WILLIAM J BUTCHER, CPA P.S.
----------Certified Public accountant-----------
EVERETT-(425) 333-O6O3 - MARYSVILLE (36O) 658-8347 FAX (425) 335-3567
Independent Auditor's Report
To the Board of Directors and Stockholders of
Hybrid Fuels Inc.
Kelowna, BC. Canada
I have audited the accompanying Statement of Financial Position of Hybrid Fuels,
Inc.(a Nevada Corporation), (a development stage company), as of September 30,
2000, June 30 2000 and 1999 and the related Statements of Loss and Deficit,
Statement of Cash Flows and the Statement of Changes in Shareholders' Equity for
the interim period ended September 30, 2000, for the years ended June 30, 2000
and 1999 and for Inception to September 30, 2000. My responsibility is to
express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Hybrid Fuels, Inc. (a Nevada
Corporation), (a development stage company), as of September 30, 2000, June 30,
2000 and 1999, and inception to September 30, 2000, and the results of its
operations and its cash flows for the periods then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Hybrid
Fuels, Inc will continue as a going concern. As discussed in Note 3 to the
financial statements, Hybrid Fuels, Inc is engaged in new operations, and the
ability to continue to exist as a going concern relies on the company's ability
to retain adequate financing and to generate sufficient sales. Management plans
in this regard are described in Note 3. The financial statements do not include
any adjustment that might result from the outcome of the uncertainty of future
agreements, financing or sales.
W. L. Butcher CPA PS
William L. Butcher, CPA P.S.
Marysville, Washington
December 6, 2000
--------------------------------------------------------------------------------
1620 3RD STREET. * MARYSVILLE, WASHINGTON 98270
621 SR 9 NE, PMB #F-4 + LAKE STEVENS, WASHINGTON 98258
<PAGE>
HYBRID FUELS INC.
(Formerly Polo Equities, Inc.)
(A Development Stage Company)
FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED SEPTEMBER 30, 2000
AND THE YEARS ENDED JUNE 30, 2000, AND 1999
WILLIAM J BUTCHER, CPA P.S.
----------Certified Public accountant-----------
1620 3rd Street
Marysville, WA 98205
Phone (360) 658-8347
FAX - (360) 658-1165
<PAGE>
TABLE OF CONTENTS
Accountant's Report 1
Financial Statements
Balance Sheet 2
Statement's of Loss and Accumulated Deficit 3
Statements of Cash Flows 4
Statements of Changes in Stockholders' Equity 5
Notes to Financial Statements 6-9
<PAGE>
<TABLE>
<CAPTION>
HYBRID FUELS, INC.
(Formerly Polo Equities, Inc.)
(A Development Stage Company)
Statement of Financial Position for the interim period ended September 30, 2000
and for the years ended June 30, 2000, and 1999
ASSETS
------
Sept 30, 2000 June 30, 2000 June 30, 1999
--------------- --------------- ---------------
<S> <C> <C> <C>
CURRENT ASSETS
--------------
Cash $ 176 $ 485 $ 0
--------------- --------------- ---------------
Total Current Assets 176 485 0
OTHER ASSETS
------------
Deposit on Plant (Note 5) 170,561 170,561 0
Stockholder Note Receivable (Note 6) 300,000 150,000
Note Receivable Blue Mountain Packers Ltd.(Note 7) 33,638 - 0
--------------- --------------- ---------------
Total Other Assets 504,199 320,561 0
TOTAL ASSETS 504,375 321,046 0
=============== =============== ===============
LIABILITIES AND STOCKHOLDERS EQUITY
-----------------------------------
CURRENT LIABILITIES
-------------------
Accounts Payable 60 39 0
Stockholder Payable (Note 8) 204,105 266,105 0
Note Payable Shareholder (Note 7) 33,638 0 0
Payable to Director (Note 9) 2,187 0 293,183
--------------- --------------- ---------------
Total Current Liabilities 239,990 266,144 293,183
STOCKHOLDERS' EQUITY
---------------------
Common Stock .001 par value
50,000,000 shares authorized; 19,687,620
shares issued and outstanding at September
30, 2000, 18,103,420 shares issued and
outstanding at June 30, 2000, 16,923,600
shares issued and outstanding at June 30,
1999, (Note 10) 19,687 18,103 16,924
Additional Paid in Capital 572,490 362,074 15,074
Deficit accumulated. (327,792) (325,275) (325,181)
--------------- --------------- ---------------
Total Stockholders' Equity 264,385 54,902 (293,183)
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 504,375 $ 321,046 $ 0
=============== =============== ===============
The accompanying notes are an intregal part of these financial statements.
