles Board Opinion (APB) No. 25, "Accounting for
Stock Issued to Employees," and disclose pro forma income amounts which would
have resulted from recognizing such awards at their fair value. The Company has
elected to account for stock-based compensation for employees under APB No. 25
and make the required pro forma disclosures for compensation expense. Stock
based compensation for non-employees are accounted for using SFAS No. 123.


3.	Deposit on Plant

The Company deposited Cnd$250,000 ($170,561), with Mega Holdings, Inc.,
pursuant to an option agreement to purchase a beef processing plant owned by
Mega Holdings, Ltd. The Company agreed to purchase the beef processing plant
facility including land, buildings and equipment for Cnd$3,000,000 which was
below appraised value. The purchase agreement required an additional payment of
Cnd$150,000 on June 24, 2000, the parties agreed to extend the deadline for the
payment until March 15, 2001. This payment was not made and the deposit was
forfeited and the option agreement terminated. Upon anticipated completion of
the purchase, this beef processing plant was to be operated by Blue Mountain
Packers, Ltd. (a related company). The Company intended to acquire the issued
and outstanding common shares of Blue Mountain Packers, Ltd. for a nominal
amount and operate it as a wholly-owned subsidiary. Blue Mountain Packers, Ltd.
had recently received certification by the Canadian Food Inspection Agency of
the Government of Canada, Department of Agriculture for the processing of
Canadian beef. Blue Mountain Packers is a related party due to having one
common director. The Company advanced $84,951 to Blue Mountain Packers for
plant refurbishing. These advances bear interest at 8%. Due to the termination
of the option agreement these advances are considered uncollectible and have
been charged to operations.


4.	Note Payable

On September 15, 2000, the Company issued a note for Cnd$50,000 ($33,638) due
and payable on or before September 15, 2001 plus 8% interest. Repayment of the
note has been extended until completion of a financing. Interest of $2,129 has
been accrued at June 30, 2001 and is included in accounts payable.
==============================================================================
                                      F-8

5.	Advances Payable

A non-related company coordinated investor relations services for the Company
and paid expenses of $69,248 on behalf of the Company and loaned the Company
Cnd$78,000 ($50,220) for a total amount owing of $119,468. This debt was
settled in June 2001 by the issuance of 1,000,000 restricted common shares of
the Company. These advances were non-interest bearing and unsecured until the
settlement date. Imputed interest of $13,326 (2000 - $2,965), calculated at a
rate of 15% per annum, was charged to operations and treated as donated
capital.

6.	Related Party Transactions/Balances.

(a)	Cash loans of $499,059 were advanced to the Company by the major
shareholder. A total of $365,590 was repaid with cash. The controlling
shareholder also paid office, rent and professional fees totalling $62,786 on
behalf of the Company. The balance of $196,255 is currently owing without
interest or specific repayment terms. Imputed interest of $29,041 (2000 -
$20,800), calculated at a rate of 15% per annum, was charged to operations and
treated as donated capital.

(b)	The President who is also a Director of the Company, has paid office
and related expenses from personal funds in the amount of $14,411 of which
$6,300 has been reimbursed with cash. Effective July 1, 1999 the President is
entitled to a deferred salary of US$6,000 per month and was owed a total of
$144,000 at June 30, 2001. These amounts are unsecured, non- interest bearing
and due on demand. Imputed interest of $16,835 (2000 - $6,970), calculated at a
rate of 15% per annum, was charged to operations and treated as donated
capital.

(c)	See Note 3 for advances to Blue Mountain Packers Ltd.

(d) On June 11, 2001 pursuant to a directors' consent, a total of 200,000
shares will be issued to a director/officer of the Company to settle $10,000
owing as at June 30, 2001. This amount has been accrued and is included in
accrued liabilities.


