Each Unit consists of one common share of Hy-Drive and six-tenths of a warrant. Each whole warrant entitles the holder to purchase one additional common share of Hy-Drive at an exercise price of $0.80 and expires two years from the date of issue.

The net proceeds of the offering will be used to fund tooling and equipment requirements and inventory build up in anticipation of commercial sales; sales and marketing expenses to develop the global marketplace; research and development expenses to further enhance the technology; patent applications to strengthen the Company's intellectual property portfolio; and for working capital and general corporate purposes.

"This financing will enable us to accelerate plans to introduce our commercial G2 Hy-Drive System," said Tom Brown, President of Hy-Drive. "We are currently assembling the first 100 of our latest generation, commercial-ready units and with the proceeds of this financing, will be investing in inventory as well as the tooling and equipment required to increase production levels to meet expected future sales."

The financing was completed principally through Capstone Investments, acting as agent. As compensation, the agent is entitled to be issued a number of broker's warrants equal to up to 6% of the number of Units purchased by investors introduced to the offering. Each broker's warrant entitles the holder to purchase one common share at an exercise price of $0.80 prior to its expiry two years from the date of issue. The agent will also receive a commission of up to 6% of the proceeds of the financing received from investors introduced to the offering.

"We are pleased to have the support of these institutional investors, which we view as a strong endorsement of our technology, its market potential and our growth strategy," Brown added.

In the United States, all the common shares and warrants and the common shares issuable under the warrants (including broker's warrants issued to the agent under the offering) are subject to resale restrictions under the U.S. Securities Act of 1933, as amended. Also, all the shares and warrants (including warrants issued to the agent under the offering) are subject to a four-month hold period under the policies of the TSX Venture Exchange.

Following completion of this financing, Hy-Drive has 36,956,833 issued and outstanding common shares and up to 45,817,059 common shares, fully diluted. All transactions are subject to final acceptance by the TSX Venture Exchange.

About Hy-Drive

Hy-Drive is an energy technology firm that has developed a proprietary, patented hydrogen generating system. The Hy-Drive system generates and injects hydrogen gas into a regular internal combustion engine, enhancing the combustion process by allowing fuel to burn more efficiently and completely. In extensive customer trials and tests conducted to date, the Hy-Drive system has demonstrated significant performance enhancements, including reduced emissions, increased torque/horsepower, fuel savings and extended engine life. These benefits provide customers with greater productivity overall, as their engines operate more efficiently, with improved cycle times and less carbon build-up. For further information, visit www.hy-drive.com.

For further information

Tom Brown, President, Hy-Drive Technologies Ltd., (905) 542-3024, (905) 542-0820 fax, tombrown@hy-drive.com
Craig Armitage or Jay Hussey, Investor Relations, The Equicom Group Inc., (416) 815-0700, (416) 815-0080 fax, carmitage@equicomgroup.com, jhussey@equicomgroup.com