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

FORM 10-QSB

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

For the Quarterly Period Ended December 31, 2002

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.
(Exact name of registrant as specified in its charter)

              NEVADA                            88 0384399
(State or other jurisdiction
of incorporation or organization)           (I.R.S. Employer Identification No.)

PO Box 41118 RPOS Winfield, B.C.,                               V1V 1Z7
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code: 250-868-0600

Indicate by check mark whether 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 shorter period that registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.

Yes [X] No[]

The number of shares outstanding of the registrant's common stock as of February 7, 2003 was 21,945,600.

The number of shares issued of the registrant's common stock as of February 7, 2003 was 22,183,353.

Transitional Small Business Disclosure Format (Check one):
Yes [] No[X]


HYBRID FUELS, INC.

FORM 10-QSB

For the quarter ended December 31, 2002

INDEX

Part I - Financial Information

       Item 1.  Financial Statements                                    Page

Balance sheet as of December 31, 2002...................................F-3

Statements of operations for the quarters ended
December 31, 2002 and 2001..............................................F-4

Statements of cash flows for the three months
ended December 31, 2002 and 2001........................................F-5

Notes to Financial Statements...........................................F-6

      Item 2.   Management's Discussion and Analysis or
Plan of Operation.......................................................12

Part II - Other Information.............................................20

Signature...............................................................20
Certification...........................................................21


F-3

Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Balance Sheets

--------------------------------------------------------------------------------
                                                     December 31,       June 30,
                                                     2002               2002
                                                     (unaudited)       (audited)
                                                         $                 $
--------------------------------------------------------------------------------
ASSETS

Current Assets
Cash                                                        325           1,796
--------------------------------------------------------------------------------
Total Assets                                                325           1,796
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
Accounts payable                                         31,025          20,458
Accrued liabilities                                      78,500           3,907
Note payable (Note 4)                                    33,638          33,638
Shareholder loan payable (Note 6(a))                    199,005         196,255
Amounts owing to a Director (Note 6(b))                 254,718         218,699
--------------------------------------------------------------------------------
                                                        596,886         476,337
--------------------------------------------------------------------------------
Temporary Equity (Note 7(d))                            223,000         223,000
--------------------------------------------------------------------------------
Stockholders' Deficit

Common Stock (Note 7): $0.001 par value;
50,000,000 shares authorized 21,350,600
and 21,300,600 shares are issued
and outstanding respectively                             21,350          21,300

Additional Paid-in Capital                              336,985         331,352
Donated Capital - Imputed Interest (Notes 5 and 6)      208,141         174,869
Deficit Accumulated During the Development Stage     (1,308,028)     (1,225,062)
--------------------------------------------------------------------------------
Total Stockholders' Deficit                            (831,192)       (697,541)
--------------------------------------------------------------------------------
Total Current Liabilities and Stockholders' Deficit         325           1,796

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

(See Accompanying Notes to the Consolidated Financial Statements)


F-4

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

                       Accumulated from     Three months          Six months
                       February 26, 1960        ended               ended
                       (Date of Inception)   December 31,        December 31,
                       to December 31, 2002  2002     2001        2002    2001
                             $                  $        $          $        $
--------------------------------------------------------------------------------
Revenue                      -               -        -          -        -
--------------------------------------------------------------------------------
Expenses

Consulting fees            84,520        78,000       -       78,000      5,473
Deposits & Advances
written-off(Note 3)       255,512            -        -         -        -
Disputed compensation
(Note 8(b))               243,463            -        -         -        -
Executive compensation
(Note 6(b))               252,000        18,000    18,000     36,000     36,000
Filing and regulatory fees 18,327           434       -          691      1,561
General and administration 59,716                      80         41        113
Interest                    6,969         1,348       -        2,118      2,049
Imputed interest
(Notes 5 and 6)           208,141        16,937     7,678     33,873     14,990
Investor relations         16,698            -        -         -        -
Professional fees         175,738         8,883       -       10,480      5,802
Rent and telephone         42,951           226       212        353        350
Research and development    8,000                     -         -        -
Travel and promotion       13,993                      23          5        234
--------------------------------------------------------------------------------
                        1,212,915       123,828    25,993    161,561     66,572
--------------------------------------------------------------------------------
Net Loss               (1,212,915)     (123,828)  (25,993)  (161,561)   (66,572)
--------------------------------------------------------------------------------
Net Loss Per Share                         (.01)     (.01)      (.01)      (.01)
--------------------------------------------------------------------------------