7.	Stockholders' Equity

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

(b)	On August 4, 1998 and March 23, 1999, the Company's former Board of
Directors authorized the issuance of 1,000,000 and 900,000 shares respectively
to individuals without consideration. On August 21, 1999, the current Board of
Directors resolved that share certificates representing ownership of these
1,900,000 shares were issued without adequate consideration being paid to the
==============================================================================
                                      F-9
7.	Stockholders' Equity (b)(con't)

Company and were therefore not fully paid and non-assessable. The Company
cancelled the share certificates and indemnified the transfer agent, for any
costs or liability it may incur in any way arising out of the cancellation of
such shares and the transfer agent removed the 1,900,000 shares from the
stockholder list effectively reversing the issuance. Six of the cancelled
certificates, totalling 550,000 shares, have been endorsed and returned to the
Company for cancellation. The contingencies regarding the cancelled shares
relate to anyone who may have subsequent holder rights, and possibly the
individuals who were issued those shares who may claim that they were issued
for due consideration. The Company has determined that there is no amount to be
accrued for future liabilities associated with claims by subsequent
shareholders. To date when these shares are delivered to a broker for possible
resale the broker phones the Company or the transfer agent and the shares are
kept and cancelled. The Company will continue to monitor this issue. No other
contingent liabilities have been included as some of the previous directors
have been informed verbally of the cancellation. No formal legal demand has
been made as the former administration has failed to provide addresses despite
a number of requests.

(c)	On May 17, 2000 the Company issued 1,500,000 shares for $150,000 cash
pursuant to a subscription agreement dated February 17, 2000.  On February 17
and 18, 2000, the Company accepted subscription agreements and notes whereby
the Company would receive $300,000 for 3,000,000 shares. The 3,000,000 shares
were issued and were then held in escrow . These shares were subsequently
released from escrow to the investors to facilitate financing. The notes were
to bear interest at 8% and were to be paid within 60 days or at the discretion
of the President. In June 2000 the President extended the time for repayment to
one week of the Company being re-listed on the Over-The-Counter Bulletin Board
or other suitable exchange. When it became apparent there were going to be long
delays the notes were demanded to be repaid by February 21, 2001. The notes
were not paid as demanded, and the 3,000,000 shares have since been sold by the
investors to innocent third parties. The investors did not and have not paid
the Company for these shares, despite demands. Since these shares have been
resold to innocent third parties they must be considered outstanding. The
Company intends to sue the investors for the balance due on the notes, however
the Company believes the balance is uncollectible.

(d)	Between October 1998 and June 1999, the previous administration sold a
total of 351,053 common shares of the Company to 34 subscribers on the basis of
an Offering Memorandum that contained a significant number of inaccuracies. A
total of $223,000 was raised pursuant to this Offering. The current
administration has concerns regarding possible misstatements, omissions and
misleading statements. On the advice of legal counsel, the Company offered
these 34 subscribers the option of receiving restricted stock as the Company
did not and does not have the funds to repay these subscribers. Those who opted
to receive restricted stock were also given an undertaking that they would
receive a rescission offer when the Company was in a position to repay their
money plus appropriate interest, in return for a return of the restricted
stock, or they could elect to retain the stock. To date, 23 subscribers, have,
pursuant to this offer received 237,853 shares, representing $158,000. These
shares are issued but not considered outstanding. The remaining 11 subscribers,
who paid $65,000 for 113,200 shares, have not responded to the offer. These
subscriptions are recorded as temporary equity until rescission rights have
been revoked.


==============================================================================
                                      F-10

7.	Stockholders' Equity (con't)
(e)	See Note 5 for 1,000,000 restricted common shares issued to a non-
related company to settle debt of $119,468.

(f)	A total of 100,000 restricted common shares, valued at $5,000, were
issued to the plant manager of Blue Mountain Packers Ltd. for plant
refurbishing work to March 15, 2001.

8. Legal Issues

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

(a) See Note 7(b) for contingencies relating to improperly issued shares that
were later cancelled.

