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


FORM 10-QSB

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

For the Quarterly Period Ended December 31, 2005

[_] 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                      (I.R.S. Employer
 incorporation or organization)                      Identification No.)

237 Main Street, Box 880, Niverville, Manitoba R0A1E0
(Address of principal executive offices) (Postal Code)

Registrant's telephone number, including area code: (888) 550-2333
:

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 [_]

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

The number of issued and outstanding shares of the registrant's common stock as of February 13, 2006 was 26,003,933

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


                                TABLE OF CONTENTS



PART-I     FINANCIAL INFORMATION                                            PAGE

Item 1     Financial Statements............................................. F-1

Item 2     Plan of Operation.................................................. 1

Item 3     Controls and Procedures...................................... ..... 4


PART-II  OTHER INFORMATION                                                  PAGE

Item 1    Legal Proceedings................................................... 4

Item 2    Unregistered Sales of Equity Securities and Use of Proceeds ........ 4

Item 3    Defaults Upon Senior Securities..................................... 5

Item 4    Submission of Matters to a Vote of Security Holders................. 5

Item 5    Other Information................................................... 5

Item 6    Exhibits and Reports on Form 8-K.................................... 5

          Signature........................................................... 5

Hybrid Fuels, Inc.
(A Development Stage Company)

December 31, 2005

                                                                           Index


Consolidated Balance Sheets.................................................F-1

Consolidated Statements of Operations.......................................F-2

Consolidated Statements of Cash Flows.......................................F-3

Notes to the Consolidated Financial Statements..............................F-4

Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(expressed in U.S. dollars)

                                                                             December 31,     June 30,
                                                                                2005            2005
                                                                                  $               $
                                                                             (unaudited)      (audited)
ASSETS

Current Assets

  Cash                                                                           205             946
----------------------------------------------------------------------------------------------------

Total Assets                                                                     205             946
====================================================================================================


LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

  Accounts payable                                                            71,523          52,084
  Accrued liabilities                                                         21,107          62,136
  Note payable and other advances (Note 3)                                    45,474          93,153
  Due to related parties (Note 4)                                            205,965         204,099
  Due to a former director (Note 5)                                          326,701         326,701
----------------------------------------------------------------------------------------------------

Total Current Liabilities                                                    670,770         738,173

Redeemable and Restricted Common Shares (Note 7(b))                          222,767         223,000
----------------------------------------------------------------------------------------------------

Total Liabilities                                                            893,537         961,173
----------------------------------------------------------------------------------------------------

Commitments and Contingencies (Note 7)

Stockholders' Deficit

Common Stock (Note 6): $0.001 par value; 50,000,000 shares authorized
25,969,833 and 25,174,980 shares issued and outstanding, respectively         25,970          25,175

Additional Paid-in Capital                                                   947,587         847,311

Common Stock Subscribed (Note 8)                                                 863               -

Donated Capital                                                              492,920         438,464

Deferred Compensation                                                        (52,000)        (78,500)

Deficit Accumulated During the Development Stage                          (2,308,672)     (2,192,677)
----------------------------------------------------------------------------------------------------
Total Stockholders' Deficit                                                 (893,332)       (960,227)
----------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit                                      205             946
====================================================================================================

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

F-1

Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(expressed in U.S. dollars)
(unaudited)

                                                             Accumulated from
                                                             January 28, 1998        For the Three                For the Six
                                                           (Date of Inception)        Months Ended                Months Ended
                                                              to December 31,         December 31,                December 31,
                                                                   2005           2005           2004          2005          2004
                                                                    $              $              $             $             $
Revenue                                                               -              -              -              -              -
-----------------------------------------------------------------------------------------------------------------------------------
Expenses

  Deposits and advances written-off                             305,512              -              -              -              -
  Foreign exchange loss                                          12,198            335          2,584          2,952          5,014
  General and administrative (1) (Note 4)                     1,544,117         43,540         40,256         84,087         79,189
  Imputed interest (Note 4 and 5)                               440,420         19,728         19,728         39,456         39,455
  Research and development                                       16,925              -              -              -              -
-----------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses                                      2,319,172         63,603         62,568        126,495        123,658
-----------------------------------------------------------------------------------------------------------------------------------
Operating Loss                                               (2,319,172)       (63,603)       (62,568)      (126,495)      (123,658)