Weighted Average Shares Outstanding 21,345,600 21,053,600 21,325,600 21,053,600

(See Accompanying Notes to the Consolidated Financial Statements)


F-5

Hybrid Fuels, Inc.
(A Development Stage Company
Consolidated Statements of Cash Flows
(unaudited)

                                                          Six Months ended
                                                            December 31,
                                                       2002              2001
                                                         $                 $
--------------------------------------------------------------------------------
Cash Flows To Operating Activities

Net loss                                              (161,561)         (66,572)

Non-cash items

Adjustment to reconcile net loss to cash
Imputed interest                                        33,873            14,990

Change in non-cash working capital items
Accounts payable and accrued liabilities                85,160             9,485
--------------------------------------------------------------------------------
Net Cash Used In Operating Activities                  (42,528)         (42,097)
--------------------------------------------------------------------------------
Net Cash Used By Investing Activities
--------------------------------------------------------------------------------
Cash Flows From Financing Activities
Common Stock issued                                      5,673             6,300
Amounts owing to a Director                             36,019            34,305
Shareholder loans payable                                 (630)            1,490
--------------------------------------------------------------------------------
Net Cash Provided By Financing Activities               41,062            42,095
--------------------------------------------------------------------------------
Net Increase (Decrease) in Cash                         (1,471)              (2)
Cash - Beginning of Period                               1,796                 2
--------------------------------------------------------------------------------
Cash - End of Period                                       325              -
--------------------------------------------------------------------------------
Non-Cash Financing Activities
Value of common stock issued for settlement of debt                       10,000
Value of common stock issued for services                                  5,000

(See Accompanying Notes to the Consolidated Financial Statements)


F-6

Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements

1. Nature of Operations and Continuance of Business The Company was originally incorporated in the State of Florida on February 16, 1960. After a number of name changes the Company changed its name to Polo Equities, Inc. on June 3, 1993. Prior to May, 1998 the Company had no business operations.

In May 1998, the Company caused a Nevada corporation to be formed under the name Polo Equities, Inc., (Polo) (a Nevada corporation), with authorized capital of 50,000,000 common shares of $.001 par value. The two companies then merged pursuant to Articles of Merger adopted May 28, 1998 and filed with the State of Nevada on June 10, 1998, which changed its domicile to Nevada.

On May 28, 1998, the Company acquired, by issuing 12,000,000 shares, Hybrid Fuels, USA, Inc. and 330420 B.C. Ltd., which changed its name to Hybrid Fuels (Canada) Inc. This acquisition was accounted for as a reverse merger whereby the shareholder of Hybrid Fuels, USA, Inc. and Hybrid Fuels (Canada) Inc. gained control of Polo Equities Inc. which changed its name to Hybrid Fuels, Inc. All historical financial statements are those of Hybrid Fuels, USA, Inc. and Hybrid Fuels (Canada) Inc. As part of the acquisition, three shareholders 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. No amount was allocated to the intellectual asset as it was acquired from a related party and the transfer had no cost basis associated with it. There was no public market for the shares of Polo Equities, Inc. at the time of the reverse merger. The Company operates through these two wholly-owned subsidiaries.

On May 29, 1998 the Company changed its name to Hybrid Fuels, Inc., herein "the Company". On June 10, 1998 the Company began trading on the OTC Bulletin Board under the symbol "HRID" and in December, 1999 was moved to the "Pink Sheets".