(b) Unauthorized and/or unsupported payments in the amount of $243,463 were
made from Company funds by past officers of the Company during the period May,
1998 to June, 1999. The Company has requested a full accounting from the past
president. All amounts that were unauthorized by the board of directors or
amounts that are not properly documented with invoices and receipts have been
accounted for as disputed executive compensation. At such time as Company
resources permit, the Company will seek legal advice to determine whether or
not it is possible to recover all such disputed and unauthorized amounts from
the previous administration.

(c) See Note 7(d) for temporary equity and related rescission rights for
subscribers of 351,053 shares of the Company.

9. Subsequent Events

On September 19, 2001, 200,000 shares were issued to settle debt referred to in
Note 6(d).

10.	Restatements

The Company has restated its financial statements for the year ended June 30,
2000. The nature of the restatements and the effect on net income and earnings
per share are as follows:
                                                                $
Net loss for the year as previously reported                 (80,835)

Corrections effecting net income:
(a) Inclusion of imputed interest at a rate of 15% per annum on non-interest
bearing loans                                                (30,735)
(b) Deposit on plant written-off                            (170,561)
(c) Recognition of a liability owing to a non-related company for expenses paid
on behalf of the Company                                     (42,013)
Net loss for the year as restated                           (324,144)

                                                                $
Loss per share as previously reported                           (.01)
Loss per share on restatements                                  (.01)
Loss per share as restated                                      (.02)
In addition to the restatements noted above certain other financial statement
note disclosures were provided to improve the overall presentation of the
Company's financial statements.
==============================================================================
Page-39-

ITEM  8.  CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS

On July 25, 2000 the Company terminated James E. Slayton, CPA as its
independent accountant, and appointed William L. Butcher CPA PS as its
independent accountant. The form 8-K regarding the reasons for that change was
filed with the SEC on August 28, 2001. (See Item

On February 5, 2001, the Company terminated William L. Butcher CPA PS as its
independent accountant, and appointed Manning Elliott as its independent
accountant.

During the Company's two fiscal years ended June 30, 2000 and 2001, and any
subsequent interim period, there were no "reportable events" requiring
disclosure pursuant to Item 304 of Regulation S-B.

PART III

ITEM  9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.

The following table sets forth as of June 30, 2001, the name, age, and position
of each executive officer and director and the term of office of each director
of the Corporation.

NAME            AGE     POSITION                    DIRECTOR OR OFFICER SINCE

Clay Larson     60      President and Director,           June 28, 1999

John Morrison   67      Director, Secretary and           August 6, 2000
                        Chief Financial Officer,

Gordon Colledge 57      Director and Vice-President.      September 26, 2000

Information about the Offices and Directors

Clay Larson
Prior to becoming a Director and President, Mr. Larson was a practicing lawyer
for 25 years. Prior to leaving the profession in February 1997, he was the
senior and managing partner in the law firm. He has extensive business
experience involving dealing with government agencies, financial institutions,
client services, personnel, computer equipment and operating systems.  After
leaving the practice of law, he worked as a business consultant, leaving that
to become President and Director of the Company. Mr. Larson has no other
directorships in any reporting companies.

John Morrison
Mr. Morrison has an extensive accounting background with over thirty years
experience with KPMG ("KPMG").  He passed his CPA exams in 1966, and was
appointed to Beta Alpha Psi as a result of receiving a GPA in excess of 3.5 and
graduated Summa Cum Laude. He received his CA designation in 1968 and then
worked his way from partner in KPMG's Winnipeg Office in 1972 to a senior
partner in KPMG's Vancouver office in 1979.  From 1980 to 1989, Mr. Morrison
was the managing partner of KPMG's Kelowna office.  He was also Vice-President
of Thorne Ernst & Whinney Inc. from 1980 to 1989.  During his tenure with KPMG,
Mr. Morrison was involved in a large number of mergers, acquisitions and
reorganizations.  After his retirement from KPMG in 1989, he has provided
ongoing consulting services to a wide range of clients in diverse industries.

