This Form 10-KSB contains forward-looking statements. The words "anticipate", "believe", "expect", "plan", "intend", "estimate", "project", "could", "may", "foresee", and similar expressions identify forward-looking statements that involve risks and uncertainties. Except for disclosures that report the Company's historical results, the statements in this document are forward-looking statements. You should not place undue reliance on forward-looking statements because of their inherent uncertainty and because they speak only as of the date hereof. Actual results could differ materially from the results discussed in the forward-looking statements and the Company assumes no obligation to update forward-looking statements or the reasons why actual results may differ therefrom.

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

GENERAL INFORMATION ON THE COMPANY

Hybrid Fuels Inc. is a development-stage company and has had no income since the inception date of June 10, 1998. The Company is unlikely to have any significant cash flow until after the quarter ending December 31, 2007.

The Company acquired Hybrid Fuels, USA, Inc. on May 28, 1998, which was accounted for as a reverse takeover. All historical financial statements are those of Hybrid Fuels, USA, Inc. Since the inception date of Hybrid Fuels, USA, Inc. was January 28, 1998, this is the inception date used in the presentation of the Company's financial statements. In May 1998, the Company changed its domicile to Nevada and, on June 10, 1998, changed to its current name, Hybrid Fuels, Inc.

In May of 1998, in a stock for stock exchange, the Company issued 12,000,000 shares to Donald Craig to acquire all of the issued and outstanding shares of Hybrid Fuels, U.S.A., Inc. and 330420 B.C. Ltd., (which subsequently changed its name to Hybrid Fuels (Canada) Inc.). At the time of the acquisition, Mr. Craig held all of the issued and outstanding shares of Hybrid Fuels, U.S.A., Inc., and Hybrid Fuels (Canada) Inc., as Trustee for a group of individuals and companies that had contributed to the development of the Hybrid technology. At the time of the acquisition, Hybrid Fuels (Canada) Inc., owned the rights to the technology, with the result that, as a part of the acquisition, the Company acquired control over the technology necessary for the Company's intended operations. Prior to the acquisition of Hybrid Fuels, U.S.A., Inc. and Hybrid Fuels (Canada) Inc., the Company had no significant operations and was seeking a business opportunity.

At this time the Company's intended principal business is to integrate cattle feeding and finishing with the production of electrical power. The Company is also actively pursuing other sources of revenue related to their integrated farm system.

On December 14, 2006 the Company acquired a commercial-ready facility situated in Oyama, BC, Canada from a Hybrid Fuels Inc. shareholder consortium that financed its construction. This facility includes all equipment and infrastructure necessary to utilize the Company's proprietary technology including a cattle barn, a hydroponics barley-grass growing system and an ethanol-producing plant. The facility was acquired for total consideration of 3.72 million restricted common shares of Hybrid Fuels Inc. valued at $1,413,600.

The purpose of this facility is to demonstrate the economic feasibility of the 'Hybrid Fuels' system. Once this first facility is operating, the intention is to use it for demonstration and training purposes and to earn revenue from its operation. Our projections indicate that the facility will show sufficient profitability to make it possible for us to get approval for financing subsequent facilities.

The facility will not be run at full capacity until approximately four months have passed from the facility becoming operational. During this four-month period we believe that we will have sufficient data to estimate revenue streams and expenses to establish comprehensive business plans.

It is intended that future facilities will be constructed for the Company by independent contractors on privately-owned farms after a written, contractual agreement is made between the Company and the operator (s).

On December 16, 2006 a formal agreement was signed between the Company's wholly-owned subsidiary Hybrid Fuels (Canada) Inc. and the A4 Bar Cattle Company Ltd., covering the joint venture between the two companies, known as the 'Siksika A4 Bar Farm Operations Project.' The site of the project is located approximately 60 miles east of Calgary, Alberta, Canada on the land of the Siksika First Nations.

