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

                                    FORM 10-KSB


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

                      For The Fiscal Year Ended June 30, 2003

     [ ]   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:  Common stock with
                                               par value of $0.001.

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 [X]  No []

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 September 23,
2003 is 22,183,353

The number of shares outstanding of the registrant's common stock as of
September 23, 2003 is 21,990,600

Amount of revenue for most recent fiscal year   $0.00

DOCUMENTS INCORPORATED BY REFERENCE: NONE







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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 18


PART II .........................................................Page 19

 Item 5.   MARKET FOR REGISTRANT'S COMMON
           EQUITY AND RELATED STOCKHOLDER MATTERS................Page 19

 Item 6.   MANAGEMENT DISCUSSION AND ANALYSIS OR
           PLAN OF OPERATION.....................................Page 19

 Item 7.   FINANCIAL STATEMENTS..................................Page 26

 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 40

 Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
           OWNERS AND MANAGEMENT.................................Page 41

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

 Item 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
           AND REPORTS ON FORM 8-K...............................Page 42

 Item 14.  Controls and Procedures...............................Page 42

 Signatures......................................................Page 43

 Certifictions...................................................Page 44

 Exhibits........................................................Page 46
















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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. Except for disclosures that report the
Company's historical results, the statements in this document are
forward-looking statements. You should not place undue reliance on
forward-looking statements because of their inherent uncertainty and because
they speak only as of the date hereof. Actual results could differ materially
from the results discussed in the forward-looking statements and the Company
assumes no obligation to update forward-looking statements or the reasons why
actual results may differ therefrom.

The following discussion and analysis should be read in conjunction with the
various disclosures made by us in this Report and in our other reports filed
with the SEC.

The Company is a developmental stage company and has had no income since the
acquisition of the hybrid fuels technology in June 1998, nor is it likely to
have any significant cash flow until after the end of its current fiscal period
ending June 30, 2004. The Company is currently seeking additional capital to pay
operating costs and develop operating activities, but there can be no assurance
that the Company will be able to fulfill its capital needs in the future.
Moreover, due to Company's poor liquidity and lack of operations, the cost of
obtaining additional capital is expected to be significant. Management cannot
provide assurance that the Company will ultimately achieve profitable operations
or become cash flow positive. If the Company is unable to obtain funds from
external sources, it is probable that it would be unable to continue to operate
in the long term.

RISK FACTORS

You should carefully consider the following risks and the other information
contained in this report and in our other filings with the Securities and
Exchange Commission before you decide to invest in us or to maintain or increase
your investment. The risks and uncertainties described below are not the only
ones facing us. Additional risks and uncertainties may also adversely impact and
impair our business. If any of the following risks actually occur, our business,
results of operations or financial condition would likely suffer. In such case,
the trading price of our common stock could decline, and you may lose all or
part of your investment.

1. Our cash reserves may not be adequate to cover our costs of operations. To
date, we have covered our operating losses by loans from shareholders or
privately placing securities. We expect to fund our general operations and
marketing activities for 2004 with our current cash, which was obtained from
loans from shareholders and/or the sale of securities. However, our cost
estimates may not include enough provisions for any contingency, unexpected
expenses or increases in costs that may arise.

2. We may not be able to raise the capital we need. We will need to raise
additional capital to develop operations and to pay ongoing expenses. If
additional funds are raised through the issuance of equity, our shareholders'
ownership will be diluted. There can be no assurance that additional financing
will be available on terms favorable to us or at all. If funds are not available
on terms acceptable to us, we may not be able to continue our business.

3. We have not sought protection of our intellectual property through any
patents, but have elected to protect it through non-disclosure agreements. Our
intended business may suffer if we are unable to adequately protect our
intellectual
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property. Because our intellectual property is not protected by patents, others
may seek to discover and use our intellectual property. We cannot provide
assurance that our intellectual property rights will not be invalidated,
circumvented or challenged. If we are found to infringe on the intellectual
property rights of others, we may not be able to continue to market our process,
or we may have to enter into costly license or settlement agreements. Third
parties may allege infringement by us with respect to past, current or future
intellectual property rights. Any claim of infringement, regardless of merit,
could be costly, time-consuming and require us to develop non-infringing
technology or enter into royalty, licensing or settlement agreements. These
agreements could be on terms unfavorable or unacceptable to us and could
significantly harm the development of our business. In the future, we may also
have to enforce our intellectual property rights through litigation. Any such
enforcement could also result in substantial costs and could materially affect
our financial condition and our business.


4. We have a history of operating losses and an accumulated deficit, as of June
30, 2003, of $1,478,997.

5. Our ability to begin operations and to generate revenues and profits is
subject to the risks and uncertainties encountered by development stage
companies. Our future revenues and profitability are unpredictable. We currently
have no operating activities that will produce revenue.  Furthermore, we cannot
provide assurance that we will be successful in raising the money necessary to
begin or expand operations.

6. The production of ethanol is being strongly encouraged by governments and
private parties as a way to reduce water and air pollution which could lead to
rapidly changing technology. If we are unable to adapt to rapidly changing
technologies, our intended business could be adversely affected.

   7. We have no operating history which makes an evaluation of our future
prospects very difficult.  If we succeed in completing the construction of the
first operating facility, there can be no assurances that we will be able to
develop operations that are profitable or will operate as intended. If the
market for our facilities fails to develop, or develops more slowly than
anticipated, we may not be able to meet our expenses and may not achieve
profitable results.

8. Our common stock is not widely traded, and, as a result, the prices quoted
for our stock may not reflect its fair market value. Because of the low volume
of trading in our common stock, our stockholders may find it difficult to sell
their shares.

9. We have no insurance covering our operations, potential products, services or
directors and officers.

10.Future performance depends on the ability to attract, train, and retain
management, technical and marketing personnel. In the future, loss of one or
more key employees could negatively impact us, and there is no "key man" life
insurance in force at this time. Competition for qualified personnel is intense,
and there can be no assurance that we will attract or maintain key employees or
other needed personnel.

11.We may experience a period of expansion and growth, which would likely place
significant strain upon management, employees, systems, and resources. Because
the market could develop rapidly, it is difficult to project the rate of growth.
Failure to properly manage growth and expansion, if and when it occurs, may
jeopardize our ability to sustain our business. There can be no assurance that
we will be able to properly manage growth, especially if such growth is more
rapid than anticipated.


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The following discussion has been prepared assuming the Company will continue as
a going concern; however, the audit report for the financial statements as of
and for the periods ended June 30, 2001 and 2002, includes a caveat on this
point. In reading the following, one should consult the audit report, financial
statements and footnotes, and keep in mind the significant losses generated by
the Company.

(a) BUSINESS DEVELOPMENT
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, 1984, the Company
changed its name to Polo Investment Corp. of Missouri, Inc., and on October 7,
1985 changed it's name to Medical Advanced Systems, Inc. Then, by resolution
adopted May 14, 1993 and filed 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, on June 10, 1998, changed to its current name, Hybrid Fuels, Inc.

