Pre-close Update

 

TIDMPYF 
 
RNS Number : 9806N 
PolyFuel Inc. 
27 February 2009 
 

27 February 2009 
PolyFuel Inc 
 
 
Pre-Close Update 
 
 
PolyFuel, Inc (AIM: PYF), a world leader in fuel cell technology and engineered 
fuel cell membranes for the portable electronics and automotive industries, 
today provides a pre-close update ahead of the announcement of its preliminary 
results for the year ended 31 December 2008. 
 
 
Technological and commercial update 
 
 
During the period, PolyFuel has continued in its efforts to catalyse the 
commercial market for portable fuel cell power supplies. Delivering all-day 
runtime in a compact, lightweight notebook PC remains the Holy Grail for battery 
manufacturers, PC OEMs, and fuel cell developers. 
 
 
The primary difficulty with portable fuel cells so far has been making them 
small enough to be integrated into the notebook PC itself. PolyFuel has brought 
its extensive membrane engineering experience to bear on the problem, as well as 
its strong fuel cell stack and system design capabilities and announced in July 
2008 that it had achieved this goal with a prototype notebook PC fuel cell power 
supply fully integrated with a Lenovo/IBM T40 ThinkPad notebook PC. 
 
 
The principal breakthrough was the engineering of a revolutionary new membrane, 
dubbed the DM3, and associated technology, that together enable a substantial 
simplification in system design, and subsequent elimination of a number of 
components which typically constitute a fuel cell system. 
 
 
As a result PolyFuel made substantial progress towards achieving the 5th and 
final milestone of its program to develop and demonstrate a prototype fuel cell 
power supply integrated with a notebook PC that can deliver 10 hours of off-grid 
runtime. While other technical goals will have to be achieved to reach full 
scale commercialization, the prototype can currently deliver 9 hours of off-grid 
runtime, and is expected to fulfill its 10 hour design goal shortly. The 
demonstration prototype occupies the same volume as an equivalent lithium-ion 
battery, but at approximately 30% less weight. 
 
 
The system is based upon the unique advantages of PolyFuel's patented and patent 
pending DM3 membrane technology and utilizes hot-swappable methanol fuel 
cartridges, allowing the delivery of non-stop power. The significantly smaller 
footprint and simpler design is appealing to consumer electronics manufacturers, 
and their battery suppliers, who wish to provide consumers with non-stop power 
for their notebook PCs and other products without resorting to external power 
connections or unwieldy spare batteries.  The Company believes its system 
represents a significant advancement for the portable power market and is the 
leading technology available to the industry today. 
 
 
PolyFuel intends for this prototype to function as a reference design for 
customers of the new DM3 membrane. The Company plans to license its MEA and 
system technology to the leading portable fuel cell system and battery 
manufacturers to assist them in designing compact, lightweight, fuel cell power 
supplies. One of the early potential applications is the 120+ million notebook 
PC market, among others. 
 
 
The Company is currently in discussions with some of the largest notebook PC 
OEMs and battery manufacturers in the world regarding a joint development 
agreement (JDA) to enable these companies to develop and launch their own 
products based on PolyFuel's revolutionary DM3 membrane. The Company's strategy 
is to enter into one or more such JDAs in 2009 to accelerate the commercial 
introduction of fuel cell-powered products. 
 
 
PolyFuel's DM3-based system technology is also applicable to a wide-variety of 
other portable power devices in the 5 watt to 100 watt range, including consumer 
electronics, defense, and industrial and recreational power supplies, among 
others. 
 
 
 PolyFuel also introduced a new membrane in 2008 to meet the needs of those 
portable fuel cell system developers which have designed their systems around 
the particular characteristics of DuPont's Nafion membrane. Several of these 
customers had requested that PolyFuel provide a membrane with similar water 
transport characteristics as the Nafion fluorocarbon membrane, while retaining 
the low methanol crossover and high power characteristics of PolyFuel's 
hydrocarbon membranes. This new membrane, dubbed DM2, has been tested by a 
number of these customers, with promising results. 
Sales of PolyFuel's DM1 membrane slowed during the past year compared to the 
previous year as a consequence of the downsizing of the company's sales and 
marketing staff and reduction in related activities as part of a Company-wide 
effort to reduce costs, and the shift in focus of the remaining staff to 
securing a JDA related to its DM3 membrane.  Nevertheless, PolyFuel continued to 
build its direct membrane customer base, from 24 customers in 2007 to 26 
customers in 2008. 
The Company recently received notification that 3 more of its patents have been 
allowed, bringing the total of issued and allowed patents to 8, with 17 more 
pending for a total of 25. This strong intellectual property portfolio underpins 
PolyFuel's value proposition and positions the Company to capitalize on the sale 
of high margin membrane products, once the commercial market for fuel cell 
powered products begins. 
In 2008 all of the necessary worldwide regulations were completed in relation to 
the transport of portable fuel cells and methanol fuel cartridges. Fuel cell 
powered devices and methanol fuel cartridges can now be transported and used in 
the cabin of commercial aircraft, as well as all other modes of public 
transportation. 
Funding update 
The Company realized the benefits of two new government programmes during the 
year, including participation in a two year, $2 million project under the 
Advanced Technology Program of the National Institute of Standards and 
Technology, and the initiation of a $2 million programme, in conjunction with 
other institutions, with the US Army's Communications-Electronics Research, 
Development, and Engineering Center (CERDEC).  During 2008, the Company 
concluded a $3 million project with the US Department of Energy, which has 
assisted in the DM3 and demonstration prototype development. 
During the course of 2008 PolyFuel reduced its monthly cash burn rate. The 
Company estimates its cash burn rate to be approximately $600,000. The Company 
ended the year with approximately $6.6 million in cash and investments.PolyFuel 
is actively seeking additional capital to complete its technology and product 
development, build out its manufacturing capability, and achieve commercial 
introduction of its products. 
Board change 
David Berkowitz, a Director of the company, has submitted notice that he will 
resign from the PolyFuel Board, effective at PolyFuel's April Board meeting. Mr. 
Berkowitz is a General Partner at Ventures West Capital where he leads the 
Cleantech practice. He was recently appointed to the role of raising Ventures 
West Capital's newest fund and is reducing his board activity in order to focus 
his efforts on this new assignment. Appointed in 2002, Mr. Berkowitz is 
PolyFuel's longest serving Board member. David has been a long time advisor and 
mentor to PolyFuel. The Board and Company are grateful for his contribution over 
the years and wish him well in his future endeavours. 
Ends 
For further information, please contact: 
+---------------------------------------------+--------------------------+ 
| PolyFuel, Inc                               | Tel: [phone]     | 
+---------------------------------------------+--------------------------+ 
| Jim Balcom, Chief Executive Officer         |                          | 
+---------------------------------------------+--------------------------+ 
| Hogarth Partnership Limited                 | Tel: [phone] | 
+---------------------------------------------+--------------------------+ 
| Nick Denton / Ian Payne                     |                          | 
+---------------------------------------------+--------------------------+ 
| KBC Peel Hunt (Nominated Adviser and        | Tel: [phone] | 
| Broker)                                     |                          | 
+---------------------------------------------+--------------------------+ 
| Jonathan Marren / David Anderson            |                          | 
+---------------------------------------------+--------------------------+ 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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