Item 2. Management's Discussion and Analysis or Plan of Operation
FORWARD-LOOKING STATEMENTS
This Form 10-QSB contains forward-looking statements. The words "anticipate", "believe", "expect", "plan", "intend", "estimate", "project", "could", "may", "foresee", and similar expressions identify forward-looking statements that involve risks and uncertainties. You should not place undue reliance on forward- looking statements in this Form 10-QSB because of their inherent uncertainty. Actual results could differ materially from the results discussed in the forward-looking statements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations.

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, including our Annual Report on Securities and Exchange Commission ("SEC") Form 10-KSB for the year ended June 30, 2001, as amended.

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, 2002. 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, lack of operations and the absence of a listing for its common stock on a major exchange, 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 will be unable to continue to operate in the long term.

However, management believes that the Company's resources should be adequate to continue operating and pursue its business development strategy during fiscal 2002.

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 the balance of the fiscal year 2002 with our current cash,which was obtained from the sale of securities. However, our cost estimates do not include provisions for any contingency, unexpected expenses or increases in costs that may arise.

Item 2. RISK FACTORS(con't)
3. Our intended business depends on the protection of our intellectual property and may suffer if we are unable to adequately protect our intellectual property. We have not sought protection of our intellectual property through any patents, but have elected to protect them through secrecy and non-disclosure agreements. Because they are 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 circumvented, invalidated 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 March 31, 2002, of $1,172,974.

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 and have not been able to raise the capital necessary to build our first facility and commence operating activities and as such, we do not know when we may be able to begin operations. 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. There can be no assurance that we can raise the money to build the first plant and if we succeed in building the first operating plant, 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 plants 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. Our Common Stock is traded on the "Pink Sheets" and there is no assurance that it will ever be listed on any major stock exchange. While our stock is on the "Pink Sheets", it has an effect on the perception of us amongst potential investors which makes it very difficult to raise capital. It can also impact the dilution associated with any financing.

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

Item 2. RISK FACTORS(con't)

other needed personnel.

12. 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, if any. 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 properly be able to manage growth, especially if such growth is more rapid than anticipated.

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, 2000 and 2001, 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.

RESULTS OF OPERATIONS

The loss for the present quarter is $49,190 compared to $73,096 for the comparable quarter last year. The loss for the same quarter last year was higher largely due to advances of $27,999 written off, which is not likely to reoccur. The higher imputed interest this quarter of $28,255 compared to $16,307 for the same period last year results from increased amounts owing to the President as a result of the increase in deferred salary over the same quarter last year. The loss for this quarter includes amounts of $18,000, which is deferred salary for the President and $28,255 imputed interest, which do not represent a cash outlay. These non-cash items total $46,255. Working capital was obtained from cash received from the sale of shares.

At the end of the quarter, the Company had cash reserves of $4114, which was the balance of cash received from the sale of 68,700 shares for $5,481. The shares were sold when the shares were trading at 8 cents. This cash should be sufficient to pay all operating costs for the next three to six months. In the absence of operating activities, the Company's general and administrative expenses for the next 12 months that require a cash outlay are expected to be less than $500 per month, exclusive of professional fees and executive compensation which is deferred.

At the beginning of the quarter, the Company had an agreement in principle for the sale of a license to use the technology within the Province of Quebec, Canada. At that time, the parties were negotiating, but no definitive agreement had been signed and no money had changed hands. By the end of the quarter, negotiations had failed to make any progress and management concluded that it was unlikely we would be able to conclude a satisfactory agreement with the prospective licensee and we therefore broke off negotiations on March 28th, 2002.

PLAN OF OPERATION

Item 2. Plan of Operation (con't)
The manure and used bedding straw are cleaned up frequently, and burned in a gasifier, thus removing the media in which disease might otherwise grow and creating a heat source that is used in the ethanol making process. According to the specifications provided by the gasifier manufacturer, the gasifier will generate more than enough heat energy for heating the grain and water prior to fermentation and for the distillation of the ethanol from the beer after fermentation.

The intention is to mix the ethanol with a proprietary emulsifier and diesel, to create the hybrid fuel. When this fuel was tested at The British Columbia Institute of Technology in June, 1996, in an unaltered diesel engine, it reduced opacity (black smoke emissions) by over 65% and the NOx emissions by over 22%, without any significant loss of power.