In May of 1998, as part of a reverse merger, 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 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 ethanol is intended to be mixed
with diesel to create a hybrid fuel. The Company expects to act as the marketing
agent for the hybrid fuel and the finished animals in order 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
We believe 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,
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
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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 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."

Concerns such as these 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 facility was shut down.
However, those test results persuaded us to begin commercialization of the
process.
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The hybrid fuels technology was acquired by the Company in a reverse takeover in
June 1998 as described above, and a facility that was intended to be the first
commercial facility was constructed near Cardston, Alberta. Improvements to the
technology installed in that facility 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 facility near Cardston could begin operating, the farmer sold the
land and improperly removed the buildings and equipment. Although the facility
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 facility
being dismantled, there are no prototypes in existence at this time

THE PROPOSED FACILITIES

The proposed facilities 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.

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 used first to make
the ethanol and then to feed the animals.

In order to make ethanol, grain, referred to as feedstock, and heat for
fermentation and distillation, are needed. The heat is supplied from the burning
of the used bedding straw and manure. To avoid confusion, we need to make it
clear that the ethanol is not made from this waste. The ethanol is made from the
fermentation of the feedstock, followed by the separation of the mash from
liquid and then the distillation of the ethanol from the liquid.

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 six pens,
40 feet by 30 feet, 1 of which is empty and 5 of which have animals in them.
This means that there will be approximately 40 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 air from
outside, 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 reduce or even eliminate the need for toxic chemicals
to control those pests.

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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.

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 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 animals 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 facilities 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, the
Company intends to have a policy that permits the use of antibiotics only as
required on any sick animal.

In the proposed facilities, grains, which are 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.


ETHANOL ENERGY BALANCE 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 or ratio between the energy
(generally expressed in British Thermal Units or BTU's) in the ethanol compared
to the energy used to produce the ethanol and is written as 2:1, 4:1, etc. Those
ratios would mean 2 or 4 BTU's of energy in a quantity of ethanol compared with
1 BTU of energy from some external source required to make that quantity of
ethanol.

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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The Peoria, IL pilot plant built by the US Department of Agriculture illustrates
that energy in the product is only 30% of energy consumed for distillation.  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.

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 was discovered by the Company
and 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 a pre-determined stage of fermentation, the resulting mash is passed through
a centrifugal type separator or "spinner", which separates the liquid "beer"
from the solids, called wet distillers grains, or WDGs. The separation of the
liquid, called stillage water (or beer) from these WDGs, dries them to an
appropriate moisture content for feeding, and they are then conveyed to the
animal feed troughs. At the same time, the "beer" is drained off to be used for
the distillation of the ethanol.

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.

Management believes that the combination of the Company's proprietary
fermentation process and distillation column, will result 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. The proprietary fermentation process referred to above is considered a
"trade secret" as it was developed by the Company, and is not used by anyone
else so far as we are aware. It is not protected by patent and therefore could
be used by others which could reduce our competitive advantage.

In more typical ethanol producing plants, the WDGs are dried so 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 is important in reducing costs and improving the
economics of the operations.

At the completion of distillation, the de-alcoholized 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 wet
distillers grains and stillage water to cattle promotes weight gains. In
addition, feeding the WDGs and stillage water to the animals in the adjacent
barn is very important because it uses another co-product on-site, eliminates
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Page-10-

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.

Aside from the capital costs of the facility, the two major costs of ethanol
production are the feedstocks and the input energy required for fermentation and
distillation. For ethanol to be accepted as a fuel extender, it must be
available in a practical price range. By using the feedstock for the dual
purpose of making ethanol and feeding cattle, our process effectively reduces
the cost of making the ethanol. Also, by using the heat from burning the waste
as an energy source for the fermentation and distillation processes, the Company
believes it will not have to pay for energy from an outside source to make the
ethanol, which means the process will not incur that input energy cost. Making
ethanol also generates another stream of income, which should make the operation
more economical.

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). The
stillage water is also to be fed to the animals. The plants are designed to run
in a balanced state, producing 200 Imperial (240 US) gallons of ethanol per day
and enough distillers grains to supply enough food for 200 cattle.

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, and feeding
stillage water increases weight gains. For example, see Dr. T. J.
Klopfenstein of the University of Nebraska, in an article entitled: "How Do Wet
Distillers Grains (Byproducts) Compare To Dry Distillers Grains?" in a report 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 Company's experimental
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 and stillage water 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 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.

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Page-11-

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 CCA (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 less waste, than the industry average of 57 to 58%, according to CCA.
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 CCA. Because of these processing results, Cargill offered a premium
of $0.10 per pound, for all animals that could be produced using this process,
FOB the facility, which eliminates trucking and auction costs. We see 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 4000 grocery stores in 39 states
in the US, according to their website, www.laurasleanbeef.com. This is up from
3000 grocery stores in 33 states one year ago. 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.

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.



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Page-12-

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. 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 facility. The equipment
to produce this green feed is expected to cost around $15,000 and to fit into
the barn so that feeding 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. Each day, 200 gallons are expected to be produced 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.

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 begin at no cost to the
operators. However, later, as quantities increase, 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. The price is somewhat tied to the
retail price of diesel. 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 facility is operating, subsequent facilities are expected to be
built in the vicinity of commercial mixing plants that have the capacity to
handle the production 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.
================================================================================
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When a larger number of facilities 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 the engine needs no modifications to
switch back to regular diesel fuel if 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 thesmall 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.

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
facilities, and the preparation of the training and operations manuals. He has
agreed to donate his time without remuneration until the first facility 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.




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

SUPPLIERS

The Company is not dependent on a limited number of suppliers as most of the
equipment and materials required for the facilities are readily available in all
areas where the Company expects to be operating. The Company plans to obtain its
raw materials as and when needed from local suppliers. In addition, we expect to
arrange with independent contractors to manufacture the columns and separators
as necessary. Fabrication of these items is expected to be on the basis that the
Company will supply the raw materials for each item, and the contractor will
fabricate each item only on request by the Company. Each item will be made to
our specifications, at a price that is agreed for each item. The price may
change over time.  Dale Hallaby Fabricating, the independent contractor we have
used to date, works from its 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. We do not have contracts with any contractors at this time, although
we have confirmed they are still available to us.

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 facility.  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 facility 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 facilities produce
ethanol, each will require a distillers license.  This would require the
installation of equipment in each facility which is designed to measure the
amount of alcohol.

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 facilities may be built without the ethanol equipment. The operators of
these facilities 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 facilities in the U.S.
The prototype facility 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. 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
================================================================================
Page-15-

states of the US. The necessary building permit has already been issued for the
first facility.

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 facilities is the farming
communities. The Company intends to advertise its facilities 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.

The Company is expecting to have a screening process in place and at least four
candidates approved by the time the first facility 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
facility is finished and ready to operate.

COMPETITION

The production of beef 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
================================================================================
Page-16-

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 produced using it's process 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.


