NEW, THIN POLYFUEL MEMBRANE BOOSTS DIRECT
METHANOL FUEL CELL PEAK PERFORMANCE BY 33%

PolyFuel Inc.
17 January 2006


17th January 2006
POLYFUEL, INC.

TRADING UPDATE
FOR 3 MONTHS TO 31ST DECEMBER 2005

PolyFuel, Inc ('PolyFuel') announces its trading update for the three months
from 1st October to 31st December 2005.

During the period progress has continue to be made in PolyFuel's market,
technology and the regulatory environment as the portable fuel cell market moves
towards commercialisation, still predicted by the leading consumer electronic
companies for 2007/2008.

Market

PolyFuel has added two more customers into the evaluation phase bringing the
total to nineteen. During the quarter, two of the companies that were testing
PolyFuel's membrane completed their evaluation and both have gone on to purchase
PolyFuel's membrane for incorporation in their development programmes. Eleven
companies have now completed their evaluation stage and all eleven have gone on
to purchase PolyFuel's membrane.

In December PolyFuel disclosed that Sanyo, the world's largest battery
manufacturer, and NEC, the largest mobile phone manufacturer in Japan, are both
working closely with PolyFuel. In total eleven of PolyFuel's customers are
household brand name consumer electronics manufacturers while several are
leading developers of fuel cells for military and industrial applications.

In early January, Matsushita Battery Inc., manufacturer of Panasonic brand
batteries, demonstrated an advance in DMFC technology for a laptop computer at
the Consumer Electronics Show in Las Vegas. Panasonic did not publicly disclose
the membrane that was used in the prototype.

Over the quarter, as customers move from the research stage to the development
stage, PolyFuel's average monthly order rate grew by almost 50% over the
previous quarter, and at the end of the year was 41/2 times higher than in
December 2004.

Technology

As previously disclosed PolyFuel announced in November that it had surpassed
5,000 hours of durability on its original 62 micron DMFC membrane.

In December PolyFuel announced a higher power, thinner version of its DMFC
membrane. The 45 micron membrane delivers 33% more power than the previous 62
micron version, which was itself the highest power DMFC membrane available on
the market. Several customers have tested this material including extensive
durability testing. Feedback on durability from customers is very promising.

Regulation

Key regulatory events occurred during the quarter which are set to pave the way
for worldwide commercial introduction of Direct Methanol Fuel Cells starting
January 2007.

In October, the International Electrotechnical Commission issued a Committee
Draft of the safety standards for portable fuel cell and fuel cartridge design.
These industry standards are expected to be approved for worldwide adoption in
the first quarter of 2006.

In November, the International Civil Aviation Organization's Working Group on
Dangerous Goods voted upon and passed an exception allowing passengers and crew
to carry and use methanol fuel cell cartridges and DMFCs on board commercial
aircraft. These regulations are expected to come into effect worldwide in
January 2007.

-Ends-

very interesting long term investment but I feel it has got ahead of itself so I'm watching and waiting.

Moneyplus
At this price I dont blame you just watching it has shot up over the past few days. On the plus side news flow has been good. One other to watch is RGY.

From UK-Analyst.com today

"News of an ambitious 10-million-pound placing sent the shares of Polyfuel 7.5p lower at 85.5p. The world leader in engineering membranes for fuel cells said that it was to raise 10 million pounds before expenses by way of a placing of 12.5 million new shares at 80p. The proceeds of the placing are set to be used to strengthen its balance sheet. A statement from Polyfuel said that whilst it expected the outstanding warrants to be exercised in January next year, the latest fundraising plans mitigated the risks associated with that event. A strengthened balance sheet will unquestionably remove any potential uncertainty among customers and partners regarding its financial capability to execute its business plan.
Just last week Polyfuel was touring City writers, including top tipster Tom Winnifrith of website www.t1ps.com who were told that the company easily had enough cash to see it through to profitability. To make a point of asking to see tipsters and to send out that message (presumably in the hope that the tipsters would steer private clients in to the stock pushing the stock higher to make the institutional placing easier) is very bad form. Tom did not tip that stock and on the basis of such appalling behaviour he says that he will now never tip that stock. Shame on you Polyfuels.

PapalPower

Thanks for the post. I agree Idont like the timing of the RNS.
Separately, PolyFuel received informal notification on 19 January 2006 from the
US Department of Energy ("DOE") that the DOE's portion of the funding for one of
the Company's research projects has been suspended for 2006. Formal notification
will apparently be sent in the coming weeks. According to the spokesperson, the
suspension is not due to lack of performance, but rather the result of
reductions in the DOE's fiscal 2006 budget.
I still rate this as a long term sh.

Last time I checked this stock in April it was up to 106, following an agreement with Johnson Matthey to fuel cell membranes and the outlook was rosy. "Looks like a cracker" was the quote (the way he tells em). However, since then its been on the slippery slope and is now down around 54. Is this low enough for a punt?

The entire fuel cell sector seems on a slide at the moment and there are plenty of bargains floating around, E.g. VLR and ITM. I am going to wait until sentiment changes before returning to this sector.

Positive rns, yesterday! Re, 2 broad patents for their fuel cell technology.
Turned the corner perhaps?

Down to 21/23p after a sell of 20k shares. The company seemed to have the edge in membrane technology. Wonder if this is now just in a much oversold situation. Any of the 'regular' followers of this stock any thoughts?