Other Income

  Gain on settlement of debt                                     10,500              -              -         10,500              -
-----------------------------------------------------------------------------------------------------------------------------------
Net Loss                                                     (2,308,672)       (63,603)       (62,568)      (115,995)      (123,658)
===================================================================================================================================
Net Loss Per Share - Basic and Diluted                                               -              -          (0.01)         (0.01)
===================================================================================================================================
Weighted Average Shares Outstanding                                         25,887,000     23,553,000     25,739,000     23,475,000
===================================================================================================================================

(1) Stock-based compensation is included in the following:

     General and administrative                                 235,337         13,250         13,650         26,500         27,299
===================================================================================================================================

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

F-2

Hybrid Fuels, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
(unaudited)

                                                                                        For the Six Months Ended
                                                                                              December 31,
                                                                                          2005            2004
                                                                                            $              $
Operating Activities

  Net loss                                                                              (115,995)      (123,658)

  Adjustments to reconcile net loss to net cash used in operating activities
    Amortization of deferred compensation                                                 26,500         27,299
    Donated services                                                                      15,000         15,000
    Imputed interest                                                                      39,456         39,455
    Foreign exchange translation loss                                                      2,321          4,574
    Gain on settlement of debt                                                           (10,500)             -

  Change in operating assets and liabilities
    Accounts payable and accrued liabilities                                              21,410          9,441
---------------------------------------------------------------------------------------------------------------
Net Cash Used In Operating Activities                                                    (21,808)       (27,889)
---------------------------------------------------------------------------------------------------------------
Net Cash Used In Investing Activities                                                          -              -
---------------------------------------------------------------------------------------------------------------
Financing Activities

  Advances from related parties                                                            1,866          2,658
  Common stock subscribed                                                                    863              -
  Proceeds from issuance of common stock                                                  18,338         17,872
---------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities                                                 21,067         20,530
---------------------------------------------------------------------------------------------------------------
Decrease in Cash                                                                            (741)        (7,359)

Cash - Beginning of Period                                                                   946          7,907
---------------------------------------------------------------------------------------------------------------
Cash - End of Period                                                                         205            548
---------------------------------------------------------------------------------------------------------------
Non-cash Investing and Financing Activities

  Common shares issued to settle debt                                                     82,500              -
---------------------------------------------------------------------------------------------------------------
Supplemental Disclosures

  Interest paid                                                                                -              -
  Income taxes paid                                                                            -              -
---------------------------------------------------------------------------------------------------------------

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

F-3

Hybrid Fuels, Inc.
(A Development Stage Company)

Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)

1. Nature of Operations and Continuance of Business

In May 1998, the Company caused a Nevada corporation to be formed under the name Polo Equities, Inc. 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.

On May 28, 1998, the Company acquired, by issuing 12,000,000 shares, Hybrid Fuels, USA, Inc., with an inception date of January 28, 1998, 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.

On May 29, 1998 the Company changed its name to Hybrid Fuels, Inc., herein "the Company". The Company trades on the OTC Bulletin Board under the symbol HRID.

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 that involve a number of proprietary technologies exclusively owned by the Company. Other proprietary technology involves the use of a bio-gas burner that 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 that 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 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 generate significant revenue. There is no guarantee that the Company will be able to complete any of the above objectives. At December 31, 2005, the Company had a working capital deficit of $670,565 and an accumulated deficit of $2,308,672. These factors, among others, cause substantial doubt about the continuance of the Company as a going concern.

The Company expects that future capital requirements for developing and expanding technologies will be met through stock offerings by way of private placements.

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. The Company's subsidiary is currently inactive and has no assets, liabilities or operations. The Company's fiscal year end is June 30.

(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 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.

F-4

Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)

2. Summary of Significant Accounting Policies (continued)

(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) which 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 anti-dilutive.

(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 re-measured 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 financial 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 December 31, 2005 and 2004, 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, accounts payable, accrued liabilities, notes and advances payable, due to related parties and due to a former director approximate their carrying values due to the immediate or short-term maturity of these financial instruments.

(h) Income Taxes

The Company has adopted SFAS No. 109 "Accounting for Income Taxes" as of its inception. Pursuant to SFAS No. 109 the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits 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.