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 past year the Canadian beef market has suffered as a consequence of the
US closing its border to all beef imports from Canada because of a case of "mad
cow" disease. The US has recently permitted the resumption of beef shipments
which will likely return to pre-scare levels over time. If beef sales do not
return to earlier levels, this could have an adverse effect on the Company.
However, Successful Farming Online reported in January 2000, that consumers will
pay more for beef that is guaranteed good quality.  The Company believes that
beef fed distillers grains, without added hormones, antibiotics or protein from
animal sources, will draw a positive response from health-conscious consumers
looking for healthier food sources.

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 our process is
expected to produce exceptional quality beef which we anticipate marketing as
guaranteed quality beef that 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. A recent 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
================================================================================
Page-17-

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 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. Local
authorities are implementing stricter environmental requirements, in particular
tighter restrictions on the handling of animal waste which has been found to
contaminate ground water.

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.

The Company is working with local equipment operators and investigating the
availability of grants from various government agencies for support in further
testing of the hybrid fuel.

2. Researching efficiencies in facility 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 facility
and with local equipment operators.  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 they are constructed. They would essentially
have to destroy the column to find out how it was made and how it works. While
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Page-18-

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. Other ethanol plants that are being considered, that we are aware of,
are large operations that will produce millions of gallons per year. Our
technology is useless to those operations. Management therefore believes that
the risk associated with the lack of patent protection, described under number
3, RISK FACTORS, on page 3 above, 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 facility, also at no cost to the
Company.

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

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:

On August 4, 1998 and March 23, 1999, the Company's former President 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 resolutions 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.
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Page-19-

(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 authorized
the issuance of 1,000,000 and 900,000 shares respectively to 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
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 22,183,353 were issued and 21,950,600 were
outstanding as at June 30, 2003 and the Company had 237 shareholders of record.

The Company's common stock is traded on the OTC Bulletin Board 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
                                                 2001
                   3rd Quarter          0.75             0.275
                   4th Quarter          0.40             0.15
                                       HIGH               LOW
                                                 2002
                   1st Quarter          0.28             0.05
                   2nd Quarter          0.14             0.045
                   3rd Quarter          0.20             0.06
                   4th Quarter          0.22             0.08
                                                 2003
                   1st Quarter          0.50             0.09
                   2nd Quarter          0.40             0.11

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.

RECENT  SALES  OF  UNREGISTERED  SECURITIES. NIL

Item 6.   MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Background
We are a development stage company that has not yet proved the feasibility of
its planned principal operations.  As at June 30, 2003, our independent auditors
raised a substantial doubt about our ability to continue as a going concern
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Page-20-

because we have not generated any revenues and have conducted operations at a
loss since inception.  To date we do not have any operations that generate
revenue. Until such time as we prove the feasibility of our planned principal
operations, we are likely to continue to experience a cash shortage. Because we
are a developmental stage company, we are 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.

Although our cash reserves at June 30, 2003 were limited to $1247, related
parties have indicated a willingness at the present time to continue to pay
operating expenses and advance funds to pay legal and accounting fees. The
Company therefore believes that it can continue as a going concern in the near
term. These related parties are not obligated to pay Company operating costs,
and therefore, no assurances can be given that they will continue to do so. If
these related parties cease to advance money to pay these operating costs, the
Company may have to cease operations and liquidate.

Our ability to continue to operate in the future depends on us being able to
build our first operating facility. We estimate it will cost approximately $1
million to cover payables, build the first facility, begin the development of
operating activities and deal with potential claimants. This estimate includes
$350,000 for facility construction, $110,000 for cattle, $36,000 for payables
(excluding shareholder loans and accrued executive salaries), $80,000 for
salaries, consumables and other operating expenses until the facility begins to
generate cash flow, and $250,000 for contingencies and the development of
operating activities. The remaining $190,000 constitutes a reserve for any
shortfalls in our estimation process or any unforeseen contingencies.

Management recognizes that to generate long-term cash flow, we need to develop
operating activities. We need to build and begin operating the first bio-fuel
and beef facility 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 facilities want to see a profitable facility in operation before they
commit themselves.

Until we have arranged financing, limited operating activities are planned. In
the absence of operating activities, our cash general and administrative
expenses for the next 12 months are expected to be less than $100 per month,
exclusive of executive compensation, which is deferred, and professional fees
for legal and accounting services.

Shortly after year end June 30, 2003, our wholly owned subsidiary, Hybrid Fuels
(Canada) Inc., borrowed sufficient money from several shareholders and made an
arrangement with Team Steel Building Systems, of Edmonton Alberta, to commence
clearing, compacting and other preparatory work needed to prepare the site for
the first facility. In addition, Team Steel has agreed to provide the credit to
complete the foundations and construct the facility. This first facility is to
be built at Oyama, on approximately six acres of farmland just north of Kelowna,
British Columbia. This location provides the company supervisory ability and
site control. Upon completion of construction, we anticipate being able
to arrange lease financing in order to pay the construction costs.  We
anticipate that having a facility operating will make it possible to raise the
funds necessary to develop operations through either borrowing or through the
sale of securities through a private placement.  This statement is not an offer
of securities or a solicitation of an offer to buy securities. Any offering and
sale of our securities in the United States will be accomplished only by
registration under the Securities Act of 1933 or, absent registration, pursuant
to an applicable exemption from the registration requirement. Any placements
will be made only to investors with pre-existing contacts with Hybrid Fuels and
its authorized representatives.


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

Plan of Operation Assuming Adequate Capital Raised

The discussion in this section assumes that we will succeed in raising the
approximately $1 million that will be used to place our first facility in
service. The major goal of placing the first facility in service is to
demonstrate the economic feasibility of the system. Once this first facility is
operating, we expect to use it as a demonstration and training facility and to
earn revenue from its operation. 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, our projections indicate that
the facility should generate sufficient revenue to pay all of our operating
costs, plus a small surplus which may be used toward development of operating
activities. The financial institutions that have expressed interest in financing
subsequent facilities want to see this first facility generate sufficient cash
flow to pay all operating costs and debt service. We anticipate that the
facility will show sufficient cash flow to make it possible for us to get
approval for financing subsequent facilities.

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 7 above. The cost of building this facility is
anticipated to be approximately $350,000. Approximately $220,000 of this cost is
for foundations and flooring, buildings, the gasifier, the ethanol making
equipment, tanks and machinery. Soft costs, for such items as permits,
engineering and other professional fees, survey and layout, site preparation,
delivery of buildings and materials, rentals, small tools and miscellaneous, are
estimated at $60,000. We estimate we will spend approximately $70,000 for
construction labor and supervision.

Once financing is arranged and we have finalized our lease, we anticipate it
will take approximately two to three months to construct the facility.
Foundations and flooring are expected to take approximately two weeks and the
erection of the buildings are expected take another two weeks to four weeks,
depending on the availability of construction personnel. Once the buildings are
finished, the installation of the gasifier, pens, feed bunks and ethanol making
equipment are expected to take another month. Our plan then provides up to
another two months for any delays, initial start-up and testing, for a total of
up to four months from beginning construction until the facility is fully
operational.