==============================================================================
Page-40-

Gordon Colledge
Gordon Colledge was appointed a Director and Vice-President on September 26,
2000. Mr. Colledge attended the University of Lethbridge and is currently
taking courses at the University of Great Falls in Montana. During the last
five years, he has been a contract instructor in Family Studies at the
Lethbridge Community College and an international conference keynote speaker
and workshop facilitator.  In addition to teaching, Mr. Colledge, along with
his wife, operate two privately held, family owned companies: Advance
Communications Ltd. and Adcomm Research Ltd., both of which are involved in
educational workshops, family mediation and succession planning for small
businesses.

Gordon has earned an international Teaching Excellence Award from the
University of Texas at Austin. He has worked with dozens of towns and
communities in Western Canada on community development projects through
WESTARC, an applied research group at the University of Brandon, Manitoba. An
expert in communication, Mr. Colledge was also assigned to work with farm and
ranch families and has earned recognition on the Premier's Council in Alberta
for his support of those families. Mr. Colledge knows the value of cost
effective ranching and farming.

It was in his counseling capacity that Mr. Colledge became knowledgeable with
the Issuer's proprietary technology and the positive effect that these
technologies have for small to large farms and ranches.  Gordon has been an
enthusiastic supporter of the Hybrid technology for more than a decade.

All officers hold their positions at the will of the Board of Directors.  All
directors hold their positions for one year or until their successors are
elected and qualified.




























===============================================================================
Page-41-

ITEM 10. EXECUTIVE COMPENSATION.

Mr. Larson, the Company's President and a Director, began accruing salary in
the amount of $6,000 per month as of July 1, 1999, which is being deferred
until such time as the Company has adequate funds to pay compensation. The
Company also agreed to pay John Morrison $150.00 per hour for work he does for
the Company. As at June 30, 2001, the Company issued 200,000 restricted shares
to Mr. Morrison for services rendered to year end. At the present time, the
Company does not have any other compensation agreements or plans with any other
officers and directors of the Company.  The Company does intend to enter into
such agreements in the future when resources allow.


The Company intends to appoint not more than five new directors who will be
remunerated in accordance with their responsibilities with the Company. At year
end, no prospective directors had been identified. At such time as new
directors and/or officers are appointed, the Company will adopt a compensation
plan which will likely include stock options and performance incentives which
may be tied to gross sales, increase in sales, gross revenues, increase in
gross revenues and profitability.

                         SUMMARY COMPENSATION TABLE
               Annual compensation               Long term compensation
-----------------------------------------------------------------------------
                              Other   Restricted Securities   LTIP    All
                              Annual    stock    underlying   payouts other
Name &      Year Salary Bonus Compen-  awards    options/SARs  ($)    Compen-
Principal   ($)  ($)          sation     ($)        (#)               sation
Position
-----------------------------------------------------------------------------
Clay Larson 2001 72,000 -0-    -0-      -0-         -0-        -0-      -0-
            2000 72,000 -0-    -0-      -0-         -0-        -0-      -0-
President,  1999 36,000 -0-    -0-      -0-         -0-        -0-      -0-
-----------------------------------------------------------------------------
J. Morrison 2001 $150/hr -0-   -0-      -0-         -0-        -0-      -0-
-----------------------------------------------------------------------------

There are no compensatory plans or arrangements, including payments to be
received from the Company, with respect to any person named in Cash
Compensation set out above which would in any way result in payments to any
such person upon termination of their employment with the company or its
subsidiaries, or any change in control of the Company, or a change in the
person's responsibilities following a change in control of the Company.

ITEM  11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT;

CHANGES IN CONTROL

The following table sets forth as of June 30, 2001, the name and the number of
shares of the Registrant's Common Stock, par value $.001 per share, held of
record or beneficially by each person who held of record, or was known by the
Registrant to own beneficially, more than 5% of the 20,623,600 issued and
outstanding shares (see  Consolidated  Statement  of  Shareholders  Equity in
Financial Statements) of the Registrant's Common Stock, and the name and
shareholdings of each director and of all officers and directors as a group.