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. Other proprietary technology involves the use of a bio-gas burner which burns manure and bedding straw. This technology eliminates ground and ground-water contamination and produces most of the energy required for the facility by supplying heat for fermentation and vaporization and for the operation of a greenhouse, if desired. Another exclusive proprietary technology is a vegetable based formula which allows diesel and ethanol to emulsify. This hybrid fuel reduces particulate emissions without reduction in power when used in an unaltered diesel engine.

The Company is in the early development stage. In a development stage company, management devotes most of its activities in investigating business opportunities and further advancing its technologies. Because of a serious working capital deficiency and significant operating losses from inception, there is substantial doubt about the ability of the Company to continue as a going concern.


F-7

1. Nature of Operations and Continuance of Business (con't)

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 two subsidiaries Hybrid Fuels, U.S.A., Inc, and Hybrid Fuels (Canada) Inc.

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

(c) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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) Accounting for Stock-Based Compensation SFAS No. 123, "Accounting for Stock-Based Compensation," requires that stock awards granted be recognized as compensation expense based on fair values at the date of grant. Alternatively, a company may account for stock awards granted under Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and disclose pro forma income amounts which would have resulted from recognizing such awards at their fair value. The Company has elected to account for stock-based compensation for employees under APB No. 25 and make the required pro forma disclosures for compensation expense. Stock based compensation for non-employees are accounted for using SFAS No. 123.

(e) 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. Loss per share for December 2002 and December 2001 does not include the effect of the potential conversions of stock options, warrants or convertible debentures, as their effect would be anti-dilutive.

(f) Foreign Currency Transactions/Balances Transactions in currencies other than the U.S. dollar are translated at the rate in effect on the transaction date. Any balance sheet items denominated in foreign currencies are translated into U.S. dollars using the rate in effect on the balance sheet date.


F-8

2. Summary of Significant Accounting Policies (continued)

(g) Interim Financial Statements These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

h) Recent Accounting Pronouncements

On June 29, 2001, SFAS No. 141, "Business Combinations," was approved by the Financial Accounting Standards Board ("FASB"). SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Goodwill and certain intangible assets will remain on the balance sheet and not be amortized. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs may be necessary. The Company implemented SFAS No. 141 on July 1, 2001 and its impact is not expected to be material on its financial position or results of operations.

On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets," was approved by FASB. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this statement. The Company adopted SFAS No. 142 on April 1, 2002 and its impact is not expected to have a material effect on its financial position or results of operations.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligation." SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, and will require companies to record a liability for asset retirement obligations in the period in which they are incurred, which typically could be upon completion or shortly thereafter. The FASB decided to limit the scope to legal obligations and the liability will be recorded at fair value. The effect of adoption of this standard on the Company's results of operations and financial positions is being evaluated.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. It provides a single accounting model for long-lived assets to be disposed of and replaces SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." The Company adopted SFAS No. 144 on April 1, 2002. The effect of adoption of this standard on the Company's results of operations and financial position is not expected to be material.


F-9

h) Recent Accounting Pronouncements (con't)

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 Company will adopt SFAS No. 146 on January 1, 2003. The effect of adoption of this standard on the Company's results of operations and financial position is being evaluated.

FASB has also issued SFAS No. 145 and 147 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. Deposit on Plant

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

4. Note Payable On September 15, 2000, the Company issued a note for Cnd$50,000 ($33,638) due and payable on or before September 15, 2001 plus 8% interest. Repayment of the note has been extended until completion of a financing. Interest of $6,374 has been accrued for the 27 months ended December 31, 2002 and is included in accounts payable.

5. Advances Payable Prior to the year ended June 30, 2001, a non-related company coordinated investor relations services for the Company, paid expenses of $69,248 on behalf of the Company and loaned the Company Cnd$78,000 ($50,220) for a total amount owing of $119,468. This debt was settled in June 2001 by the issuance of 1,000,000 restricted common shares of the Company. These advances were non-interest bearing and unsecured until the settlement date. Imputed interest of $16,291, calculated at a rate of 15% per annum, was charged to operations and treated as donated capital during fiscal 2001 and 2000.