We have designed the barn to accommodate 200 head of cattle.  As we near the end
of testing the facility, we plan to begin the finishing operation for the
cattle, with an initial group of 20 to 25 cattle.  The finishing operation is
designed to function on a staggered basis, so that every two weeks (initially)
we will bring in an additional 20 to 25 cattle.  We will sell the cattle on the
same staggered basis as they complete the finishing process.  As we gain
experience with the facility, we intend to bring cattle in 40 to 50 at a time on
three to five week intervals to take maximum advantage of the size of the trucks
used to transport the cattle.

The cattle will begin the finishing operation in quieting pens where they spend
approximately two weeks being transitioned from their prior diet to the wet
distillers grains diet.  After completing the diet transition, the cattle are
moved into the barn, where, on average, they will spend approximately 100 days
being fed the finishing diet.  At the end of the finishing operation, our plans
for this demonstration facility call for the cattle to be sold at auction.  As
one group of cattle is sold, another takes its place, as both the finishing
operation and our staggered acquisition scheme are scheduled to take
approximately three to four months, depending on how long the finishing
takes.  As a result of using this staggered acquisition scheme, we will not run
the facility at full capacity until approximately four months have passed from
the facility becoming operational.  As a result the cattle we begin selling
================================================================================
Page-22-

during the fourth month, which will generate our initial revenues, will bear a
disproportionate amount of fixed costs compared to cattle sold beginning in the
eighth month.  We believe, however, that at the end of the fourth month, when we
sell the first group of finished cattle, we will have an initial set of data
with which to prepare pro forma information for purposes of estimating cash
flows to prospective financiers of future facilities, rather than having to wait
until the end of the eighth month, to present this information.

We plan to add, on average, between 400 and 500 pounds per head during the
finishing operation.  The weight per head when we acquire the cattle will vary,
principally due to the time of year when the cattle are acquired (most calves
are born in the spring and are ready to be sold as feeder cattle seven months to
a year later. Generally speaking, the older they are, the more they weigh. One
of our fundamental assumptions is that the facility will have the potential to
break even if we can sell finished cattle at prices per pound that are less than
the prices per pound at which we purchase them.  Generally in the cattle
industry feeder cattle sell at a higher price per pound than finished cattle.
The increase in weight during the finishing operation provides the potential for
generating a profit or at least breaking even when selling finished cattle at a
lower price per pound.  For example, assume we purchase a 600-pound animal for
$0.90 per pound, or $540, that we finish to 1000 pounds and sell at $0.85 per
pound, or $850.  The $310 difference between our purchase price and the sale
price would have to cover the consumables purchased to prepare wet distillers
grains for the animal and a pro rata share of the facility's operating costs,
including debt service.  At this time we do not have financial data to support
the breakeven pricing spread for the facility.  Developing this relationship
between the facility's cost structure and tolerable price differentials will
provide critical information for prospective financiers of future facilities.

We expect that as sale prices move close to or exceed purchase prices, the
facility's cattle finishing operation will make a profit.  Cattle prices are
volatile, however, so there is a distinct risk that sale prices for finished
cattle could be below the pricing threshold, resulting in a loss on cattle
finishing.  The greater the price spread, the more important ethanol sales
become to the overall profitability of the facility.  Farmers with integrated
operations who grow their own consumables could have greater price flexibility
on the cattle finishing operation if their cost of producing the consumables is
less than the market price for consumables.  We do not plan to have an
integrated operation at the first facility, so we will have to pay market prices
for our consumables.

We do not plan to sell the ethanol produced by the first facility during at
least the first two to three months of its operation.  We have discussed with a
local owner of a sawmill and trucking company giving him the ethanol for this
two- to three-month period, with a view toward charging him in the future once
he has determined that he can use the ethanol economically without harm to his
equipment.  Once the ethanol plant is at full capacity, we project that the
plant will produce approximately 240 US gallons of ethanol per day, which could
be sold at market prices slightly below the price of the diesel fuel with which
it will be blended.  The price of ethanol will vary, usually in tandem with the
price of diesel.  Assuming a price of $0.70 per gallon for ethanol, monthly
sales of ethanol would be approximately $5,000.

Once we have operated the facility for four months, we believe that the actual
financial results for the finishing operation and ethanol sales will provide us
with the data needed to prepare pro forma financial information assessing the
economic feasibility of the facility.  If the data establishes the economic
feasibility of the facility, we will then be able to implement our business
plan, which is based on identifying third parties who will work with us to
construct and operate their own facilities.  If our assumptions prove wrong or
we encounter unforeseen obstacles, our ability to demonstrate the facility's
economic feasibility may be delayed, or, in the worst case, we may not be able
to establish the economic feasibility of the facility and may have to abandon
================================================================================
Page-23-

the business and liquidate the company.

Plan of Operation Assuming Establishment of Facility Feasibility

The discussion in this section assumes that we will succeed both in raising the
approximately $1 million that will be used to place our first facility in
service and in demonstrating the economic feasibility of the facility.  Once
these milestones are achieved, we intend to have others build, own and operate
additional facilities, while we earn revenues from a variety of sources related
to the facilities.

We plan to earn revenue from:

1.operating the demonstration facility we build and own;
2.profit on the sale of subsequent facilities;
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.

Once we have established the economic feasibility of our demonstration facility,
we intend to operate it and earn revenue from the sale of cattle and ethanol.

We intend to license our technology and provide our expertise to third parties
that want to construct facilities.  We expect to earn a profit and recognize
revenue on the sale of each facility. We plan to charge fees in connection with
the sale of each facility, based on the value to the operator of having us
organize and supervise the construction of the facility and train the operator.
We expect the fees from the sale of the facilities to be sufficient to cover all
of the operating costs we will incur in qualifying candidates, training
operators, supervising construction and start-up, etc., until royalties are
received.  It should be recognized that once the first facility is operational
that may lead to modificaions of the planned methods of operation.

To date, we have received applications from more than 50 farmers who have
expressed interest in constructing a facility. We are currently developing a
screening process to select suitable candidates, and we expect to assist them in
obtaining financing for facility construction. Once we have demonstrated our
demonstration facility's economic feasibility for purposes of obtaining
financing of subsequent facilities, we expect to have selected four operators.
After operators have been selected and have qualified for financing, we plan to
train them and assist in constructing facilities.

We intend 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 the facilities, and leasing them is designed to protect
the secrecy of these most vital pieces of the technology. The lease payments
will generate revenue for us and will be payable monthly in amounts yet to be
finalized.

We plan to charge a royalty for the use of the trade secrets and proprietary
information. The royalty, which is expected to be $2500US per month, per
facility, based on the projected benefits of the use of trade secrets to the
operator, will begin when each facility 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 facilities.

We also expect to charge each operator service fees to cover the cost of ongoing
training, service, technical support, and quality control. We expect these fees
to be in the $150 to $250 per month range.