(i) Stock-based Compensation

The Company accounts for stock-based awards using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). Under the intrinsic value method of accounting, compensation expense is recognized if the exercise price of the Company's employee stock options is less than the market price of the underlying common stock on the date of grant. SFAS 123 "Accounting for Stock-Based Compensation" established a fair value based method of accounting for stock-based awards. Under the provisions of SFAS 123, companies that elect to account for stock-based awards in accordance with the provisions of APB 25 are required to disclose the pro forma net income (loss) that would have resulted from the use of the fair value based method under SFAS
123. As of December 31, 2005, the Company has not issued any stock options.

F-5

Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)

2. Summary of Significant Accounting Policies (continued)

(j) Recent Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, "Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and SFAS No. 3". SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. 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 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29". The guidance in APB Opinion No. 29, "Accounting for Nonmonetary Transactions", is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. SFAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard did not have a material effect on the Company's results of operations or financial position.

In December 2004, the FASB issued SFAS No. 123R, "Share Based Payment". SFAS No. 123R is a revision of SFAS No. 123, and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees" and its related implementation guidance. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123 as originally issued and Emerging Issues Task Force Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services". SFAS No. 123R does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans". SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period (usually the vesting period). SFAS No. 123R requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The scope of SFAS No. 123R includes a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. Public entities that file as small business issuers will be required to apply SFAS No. 123R in the first interim or annual reporting period that begins after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Company's results of operations or financial position.

In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107 ("SAB 107") to give guidance on the implementation of SFAS NO. 123R. The Company will consider SAB 107 during implementation of SFAS NO. 123R.

(k) Reclassifications

Certain reclassifications have been made to the prior period's financial statements to conform to the current period's presentation.

F-6

Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)

3. Note Payable and Other Advances

(a) On September 15, 2000, the Company issued a note for CAD$50,000 (US$33,638) 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 $1,970 has been accrued for the period ended December 31, 2005 (2004 - $1,820). The note payable was $42,900 after translation into U.S. dollars at December 31, 2005. For the six month period ended December 31, 2005, the Company incurred a foreign currency translation loss of $2,190 that was charged to operations.

(b) Cash advances totalling $2,574 (CAD$3,000) from unrelated parties are non-interest bearing, unsecured and due on demand.

4. Related Party Transactions

(a) A shareholder is owed $199,371 (June 30, 2005 - $199,371) for payment of rent, office expenses and professional fees on behalf of the Company. Imputed interest of $14,953, calculated at a rate of 15% per annum, was charged to operations and treated as donated capital. This amount owing is unsecured, non-interest bearing and due on demand.

(b) During the six month period ended December 31, 2005, the Company recognized a total of $15,000 (2004 - $15,000) for donated services provided by the President of the Company.

(c) At December 31, 2005, the Vice-President of the Company is owed $6,594 (June 30, 2005 - $4,728) for expenses paid on behalf of the Company. This amount is unsecured, non-interest bearing and due on demand.

5. Amounts Owing to a Former Director

The former President, who was also a director of the Company, is owed $2,701 for office and related expenses paid for on behalf of the Company. Effective July 1, 1999 the former President was entitled to a salary of US$6,000 per month and was owed $326,701 at September 30, 2005. These amounts are unsecured, non-interest bearing and due on demand. Imputed interest of $24,503 (2004 - $24,502), calculated at a rate of 15% per annum, was charged to operations and treated as donated capital. The Company did not have a written employment contract with the former President.

6. Common Shares

(a) Private Placements

(i) On October 5, 2005, the Company issued 30,000 shares of common stock at a price of $0.08 per share for proceeds of $2,532 (CAD$3,000), and 56,700 shares of common stock at a price of $0.10 per share for proceeds of $5,631 (CAD$6,590).

(ii) On December 9, 2005, the Company issued 50,400 shares of common stock at a price of $0.10 per share for cash proceeds of $5,051 (CAD$5,990).

(iii) On December 13, 2005, the Company issued 30,000 shares of common stock at a price of $0.08 per share for cash proceeds of $2,539 (CAD$3,000), and 20,000 shares of common stock at a price of $0.13 per share for cash proceeds of $2,585 (CAD$3,000).