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
HYBRID FUELS, INC.
(Formerly Polo Equities, Inc.)
(A Development Stage Company)
Statement of Losses and Accumulated Deficit for the interim period ended September 30, 2000 and
for the years ended June 30, 2000, and 1999 and Inception to Sept 30, 2000
Inception
February 26, 1960
through
Sept 30, 2000 June 30, 2000 June 30, 1999 Sept 30, 2000
------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUE $ $ $ $
Sales 0 0 0 0
Cost of Sales 0 0 0 0
------------------- --------------- --------------- ---------------
Gross Profit 0 0 0 0
EXPENSES
Accounting Fees 0 0 13,650 13,650
Advertising 17 0 147 164
Automobile 0 0 0 545
Banking 40 55 119 475
Commissions 0 0 3,307 3,307
Consultant 135 0 0 135
Contract Labor 0 0 1,961 1,961
Executive Compensation 0 0 62,818 118,575
Filing & Registration fees 403 0 0 5,403
General & Administration 0 0 0 18,398
Insurance 0 0 450 3,085
Legal Fees 0 0 8,500 8,500
License & Permits 0 0 125 125
Marketing 0 0 2,664 5,587
Meals 183 0 0 183
Miscellaneous 0 0 749 1,149
Office Expense 709 39 3,114 4,330
Postage & Delivery 115 0 6,241 6,786
Printing & Reproduction 0 0 11,004 17,570
Professional Fees 0 0 70,755 83,214
Rent 0 0 13,457 15,249
Security 0 0 1,143 1,248
Telephone 660 0 11,694 14,100
Travel & Entertainment 256 0 1,284 4,055
------------------- --------------- --------------- ---------------
Total operating Expenses 2,516 94 213,180 327,792
------------------- --------------- --------------- ---------------
Net (Loss) (2,516) (94) (213,180) $ (327,792)
===============
Accumulated Deficit beginning of period (325,275) (325,182) (112,002)
Accumulated Deficit end of period $ (327,792) $ (325,275) $ (325,182)
=================== =============== ===============
The accompanying notes are an intregal part of these financial statements.
</TABLE>
-3-
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<TABLE>
<CAPTION>
HYBRID FUELS, INC.
(Formerly Polo Equities, Inc.)
(A Development Stage Company)
Statement of Cash Flows for the interim period ended September 30, 2000 and for the
years ended June 30, 2000, and 1999 and Inception to Sept 30, 2000
Inception
February 26, 1960
through
Sept 30, 2000 June 30, 2000 June 30, 1999 Sept 30, 2000
------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (2,516) $ (94) $ (213,180) $ (327,792)
Adjustments to reconcile net loss to cash
used in operating activities
Changes in assets and liabilities
Accounts Payable 21 39 0 60
Net cash used in operating activities (2,495) (55) (213,180) (327,732)
CASH FLOWS FROM INVESTING ACTIVITIES
Loan to Blue Mountain (33,638) (170,561) 0 (204,199)
------------------- --------------- --------------- ---------------
Net cash provided (used) by investing activities (33,638) (170,561) 0 (204,199)
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholder Note Receivable (150,000) (150,000) 0 (300,000)
Shareholder Loans Payable (26,175) (27,078) 142,603 251,427
Sale of common stock 212,000 348,179 13,600 580,680
------------------- --------------- --------------- ---------------
Net cash provided (used) by financing activities 35,825 171,101 156,203 532,107
NET INCREASE (DECREASE) IN CASH (308) 485 (56,976) 176
CASH AT BEGINNING OF PERIOD 485 (0) 56,976 0
------------------- --------------- --------------- ---------------
CASH AT END OF PERIOD $ 176 $ 485 $ (0) $ 176
=================== =============== =============== ===============
The accompanying notes are an intregal part of these financial statements.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
HYBRID FUELS, INC.