================================================================================
Page-24-

We expect to enter into contracts with our operators to act as their marketing
arm for the beef and fuel. We expect this arrangement to generate revenue for us
and give us control over greater quantities of both products than any individual
operator would have. We believe this arrangement will provide us with the
ability to make better deals with, and provide more secure delivery to,
distributors and other purchasers. We believe that operators will appreciate
being relieved of these marketing responsibilities, particularly if beef sales
at premium prices generate greater revenue for them. We expect revenue for
Hybrid to come from the resale of the fuel and from a portion of any premium
that the Company can obtain from the sale of the beef.

We expect that many of these operators will require assistance to obtain
financing in order to construct a facility. 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. We have been told that our project should qualify if we
can demonstrate the economic viability of the operation. Once the first facility
is operating the plan is for the Swiss broker to arrange to have the appropriate
representatives of these ECO funds inspect the facility and if it qualifies, to
use them as a source of financing for facility construction, thereby permitting
us to expand our operations.

Operating Results for the year ended June 30, 2003

The loss for the year ended June 30, 2003, was $253,935 compared to $167,850,
for the comparable period the previous year. The increase was made up of $78,000
in legal, accounting and management expenses and $10,000 for consulting
services, all of which were paid for by the issuance of restricted stock. The
loss also includes deferred salary for the President of $72,000 and imputed
interest of $68,733. Imputed interest is interest that is imputed on
non-interest bearing amounts such as deferred executive compensation or amounts
that are advanced to, or paid on behalf of the Company. Executive compensation
shown is the salary for the President, which is deferred until funds are
available to pay his salary.

Liquidity and capital resources
At June 30, 2003 the Company had sufficient cash reserves to pay all of our
ordinary operating expenses for the subsequent 12 months, with the exception of
professional fees.  Related parties have agreed to pay those professional fees
but are not obligated to do so. During the last fiscal year, related parties
have loaned approximately $2,000 to the Company to pay professional fees and
other operating expenses. As we begin to develop operating activities, we will
require increased cash resources, which we intend to raise through borrowing
based on the anticipated performance of the first operating facility. If there
is no other source of funds to pay operating expenses the Company may sell more
shares.

Recent Accounting Pronouncements
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). The requirements of SFAS No.
150 apply to issuers' classification and measurement of freestanding financial
instruments, including those that comprise more than one option or forward
contract. SFAS No. 150 does not apply to features that are embedded in a
financial instrument that is not a derivative in its entirety. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities. It is to be implemented by reporting the
cumulative effect of a change in an accounting principle for financial
================================================================================
Page-25-

instruments created before the issuance date of SFAS No. 150 and still existing
at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption of this standard is not expected to have a material
effect on the Company's results of operations or financial position. In December
2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-
Transition and Disclosure", which amends SFAS No. 123 to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
expands the disclosure requirements of SFAS No. 123 to require more prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The transition provisions of SFAS No. 148 are
effective for fiscal years ended after December 15, 2002. The disclosure
provisions of SFAS No. 148 are effective for financial statements for interim
periods beginning after December 15, 2002. The transition provisions do not
currently have an impact on the Company's financial position and results of
operations as the Company currently has no stock-based employee compensation. In
June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit
or Disposal Activities". The provisions of this Statement are effective for exit
or disposal activities that are initiated after December 31, 2002, with early
application encouraged. This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". This Statement requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. The adoption of this standard did not
have a material effect on the Company's results of operations or financial
position. FASB has also issued SFAS No. 147 and 149 but they will not have any
relationship to the operations of the Company therefore a description of each
and their respective impact on the Company's operations have not been disclosed.

































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

Hybrid Fuels, Inc.
(A Development Stage Company)
June 30, 2003










Item 7. FINANCIAL STATEMENTS
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' Deficit.........................F-5
Notes to Consolidated Financial Statements...............................F-7







































================================================================================
                                        F-1
                            INDEPENDENT AUDITORS' REPORT

To the Stockholders Hybrid Fuels, Inc.
(A Development Stage Company)

We have audited the accompanying consolidated balance sheets of Hybrid Fuels,
Inc. (A Development Stage Company) as of June 30, 2003 and 2002 and the related
statements of operations, stockholders' deficit and cash flows accumulated for
the period from February 16, 1960 (Date of Inception) to June 30, 2003 and the
years ended June 30, 2003 and 2002. 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 auditing standards generally accepted
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.


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, 2003 and 2002, and the results of
its operations and its cash flows accumulated for the period from February 16,
1960 (Date of Inception) to June 30, 2003 and the years ended June 30, 2003 and
2002 in conformity with accounting principles generally accepted 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 accumulated losses 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.


/s/ "Manning Elliott"


CHARTERED ACCOUNTANTS
Vancouver, Canada
September 24, 2003
















================================================================================
                                        F-2
Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Balance Sheets

                                               June 30, 2003      June 30, 2002
                                                      $                  $
--------------------------------------------------------------------------------
ASSETS
Current Assets
Cash                                                   1,247              1,796
--------------------------------------------------------------------------------
Total Assets                                           1,247              1,796
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable                                      35,695             20,458
Accrued liabilities                                   12,500              3,907
Note payable (Note 3)                                 37,106             33,638
Shareholder loans payable (Note 4(a))                201,305            199,635
Amounts owing to a Director (Note 4(b))              290,701            218,699
--------------------------------------------------------------------------------
                                                     577,307            476,337
--------------------------------------------------------------------------------
Redeemable and Restricted Common Stock (Note 6 (c))  223,000            223,000
--------------------------------------------------------------------------------
Contingencies and Commitments (Notes 1 and 6)
Stockholders' Deficit
Common Stock: $0.001 par value; 50,000,000 shares
authorized; 21,950,600 and 21,300,600 shares are
issued and outstanding respectively                   21,950             21,300
Additional Paid-in Capital                           414,385            331,352
Donated Capital (Notes 4 (a) and (b))                243,602            174,869
Deficit Accumulated During the Development Stage  (1,478,997)        (1,225,062)
Total Stockholders' Deficit                         (799,060)          (697,541)
Total Liabilities and Stockholders' Deficit            1,247              1,796





























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

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

                                Accumulated from
                                February 16, 1960         Years Ended
                                (Date of Inception)    June 30,        June 30,
                                to June 30, 2003           2003            2002
                                                            $               $
--------------------------------------------------------------------------------
Revenue                                    -                -               -
--------------------------------------------------------------------------------
Expenses
Assets written-off                       255,512            -               -
Consulting fees                           94,520          88,000          6,520
Executive compensation (Note 4(b))       288,000          72,000         72,000
Filing and regulatory fees                18,644           1,014          2,100
General and administration                63,340           3,665            726
Imputed interest (Note 4)                243,602          68,733         58,932
Interest                                   9,940           5,089          2,722
Investor relations                        16,698            -              -
Other compensation (Note 6(b))           243,463            -              -
Professional fees                        180,143          14,885         23,890
Rent and telephone                        43,142             544            676
Research and development                   8,000            -              -
Travel and promotion                      13,993               5            284
--------------------------------------------------------------------------------
                                       1,478,997         253,935        167,850
--------------------------------------------------------------------------------
Net Loss                              (1,478,997)       (253,995)      (167,850)
--------------------------------------------------------------------------------
Net Loss Per Share                                         (0.01)         (0.01)
--------------------------------------------------------------------------------
Weighted Average Shares Outstanding                   21,600,000     20,962,000