==============================================================================
Page-42-

CHANGES IN CONTROL (con't)


Title of   Name and Address of    Amount and Nature of        Percentage of
Class      Beneficial Owner       Beneficial Ownership        Class
-------------------------------------------------------------------------
Common      Donald  Craig                    1,850,000               8.97%
            12650 Ponderosa Road
            Winfield, B.C. V4V 2G8

Common      Clay  Larson  (1)                1,000,000               4.85%
            740 Westpoint  Crt.
            Kelowna,  B.C. V1W 2Z4

Common      John Morrison (1)                  300,000               1.44%
            439 Viewcrest Dr.,
            Kelowna, B.C. V1W 4K1

Common      Gordon Colledge (1)                212,000               1.03%
            2213 27th Avenue
            Lethbridge, AB T1K 6K4

Common      Auchengrey Ltd.                   2,000,000              12.1%
            Diane Smith, PO Box 3321,
            Tortula, BVI.

Common      Killaloe Ltd.                     2,000,000              12.1%
            Don Murray, Drake Chambers,
            Tortula, BVI

===========================================================================
Common      Total Officers and Directors
            as a Group (3 Persons)            1,512,000              7.32%
============================================================================

(1)  Officer and/or director.

There are no contracts or other arrangements that could result in a change of
control of the Company.


ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

The Company utilizes office space provided by the President of the Company at
no charge.

The Company does not expect to have any significant dealings with affiliates.
Presently, other than as described above, none of the officers and directors
have any transactions which they contemplate entering into with the Company.








==============================================================================
Page-43-

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) Financial Statements and Schedules The financial statements as set forth in
Item 7 of this report on Form 10-KSB are incorporated herein by reference.

Financial statement schedules have been omitted since they are either not
required, not applicable, or the information is otherwise included.

(b) Reports on Form 8-K.
The Company late filed two reports on Form 8-K during the year. The first, to
report the change of auditor from James E. Slayton to William L. Butcher on
July 25, 2000, was filed on August 28, 2001, amended and re-filed on October
22, 2001. The second, to report the change of auditor from William L. Butcher
to Manning Elliott on February 1, 2001, was filed on June 19, 2001.

(c) Exhibit No.
            3.1 Articles of Incorporation (1)

            3.2 Bylaws (1)

            4.1 Specimen stock certificate. (2)

            16a Change of Certifying Accountant, James E. Slayton to William L.
                Butcher on July 25, 2000.

            16b Change of Certifying Accountant, Butcher to Manning Elliott
                February 1, 2001.

            21  List of Subsidiaries

(1) Incorporated by reference from the Company's Form 10SB filed with the SEC
on February 7, 2000.

(2) Incorporated by reference from the Company's Form 10-QSB filed with the SEC
on May 14, 2001.


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this statement to be signed on its behalf, by the
undersigned; thereunto duly authorized.

Hybrid Fuels, Inc.

Date: March 5, 2002.			        By: /s/ John Morrison
                                    		----------------------------
                                                Chief Financial Officer









==============================================================================
Exhibits

Exhibit 16a
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 8-K/A
                                 CURRENT REPORT

     Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)            July 25, 2000

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

          NEVADA                   0-29351         88-0384399
  State or other jurisdiction   (Commission     (IRS Employer
        of incorporation        File Number)     Identification No.)

               PO Box 41118, RPOS Winfield, B.C., Canada  V4V 1Z7
              (Address of principal executive offices)  (Zip Code)

Registrant's telephone number, including area code 250-764-0352

               #214-2791 Hwy 97 N, Kelowna, B.C., Canada, VIX 4J8
         (Former name or former address, if changed since last report)

Item 4. Change of Registrant's Certifying Accountant

On the April 7, 2000, the SEC issued a comment letter regarding the
Registrant's Form 10 SB, filed February 7, 2000.  A significant number of the
comments related to the financial statements prepared by the Company's auditor,
James E. Slayton.  The Company forwarded a copy of the comment letter to Mr.
Slayton in April 2000 and requested that he respond to those comments.