(Formerly Polo Equities, Inc.)
(A Development Stage Company)
Statement of Changes in Stockholders' Equity for the interim period ended
September 30, 2000 and for the years ended June 30, 2000, and 1999
Common Stock Deficit
-------------------------- Accumulated
Additional during the
Par Value Paid-in development
Shares Amount Capital stage Total
------------ ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1998 15,000,000 15,000 3,398 (112,002) (93,604)
============ ============ ============= ========== ==========
Issuance of 1,000,000 shares common stock on
Aug 4, 1998, (Note 8) 1,000,000 1,000 (1,000) 0 0
Issuance of 2,400 shares common stock on Sept.
19, 1998 for cash. 2,400 3 3,597 0 3,600
Issuance of 21,200 shares common stock on Nov
24, 1998 for cash 21,200 21 9,979 0 10,000
Issuance of 900,000 shares common stock on
March 23, 1999, (Note 8) 900,000 900 (900) 0 0
Net loss June 30, 1999 0 (213,180) (213,180)
------------ ------------ ------------- ---------- ----------
BALANCE AT JUNE 30, 1999 16,923,600 16,924 15,074 (325,181) (293,183)
============ ============ ============= ========== ==========
Issuance of 5,000 shares common stock on Sept
1, 1999 for cash 5,000 5 2,495 0 2,500
Issuance of 15,000 shares common stock on Oct
8, 1999 for cash 15,000 15 7,485 0 7,500
Cancellation of August 4, 1998 1,000,000 share
issuance and March 23, 1999 900,000 share
issuance (Note 8) (1,900,000) (1,900) 1,900 0 0
Issuance of 29,050 shares common stock on Jan
6, 2000 for cash 29,050 29 16,971 0 17,000
Issuance of 17,730 shares common stock on Feb
7, 2000 for cash 17,730 18 12,662 0 12,680
Issuance of 13,040 shares common stock on
March 17, 2000 for cash 13,040 13 8,487 0 8,500
Issuance of 1,500,000 shares common stock on
February 17, 2000 pursuant to subscription
agreement 1,500,000 1,500 148,500 0 150,000
Issuance of 1,500,000 shares common stock on
February 17, 2000 pursuant to subscription
agreement 1,500,000 1,500 148,500 0 150,000
Net loss June 30, 2000 - - 0 (94) (94)
------------ ------------ ------------- ---------- ----------
BALANCE AT JUNE 30, 2000 18,103,420 $ 18,103 $ 362,074 $(325,275) $ 54,902
============ ============ ============= ========== ==========
Issuance of 1,500,000 shares common stock on
July 5, 2000 pursuant to subscription
agreement 1,500,000 1,500 148,500 0 150,000
Issuance of 53,400 Shares to reduce Stockholder
Payable. 53,400 53 39,947 0 40,000
Issuance of 10,700 Shares to reduce Stockholder
Payable. 10,700 11 6,989 0 7,000
Issuance of 20,100 Shares to Stockholder
Payable. 20,100 20 14,980 0 15,000
Net loss September 30, 2000 - - 0 (2,516) (2,516)
------------ ------------ ------------- ---------- ----------
BALANCE AT SEPTEMBER 30, 2000 19,687,620 $ 19,687 $ 572,490 $(327,792) $ 264,385
============ ============ ============= ========== ==========
The accompanying notes are an intregal part of these financial statements.
</TABLE>
-5-
<PAGE>
HYBRID FUELS, INC.
(Formerly Polo Equities, Inc.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1. THE COMPANY
----------------------
The Company was originally incorporated in the State of Florida on February 16,
1960 as Fiberglass Industries Corporation of America. On August 29, 1966, the
Company changed its name to Rocket-Atlas Corp. and again changed its name on
November 21, 1966 to Rocket Industries, Corporation. On January 27, 1984, the
Company changed it's name to Polo Investment Corp. of Missouri, Inc. On August
2, 1985 the name was changed to Medical Advanced Systems, Inc. and on June 3,
1993, the Company changed its name to Polo Equities, Inc
In May 1998, the Company caused a Nevada corporation to be formed under the name
Polo Equities, Inc., (Polo) (a Nevada corporation), with authorized capital of
50,000,000 shares of $.001 par value common stock. The Company then merged with
Polo pursuant to Articles of Merger adopted May 28, 1998 and filed with the
State of Nevada on June 10, 1998, which changed its domicile to Nevada.