(Diluted loss per share has not been presented as the result is anti-dilutive)



























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

                                Accumulated from          Years Ended
                                February 16, 1960      June 30,        June 30,
                                (Date of Inception)        2003            2002
                                to June 30, 2003            $               $
--------------------------------------------------------------------------------
Cash Flows To Operating Activities
Net loss                              (1,478,997)       (253,935)      (167,850)
--------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash
Common shares issued for services         95,000          78,000           -
Deferred executive compensation          288,000          72,000         72,000
Other adjustment                            (502)           -              -
Imputed interest                         243,602          68,733         58,932
Assets written-off                       255,512            -              -
Change in operating assets and liabilities
Accounts payable and accrued liabilities  48,195          23,830         (5,442)
--------------------------------------------------------------------------------
Net Cash Used In Operating Activities   (549,190)        (11,372)       (42,360)
Cash Flows To Investing Activities
Deposit and advances                    (255,512)           -              -
Net Cash Used By Investing Activities   (255,512)           -              -
--------------------------------------------------------------------------------
Cash Flows From Financing Activities
Proceeds from issuance of note payable    33,638            -              -
Proceeds from advances                   134,468            -            15,000
Advances from a director                   2,699            -            (5,412)
Proceeds from shareholder loans          201,307           1,672          3,380
Proceeds from issuance of
restricted common stock                  223,000            -              -
Proceeds from issuance of common stock   207,369           5,683         31,186
--------------------------------------------------------------------------------
Net Cash Provided By
Financing Activities                     802,481           7,355         44,154
--------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash    3,468           3,468           -
--------------------------------------------------------------------------------
Net Increase (Decrease) in Cash            1,247            (549)         1,794
--------------------------------------------------------------------------------
Cash - Beginning of Period                  -              1,796              2
--------------------------------------------------------------------------------
Cash - End of Period                       1,247           1,247          1,796
--------------------------------------------------------------------------------
Non-Cash Financing Activities
Common shares issued for services        105,000            -             5,000
Common shares issued to settle debt      134,468          78,000         10,000
--------------------------------------------------------------------------------
Supplemental Disclosures
Interest paid                               -               -              -
Income taxes paid                           -               -              -

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









================================================================================
                                        F-5
Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Deficit
Accumulated from February 16, 1960 (Date of Inception) June 30, 2003
                                                               Deficit
                                                               Accumulated
                           # of            Additional          During the
                           Shares          Paid-in   Donated   Development
                       Issued and  Par     Capital   Capital   Stage
                       Outstanding Value                                   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
                      (12,000,000)(12,000) 12,000      -         -          -
--------------------------------------------------------------------------------
Shares issued to effect a reverse merger
                       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
                        1,900,000   1,900  (1,900)     -         -         -
Issuance of shares for cash
                           23,600      24  13,576      -         -       13,600
Imputed Interest             -       -       -       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
                       (1,900,000) (1,900)  1,900      -         -         -
Issuance of shares for no consideration
                        3,000,000   3,000  (3,000)     -         -         -
Issuance of shares pursuant to a subscription agreement
                        1,500,000   1,500 148,500      -         -      150,000
Imputed Interest             -       -       -       30,735      -       30,735
Net loss for the year        -       -       -         -     (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 to settle debt
                        1,100,000   1,100 123,368      -         -      124,468
Imputed interest             -       -       -       59,202      -       59,202
Net loss for the year        -       -       -         -     (312,660) (312,660)
--------------------------------------------------------------------------------
Balance at June 30, 2001
                       20,623,600  20,624 285,242   115,937 (1,057,212)(634,809)
Issuance of shares to settle debt
                          200,000     200   9,800      -          -      10,000
Issuance of shares for services
                          100,000     100   4,900      -          -       5,000
Issuance of shares for cash
                          377,000     376  30,810      -          -      31,186
Imputed interest             -       -       -       58,932       -      58,932
Net loss for the year        -       -       -         -      (167,850)(167,850)
--------------------------------------------------------------------------------



================================================================================
                                        F-6
Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Deficit
Accumulated from February 16, 1960 (Date of Inception) June 30, 2003
(con't)

Balance at June 30, 2002
                       21,300,600  21,300 331,352   174,869 (1,225,062)(697,541)
Issuance of shares to settle debt
                          600,000     600  77,400      -          -      78,000
Issuance of shares for cash
                           50,000      50   5,633      -          -       5,683
Imputed interest             -       -       -       68,733       -      68,733
Net loss for the year        -       -       -         -      (253,935)(253,935)
--------------------------------------------------------------------------------
Balance at June 30, 2003
                       21,950,600  21,950 414,385   243,602 (1,478,997)(799,060)















































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


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 formed a corporation 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 which were filed with the State of
Nevada on June 10, 1998. Also pursuant to the merger the Company changed its
domicile to the State of Nevada.

On May 28, 1998, the Company acquired, by issuing 12,000,000 shares, Hybrid
Fuels, USA, Inc. and 330420 B.C. Ltd., which changed its name to Hybrid Fuels
(Canada) Inc. This acquisition was accounted for as a reverse merger whereby the
shareholder of Hybrid Fuels, USA, Inc. and Hybrid Fuels (Canada) Inc. gained
control of Polo Equities Inc., which changed its name to Hybrid Fuels, Inc. All
historical financial statements are those of Hybrid Fuels, USA, Inc. and Hybrid
Fuels (Canada) Inc. As part of the acquisition, three shareholders holding
12,000,000 previously issued shares returned their shares for cancellation. For
accounting purposes the acquisition was treated as a reverse merger business
purchase of Polo Equities Inc. by Hybrid Fuels, USA, Inc. and Hybrid Fuels
(Canada) Inc. 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".

Pursuant to the above acquisition, the Company acquired a number of proprietary
technologies with the primary objective of the business being to build small
farm scale ethanol facilities, which involves a number of proprietary
technologies exclusively owned by the Company. Hybrid fuel reduces particulate
emissions without reduction in power when used in an unaltered diesel engine.

The Company is a development stage company with management devoting most of its
activities in investigating business opportunities and further advancing its
technologies. The ability of the Company to emerge from the development stage
with respect to any planned principal business activity is dependent upon its
successful efforts to raise additional equity financing and/or attain profitable
operations. There is no guarantee that the Company will be able to complete any
of the above objectives. At June 30, 2003, the Company had a working capital
deficit of $576,060 and an accumulated deficit of $1,478,997. These factors
raise substantial doubt regarding the Company's ability to continue as a going
concern.

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.