During April, May, June, and July, the Company President had several
conversations with Mr. Slayton, requesting that he respond to the comments of
the SEC.  When he failed to do so, the Company's sole Director passed a
resolution dated July 25, 2000 terminating Mr. Slayton's appointment as the
Company's independent accountant.

(a) Previous independent accountants.

(i)  On July 25, 2000, Hybrid Fuels, Inc., (Hybrid) dismissed James E. Slayton
who had previously served as independent accountant for Hybrid.

(ii)  The reports of James E. Slayton on the consolidated financial statements
of Hybrid as of and for the fiscal years ended June 30, 1998, June 30th 1999,
and any subsequent interim  period preceding the termination, contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope, or accounting principles.

(iii) The change in independent accountants was approved by Hybrid's President
and sole Director.

(iv) In connection with its audit for the fiscal years ended June 30, 1998,
June 30, 1999 and any subsequent interim period preceding the termination,
there were no disagreements with James E. Slayton on any matter of
=============================================================================
Page-2-

Item 4. Change of Registrant's Certifying Accountant (a)(con't)

accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
James E. Slayton, would have caused James E. Slayton to make reference to such
disagreements in its report on the consolidated financial statements for such
periods.

(v)  During the fiscal years ended June 30, 1998, and 1999, and any subsequent
interim period preceding the termination, there were no "reportable events" as
that term is defined in Item 304(a)(1)(v) of Regulation S-K of the Securities
and Exchange Commission (the SEC).

(vi)  Hybrid has requested that James E. Slayton furnish it with a letter
addressed to the SEC stating whether or not James E. Slayton agrees with the
above statements.  A copy of his letter, dated October 10, 2001, is filed as
Exhibit 16 to this Form 8-K/A.

(b) New independent accountants.

On July 25th, 2000, Hybrid engaged William L. Butcher, CPA P.S., (Butcher) as
its new independent accountants.  The engagement of Butcher, was approved by
the sole director of the Company. During the fiscal years ended June 30, 1999
and 2000 and any subsequent interim period, Hybrid has not consulted with
Butcher, regarding either:

(i)  the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on Hybrid's financial statements, and neither a written report was
provided to Hybrid nor oral advice was provided that Butcher concluded was an
important factor considered by Hybrid in reaching a decision has to any such
accounting, auditing or financial reporting issue; or

(ii) any matter that was either the subject of a "disagreement" as that term is
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to
Item 304 of regulation S-K, or a "reportable event" as that term is defined in
Item 304 (a)(1)(v) of Regulation SK.


Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

(a) Financial Statements               Not applicable.
(b)  Pro Forma Financial Information   Not applicable.
(c)  Exhibit 16 Letter from James E. Slayton October 10, 2001 regarding change
in certifying accountants.












==============================================================================
Page-3-

Signatures

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

Hybrid Fuels, Inc.

/s/ Clay Larson ---------------------------------------------
    Clay Larson
    President and Chief Executive Officer.
    Dated October 10, 2001













































===============================================================================
EX-16
James E. Slayton, CPA
2858 WEST MARKET STREET
SUITE C FAIRLAWN, OHIO
44333 1-330-869-6704

Securities and Exchange Commission                      October 10, 2001
Washington, D.C. 20549

Dear madam/sir,

I have been notified that I have been replaced as the accountant for Hybrid
Fuels, Inc., (the Company).  I previously reported on the Company's financial
statements for the periods ending June 30, 1998, June 30th 1999 and the interim
period ended November 30, 1999.

The audit report dated December 18, 1999, was unqualified except for an
explanatory paragraph stating that there was substantial doubt about the
Company's ability to continue as a going concern.  There were no disagreements
with the company's management on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure
during the audit period to the present time.

I have read the Company's statements contained in Form 8-K and agree with them
except that I have except that I am not in a position to agree with the
Company's statement that the change was approved by the Audit Committee of the
Board of Directors or that William L. Butcher, CPA, was not engaged regarding
any matter requiring disclosure under Regulation S-K, Item 304 (a)(2).