On May 29, 1998 the Company changed its name to Hybrid Fuels, Inc., the current
name.
In May of 1998, in a stock for stock exchange, the Company acquired Hybrid
Fuels, USA, Inc. and 330420 B.C. Ltd., which changed its name to Hybrid Fuels
(Canada) Inc., As part of the acquisition, the Company acquired the technology
necessary for the Company's current operations. The Company operates through
its wholly owned subsidiaries, Hybrid Fuels, U.S.A., Inc, and Hybrid Fuels
(Canada) Inc.
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.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------
This summary of significant accounting policies of Hybrid Fuels, Inc. (the
Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
NATURE OF OPERATIONS
----------------------
See The Company above
CASH AND CASH EQUIVALENTS
----------------------------
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
PROPERTY AND EQUIPMENT
------------------------
Property and equipment are stated at the lower of cost or fair market value.
Depreciation is computed for financial statement purposes as well as for federal
income tax purposes using the MACRS (Modified Accelerated Cost Recovery System)
method of depreciation. Equipment is depreciated over five years. Software is
amortized over five years.
INCOME TAXES
-------------
The Company has not filed any tax returns. It is anticipated that if tax
returns were filed, the company would have net operating losses. The current
deficit of $327,792 at September 30, 2000 would potentially create a similar net
operating loss, which could begin expiring for tax purposes in 2004.
- 6 -
<PAGE>
HYBRID FUELS, INC.
(Formerly Polo Equities, Inc.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
USE OF ESTIMATES
------------------
The preparation of financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
FOREIGN EXCHANGE
-----------------
Some financial activity was based on Canadian dollars and translated on June 30,
2000 using the rate of (C$/US$) 1.468 or a multiplier of .6812 and 1.4864 or a
multiplier of .6728 on September 30, 2000.
NOTE 3. GOING CONCERN
------------------------
Because of a deficiency in working capital and significant operating losses,
there is doubt about the ability of the Company to continue in existence unless
additional working capital is obtained. The Company currently has plans to
raise sufficient working capital through equity financing and through the
acquisition of companies having sufficient assets and cash flow to enable the
Company to be self-sufficient and profitable. The Company has acquired an
option to purchase a beef packing plant which it anticipates will begin
operations January 1, 2001. See NOTE 5
NOTE 4. COMPANY FACILITIES
-----------------------------
The Company currently uses office space at #214-2791 Hwy 97 N, Kelowna, B.C.,
VIX4J8, which is provided by a shareholder at no cost to the Company. The
President also maintains an office in his home at no cost to the Company.
NOTE 5. DEPOSIT
-----------------
The Company deposited $250,000 Canadian Dollars ($170,561 USD), to Mega
Holdings, Ltd., pursuant to an agreement to purchase a beef processing plant
owned by Mega Holdings, Ltd. The Company has agreed to purchase the beef
processing plant facility including land, buildings and equipment for $3,000,000
Canadian Dollars. The property, buildings and related equipment were appraised
in 1996 at a replacement value of $4,990,000 Canadian Dollars, during a time in
which the plant was dormant and in need of repair. The purchase agreement
requires an additional payment of $150,000 Canadian Dollars within 45 days of
acceptance, which made it due on June 24, 2000, the parties have agreed to
extend the deadline for the payment. Upon completion of the purchase this beef
processing plant will be operated by Blue Mountain Packers, Ltd., The Company
intends to acquire the issued and outstanding shares of stock of Blue Mountain
Packers, Ltd. and operate this corporation as a wholly owned subsidiary. Blue
Mountain Packers, Ltd. recently received certification by the Canadian Food
Inspection Agency of the Government of Canada, Department of Agriculture for the
processing of Canadian beef.
NOTE 6. STOCKHOLDERS LOAN RECEIVABLE
----------------------------------------
On February 17, 2000, and then again on July 5, 2000, the Company executed
subscription agreements and notes whereby the Company would receive $150,000 for
1,500,000 shares common stock for each agreement. The notes are interest free
and are to be received within one (1) week of the Company being re-listed on the
OTC:BB or other suitable exchange.