F-10

6. Related Party Transactions/Balances
(a) Cash loans of $499,059 were advanced to the Company by the major shareholder. A total of $365,590 was repaid with cash. The controlling shareholder also paid office, rent and professional fees totalling $62,786 on behalf of the Company. The balance of $199,635 is currently owing without interest or specific repayment terms. Imputed interest of $14,973 (2001 - $7,900), 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 $13,787 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 $252,000 at December 31, 2002. These amounts are unsecured, non-interest bearing and due on demand. Imputed interest of $18,900 (2001 - $7,090), calculated at a rate of 15% per annum, was charged to operations and treated as donated capital.

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

(d) On September 19, 2001 pursuant to a directors' resolution, a total of 200,000 shares were issued to a director/officer of the Company to settle $10,000 owing as at June 30, 2001. On October 18, 2001, a further 100,000 shares were issued to an arms-length party for services rendered to the Company, valued at $5,000.

7. Stockholders' Equity

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

(b) On August 4, 1998 and March 23, 1999, the Company's former Board of Directors authorized the issuance of 1,000,000 and 900,000 shares respectively to individuals without consideration. On August 21, 1999, the current Board of Directors resolved that share certificates representing ownership of these 1,900,000 shares were issued without adequate consideration being paid to the Company and were therefore not fully paid and non-assessable. The Company cancelled the share certificates and indemnified the transfer agent, for any costs or liability it may incur in any way arising out of the cancellation of such shares and the transfer agent removed the 1,900,000 shares from the stockholder list effectively reversing the issuance. Six of the cancelled certificates, totalling 550,000 shares, have been endorsed and returned to the Company for cancellation. The contingencies regarding the cancelled shares relate to anyone who may have subsequent holder rights, and possibly the individuals who were issued those shares who may claim that they were issued for due consideration. The Company has determined that there is no amount to be accrued for future liabilities associated with claims by subsequent shareholders. To date when these shares are delivered to a broker for possible resale the broker phones the Company or the transfer agent and the shares are kept and cancelled. The Company will continue to monitor this issue. No other contingent liabilities have been included as some of the previous directors have

F-11

7. Stockholders' Equity (b)(con't) been informed verbally of the cancellation. No formal legal demand has been made as the former administration has failed to provide addresses despite a number of requests.

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

Since these shares have been resold to innocent third parties they must be considered outstanding. The Company intends to sue the investors for the balance due on the notes, however the Company believes the balance is uncollectible.

(d) Between October 1998 and June 1999, the previous administration sold a total of 361,120 common shares of the Company to 34 subscribers on the basis of an Offering Memorandum that contained a significant number of inaccuracies. A total of $223,000 was raised pursuant to this Offering. The current administration has concerns regarding possible misstatements, omissions and misleading statements. On the advice of legal counsel, the Company offered these 34 subscribers the option of receiving restricted stock as the Company did not and does not have the funds to repay these subscribers. Those who opted to receive restricted stock were also given an undertaking that they would receive a rescission offer when the Company was in a position to repay their money plus appropriate interest, in return for a return of the restricted stock, or they could elect to retain the stock. To date, 23 subscribers, have, pursuant to this offer received 237,753 shares, representing $158,000. These shares are issued but not considered outstanding. The remaining 11 subscribers, who paid $65,000 for 123,367 shares, have not responded to the offer. These subscriptions are recorded as temporary equity until rescission rights have been revoked.

(e) See Note 5 for 1,000,000 restricted common shares issued to a non-related company to settle debt of $119,468 during fiscal 2001.

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

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

(h) On October 18, 2001, 100,000 shares where issued for services referred to in Note 6(d).

(i) 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.

(j) During the three months ended September 30, 2002 a total of 40,000 shares were issued for cash of $3,783 at an average price of $0.095 per share.