(b) Non-cash Consideration

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

On August 16, 2005, the Company issued 375,000 shares of common stock at a fair value of $82,500 to settle an outstanding debt of $50,000 and accrued interest of $43,000, resulting in a gain on debt settlement of $10,500.

F-7

Hybrid Fuels, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)

7. 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 shares. The transfer agent removed the 1,900,000 shares from the stockholder list effectively reversing the issuance. Six of the cancelled certificates, totaling 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 have been delivered to a broker for possible resale, the broker has informed 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 former management has failed to provide addresses despite a number of requests.

(b) Between October 1998 and June 1999, the management at that time 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. Management had 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. Restricted shares must be owned and fully paid for at least one year. After the one-year holding period, the number of shares non-affiliates may sell during any three-month period cannot exceed 1% of the outstanding shares of the same class being sold. If the shares have been owned for two years or more, no volume restrictions apply to non-affiliates. 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. 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.

8. Subsequent Events

(a) On January 6, 2006, the Company issued 6,600 shares of common stock at a price of $0.13 per share for proceeds of $863 (CAD$1,000), and 15,500 shares of common stock at a price of $0.14 per share for proceeds of $2,171 (CAD$2,500). The proceeds of $863 were received in full prior to December 31, 2005.

(b) On January 31, 2006, the Company issued 12,000 shares of common stock at a price of $0.15 per share for proceeds of $1,720 (CAD$2,000).

(c) On February 11, 2006, the Company received $4,471 (CAD$5,200) in shares subscriptions and will issue 30,000 shares of common stock at $0.15 per share.

F-8

ITEM 2. Plan of Operation

This Form 10-QSB contains forward-looking statements. The words "anticipate", "believe", "expect", "plan", "intend", "estimate", "project", "could", "may", "foresee", and other similar expressions identify forward-looking statements that involve risks and uncertainties. The reader 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 fiscal year ended June 30, 2005. Actual results could differ materially from the results discussed in the forward-looking statements. Hybrid Fuels Inc. ("the Company") assumes no responsibility to correct or update the forward looking statements as circumstances change and therefore, the forward looking statements should be assumed to speak only as at the date of the filing of this report.

Hybrid Fuels Inc. is a developmental stage company and has had no income since the acquisition of the hybrid fuels technology in June 1998. The Company is unlikely to have any significant cash flow until after the quarter ending March 31, 2006.

As at June 30, 2005, 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. As of December 31, 2005, the Company has a working capital deficit of $(670,565).

The management of Hybrid Fuels Inc. recognizes the importance of developing existing technologies and creating new opportunities as well.

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

1. Researching efficiencies in facility construction and operation;
2. Researching new technologies; consulting with various technical researchers and agriculture officials.

If resources permit, the amount we anticipate spending on further research and development for the fiscal year ending June 30, 2006 is approximately $50,000.

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

After the Dalum facility was closed in 1996, further research enabled us to modify the facility's material requirements, improve the building designs, select the latest equipment, and refine the process.

Currently, the Company's intended principal business is to integrate cattle feeding-to-finish with the production of wet ethanol. The main source of revenue for the Company is expected to come from the sale of finished cattle and a blend of wet ethanol and diesel fuel.

1

Our subsidiary, Hybrid Fuels (Canada), has entered into a verbal agreement with a group of Hybrid Fuels Inc. shareholders to construct a fully operational facility at Oyama, B.C., Canada on 12 acres of farmland. This group is bearing the financial burden of constructing this commercial facility and retains legal ownership. Once the facility has been completed, the Company intends to negotiate with this group to acquire the facility on mutually agreeable terms. The land on which the facility is being constructed is owned by an unrelated third party.

The commercial facility being built by the shareholder group is to include all items necessary for a fully operational facility utilizing the Company's technology. The Company has not incurred any costs pertaining to the facility to date and will not be obligated financially until the facility has been completed and the Company enters into a formal agreement to acquire the facility. The Company expects to acquire the facility in the quarter ending March 31, 2006.

An operating facility includes the cattle barn, ethanol-producing plant, gasifier/burner (manure burning unit), and a hydroponics barley-grass growing system.

In these facilities, barley is fermented and then distilled to produce the wet ethanol. The ethanol production process also generates a high protein product, called "distillers mash" and a liquid byproduct called "stillage water." The mash and liquid is supplemented by barley grass and creates an excellent feed for the cattle. The expected weight gain is an average of four pounds a day per head during the planned 100-120 day feeding cycle.