The Project will initially consist of the construction of two facilities - each utilizing Hybrid Fuels' proprietary technology together with the industry expertise and cattle provided by A4 Bar Cattle Company Ltd. Construction is expected to start during the fiscal year ending June 30, 2008.

The two aforementioned facilities are expected to produce a combined daily volume of approximately 800 US gallons (3,200 litres) of ethanol per day, generate up to 2 megawatts of power, finish up to 2,400 head of cattle annually, and provide up to 10 full time jobs. The internal hydroponics barley grass growing system is designed to produce a 10-15 pound ration of grass per head of cattle per day.

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 generate revenue from the sale of electrical power and finished cattle.

Efforts to improve every aspect of the whole operation continue with positive results. Management believes the overall Hybrid Fuels program involving progressive and environmental sensitivity towards cattle feeding, maintenance and processing will present a chemical-free product cycle which offers a world- class benchmark for the industry.

OUR FACILITIES

The proposed facilities are planned to consist of a cattle barn, a hydroponics barley-grass growing system, an ethanol-producing plant, a gasifier/burner (manure/straw burning unit), a hot-air turbine and generator.

The cattle 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, it is expected that the cattle will be fed 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.

Until the Company is operating a beef processing facility it is intended that the cattle will be sold to processors at a price reflective of its high quality.

The cattle 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.

In the ethanol plant, grains are fermented and then distilled to produce the wet ethanol. The heat is supplied from the burning of the used bedding straw and manure in the gasifier/burner. 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. Once the Oyama facility is operating at full capacity, we project that the ethanol production will be approximately 200 US gallons (800 litres) per day.

Ethanol produced by the first facility is expected to be used in the gasification process. It is expected that using ethanol in this process will result in a significant increase in heat energy, ie. BTUs, for the purpose of electrical power generation.

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 the grass unit at Oyama represents approximately the equivalent of 400 acres of grass-growing land.

The barns have been designed to raise beef cattle under controlled atmospheric conditions. The buildings are constructed from prefabricated metal, insulated sufficiently to keep the cattle warm in cold weather and cool in warm weather. The barns are intended to include air-to-air heat exchangers that in cold weather, exchange the warm, heavily moisture-laden barn air with fresh air from outside, that is heated and dried as it passes through a heat exchanger. Based on the heat exchanger equipment we plan to use, the calculations estimate heat losses from the barn at a total of 404,052 BTU per hour with gain from animal heat production of 407,078 BTU per hour at -17 Degrees F outside temperature. At this outside temperature, the inside building temperature should remain around 50 Degrees F. Management believes that these heat exchangers will keep the barn warm and dry in winter and that simple "swamp type" coolers common to the greenhouse industry will be adequate to provide summer cooling.

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

Cattle being finished generally produce an average of approximately 12 pounds of manure and urine each day, containing about 80% moisture. Moisture content in the waste is controlled by spreading bedding, in the form of chopped straw, wood shavings, or sawdust (depending on price and availability) into the pens to absorb moisture from the manure and urine. The amount of bedding is adjusted so that one week's accumulation of manure and urine in the bedding will generate waste with moisture content of approximately 45%, which is ideal for waste destruction within the gasifier, according to the manufacturer.

This commercially available gasifier unit is rated by its manufacturer at 900,000 BTU per hour and daily waste removal from one pen is estimated by the company to yield +/- 6.5MM BTU. Estimated energy need for distillation and cooking totals +/- 4MM BTU leaving a surplus of energy for other uses, including electrical power generation. This gasifier has five burning stages and, according to the manufacturer, is expected to burn manure, bedding and denatured ethanol without significant emissions or residual waste.

The cattle are expected to be started at a weight of between 600 and 1000 pounds and finished in the range of 1100 to 1400 pounds. The cattle are introduced into the barn in stages and thus are at various weights within the stages of the finishing cycle.

