The Company intends to use the proceeds of the placing to strengthen its balance
sheet. While the Directors are optimistic that the Company's outstanding
warrants will be exercised in January 2007, this financing mitigates the risks
associated with that event. The Directors believe that its strengthened balance
sheet will also help remove any potential uncertainty among customers and
partners regarding PolyFuel's financial capability to execute its business plan
as the portable fuel cell market reaches commercialisation expected in 2007 and
2008.

The Company has entered into a placing agreement with Collins Stewart Limited
("Collins Stewart"), under which Collins Stewart has agreed to procure placees
for the new common shares to be issued under the Placing. The Placing, which has
been underwritten by Collins Stewart, is subject, inter alia, to the new common
shares being admitted to trading on AIM. The new common shares will rank pari
passu in all respects with existing issued common shares in PolyFuel. Admission
of the new common shares is expected to become effective at 8.00 am on 27
January 2006.

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, and that many of the DOE's fuel cell
projects have been similarly affected. PolyFuel has received approximately $1
million of funding from the DOE to date, and a further $2 million was expected
over the next two years. The Company has the complete ability to control its
costs under the program. PolyFuel was informed that funding may resume in the
DOE's FY2007 budget. The Directors do 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.

Jim Balcom, Chief Executive of PolyFuel, said:
"Following the Company's recent trading update, several institutions indicated
their interest in participating in a secondary offering. PolyFuel directors are
delighted with the confidence expressed by existing and new investors in
participating in the secondary offering."