The barn at the Oyama facility has been designed to accommodate 200 head of cattle and the hydroponics barley-grass growing system. Once the facility is operational, we expect to begin feeding cattle starting with 50 head and adding another 50 approximately every four weeks until the barn is at full capacity. As we gain experience with the facility, we intend to operate the barn continuously at full capacity during the subsequent 100-day feeding cycles. At the end of each feeding cycle, it is intended that the cattle will be sold at auction.

The barn includes floor space for six individual pens - five occupied pens and one pen remaining empty and free of manure and bedding waste. Cattle are to be moved to a clean pen every five days on a rotational basis. The manure and bedding straw is removed from the pens and destroyed in the gasifier/burner that provides heat energy for the ethanol production and the hydroponics feed system.

Ethanol produced by the first facility in the first two to three months of its operation is expected to be used for testing purposes. Once the facility is operating at full capacity, we project that the ethanol production will be approximately 200 US gallons per day.

It is intended that the wet ethanol will be blended with a proprietary emulsifier and diesel fuel. When this newly created fuel was tested in an unaltered diesel engine at the British Columbia Institute of Technology in June 1996, it reduced particulate emissions (black smoke) by over 62% and the smog-causing nitrogen oxide (NOx) emissions by more than 22%. Researchers also noted no measurable loss of engine power when testing this fuel blend.

The hydroponics barley-grass growing system is expected to produce a ration of 10-15 pounds per day of fresh grass per animal, year round, regardless of climate. We believe each grass unit represents approximately the equivalent of 400 acres of grass-growing land.

2

Current estimates have the final cost of building this facility to be approximately $930,000. An estimated $630,000 of this cost is for foundations and flooring, buildings, the gasifier/burner, the ethanol-producing equipment, the hydroponics unit, tanks and machinery. Soft costs, for such items as permits, engineering and other professional fees, survey and layout costs, site preparation, delivery of buildings and materials, equipment rentals, tools and miscellaneous items, are estimated to cost $150,000. Approximately $150,000 is expected to cover construction labour and supervision expenses.

The Company has encountered delays in commencing operations that are largely attributable to ongoing financing requirements and testing of the feed system and gasifier/burner(manure burning unit). The Company has no immediate funding source except through private sources and until one facility is fully operational and demonstrates cash flow Hybrid Fuels Inc., and our wholly-owned subsidiary Hybrid Fuels (Canada), has limited access to banks, trust companies, and other traditional lending sources. Additional financing has been required from the aforementioned shareholder group in order to complete the testing process and implement necessary improvements to the facility. This process is time consuming and has contributed to the delay in commencing operations.

Operations are expected to commence in the quarter ending March 31, 2005. Within that time it is expected that the initial testing of the facility's gasifier/burner and feed system will be completed and ready for the first delivery of cattle.

The completion and operation of the first facility is expected to enable the Company to demonstrate to potential operators and investors that the technology and processes work as described. We do not have any long-term commitments for financing at this time.

Assuming operations can commence in the quarter ending March 31, 2005, operating costs to the end of the fiscal year ending June 30, 2006 are estimated at $250,000. This estimate includes $120,000 for cattle and feed, $60,000 for payables (excluding related party loans and accrued executive salaries), $40,000 for technical support and labor and $30,000 for contingencies and other operating expenses. These estimates are subject to change based on conditions outside of management's control and actual experience with operating the first facility.

The operating cost estimate of $250,000 would not adequately cover the cost of acquiring an operating facility if the Company chooses and enters into a purchase agreement as opposed to a lease agreement.

It is expected that the facility will not be run at full capacity until approximately four months have passed from the facility becoming operational. We believe that at the end of the fourth month of operations, when we expect to sell the first group of finished cattle, we will have sufficient data to enable us to estimate cash flows and generate a comprehensive business plan.

Once we have a fully operational facility, and have proven the technology and processes, we intend that our subsidiary, Hybrid Fuels (Canada) Inc., will operate it and will earn revenue from the sale of the finished cattle and wet ethanol.

It is intended that future facilities will be constructed, for the Company, by independent contractors on privately-owned farms. The intention is for these facilities to be operated by the farmer (s) under terms of an agreement that will be determined once the Company has the data from operations of the first facility based in Oyama, BC.