It is expected that these facilities will be operated manually by up to five people. These trained people are expected to be in contact with the animals several times a day, while the cattle are being fed, or moved from one pen to another. These operators are expected to be able to detect any illness or disease early, separate any ill animal from the rest of the herd, and treat it for that specific illness, rather than giving a general course of antibiotics to all the animals as a precautionary measure. As a result, the Company intends to have a policy that permits the use of antibiotics only as required on any sick animal.

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

CONCERNS ABOUT COMMON CATTLE FINISHING METHODS

a. THE USE OF ANTIBIOTICS AND GROWTH HORMONES

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

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

b. GROUNDWATER CONTAMINATION Typical beef operations produce manure and bedding which are expensive to dispose of and cause tremendous groundwater contamination.

From the cattlenetwork.com (Source: Dr. Mindy Spiehs, University of Minnesota Beef Team):

"Large confinement feedlots have often been viewed as the primary threat to local water supplies."

"The primary pollutants in beef manure are nitrogen, phosphorus, and pathogens. Nitrate-nitrogen can leach into ground water from stockpiled manure or silage and open lots."

c. DECLINING FARM INCOME AND THE NUMBER OF FAMILY FARMS;

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

HISTORY

The Company's technology has been continually developed and refined since the early 1990s. Pilot testing of the first proprietary developments relating to fermentation techniques and distillation procedures of ethanol were carried out in Kelowna, B. C., Canada in the early 1990s. After initial tests, a confinement-type barn and adjoining buildings were leased at Dalum, Alberta in 1994 for full-scale testing. These facilities were utilized for animal feed test trials, fermentation testing, and other associated full-scale research and testing on all aspects of the system for a period of two and a half-years. Encouraging test results persuaded us to begin commercialization of the process.

HYBRID FUELS ETHANOL PRODUCTION

The Hybrid Fuels process starts with the feedstock grain being soaked in water overnight, crushed and then heated to prepare it for fermentation. An enzyme reaction is then started, using commercially available enzymes. The entire fermentation process is carried out in the feedstock preparation tanks, that are part of the ethanol plant. A proprietary process is then used to promote rapid fermentation. This process, which was discovered by the Company and is not currently patented, will be protected by non-disclosure agreements that each operator will be required to sign.

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

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

Management believes that the combination of the Company's proprietary fermentation process and distillation column, will result in completion of the entire process in about 12 to 15 hours. In most typical distillation operations, the process takes approximately 60 hours.

In more typical ethanol producing plants, the WDGs are dried so they can be transported without becoming moldy. The energy and other costs of drying the WDGs to make dry distillers grains (DDGs) and then transporting them elsewhere are eliminated in the hybrid process by using the wet distillers grains onsite. Using such "co-products" onsite is important in reducing costs and improving the economics of the operations.

At the completion of distillation, the de-alcoholized stillage water is recovered and stored for delivery to appropriate feed containers for the animals in the barn. According to the research described below under the heading "Feeding Wet Distillers Grains and Stillage Water", the feeding of wet distillers grains and stillage water to cattle promotes weight gains. In addition, feeding the WDGs and stillage water to the animals in the adjacent barn is very important because it uses another co-product on-site, eliminates transport and drying costs and addresses the challenge of stillage disposal. The Biomass Energy Monograph by Edward Hiler and Bill Strout of Texas A. & M. University, states:

"If the nation were to replace 10 percent of its gasoline consumption with ethanol, the liquid stillage from ethanol fuel production would constitute a biochemical oxygen demand (BOD) load equivalent to all its domestic sewage. Therefore, expensive water pollution controls must be major goals of the emerging fuel-alcohol industry."

These "expensive water pollution controls" are not necessary in our process, as the stillage becomes a valuable animal feed supplement, not a by-product destined for disposal.

Aside from the capital costs of the facility, the two major costs of ethanol production are the feedstock and the input energy required for fermentation and distillation. By using the feedstock for the dual purpose of producing ethanol and feeding cattle, our process effectively reduces the cost of producing the ethanol. Also, by using the heat from burning the waste as an energy source for the fermentation and distillation processes, the Company believes it will not have to pay for energy from an outside source to produce the ethanol, which means the process will not incur that input energy cost.