Page-12-

7. Stockholders' Equity (con't)
(k) During the three months ended December 31, 2002 a total of 10,000 shares were issued for cash of $1,890 at an average price of $0.19 per share.

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

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

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

(c) See Note 7(d) for temporary equity and related rescission rights for subscribers of 361,120 shares of the Company.

Item 2. Management's Discussion and Analysis or Plan of Operation PLAN OF OPERATION
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. The following discussion and analysis should be read in conjunction with the Financial Statements and Notes thereto and other financial information included in this Form 10-QSB and our Form 10-KSB for the year ended June 30, 2002. Actual results could differ materially from the results discussed in the forward-looking statements.

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, 2003. 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.

Although the Company is in the developmental stages, the process behind Hybrid's intended business has been researched and developed over more than a decade. A plant that integrated the process described below was constructed and operated near Dalum, Alberta from 1994 to 1996. That facility was designed to prove the concepts and included all of the ethanol-making and cattle-feeding features of a full-scale commercial operation. That operation is the source of the actual operating results that are referred to later in this report.

After that plant was closed in 1996, further research, development and construction enabled us modify construction materials and layout to improve the buildings and equipment and refine the process, which is now ready for market.


Page-13-

Item 2. Management's Discussion and Analysis or Plan of Operation (con't)

The Company's intended business is to sell and build farm scale plants that produce ethanol integrated with a cattle finishing operation. Grain, corn or other feedstock is fermented and then distilled to make the ethanol. Left over from the ethanol production process are a high protein mash, called "distillers grain" and water, called "stillage water". These contain nutrients and are therefore used as feed and water for livestock. By using the distillers grain and stillage water on site the animals get the benefit of the nutrients in these byproducts. In addition, the plants do not incur the costs of drying the distillers grain and transporting it as would be necessary if it was to be used at another site. A further benefit is that no costs are incurred to dispose of the stillage water. Rather than it being something that is costly to be disposed of, it becomes a valuable feed product.

The manure and used bedding straw are cleaned up frequently, thus removing the media in which disease would otherwise grow. They are burned in a gasifier and the heat produced is used in the fermentation and distillation processes. From discussions with the gasifier manufacturer, management believes that there will be sufficient heat leftover to operate a greenhouse, if the operator so desires.

The ethanol is mixed with a proprietary emulsifier and diesel. When this emulsion was tested at The British Columbia Institute of Technology in June, 1996, in an unaltered diesel engine, it reduced the particulate (black smoke) emissions by over 62% and the NOx emissions by over 22%, without any 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 Form 10-KSB for the year ended June 30, 2001, as amended and filed with the SEC.

Although there are no operating plants at the moment, the Company is expecting to have the first one operating in the late spring or early summer of 2003, as described below.

The Company intends to sell these facilities (except the column and spinner) to farm operators, preferably those who grow or have access to sufficient grain to supply the 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.

RESULTS OF OPERATIONS
The loss for the present quarter is $123,828 compared to $25,993 for the comparable quarter last year. The loss for the same quarter last year was lower largely due to higher professional and consulting fees. We anticipate professional and consulting fees to be lower in the upcoming year, partly because a significant portion of the consulting fees is a non-recurring accrual for the Directors who have served the Company without remuneration for over two and onme half years. In addition the higher imputed interest this quarter of $11,131 compared to $7,678 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, $78,000 which is accrued consulting fees for the Directors and $16,937 imputed interest, which do not require a cash outlay. These non-cash items total $112,937. Working capital was obtained from cash received from the sale of shares.

At the end of the quarter, the Company had cash reserves of $325 down from 1,796 at the end of the previous quarter. This cash should be

Page-14-

Item 2. Management's Discussion and Analysis or Plan of Operation (con't)

sufficient to pay operating costs for the next three to six months, as the Company is keeping its operating expenses requiring cash to a very minimum. 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 $100 per month, exclusive of executive compensation, which is deferred, and professional fees, which have been paid by related parties in the past.

