Trading Update

RNS Number:9108O
PolyFuel Inc.
28 February 2008


28 February 2008
                                  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 2007.

Despite the fact that 2007 was a challenging year for the portable fuel cell
industry, PolyFuel has made significant progress toward its goal of catalysing
the commercial market for portable fuel cell power supplies.

During the year, the world's leading fuel cell developers endeavoured to reach
the commercial benchmark of Lithium-ion battery energy density. Contrary to the
Company's prior expectations and fuel cell developers' public statements, no
test market activities were conducted by portable fuel cell system developers in
2007. PolyFuel recognised that, despite the best efforts of fuel cell
developers, certain problems were proving challenging to solve, and so the
Company embarked on an aggressive internal programme to help address these, the
results of which are detailed below.

Delivering all-day runtime in a notebook PC is 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 able to be
integrated into the notebook PC itself. PolyFuel brought its extensive membrane
engineering experience to bear on the problem, as well as its strong fuel cell
stack and system design capabilities. The Company also received a $3 million
grant from the U.S. Department of Energy to support the programme.

The goal of the programme is a working prototype fuel cell designed to be
integrated with a commercially available notebook PC, and which surpasses the
performance of Lithium-ion batteries in terms of runtime versus size and weight.
The underlying technology would then be made available to PolyFuel's customers
and partners as a reference design to help them implement the solution quickly
and easily.

PolyFuel recently completed the fourth step of the five-step programme, and in
doing so has fundamentally solved the water management problem that has been an
issue for portable fuel cell developers for nearly a decade. All fuel cells
create water as a by-product of the electricity generation process. The
challenge has been what to do with it. To address this, PolyFuel engineered an
entirely new membrane, a breakthrough "membrane electrode assembly" (MEA) and a
new system design that work together to not only reduce the amount of water
by-product produced during fuel cell operation, but also to recycle a
significant portion of that water directly back through the membrane, where it
can be reused to generate more electricity.

The new membrane and MEA allow the water to be kept in optimal balance within
the fuel cell. The result is a considerable simplification in the design of the
fuel cell system, eliminating components, reducing overall size and weight, and
lowering cost. PolyFuel has operated multiple "proof of concept" cells,
incorporating the new membrane and MEA materials, for hundreds of hours under
the newly-engineered system architecture. PolyFuel is now working on the final
step of incorporating the fuel cell into a functioning hybrid power module and
integrating it with a commercially available notebook PC.

Once completed, PolyFuel is planning to make several prototypes available to
customers, thereby accelerating their development and commercialisation
activities. PolyFuel intends to work with battery and notebook/PC OEMs to seek
to introduce the fuel cell system into the high growth, 100+ million unit per
year market.

In addition to the progress with its reference design programme, PolyFuel
continued to build its membrane customer base, increasing the number of direct
customers from 18 at the end of 2006 to 24 at the end of 2007. Shipments of
membranes to customers increased almost threefold over 2006 and PolyFuel has
continued to increase its market share of known prototype portable fuel cell
design wins to 44% in 2007 (vs. approximately 30% in 2006).

PolyFuel also advanced its relationship with channel partner Johnson Matthey
Fuel Cells (JMFC) last year, with the successful completion of a rigorous vendor
qualification audit. During 2007 JMFC delivered numerous value-added fuel cell
components incorporating PolyFuel's membranes to its various fuel cell customers
for evaluation testing. In addition, JMFC is working with PolyFuel to develop
the new MEA for PolyFuel's notebook PC reference design.

Meanwhile evidence of the limitations of Lithium-ion battery technology
continues to grow, with increased regulation on the transport of Lithium-ion
batteries onboard aircraft contrasting with the relaxation of regulations on the
transport of fuel cells.

Jim Balcom, CEO of PolyFuel, commented: "During the period we reached several
key milestones towards our goal of beating Lithium-ion batteries, and as a
result we believe now more than ever in the market potential for portable fuel
cells. We recently shared our progress with selected customers, and without
exception, each stated their belief that PolyFuel is at the leading edge of fuel
cell system technology - not just membranes. Moreover, we were uniformly told
that our technology, when made available as a reference design, would enable our
customers to develop and introduce fuel cell powered notebook PCs and other
portable electronic products."

Jim Balcom (CEO) and Tom Caldwell (Interim CFO) of PolyFuel will be available to
answer analyst and investor questions on a conference call from 4.00pm to 4.30pm
(GMT) today. The dial-in number for this call for UK participants is 020 8817
9301. Please contact Hogarth on 020 7357 9477 if you require any further
details.

PolyFuel's Preliminary Results will be announced on 28 April 2008.


                                      ENDS


For further information please contact:

PolyFuel, Inc                                      Tel: [phone]
Jim Balcom, Chief Executive Officer

Hogarth Partnership Limited (Financial PR)         Tel: [phone]
Nick Denton / Sarah MacLeod / Ian Payne

Collins Stewart (NOMAD)                            Tel: [phone]
Mark Connelly



                      This information is provided by RNS
            The company news service from the London Stock Exchange

END
TSTKGGZZNNFGRZM