The distillers grains that are left over from the ethanol-producing process have a low moisture content of around 5% and are fed as wet distillers grains (WDGs). The stillage water is also to be fed to the animals. The Oyama demonstration facility is designed to produce 200 US gallons (800 litres) of ethanol per day and enough distillers grains to supplement the diet for 200 head of cattle.

THE HYBRID FUEL

The ethanol is "de-natured" by blending about 2% diesel fuel into the ethanol in the vaporization column so there is no pure ethanol accessible in the plant. Each day, 200 gallons (800 litres) of ethanol are expected to be produced at the Oyama facility. This ethanol and chemical mixture would be stored in a tank on site.

Ethanol produced by the first facility is expected to be used in the gasification process. It is expected that using ethanol in this process will result in a significant increase in heat energy, ie. BTUs, for the purpose of electrical power generation.

FEEDING WET DISTILLERS GRAINS AND STILLAGE WATER

There is a considerable body of literature that indicates that the feed value of the distillers grains is superior to that of ordinary grain, and feeding stillage water increases weight gains. For example, see Dr. T. J. Klopfenstein of the University of Nebraska, in an article entitled: "How Do Wet Distillers Grains (Byproducts) Compare To Dry Distillers Grains?" in a report to the 31st Distillers Feed Conference on the "Digestibility of Distillers Grains", and G. M. Erickson and G. R. Tisher, writing in a Beef Science article #72-980 in 1989; "Barley Distillers Grains As Supplements For Beef Cattle". These articles generally indicate a significantly higher feed value of dried distillers grains (DDG) over ordinary grain, and higher still for wet distillers grains (WDG), that our process uses, over DDG.

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

These animals, that were fed wet distillers grain and stillage water at the Dalum facility, had a packout grade of 62% AAA, 34% AA and 4% A. This categorization represents a meat grading system that helps the consumer distinguish the quality of the meat. AAA represents a superior grade of meat based on a variety of factors including the amount of back fat, the color of the fat, the marbling of fat in the meat, and the size of the rib eye. AA is a lower level of these factors, A is less desirable still, and B is less desirable than
A.

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

The same kill report showed there was no death loss, no liver damage and none were condemned. Industry average for death loss and rejected animals is about 1% according to CCA. Because of these processing results, Cargill offered a premium of $0.10 per pound, for all animals that could be produced using this process, FOB the facility, which eliminates trucking and auction costs.

BEEF WITHOUT ADDED HORMONES

There is a growing market for beef that is free of added hormones and antibiotics. This beef also commands a higher price in the marketplace.

In order to access the "natural" beef market, the Company intends to require that when animals are brought in for finishing that they are certified "natural" in accordance with an existing certification protocol. This program requires that calves be registered and ear-tagging records be kept of the ancestry, ranch of origin and every inoculation, injection and implant.

Company policy will also require compliance with the "natural" protocol and that antibiotics not be used generally on the animals, although use on an ill animal as prescribed by a vet will be allowed.

Hormones are generally used to reduce the cost of weight gains. The Company believes that feeding the wet distillers grains and stillage water will result in lower cost weight gains without resorting to hormones.

NEW TECHNOLOGIES

During the period between the closure of the Cardston-area facility and the present time, the Company has developed a simple to operate, hydroponics-growing system that will be tested for internal housing purposes in the cattle-feeding barn. This technology has the potential to produce daily rations of fresh feed grasses for the cattle regardless of outside weather conditions.

Analyses of the green feed performed by Norwest Labs of Lethbridge, Alberta in May, 2001, indicates that with a barley grass feed ration of fifteen (15) pounds per day for each animal, the company could eliminate the use of feeding hay. The Company also has a feed enrichment process that has been described in reports previously filed with the SEC. As the green grass from this system is expected to be more beneficial to the cattle at less cost than the feed enrichment process, that process will no longer be included in each facility. The equipment to produce this green feed is expected to cost around $15,000 and to fit into the barn so that feeding is relatively easy.

