Hy-Drive Technologies announces: Product Performance Test Results and Memorandum of Understanding

    TSXV: HGS

    MISSISSAUGA, ON, Oct. 30 /CNW/ - Hy-Drive Technologies Ltd. announces
that a series of tests used to determine fuel efficiency as well as emissions
performance under the supervision of accredited validation laboratories have
now been completed. Fuel economy tests followed industry standard SAE J1321
Type II, test format procedures, while particulate emissions test procedures
followed the SAE J1667 protocol. As previously announced, Hy-Drive had
determined that it would only announce performance results subsequent to
accredited third party validation.
    Hy-Drive is pleased to report verified results from repeated sample
trials conducted over the past several months on diesel engines in the
5.9-7.3 litre size. Testing for both fuel performance and particulate
emissions were all positive, with a range of performance results now
documented. Average fuel savings in excess of 20% with commensurate emissions
reductions were recorded. These results are notable as they represent an
important directional sign that supports the validity of Hy-Drive's HGS
(Hydrogen Generating System) technology, and are an indication of performance
repeatability.
    Hy-Drive has also initiated testing on Class 7 type engines, and while
yet early in the process, validated preliminary results are encouraging. This
progress represents an important milestone as the company moves ever closer
towards completing the development of HGS product targeted to service
Hy-Drive's initial primary market - high fuel use - Class 8 size highway
tractors.
    Hy-Drive also announces that it has entered into a non-binding Memorandum
of Understanding ("MOU") with an arm's length developer of enhancements for
diesel engines. Pursuant to the MOU, Hy-Drive will acquire certain
intellectual property assets (the "IP Assets") from the vendor which, in turn,
will be used to further refine the hydrogen control system being used within
Hy-Drive's HGS product. In addition, the vendor will also be engaged to
collaborate with Hy-Drive relative to further developments.
    In consideration for the purchase of the IP Assets, Hy-Drive will issue
the vendor 3,250,000 common shares at a price of $0.36 per share and a
corresponding number of common share purchase warrants. The warrants will be
issued in series, with 1,950,000 warrants exercisable at a price of $4.50 per
share, 975,000 warrants exercisable at a price of $5.00, and 325,000 warrants
exercisable at a price of $8.00. Warrants priced at $4.50 will be exercisable
for a period of two (2) years from their date of issue, other warrants will be
exercisable for a period of five (5) years from their date of issue.
    In addition to a four month regulatory hold period, the securities issued
upon acquisition of the IP Assets will be subject to a contractual escrow
arrangement, whereby the securities will only be released from escrow to the
vendor upon the satisfaction of two conditions: (1) the earlier of (i) two
years from the date of issuance; or (ii) when Hy-Drive's share price exceeds
$4.50 for a period of 60 consecutive days; and (2) Hy-Drive reports two
consecutive quarters of revenue related to the development of technology
utilizing the IP Assets. In addition, the consideration paid to the vendor
will be subject to a purchase price adjustment whereby up to 80% of the
securities issued to vendor may be cancelled if certain conditions are not met
prior to the securities being eligible for release from escrow.
    The acquisition of the IP Assets remain subject to receipt of all
regulatory approvals, including that of the TSX Venture Exchange as well as
the parties entering into a definitive agreement.
    As previously announced Hy-Drive elected to pause broad HGS product
roll-out and instead re-set pre-shipment quality control to substantially
higher standards. Rigorous in-house technical test procedures for both
individual components and whole HGS units are equally contributing towards the
development of a more robust product. This focused approach is expected to
benefit Hy-Drive customers by delivering higher product reliability.
    Hy-Drive's President and C.E.O Hugo Sorensen commented that "while
testing showed a range of fuel improvement with some variance from engine to
engine, HGS technology demonstrated repeatable improvement in both fuel
economy and reduced emissions. We recognize that these encouraging results
have been long awaited however, the process has been a very cautious and
disciplined approach towards better understanding engine operating
performance. There is more work and diligent testing to be done however, as a
result of these advances Hy-Drive is in a better position to proceed towards
staged commercialization for on-highway diesel tractors."
    Ongoing performance testing as well as selective expansion of customer
trials will continue. The company intends to announce additional disclosure
with respect to product performance following receipt of further validation
test results.

    
    About Hy-Drive
    --------------
    

    Hy-Drive's market strategy is to provide a technological solution that
delivers both fuel savings and emission reduction for the company's principal
market - Class 8 on-highway trucks. The HGS (Hydrogen Generating System)
provides additive amounts of on-vehicle generated hydrogen, which is intended
to enhance overall engine performance when injected pre-combustion into the
engine.
    For more information, please visit www.hy-drive.com.

    
    Cautionary Note Regarding Forward-Looking Information
    -----------------------------------------------------
    

    This news release contains "forward-looking information" within the
meaning of applicable Canadian securities legislation. Forward-looking
information includes, but is not limited to, information concerning Hy-Drive's
HGS technology, efforts to increase product reliability and the proposed
business transaction and possible related benefits, product testing,
development and commercialization as well as Hy-Drive's business strategy.
Generally, forward-looking information 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", 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".
Forward-looking information is based on the opinions and estimates of
management at the date the information is made, and is based on a number of
assumptions and subject to a variety of risks and uncertainties and other
factors that could cause actual events or results to differ materially from
those projected in the forward-looking information. Many of these assumptions
are based on factors and events that are not within the control of Hy-Drive
and there is no assurance they will prove to be correct. Factors that could
cause actual results to vary materially from results anticipated by such
forward-looking information include completion of a definitive agreement with
the vendor of the IP Assets and receipt of all requisite approvals as well as
those risk factors discussed in Hy-Drive's Management's Discussion and
Analysis for the period ended June 30, 2008 at www.sedar.com. Although
Hy-Drive has attempted to identify important factors that could cause actual
actions, events or results to differ materially from those described in
forward-looking information, there may be other factors that cause actions,
events or results not to be anticipated, estimated or intended. There can be
no assurance that forward-looking information will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such information. Hy-Drive undertakes no obligation to update
forward-looking information if circumstances or management's estimates or
opinions should change except as required by applicable securities laws. The
reader is cautioned not to place undue reliance on forward-looking
information.

    
    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.

    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.
    

For further information:

For further information: Hugo T. Sorensen, President & C.E.O.,
hsorensen@hy-drive.com, (905) 542-3024 Ext No. 222