2.	Summary of Significant Accounting Policies
(a)     Consolidated Financial Statements
These consolidated financial statements represent the consolidation of the
Company and its wholly owned subsidiary, Hybrid Fuels (Canada) Inc.

(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.


================================================================================
                                        F-8
2. Summary of Significant Accounting Policies (continued)

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


(d)     Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with SFAS No.
128, "Earnings per Share" (SFAS 128). SFAS 128 requires presentation of both
basic and diluted earnings per shares (EPS) on the face of the income statement.
Basic EPS is computed by dividing net income (loss) available to common
shareholders (numerator) by the weighted average number of common shares
outstanding (denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period including stock
options, using the treasury stock method, and convertible preferred stock, using
the if-converted method. In computing Diluted EPS, the average stock price for
the period is used in determining the number of shares assumed to be purchased
from the exercise of stock options or warrants. Diluted EPS excludes all
dilutive potential common shares if their effect is antidilutive.

(e)     Foreign Currency Translation
The Company's functional and reporting currency is the United States dollar.
Foreign currency transactions are primarily undertaken in Canadian dollars and
are translated into United States dollars using exchange rates at the date of
the transaction. Monetary assets and liabilities denominated in foreign
currencies are remeasured at each balance sheet date at the exchange rate
prevailing at the balance sheet date. Foreign currency exchange gains and losses
are charged to operations. The Company has not, to the date of these financials
statements, entered into derivative instruments to offset the impact of foreign
currency fluctuations.

(f)     Comprehensive Loss
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the
reporting and display of comprehensive loss and its components in the financial
statements. As at June 30, 2003, the Company has no items that represent a
comprehensive loss and, therefore, has not included a schedule of comprehensive
loss in the financial statements.

(g)     Financial Instruments
The fair values of cash and equivalents, accounts payable and accrued
liabilities, note payable, and amounts due to related parties approximate their
carrying values due to the immediate or short-term maturity of these financial
instruments.

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







================================================================================
                                        F-9
2. Summary of Significant Accounting Policies (continued)

(i)     Stock-Based Compensation
The Company has elected to apply the intrinsic value principles of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and related interpretations in accounting for its stock options
granted to employees and directors. Under APB 25, compensation expense is only
recorded to the extent that the exercise price is less than the market value of
the underlying stock on the measurement date, which is usually the date of
grant. Stock-based compensation for employees is recognized on an accelerated
basis over the vesting period of the individual options. Stock options granted
to non-employees are accounted for under SFAS No. 123 "Accounting for
Stock-Based Compensation" and are recognized as compensation expense based on
the fair market value of the stock award or fair market value of the goods and
services received, whichever is more reliably measurable.

(j)     Recent Accounting Pronouncements
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). The requirements of SFAS No.
150 apply to issuers' classification and measurement of freestanding financial
instruments, including those that comprise more than one option or forward
contract. SFAS No. 150 does not apply to features that are embedded in a
financial instrument that is not a derivative in its entirety. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities. It is to be implemented by reporting the
cumulative effect of a change in an accounting principle for financial
instruments created before the issuance date of SFAS No. 150 and still existing
at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption of this standard is not expected to have a material
effect on the Company's results of operations or financial position.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure", which amends SFAS No. 123 to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 expands the disclosure requirements of SFAS No. 123 to require more
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The transition provisions of SFAS No. 148 are
effective for fiscal years ended after December 15, 2002. The disclosure
provisions of SFAS No. 148 are effective for financial statements for interim
periods beginning after December 15, 2002. The transition provisions do not
currently have an impact on the Company's financial position and results of
operations as the Company currently has no stock-based employee compensation.

In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities". The provisions of this Statement are effective for
exit or disposal activities that are initiated after December 31, 2002, with
early application encouraged. This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". This Statement requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. The adoption of this standard did not
have a material effect on the Company's results of operations or financial
position.

================================================================================
                                        F-10
2. Summary of Significant Accounting Policies (j)(continued)

FASB has also issued SFAS No. 147 and 149 but they will not have any
relationship to the operations of the Company therefore a description of each
and their respective impact on the Company's operations have not been disclosed.

3.	Note Payable
On September 15, 2000, the Company issued a note for $50,000 CND ($33,638 US)
payable on or before September 15, 2001 plus 8% interest. The Company extended
repayment of the note until the completion of a financing arrangement. Interest
expense of $3,138 has been accrued for the year ended June 30, 2003. The note
payable was $37,106 after translation into US dollars at year end. The Company
incurred a foreign currency translation loss of $3,468 that was charged to
operations. Accrued interest from September 15, 2000 of $7,989 is included in
accounts payable as of June 30, 2003.

4.      Related Party Transactions/Balances

(a)	The controlling shareholder is owed $197,115 for payment of rent, office
expenses and professional fees on behalf of the Company. Amounts owing are
unsecured, non-interest bearing, with no specific terms of repayment. For the
year ended June 30, 2003 this major shareholder paid $2,097 of expenses on
behalf of the Company. Imputed interest of $29,365 (2002 - $29,731), 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 $16,486 of which $13,785
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 $290,701 at
June 30, 2003. These amounts are unsecured, non-interest bearing and due on
demand. Imputed interest of $39,368 (2002 - $29,201), calculated at a rate of
15% per annum, was charged to operations and treated as donated capital.

(c)	On January 23, 2003, pursuant to a Directors resolution, a total of
600,000 shares were issued to officers who are also Directors of the Company to
settle debt of $78,000 owing as of Decmber 31, 2002 for management, legal and
accounting services rendered to the Company.

5.	Common Shares
(a)     During the year ended June 30, 2003, 40,000 shares were issued for cash
of $3,793 at an average price of $0.095 per share and 10,000 shares were issued
for cash of $1,890 at an average price of $0.19 per share.

(b)     On January 23, 2003, 600,000 shares were issued to settle debt referred
to in note 4(c).

(c)     During fiscal 2002 a total of 377,000 shares were issued for cash of
$31,185 at an average price of $0.08 per share.

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

(a)	On August 4, 1998 and March 23, 1999, the Company's former Board of
Directors authorized the issuance of 1,000,000 and 900,000 shares respectively
to individuals without consideration. On August 21, 1999, the current Board of
Directors resolved that share certificates representing ownership of these
1,900,000 shares were issued without adequate consideration being paid to the
Company and were therefore not fully paid and non-assessable. The Company
cancelled the share certificates and indemnified the transfer agent, for any
costs or liability that may incur arising out of the cancellation of such


================================================================================
                                        F-11

6.	Commitments and Contingencies (a)(continued)


shares. The transfer agent removed the 1,900,000 shares from the stockholder
list effectively reversing the issuance. Six of the cancelled certificates,
totalling 550,000 shares, have been endorsed and returned to the Company for
cancellation. The contingencies regarding the cancelled shares relate to anyone
who may have subsequent holder rights, and possibly the individuals who were
issued those shares who may claim that they were issued for due consideration.
The Company has determined that there is no amount to be accrued for future
liabilities associated with claims by subsequent shareholders. To date when
these shares are delivered to a broker for possible resale the broker phones the
Company or the transfer agent and the shares are kept and cancelled. The Company
will continue to monitor this issue. No other contingent liabilities have been
included, as some of the previous directors have been informed verbally of the
cancellation. No formal legal demand has been made as the former administration
has failed to provide addresses despite a number of requests.