The growth and use of hydroponics grass in feeding cattle is a process with minimal research data. The Company has learned that mold and fungi are real and persistent problems that can be perilous to the animals.

After months of research and testing we recognized the benefits inherent in the application of ozonated water using recently developed equipment and techniques. We believe the judicial use of ozonated water in the field of hydroponics grass will result in absolute destruction to molds, fungi and disease carrying bacteria.

We also believe the use of ozonated water also offers freedom from bacterial problems associated with fermentation and this will eliminate the concerns always inherent in ethanol production.

We intend to utilize the ozone equipment in the cattle barn as well. Following removal of manure and bedding which are incinerated through gasification, the floor of the pen will be washed with ozonated water which we believe can virtually sterilize the area and thus inhibit spread of disease. We also intend to install misting spray heads over the pens. Every few days the animals are thereby treated to prevent harmful bacterial spread.

While ozone is simply a gas composed of three oxygen atoms it has proven to be an extraordinary sanitizing agent, economical to use and is remarkably effective in direct application as well as for multi-surface cleaning and sanitation of equipment, drains, floors, chutes, tanks, barrels, etc.

The Company expects to expand the size of the cattle barn in future facilities to accommodate 400 head of cattle for economy of scale. The Company believes the additional heat energy that will be generated as a result of this expansion makes it feasible to develop renewable energy generation systems. It is expected that each facility could produce up to 400 gallons (1,600 litres) of ethanol daily, generate up to 1 megawatt of power, finish up to 1,200 head of cattle annually and provide up to 5 full time jobs. The hydroponics section of a 400-head barn is designed to have the grass growing capacity equivalent to approximately 800 acres of grassland.

Ethanol produced by the first facility is expected to be used in the gasification process. It is expected that using ethanol in this process will result in a significant increase in heat energy, ie. BTUs, for the purpose of electrical power generation.

Efforts to improve every aspect of the whole operation continue with positive results. We believe the overall Hybrid Fuels program involving progressive and environmental sensitivity towards cattle feeding, maintenance and processing will present a chemical-free product cycle which offers a world class benchmark for the industry.

EMPLOYEES

At present, the Company does not have any employees. Until resources allow, the Company will continue to use consultants or independent contractors for the various tasks required to be performed on a quarter-to-quarter basis.

SIGNIFICANT CONSULTANTS

Sir Donald Craig is the individual who is most responsible for the development of the concepts and invention of much of the equipment or improvements to the equipment. Mr. Craig is supervising the construction of the first facility in Oyama, BC. He has agreed to supervise construction of the first facility without remuneration until the facility is generating cash flow. The Company does not have a written employment contract with Mr. Craig.

SUPPLIERS

The Company is not dependent on a limited number of suppliers as most of the equipment and materials required for the facilities are readily available in all areas where the Company expects to be operating. The Company plans to obtain its raw materials from local suppliers. In addition, we expect to arrange with independent contractors to manufacture the columns and separators as necessary.

The Company intends to seek quotes from independent contractors to construct the buildings and to supply and install the flooring materials, pumps, tanks and other items required for each facility. As the Company develops a history of operations and experience with particular sources of supply, the Company may enter into exclusive supply contracts in the future if it is advantageous to the Company and its operators.

GOVERNMENTAL REGULATION

Governmental regulation will affect the Company most in the areas of compliance with environmental regulations and those regarding the production of ethanol. Each jurisdiction will require the Company to obtain the appropriate permits to comply with its specific set of regulations. The Company plans to initially build in those jurisdictions where the process for obtaining the necessary permits to produce the hybrid fuel and to operate in accordance with these regulations, are the easiest and least expensive to comply with. The Company anticipates it will have little difficulty in complying with environmental regulations as the process does not create any pollution. The Company does not anticipate any significant delays in obtaining the necessary permits for the production of the hybrid fuel in the Province of British Columbia and in most states of the US.