For a more detailed description of the entire process, plus sources of information and references, the reader is referred to the Company's amended Form 10-KSB for the year ended June 30, 2001, as filed with the SEC.

The Company intends to sell these facilities (except the column and spinner) to farm operators, preferably those who grow sufficient grain to supply a plant. Management believes this would be about 40,000 bushels of barley or other suitable grain for a plant which would feed 200 head of cattle on a continually rotating basis. Each plant consists of a barn, a second building housing the ethanol making equipment and the gasifier to burn the waste.

Hybrid plans to earn revenue from the sale and operation of these facilities in the following manner:
1. profit on the sale of each facility;
2. royalties and service fees to be paid by each operator;
3. the lease of the spinner and column to each operator;
4. an incentive for obtaining premium prices from the marketing of the finished animals;
5. income from handling the sale of the fuel.

The Company expects to earn a profit and recognize revenue on the sale of each facility. The Company intends that the profit on the sale of each facility will be sufficient to cover construction, training and operating expenses for each facility until it begins to pay royalties.

It is intended that each facility will pay royalties for the license to use the technology. The Company believes that operators will pay a royalty for the technology because it offers them the opportunity to add value to grain that the operator produces by;
1. feeding it to cattle and marketing the finished animals;
2. generating higher than average weight gains in the fed cattle; and
3. generating an extra source of revenue from the production of the ethanol from the grain.

Initially the royalty paid by each facility is expected to be $2500US per month starting when each facility begins operation. The Company may offer incentives in the form of reduced royalties to the first operators who make early commitments to purchase plants.

In addition, the Company anticipates that it will charge each operator a service fee to cover the Company's costs of regular visits for ongoing training, service, technical support, and quality control. These fees are expected to be in the $150 to $250 US per month range.

Item 2. Plan of Operation (con't)
The Company intends to lease these to the operators in order to maintain more control over these devices to protect the secrecy of their design and operation. The leases of these items are expected to create a source of revenue for the Company. The amount of the leases will depend on lending and lease rates at the time of entering into the leases and is therefore not yet determined.

The Company intends to act as the marketing arm for the sale of both the beef and the fuel to ensure control of greater quantities to market in order to ensure supplies to customers and to free each operator of having to market his own production.

The Company anticipates entering into agreements with each of its operators by which they will pay the Company an incentive for obtaining premium prices for the sale of the beef. This is expected to be in the form of a percentage of any premium realized.

We believe the Dalum test trials demonstrated the quality of the beef produced by this process. As a result, Cargill Foods, which purchased the first lot of heifers at the highest price of the day, verbally offered to pay a premium of $0.10 per pound for all of the beef that could be produced by this process. They also offered to pick up subsequent lots at the plant, which would eliminate the freight and auction costs. The Company sees no reason why the beef produced by the process will not be as good as the beef produced at Dalum, which the Company should be able to market at premium prices. (For more details on the quality of the beef from the results of the operation of the Dalum plant, see the Company's Form 10 KSB for June 30, 2001, as amended.)

Initially, when the first plant or two begin producing beef, it is anticipated that the finished beef will be sold at auction. Once we have a supply of beef, we anticipate approaching Cargill to see if we can revive the offer regarding payment of a premium for the beef, while the Company seeks other sources of premiums.

The Company has investigated a number of possible sources of premiums, including markets in the Far East and Europe, high-end restaurants, cruise ships and specialty meat markets that sell organic and hormone free meat. As a result of making these contacts, the Company believes that it will be able to generate premium prices from the sale of the beef and earn revenue from doing so. However, it must be noted that we do not have any agreements in place that would guarantee premium prices for the beef and are unlikely to be able to make any such agreements until we have one or more plants producing.

Management recognizes that to generate premium prices, it would be advantageous to be able to control the processing, marketing and distribution of the finished beef. A number of possibilities have been considered with the most promising being a packing plant known as Blue Mountain Packers. This packing plant and its officers and directors are not in related to the Company, or any of its officers or directors. This plant is located about 90 miles from our head office, and has the capacity to process around 1000 animals per day. It is also built to the specifications necessary to process beef for the European and Far East markets and would therefore fit into our plans. The packing plant has the potential to become a source of cash flow for the Company and a way to possibly enhance returns from the anticipated beef raising portion of our intended operations.