PLAN OF OPERATION

Background
We are a development stage company that has not yet proved the feasibility of its planned principal operations. In their opinion on our June 30, 2002 financial statements, our independent auditors raised a substantial doubt about our ability to continue as a going concern 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 and have been unable to raise money to begin operations. 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. We do not anticipate making any commitments to borrow money within the next 12 months, unless we can secure construction loans to build our first plant. The lack of long term, adequate financing continues to be of great concern to management.

We will require additional capital soon in order to continue as a going concern in the long term. Until we have arranged financing, no operating activities are planned. In the absence of operating activities, our general and administrative expenses for the next 12 months are expected to be less than $300 per month, exclusive of executive compensation, which is deferred, and professional fees for legal and accounting services. Legal and accounting costs are likely to increase significantly this fiscal year as we apply for listing on the OTC Bulletin Board.

Our ability to continue to operate in the future depends on us being able to raise money to build our first plant, and we therefore continue to concentrate our efforts on raising money to build the first plant and commence operations. Hybrid Fuels (Canada) Inc., a wholly owned subsidiary, has negotiated an agreement in principle with the North Okanagan First Nation near Vernon, B.C., to finance and build a plant on their land. We anticipate that a contract to build that plant will be signed late in February, and construction started in March. At the same time, on a parallel track we continue to make progress in our negotiations with Team Steel Building Systems, of Edmonton, Alberta, towards making arrangements to build a plant, and finance the commencement of operating activities. We estimate we need to raise approximately $1 million to cover payables, build the first plant, begin the development of operating activities and deal with potential claimants. This estimate includes $350,000 for plant construction, $110,000 for cattle, $30,000 for payables (excluding shareholder loans and accrued executive salaries), $70,000 for salaries, consumables and other operating expenses until the plant begins to generate cash flow, and $250,000 for contingencies and to start developing operating activities. The remaining $190,000 constitutes a reserve for any shortfalls in our estimation process or any unforeseen contingencies.

Although we are negotiating with potential investors to fund the construction of the first plant, we do not have any commitments at this

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Item 2. Management's Discussion and Analysis or Plan of Operation (con't)

time.

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 plants want to see a profitable facility in operation before they commit themselves.

Although we do not have significant cash reserves, related parties have indicated a willingness for the time being 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.

Strategy to Raise Capital

We are aware of a class of investors who will invest money in companies whose stocks are traded on the OTC Bulletin Board, although we do not have any specific investors identified at this time who have committed to invest funds in the Company. So far, all potential investors we have contacted have been reluctant to invest funds as long as we are on the "pink sheets". On September 27th 2002, the SEC told us verbally that they had no further comment on our SEC filings. Our plan now is to comply with all applicable SEC reporting requirements and pursue a listing on the OTC BB. We have a market maker that has made an application to the NASD to have our common stock authorized for inclusion on the OTC Bulletin Board, and are presently awaiting their response to that application. We hope to have met NASD requirements and to have our stock quoted on the OTC Bulletin Board within two months. Although our plan is to have our stock traded on the OTC Bulletin Board, there can be no assurance concerning the time frame when that may occur, if at all.

Because of our low stock price, and the fact that we are on the "pink sheets", we do not intend to sell additional shares of our common stock in the immediate future unless we have no other source of money to pay expenses. Once our stock is trading on the OTC Bulletin Board, we plan to contact prospective investors to raise the approximately $1 million in capital discussed above. This planned offering and sale of our common stock will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement. This disclosure is not an offer of securities or a solicitation of an offer to buy securities. Placements will be made only to investors with preexisting contacts with Hybrid Fuels and its authorized representatives. If we encounter unforeseen delays or difficulties in getting our stock to trade on the OTC Bulletin Board and we must continue to trade on the pink sheets, we may reevaluate the price at which we will sell our equity securities to raise capital.

