Hy-Drive Announces Financial Results for 1st Quarter 2010

(HGS-V)

MISSISSAUGA, ON, May 18 /CNW/ - Hy-Drive Technologies Ltd. today announced its financial results for the three-month period ended March 31, 2010. This release also covers Financial Statements for the Company and an accompanying MD&A released at www.sedar.com.

Highlights for the three-month period ended March 31, 2010:

The following outlines the key events during the three-month period ended March 31, 2010 and up to May 17, 2010, the date of the MD&A, in the development of the Company, the HGS(R) product, the mining product and the Class 8 truck market.

The following table sets out selected financial data for the three- months ended March 31, 2010:

    
    -------------------------------------------------------------------------
                                                  Three Months ended March 31
                                                           (unaudited)
    -------------------------------------------------------------------------
                                                        2010         2009
                                                          $            $
    -------------------------------------------------------------------------
    General and administration                          436,068      375,122
    -------------------------------------------------------------------------
    Sales and marketing                                 202,754        1,091
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Research and development                            446,602      309,266
    -------------------------------------------------------------------------
    Inventory write-off                                       -       38,445
    -------------------------------------------------------------------------
    Warranty costs                                      (21,764)           -
    -------------------------------------------------------------------------
    Stock-based compensation                              2,886       39,183
    -------------------------------------------------------------------------
    Amortization - property and equipment                28,055       64,548
    -------------------------------------------------------------------------
    Amortization - development costs                    242,559            -
    -------------------------------------------------------------------------
    Amortization - intellectual property                 40,598       36,991
    -------------------------------------------------------------------------
    Total Expenses                                    1,377,758      864,646
    -------------------------------------------------------------------------
    Interest and other income                            (2,378)      (8,847)
    -------------------------------------------------------------------------
    Net Gain or loss for the period                  (1,380,136)    (873,493)
    -------------------------------------------------------------------------
    Loss per share                                        (0.02)       (0.01)
    -------------------------------------------------------------------------


    -   On May 13, 2010 Hy-Drive announced that it intended to undertake a
        brokered private placement of up to 16,666,667 units ("Units") at a
        price of Cdn$0.30 per Unit for gross proceeds of up to Cdn$5 million.
        Each Unit will consist of one common share (a "Share") of the Company
        and one-half of one warrant (a "Warrant"). Each whole Warrant will be
        exercisable for one Share at a price of Cdn$0.46 per share for a
        period of five years. Hy-Drive has engaged CapStone Investments to
        act as placement agent on a best efforts basis to a limited number of
        accredited or other qualified investors. The Company's intended use
        of the net proceeds of the offering is for working capital and
        general corporate purposes, research and development, capital
        expenditures and intellectual property protection. Completion of the
        private placement is subject to the satisfaction of certain
        conditions such as the receipt of all necessary regulatory approvals,
        including that of the TSX Venture Exchange. There can be no assurance
        that the private placement will be completed or that, if completed,
        it will be on the terms currently contemplated. CapStone assisted the
        Company with a successful private placement in 2006-07. In April
        2010, CapStone was issued 100,000 purchase warrants exercisable for
        common shares at a price of $0.494 per share in consideration of
        financial advisory services valued at USD$35,000.

    -   On March 25, 2010 the Company announced that Professional Service
        Industries, Inc. ("PSI"), a large engineering consultancy, had
        validated the results of a SAE/TMC Type IV Test conducted by the
        Company in cooperation with Ontario Waste Management ("OWM"). The
        Type IV Test followed an extended protocol to measure fuel
        consumption on a commercial route greater than 320 km (200 miles).
        The test, involving six (6) trucks, showed average fuel reduction of
        11.9% over 100,000 kilometres.

    -   In conjunction with the above tests, PSI validated results of SAE
        Snap Acceleration Tests that indicated an average of 45% reduction in
        opacity. Opacity is an indicator of the particulate emissions
        produced by an engine, which are considered harmful.

    -   Following the successful completion of the extended SAE/TMC Type IV
        Test Hy-Drive secured an order for the rental of eighteen (18) units
        on a yearly rental basis to OWM. The installation of the HGS units is
        being completed in May 2010.

    -   On March 16, 2010 the Board of Directors announced a management
        change. Mr. Hugo Sorensen, President and CEO, had elected to retire
        effective June 1, 2010. Fred Florence, VP & CFO was appointed Chief
        Operating Officer. As an interim transitional step, the Chairman, Mr.
        Dan Doucette, was appointed Executive Chairman and announced the
        commencement of a search process for a CEO. Mr. Sorensen will remain
        in a consulting capacity for the balance of 2010.