The Company believes that the impact of the cost and effects of the Company's compliance with environmental laws should be minimal as the Company's process is believed to be very environmentally friendly.

NEWS RELEASES, MARKETING AND ADVERTISING

The Company's target market for the construction of the facilities are the domestic and international farming communities from which there appears to be a strong and growing interest.

The Company intends to market their technology through such means as their website, press releases, trade journals, local newspapers and trade shows. The Company is also in contact with agencies and industry organizations whose role it is to locate and promote new opportunities for the economic benefit of farmers.

The Company plans to promote the beef produced using its process as being free of antibiotics and added hormones. The Company also intends to "brand" the finished product with a name, trademarks and logos to make the product more easily recognizable in order to generate consumer loyalty and capitalize on brand quality.

TRENDS THAT MAY AFFECT THE COMPANY'S BUSINESS

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

Businesses that have a positive environmental impact have received an increasing amount of support. The Company seeks to take advantage of this trend by promoting the animal finishing operation as having an environmentally positive impact in that it produces no groundwater pollution and virtually no odor.

We believe that consumers will pay more for beef that is guaranteed good quality. The Company believes that cattle which are fed distillers grains, without added hormones, antibiotics or protein from animal sources, will draw a positive response from health-conscious consumers looking for healthier food sources.

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

According to Energy Information Administration (eia.doe.gov) the United States is in the middle of a transition toward an unbundled and competitive electric power market, separating generation from transmission and distribution. One major effect of this transition is the steep rise in generating capacity held by non-utility generators, and the decline in generating capacity held by traditional investor-owned utilities.

Canada also is restructuring its electricity sector to facilitate competition. While more than half of Canada's current electricity supply is from hydroelectric dams, natural gas- fired power plants are expected to make up an increasing portion of Canada's electric power sector. The Canadian Energy Research Group has estimated that Canada's use of natural gas for electric power generation will triple over the next decade.

Canada and the United States have highly interconnected power grids, and competition in the industry is expected to increase volumes of electricity trade between the two.

RESEARCH AND DEVELOPMENT

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 research and development for the fiscal year ending June 30, 2008 is approximately $500,000.

PRODUCT PROTECTION

The Company has not patented any of its proprietary technologies, on the advice of legal counsel. Their reasoning is that obtaining patents tends to publish the discoveries that others can then copy and a small company will have difficulty protecting itself from infringement. As a consequence, the Company has

determined that in the near term it will protect its trade secrets and proprietary technologies by careful screening of potential operators and then having them sign non-disclosure agreements. All operators will be well briefed on protecting the proprietary information in their own best interests and all reasonable steps will be taken to ensure that they take all reasonable precautions. Also, the column and the spinner will be manufactured elsewhere, delivered and installed, without the operators knowing how they are constructed.

RISK FACTORS

The following factors have affected or could affect the Company's actual results and could cause such results to differ materially from those expressed in any forward-looking statements made by the Company. Investors should consider carefully the following risks and speculative factors inherent in and affecting the business of the Company and an investment in the Company's common stock.

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

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

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

4. We have a history of operating losses and an accumulated deficit, as of June 30, 2007, of $2,806,741.

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

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

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

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

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

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

11. The continual shift in supply and demand factors create volatility in cattle pricing that could result in a loss on cattle finishing.

12. There are a number of technological challenges that must be successfully addressed to complete our development and commercialization efforts. Our inability to address such technological challenges could adversely affect our ability to acquire customers for our technology. Delays in development, as a result of technological challenges or other factors, may result in the introduction or commercial acceptance of our technology later than anticipated.

13. Since May 2003, the Canadian beef market has suffered as a consequence of the United States limiting imports from Canada because of an isolated case of Bovine Spongiform Encephalopathy (BSE). A recurrence of BSE in Canada could potentially have an adverse effect on the Company even though the age of finished cattle raised within our controlled facilities are planned to be under the current 30-month age restriction on beef imported into the U.S.