The company said it intends to use the proceeds to strengthen its balance sheet. The board also said that this financing mitigates any risks associated with the exercise of outstanding warrants in January 2007.

The directors believe that its strengthened balance sheet will also help remove any potential uncertainty among customers and partners regarding PolyFuel's ability to execute its business plan as the portable fuel cell market reaches commercialisation expected in 2007 and 2008.

PolyFuel also said today that it has received informal notification 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.

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. PolyFuel has received around 1 mln usd from the DOE to date, and a further 2 mln ysd was expected over the next two years.

PolyFuel said funding may resume in the DOE's FY2007 budget but in the meantime the board does not believe that there will be any material impact to the company or its future prospects as a result of the suspension of the DOE funding