Our plan to have our stock traded on the OTC Bulletin Board could also be frustrated by the introduction of the BBX Exchange, a proposed automated electronic exchange that would replace the negotiated order system of the OTC Bulletin Board. In the near term, the NASD may slow its processing of new applications to the OTC Bulletin Board, because the OTC Bulletin Board will terminate soon and BBX applications may be

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Item 2. Management's Discussion and Analysis or Plan of Operation (con't)

filed now. The BBX Exchange is now slated to go "live" in the last quarter of 2003, subject to SEC approval. The most recent NASD proposal to the SEC regarding the BBX Exchange does not contain a definite date when the OTC Bulletin Board will terminate, but the stated objective of the introduction of the BBX Exchange is to remove any market for stocks between the pink sheets and the BBX Exchange. If the uncertainty created by the BBX Exchange prevents us from having our stock traded on the OTC Bulletin Board, we would have to reevaluate our capital raising strategy. We would have to assess whether we would remain a pink sheets company and sell our equity securities at the lower prices that a pink sheets listing entails or whether we could achieve the more rigorous listing standards of the BBX Exchange and apply to have our common stock traded there. If we were to attempt the BBX Exchange alternative, we would either have to raise some capital at the pink sheets level to fund the application process or have to convince related parties to advance these funds.

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 plant in service and develop operating activities. The major goal of placing the first plant in service is to demonstrate the economic feasibility of the system. Once this first plant 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 plant should generate sufficient revenue to pay all of our operating costs, plus a small surplus which may be used toward development of operating activities. The financial institutions that have expressed interest in financing subsequent plants want to see this first plant generate sufficient cash flow to pay all operating costs and debt service. We anticipate that the plant will show sufficient cash flow to make it possible for us to get approval for financing subsequent plants.

Management has planned to build the first plant at Oyama, on approximately six acres of farmland just north of Kelowna, British Columbia. We will need to finalize a lease to enable us to build on this site. This location provides the company supervisory ability and site control. Once we have financing available to construct the plant, we believe we can quickly finalize the lease for the site. However, as a result of our agreement in principle with the Okanagan First Nation, it now appears likely that the first plant will be constructed on their land a few miles north of Vernon B.C.

An operating facility includes the barn, the ethanol making equipment, the bio-furnace or gasifier, "Greener Pastures" grass growing system, and the right to use the proprietary information and technology, as more fully described under "Proposed Facilities" on page 6 above. The cost of building this plant is anticipated to be approximately $350,000. 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 finalizedan agreement with respect to the land, we anticipate it will take approximately two months

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Item 2. Management's Discussion and Analysis or Plan of Operation (con't)

to construct the plant. Foundations and flooring are expected to take approximately two weeks and the erection of the buildings are expected take another two weeks. 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 plant is fully operational.

The plant is designed to accommodate 200 head of cattle. As we near the end of testing the plant, 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 plant, 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 plant 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 plant at full capacity until approximately four months have passed from the plant becoming operational. As a result the cattle we begin selling 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 be able to prepare pro forma information that will demonstrate the financial fundamentals of the plant for purposes of demonstrating cash flows to prospective financiers of future plants.

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 begin being 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 plant 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 plant's operating costs, including debt service. At this time we do not have financial data to support the breakeven pricing spread for the plant. Developing this relationship between the plant's cost structure and tolerable price differentials

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Item 2. Management's Discussion and Analysis or Plan of Operation (con't)

will provide critical information for prospective financiers of future plants.

We expect that as sale prices move close to or exceed purchase prices, the plant'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 plant. 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 plant, so we will have to pay market prices for our consumables.

We do not plan to sell the ethanol produced by the first plant 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 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 plant for four months, we believe that the actual financial results for the finishing operation and ethanol sales will provide us with a basis to prepare pro forma financial information projecting the economic feasibility of the plant. By establishing the economic feasibility of the plant, 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 plants. If our assumptions prove wrong or we encounter unforeseen obstacles, our ability to demonstrate the plant's economic feasibility may be delayed, or, in the worst case, we may not be able to establish the economic feasibility of the plant and may have to abandon 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 plant in service and in demonstrating the economic feasibility of the plant. Once these milestones are achieved, we intend to have others build, own and operate additional plants, while we earn revenues from a variety of sources related to the plants. We plan to earn revenue from:

1. operating the demonstration facility we build and own;
2. profit on the sale of subsequent plants;
3. the lease of the column and spinner to each operator;
4. the royalties and service fees that each operator will pay;
5. the purchase of the ethanol mixture from the operator at 80% of wholesale value and the sale to distributors or end-users;
6. an incentive from premiums from marketing the finished animals.