NOTE 7. NOTE RECEIVABLE BLUE MOUNTAIN
------------------------------------------
On September 15, 2000, the Company issued a note to Douglas Dickie dba Deelay
Holdings for $33,638 USD due and payable on or before September 15, 2001 plus
interest in the amount of $2,691 USD and passed this loan through to Blue
Mountain Pakers Ltd., which executed a note at the same terms.
- 7 -
<PAGE>
HYBRID FUELS, INC.
(Formerly Polo Equities, Inc.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 8. STOCKHOLDERS LOAN PAYABLE
-------------------------------------
Advanced by the controlling shareholder of the Company; The money was advanced
to the Company with no specific term of repayment.
NOTE 9. DIRECTOR PAYABLE
---------------------------
The President and Director Clay Larson, has paid office and related expenses for
the Company, from his personal funds in the amount of $2,187 USD. The Company
has agreed to reimburse him for these expenses.
NOTE 10. STOCKHOLDERS EQUITY
-------------------------------
The issuer was originally incorporated in Florida as Fiberglass Industries Corp
of America in February, 1960 with authorized capital of 500,000 shares with a
par value of $.10 per share.
In October, 1964, the Company changed its authorized capital to 1,500,000 shares
of common stock with a par value of $.10 per share
On November 21, 1966, the Company changed its name to Rocket Industries,
Corporation. and at that time authorized capital was increased to 3,000,000
shares and par value was changed to $.05 per share.
On January 27, 1984, the Company changed its name to Polo Investment Corp of
Missouri Inc. and increased its authorized capital to 30,000,000 shares.
On June 3, 1993, the Company changed its name to Polo Equities, Inc. and
increased its authorized capital to 50,000,000 shares common stock with a par
value of $.001 per share.
In May 1998, the Company caused a Nevada corporation to be formed under the name
Polo Equities, Inc., ( a Nevada corporation), with authorized capital of
50,000,000 shares of $.001 par value common stock. The Company then merged with
Polo pursuant to Articles of Merger adopted May 28, 1998 and filed with the
State of Nevada on June 10, 1998, which changed its domicile to Nevada.
On May 29, 1998, the Company changed its name to Hybrid Fuels, Inc., the current
name.
In accordance with the terms of an acquisition agreement, 12,000,000 of the
15,000,000 shares outstanding at the time, were canceled and 12,000,000 treasury
shares were issued in a share for share exchange by which the issuer became the
owner of all of the issued and outstanding shares of Hybrid Fuels, USA Inc. and
330420 B.C. LTD. That Company changed it's name to Hybrid Fuels (Canada) Inc.
By acquiring control of that company, this Company gained control of the
intellectual property.
On August 4, 1998, the Company 's Board of Directors authorized the issuance of
1,000,000 shares common stock to individuals without consideration. On March
23, 1999, the Company's Board of Directors issued an additional 900,000 shares
common stock, also without consideration. On August 21, 1999, the Board of
Directors resolved that share certificates numbered 10166 through 10174 totaling
1,000,000 shares common stock and certificates numbered 10212 through 10220
totaling 900,00 shares common stock 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,
Standard Registrar and Transfer Company Inc., for any costs or liability it may
incur in any way arising out of the cancellation of such shares and the transfer
agent removed the 1,900,000 shares from the stockholder list effectively
reversing the issuance. Six of the canceled certificates, totaling 550,000
shares, have been endorsed and returned to the Company for cancellation.
- 8 -
<PAGE>
HYBRID FUELS, INC.
(Formerly Polo Equities, Inc.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 11. U.S.A. SECURITIES AND EXCHANGE COMMISSION
-------------------------------------------------------
On November 7, 2000, the Company filled a Form SB-2 Registration Statement under
The Securities Act of 1933 with the Securities and Exchange Commission.
Registration File Number 333-49424. The Company has been advised by the
Securities and Exchange Commission that the June 30, 2000, Financial Statements
needed to be updated and resubmitted as an amended submission.
-9-
<PAGE>
<PAGE>