Although the packing plant is still available and not operating, the Company does not have an agreement to purchase, and is not negotiating to purchase, the plant as we have not been able to raise the money to purchase it and put it into operation. Furthermore, we do not at present have anyone interested in providing such financing. However, the Company continues to search for money to acquire the packing plant. No agreement will be made to purchase the packing plant until sufficient money is committed to pay the purchase price and cover operating expenses until positive cash flow is achieved.

Item 2. Plan of Operation (con't)

Another expected source of revenue is the marketing of the Hybrid fuel. The ethanol is "de-natured" with the addition of about 1% or 2% diesel in the distillation column and is then stored on site in an appropriate tank, to be picked up like bulk milk and transported to a mixing facility to be further mixed into the appropriate ratio. The Company's intention is to purchase the fuel in order to accumulate sufficient quantities to guarantee supplies to end users and relieve the operators of the need to find a market for their production. The Company plans to generate revenue by purchasing the fuel mixture from the individual operators at a discount from wholesale value, to cover the costs of transport and mixing. After mixing, the Company intends to sell the finished fuel to distributors or end users.

With regulators looking for fuels that burn cleaner and other ways to decrease engine emissions, the Company believes it will be able to develop adequate markets for the hybrid fuel as quantities increase. It should also be noted that since we are building small production units, the pace of building can be increased or decreased to closely match market development for both the fuel and the beef.

To date, the Company has received applications from more than fifty farmers who are interested in acquiring facilities. However, the Company needs to build an operating facility to demonstrate to prospective applicants that the technology works as advertised. It is also a first step toward creating operating activities and cash flow. The prospective operators want to see a plant in operation before they commit themselves and so do the banks, leasing companies and other financial institutions we have talked to about providing financing to build facilities. The institution that finances the construction of each facility is expected to be given a mortgage or similar security on the facility.

The Company has found a suitable location for its first plant, which is expected to be built in Oyama, near Kelowna, B.C., Canada. So far we have failed in our attempts to raise the money to build the first plant. We have been unable to raise money through the sale of stock because of a lack of a current market, largely due to the fact that the stock is traded on the "Pink Sheets". Conversely, because we have been unable to raise money, we have been unable to begin operations that would create cash flow that could help us get back onto the OTC Bulletin Board or other suitable exchange which might also help to develop a current market for our stock.

LIQUIDITY REQUIREMENTS
The lack of long term, adequate financing continues to be of great concern to management. Until such time as the Company sells and constructs operating facilities and recognizes revenue, the Company will probably continue to experience a cash shortage. The Company will require additional capital in the near future in order for it to continue as a going concern in the long term.

Because the Company is a developmental stage company, it is unlikely to be able to borrow money from banks and other traditional financial institutions. For the coming quarter, management will concentrate on raising money to cover liquidity requirements and complying with public reporting requirements. Our stock is presently traded on the "pink sheets" and during the next quarter, we will be responding to any comments from the SEC in order to pass the comment stage so that we can move off the "Pink sheets" and back onto the OTC Bulletin Board or some other suitable exchange. While our stock is on the "Pink Sheets", it has an effect on the perception of us amongst potential investors which makes it very difficult to raise capital.

Item 2. Liquidity Requirements (con't)

generating cash flow.

We estimate that once we have sufficient cash, it will take four to six months to complete construction and begin operations. It is expected to take a further 3.5 to 4 months after we begin operations to finish the first group of animals, and sell them to realize cash flow. The cash flow from the plant is projected to cover all of the labor and operating costs and produce a surplus which could then be used to pay for sales, marketing and other development activities.

If we are unable to raise cash by selling shares, we estimate that we have sufficient cash reserves to continue as a going concern for the next 12 months, exclusive of the cash required to pay fees for legal and accounting services. Related parties have agreed to continue to pay these operating expenses and advance funds to pay legal and accounting fees, but they are not obligated to do so and therefore no assurances can be given. In the meantime operating expenses will be kept to a minimum until money is raised or revenue generated.