    -   In March 2010, Hy-Drive re-engaged in the Australian market; CAT
        engines have a significant market share in Australia and diesel
        prices are much higher than in North America. The Company shipped ten
        (10) HGS units to its Australian sales agent, Sparta Capital Ltd. for
        sales trials commencing in April 2010 and two fleets had agreed to
        commence trials of the HGS.

    -   The Company continued in-depth discussions with companies
        specializing in out source manufacturing. Management believes that
        significant cost savings can be realized in the manufacturing
        process.

    -   The Company's program of cash conservation was carried forward into
        2010. Total cash and short-term investments used in operating
        activities was $1,282,530 for the three months ended March 31, 2010
        compared to $700,593 for the three months ended March 31, 2009.
        Although there was an increase, it was primarily due to inventory
        build up for commercial sale.

    -   Net loss for the three-months ended March 31, 2010 and 2009 was
        $1,380,136 ($0.02 per share) and $873,493 ($0.01 per share)
        respectively. The loss for the quarter included amortization of
        development costs of $242,559 that only commenced in December 2009
        and increased marketing costs resulting from the launch of the HGS
        product of $201,663

    -   The Company reports cash and short-term investments of $2,936,441 as
        at March 31, 2010, compared to $4,268,265 as at December 31, 2009; a
        reduction of $1,331,824 in the quarter.

    -   In August 2009, the Company announced receipt of an order for 100 HGS
        units from Mining Technologies International, Inc. ("MTI"). The order
        was valued at $1,200,000 and the Company received a payment in
        advance of shipment for $200,000. Timing for fulfillment of the order
        was delayed pending confirmation of MTI's readiness to incorporate
        the HGS into their OEM equipment. The Company's engineering
        department worked closely with its counterparts at MTI to finalize
        the design for a new HGS for mining application, which was signed off
        in early 2010. Hy-Drive is first building ten mining HGS units for
        quality testing purposes. Once testing is complete, the Company will
        fulfill the order with the approved design. The HGS provides
        significant reductions in particulate emissions, as confirmed in the
        PSI validated tests, which could improve air quality and reduce
        maintenance costs in underground mines.

    -   In 2009 the Company received notice of an action brought against it
        by a company with a foreign distribution agreement for the HGS. The
        Company and its counsel believe the action is without merit. Hy-Drive
        filed a defence in the action, the plaintiff posted security and the
        discovery stage has taken place.

    -   In 2008, the Company wrote down a Loan Receivable and accrued
        interest of $513,333 due from an arms-length party that declared
        bankruptcy. Hy-Drive held security on the bankrupt's assets and filed
        a claim as a secured creditor. The Bankruptcy Estate Trustee advised
        the Company that realizations could result in full recovery of the
        Loan Receivable. The Estate has claims from several secured creditors
        and CRA. Final distribution of realizations is subject to Taxation of
        the Estate by the Saskatchewan Courts. Therefore, while Management
        believes there is a high likelihood of significant recovery, the
        Company did not include any recovery in the three months ended
        March 31, 2010.
    

About Hy-Drive

Hy-Drive is a technology firm that has developed a proprietary, patented hydrogen generating system. Hy-Drive's Hydrogen Generating System ("HGS(TM)") generates and injects hydrogen gas into a regular internal combustion engine, enhancing the combustion process by allowing fuel to burn more efficiently and completely. For more information, please visit www.hy-drive.com.

Cautionary Note Regarding Forward-Looking Statements:

This press release contains certain forward-looking statements that are based upon current expectations, which involve risks and uncertainties associated with the Company's business, and the economic environment in which the business operates. Forward-looking statements contained in this MD&A that are not statements of historical fact may be deemed to be forward-looking statements including but not limited to, statements about future development of Hy-Drive's products, commercial production in 2010, future working capital requirements, and validation of Hy-Drive's products, and can be identified by the use of forward-looking terminology such as "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate", "thinks", or "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur", or "be achieved" and similar expressions to the extent that they relate to the Company or its management. These forward-looking statements are not historical facts, but reflect the Company's current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the matters discussed in the section "Risks and Uncertainties" below.

Although Hy-Drive has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Hy-Drive does not undertake to update any forward-looking information that is incorporated by reference herein, except in accordance with applicable securities laws.

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

%SEDAR: 00016984E

SOURCE HY-DRIVE TECHNOLOGIES LTD.

For further information: For further information: Fred M. Florence, COO & CFO, Hy-Drive Technologies Ltd. Tel: (905) 542-3024 ext. 257, fflorence@hy-drive.com

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HY-DRIVE TECHNOLOGIES LTD.

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