3

Results of Operations For The Three Months Ended December 31, 2005

The loss for the present quarter is $(63,303) compared to $(62,568) for the comparable quarter last year.

At the end of the quarter, the Company had cash of $205 compared to $693 at the end of the previous quarter. During the quarter we received $10,175 in cash from the issuance of restricted common stock. As at December 31, 2005, the Company had a working capital deficit of $(670,565) compared to $(737,227) as at June 30, 2005.

The President and CEO of the Company donated services in the amount of $7,500 in the current quarter.

Although we currently do not have significant cash reserves, related parties have indicated a willingness to provide operating capital in exchange for restricted common shares. These related parties are under no obligation and no assurances can be given that they will continue to do so.

ITEM 3. Controls and Procedures

Based on an evaluation as of the end of the period, the Company's Principal Executive Officer and Acting Principal Financial Officer has concluded that the Company's disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act 1934 (the "Exchange Act") are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weakness, and therefore there were no corrective actions taken.

PART II - OTHER INFORMATION

Item 1. 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.

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

Set forth below is information regarding the issuance and sales of our securities without registration during the three months ended December 31, 2005. No such sales involved an underwriter and no commissions were paid in connection with the sale of any securities.

On October 5, 2005, 30,000 shares of restricted common stock were issued for cash received September 16, 2005 at a price of $0.08 per share for total proceeds of $2,532 (CAD$3,000).

4

On October 5, 2005, 56,700 shares of restricted common stock were issued for cash received September 23, 2005 at a price of $0.10 per share for total proceeds of $5,631 (CAD$6,590).

On December 9, 2005, 21,000 shares of restricted common stock were issued for cash received November 9, 2005 at a price of $0.10 per share for total proceeds of $2,100 (CAD$2,490).

On December 9, 2005, 21,000 shares of restricted common stock were issued for cash received November 10, 2005 at a price of $0.10 per share for total proceeds of $2,108 (CAD$2,500).

On December 9, 2005, 8,400 shares of restricted common stock were issued for cash received November 10, 2005 at a price of $0.10 per share for total proceeds of $843 (CAD$1,000).

On December 13, 2005, 30,000 shares of restricted common stock were issued for cash received November 4, 2005 at a price of $0.08 per share for total proceeds of $2,539 (CAD$3,000).

On December 13, 2005, 20,000 shares of restricted common stock were issued for cash received December 7, 2005 at a price of $0.13 per share for total proceeds of $2,585 (CAD$3,000).

The foregoing issuance of common stock were made in reliance upon the exemption from registration set forth in Regulation S promulgated under of the Securities Act of 1933 for transactions not involving a US person.

Item 3. Defaults Upon Senior Securities

N/A

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

N/A

Item 5. Other Information

N/A

Item 6. Exhibits

Exhibit 31.1 Principal Executive Officer and Acting Principal Financial Officer

Certification (section 302 of the Sarbanes-Oxley Act of 2002)

Exhibit 32.1 Principal Executive Officer and Acting Principal Financial Officer

Certification (section 906 of the Sarbanes-Oxley Act of 2002)

Signature

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

HYBRID FUELS, INC.

By: /s/ Paul Warkentin
----------------------

Name:  Paul Warkentin
Title:  President/CEO/Acting CFO

Dated: February 14, 2006

5

Exhibit 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND ACTING PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul Warkentin, certify that:

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

2. Based on my knowledge, this 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 report;

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

4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date:  February 14, 2006


/s/ Paul Warkentin
-----------------------------------------------------
Paul Warkentin
President/Principal Executive Officer/Acting Principal Financial Officer


Exhibit 32.1 CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER AND ACTING PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

By signing below, the Principal Executive Officer and Acting Principal Financial Officer hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge, (i) this report on Form 10-QSB fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Hybrid Fuels Inc.

Signed this 14th day of February 2006:

By: /s/ Paul Warkentin
--------------------------------
Paul Warkentin
President/CEO/Acting CFO
(Principal Executive Officer and Acting Principal Financial Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Hybrid Fuels Inc. and will be retained by Hybrid Fuels Inc. and furnished to the Securities and Exchange Commission or its staff upon request.