Sincerely,
/s/
James E. Slayton



























==============================================================================
Exhibit 16b

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 8-K
                                 CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report ( Date of earliest event reported) February 1, 2001

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

                                     NEVADA
                 (State or other jurisdiction of incorporation)

            0-29351                               88-0384399-152512
     (Commission File Number)             (IRS Employer Identification No.)

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

Registrant's telephone number, including area code 250-764-0352

               _________________________________________________
         (Former name or former address, if changed since last report)

Item 4. Change of Registrant's Certifying Accountant

After filing the Form SB-2 in December 2000, the Company learned that William
L. Butcher, CPA P.S. (Butcher) the Company's independent certifying accountant,
was not a licensed CPA as he had represented. As a result he was not qualified
to sign the audit and the Company's Directors therefore passed a resolution
dated February 1, 2001 terminating the appointment of Butcher as the Company's
independent accountant.

(a) Previous independent accountants.

(i)  On February 1st, 2001, Hybrid Fuels, Inc., (Hybrid) dismissed Butcher who
had previously served as independent accountant for Hybrid.

(ii)  The reports of Butcher on the consolidated financial statements of Hybrid
as of and for the fiscal years ended June 30, 1999, June 30, 2000, and any
subsequent interim period, contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles.

(iii) The change in independent accountants was recommended by the Chief
Financial Officer and approved by Hybrid's Board of Directors.







==============================================================================
Page-2-

(iv)  In connection with its audit for the fiscal years ended June 30, 1999,
June 30, 2000 and the fiscal period ended December 31, 2001 there were no
disagreements with Butcher on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Butcher, would have
caused Butcher to make reference to such disagreements in his report on the
consolidated financial statements for such periods.

(v)  During the fiscal years ended June 30, 1999, and 2000, and the interim
fiscal period from July 1st, 2000 through December 31st, 2001 there were no
"reportable events" as that term is defined in Item 304 (a)(1)(v) of Regulation
S-K of the Securities and Exchange Commission (the SEC).

(vi)  Hybrid has requested that Butcher furnish it with a letter addressed to
the SEC stating whether or not Butcher agrees with the above statements.  A
copy of this letter, dated May 15, 2001, is filed as Exhibit 16 to this Form
8-K.

(b) New independent accountants.

On February 1st, 2001, Hybrid engaged Manning Elliott as its new independent
accountants.  The engagement of Manning Elliott, was approved by the Board of
Directors of the Company. During the fiscal years ended June 30, 1998, 1999 and
2000 and the interim period ended December 31, 2000, Hybrid has not consulted
with Manning Elliott, regarding either:

(i)  the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on Hybrid's financial statements, and neither a written report was
provided to Hybrid nor oral advice was provided that Manning Elliott concluded
was an important factor considered by Hybrid in reaching a decision has to any
such accounting, auditing or financial reporting issue; or

(ii) any matter that was either the subject of a "disagreement" as that term is
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to
Item 304 of regulation S-K, or a "reportable event" as that term is defined in
Item 304 (a)(1)(v) of Regulation SK.

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements                  Not applicable.
(b) Pro Forma Financial Information       Not applicable.
(c) Exhibit 16 Letter from William L. Butcher May 15, 2001 regarding change in
certifying accountants.


Signatures

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

Hybrid Fuels, Inc.
By: /s/
Clay Larson
Dated May 15, 2001       Clay Larson President and Chief Executive Officer.


==============================================================================

Exhibit 16

May 15, 2001

Securities and Exchange Commission
VIA FACSIMILE
Mail Stop 11-3
(202) 942-9656
450 5th Street, N.W.
& HAND DELIVERY
Washington, D.C., 20549


Dear Sirs/Mesdames:

We have read and agree with the comments in Item 4 of the Form 8-K of Hybrid
Fuels, Inc. dated May 15, 2001.

Yours truly,
/s/  William L. Butcher, CPA P.S.






































==============================================================================

Exhibit 21

List of Subsidiaries

Hybrid Fuels USA Inc.,
Hybrid Fuels (Canada) Inc.