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

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Item 2. Management's Discussion and Analysis or Plan of Operation (con't)

We intend to license our technology and provide our expertise to third parties that want to construct plants. We expect to earn a profit and recognize revenue on the sale of each plant. We plan to charge fees in connection with the sale of each plant, based on the value to the operator of having us organize and supervise the construction of the plant and train the operator. We expect the fees from the sale of the plants 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.

To date, we have received applications from more than 50 farmers who have expressed interest in constructing a plant. We are currently developing a screening process to select suitable candidates, and we expect to assist them in obtaining financing for plant construction. Once we have demonstrated our demonstration plant's economic feasibility for purposes of obtaining financing of subsequent plants, 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 the facility. We anticipate that it will take approximately six months from the time our plant demonstrates economic viability to build the second plant and get it operating.

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 plants, and leasing them is designed to protect the secrecy of these most vital pieces of the technology. The lease payments will generate revenue for 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 plant, based on the projected benefits of the use of trade secrets to the operator, will begin when each plant begins operation. Incentives in the form of reduced royalties may be offered to the first 10 to 20 operators who make early commitments to purchase plants.

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.

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.

Based on the results of the test trials at the Dalum plant, we believe we will be able to generate premium prices for the beef because it is hormone free and because of its high quality and taste. At the Dalum plant, the purchaser of the 123 heifers agreed to pick up subsequent lots at the plant and pay a premium of $0.10 per pound for all of the beef that could be produced using our process. We do not have commitments from any buyers to purchase the beef at premium prices at this time.

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Item 2. Management's Discussion and Analysis or Plan of Operation (con't)

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

Within 18 to 24 months of the first plant demonstrating viability, we expect third parties to have 15 to 20 plants operating. We expect that many of these operators will require assistance to obtain financing in order to construct a plant. We have had preliminary discussions with CIBC, Scotiabank, Leaseline, Dominion Leasing and a Swiss broker with connections to several European "ECO" funds, all of whom have expressed interest in providing financing for plants. We have been told that our project should qualify if we can demonstrate the economic viability of the operation. Once the first plant is operating the plan is for the Swiss broker to arrange to have the appropriate representatives of these ECO funds inspect the plant and if it qualifies, to use them as a source of financing for plant construction, thereby permitting us to expand our operations.

PART II Other Information

Item 2. RECENT SALES OF UNREGISTERED SECURITIES.

Date, title and amount of securities sold

Date                      Title                    Amount
----                      -----                    ------
October 16, 2002          Common Stock             10,000 shares

The 10,000 shares were issued for $1,890 cash paid to the Company on October 16, 2002.

The Company relied upon Section 4(2) of the Securities Act of 1933 to effect the issuance of the shares. All shares were issued in a private transaction at the unsolicited request of one existing shareholder of the Company, who is a sophisticated investor. There was no public solicitation or offering, no underwriters were involved, and the Company received the entire proceeds.

Item 6. Exhibits and Reports on Form 8K
(a)Exhibits None
(b)Reports on Form 8-K None

Signatures

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: February 13, 2003

HYBRID FUELS, INC.

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

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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 Exchange 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.

February 13, 2003

/s/ Clay Larson
Clay Larson
Chief Executive Officer and President (Principal Executive Officer)
================================================================================

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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 Exchange 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.

February 13, 2003

/s/ John Morrison
-----------------------------------------------------
 John Morrison
 Chief Financial Officer
 (Principal Financial Officer)
================================================================================