(b)	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)	Between October 1998 and June 1999, the previous administration sold a
total of 361,120 common shares of the Company to 34 subscribers on the basis of
an Offering Memorandum ("Offering") that contained a significant number of
inaccuracies. A total of $223,000 was raised pursuant to this Offering. 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 232,753 shares, representing $158,000. These shares are issued
but not considered outstanding. The remaining 11 subscribers, who paid $65,000
for 128,367 shares, have not responded to the offer. These subscriptions are
recorded as redeemable and restricted common shares until rescission rights have
been revoked.

7.	Income Tax
Potential benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has incurred net operating
losses of $704,000 since inception on February 25, 1960. Pursuant to SFAS No.
109 the Company is required to compute tax asset benefits for net operating
losses carried forward. Potential benefit of net operating losses have not been
recognized in these financial statements because the Company cannot be assured
it is more likely than not it will utilize the net operating losses carried
forward in future years. The components of the net deferred tax asset at June
30, 2003 and 2002, and the statutory tax rate, the effective tax rate and the
elected amount of the valuation allowance are indicated below:




================================================================================
                                        F-12
7.	Income Tax (con't)

                                              2003                2002
                                               $                   $
--------------------------------------------------------------------------------
Net Operating Loss                          113,000              37,000
Statutory Tax Rate                               34%                34%
Effective Tax Rate                             -                   -
Deferred Tax Asset                           38,420              12,580
Valuation Allowance                         (38,420)            (12,580)
Net Deferred Tax Asset                         -                   -
--------------------------------------------------------------------------------


8.	Subsequent Event
Services provided to the Company during the fiscal year ended June 30, 2003 with
a fair value of $10,000 were settled by the issuance of 40,000 common shares
subsequent to year end.














































================================================================================
Page-39-

ITEM  8.  CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS

During the Company's two fiscal years ended June 30, 2002 and 2003, 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, 2003, 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     62     President and Director,           June 28, 1999

John Morrison   69     Director, Secretary and           August 6, 2000,
                       Chief Financial Officer,

Gordon Colledge 59     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.

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

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. During January 2003, the Company
issued 600,000 restricted shares to three officers who are also directors for
legal, accounting and management services rendered to the Company. These
services were valued at $78,000.00. 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 2003 72,000 -0-    -0-      -0-         -0-        -0-     -0-
            2002 72,000 -0-    -0-      -0-         -0-        -0-     -0-
President,  2001 72,000 -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.









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

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

CHANGES IN CONTROL

The following table sets forth as of June 30, 2003, 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 21,990,600 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.

Title  of   Name and Address of     Amount and Nature of     Percentage of
Class       Beneficial Owner        Beneficial Ownership     Class
-------------------------------------------------------------------------
Common      Donald  Craig                    1,850,000               7.97%
            12650 Ponderosa Road
            Winfield, B.C. V4V 2G8

Common      Clay  Larson  (1)                1,200,000               5.46%
            740  Westpoint  Crt.
            Kelowna,  B.C. V1W 2Z4

Common      John Morrison (1)                  500,000               2.27%
            439 Viewcrest Dr.,
            Kelowna, B.C.
            V1W 4K1

Common      Gordon Colledge (1)                412,000               1.82%
            2213 27th Avenue
            Lethbridge, AB
            T1K 6K4

Common      Auchengrey Ltd.                   2,000,000               9.1%
            Diane Smith,
            PO Box 3321,
            Tortula, BVI.

Common      Killaloe Ltd.                     2,000,000                9.1%
Don Murray,
Drake Chambers,
Tortula, BVI

--------------------------------------------------------------------------------
Common      Total Officers and Directors
            as a  Group (3 Persons)           2,112,000              10.06%
--------------------------------------------------------------------------------

(1)  Officer and/or director.

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











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

ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

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

In 1998, Donald Craig, who owns more that 5% of the issued shares of the
Company, loaned $499,059 to the Company, of which $365,590 was repaid in cash.
He also paid expenses and loaned money to the Company of $62,786, with the
result that the Company owed him $196,255 as of June 30, 2001. The loan is
non-interest bearing, payable on demand with no fixed terms of repayment.
Imputed interest is calculated at 15% to reflect the risk of the loan and that
interest is charged to operations and treated as donated capital. During 2002
other shareholders loaned $3,380 to the Company to pay operating expenses,
increasing all shareholders loans to $199,635.

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.

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.
None

(c) Exhibit No.
3.1 Articles of Incorporation (1)
      3.2 Bylaws (1)
      4.1 Specimen stock certificate. (2)
21   List of Subsidiaries

(1)Exhibits 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.

ITEM  14.  CONTROL AND PROCEDURES

Within 90 days prior to the filing of this Form 10KSB, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's President and Chief Financial Officer, of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13-14.  Based upon that
evluation, the Company's President and Chief Financial Officer concluded that
the Company's disclosure controls and procedures are effective in timely
alerting them to material informtion relating to the Company required to be
included in this Form 10KSB.

There have been no significant changes in the Company's internal controls or in
other factors, which could significantly affect the internal controls ubsequet
to the date the Company carried out its evaluation.





================================================================================
Page-43-
                                   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: September 26, 2003.

By: /s/ Clay Larson                        By: /s/ John Morrison
---------------------                      ------------------------
Director, President & CEO                  Director & CFO



















































================================================================================
Page-44-
CERTIFICATIONS

Certification of Principal Executive Officer

I, Clay Larson, certify that:
  1.  I have reviewed this quarterly report on Form 10-Q of Hybrid Fuels Inc.;

  2.  Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

  3.  Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

  4.  The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Echange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a) designed such disclosure controls and procedures to ensure that
      material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this quarterly report is
      being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

      c) presented in this quarterly report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date;

  5.  The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)  all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

      b)  any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

  6.  The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

September 26, 2003                           /s/ Clay Larson
                                --------------------------------------
                                           Clay Larson
                                Chief Executive Officer and President
                                (Principal Executive Officer)
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Page-45- CERTIFICATIONS (continued)

Certification of Principal Financial Officer

I, John Morrison, certify that:

  1.  I have reviewed this quarterly report on Form 10-Q of Hybrid Fuels Inc.;

  2.  Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

  3.  Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

  4.  The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Echange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a) designed such disclosure controls and procedures to ensure that
      material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this quarterly report is
      being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

      c) presented in this quarterly report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date;

  5.  The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)  all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

      b)  any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

  6.  The registrant's other certifying officers and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

September 26, 2003                                   /s/ John Morrison
                                          --------------------------------------
                                                   John Morrison
                                               Chief Financial Officer
                                            (Principal Financial Officer)
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Page-46-
Exhibit 21

List of Subsidiaries

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


























































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