Each unit consists of one common share of Hy-Drive and one-half of a warrant. Each whole warrant entitles the holder to purchase one additional common share at an exercise price of $2.00 and expires two years from the date of issue.

The net proceeds of the offering will be used for working capital and equipment requirements, sales and marketing expenses, research and development expenses and the funding of patent applications.

In accordance with the terms of Hy-Drive's agency agreement with Capstone Investments, Capstone is entitled to be issued 12,642 broker's warrants. Each broker's warrant entitles the holder to purchase one common share at an exercise price of $0.85 prior to its expiry two years from the date of issue. The agent will also receive a cash commission of $10,745.29.

All shares, warrants and any shares issuable upon exercises of the warrants issued pursuant to the offering (including the broker's warrants) are subject to a four month hold period as required under applicable securities laws and the policies of the TSX Venture Exchange.

Hy-Drive currently has 45,263,787 issued and outstanding common shares.

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.