• Receipts from customers for the full year up 377% due to increased field trial activity;

• Final conversion of convertible notes to shares, reducing the company's debt to zero;

• Net cash outflow for the quarter down 5.2% and down 21% for the full year;

• Two further patents issued for the company's solid oxide fuel cell (SOFC) technology;

• Two senior management appointments.

Receipts from customers for the full year were up by 377% to A$953,000 (£381,000), compared with A$200,000 (£80,000) for FY05.  The increase in receipts relates principally to the Company's field trial programme of its Combined Heat and Power (CHP) demonstration units.  The Company expects to receive further revenues from these trials, particularly following the announcement on 29th June when the Company signed a further contract with EWE, the fifth-largest German multi-service energy company. 

The net cash outflow for the final quarter was lower by 5.2% (A$2,466,000 / £986,000) compared to the third quarter 2005 (A$2,600,000 / £1,040,000).  Higher staff costs for the final quarter were offset by the interest earned on invested funds.  Net cash outflow for the full year was (A$12,208,000 / £4,883,000), down 21% compared with FY05 (A$15,226,000 / £6,090,000). 

Capital expenditure on assets during the fourth quarter increased significantly to A$540,000 (£216,000) compared to A$75,000 (£30,000) in the third quarter.  The Company expects capital expenditure to continue to increase as the company upgrades its Australian production facilities and invests in its European specialist ceramics powder manufacturing plant and fuel cell manufacturing plant.  Otherwise, underlying operational costs were in line with previous quarters.

The Company's cash position at the end of the quarter was A$86m (£34.4m) compared to A$5.3m (£2.1m) on 30 June 2005. 

Technical

The Company is delighted to announce that it has been granted two further patents for its solid oxide fuel cell (SOFC) technology.

The first patent has been granted in the USA for a zirconia window frame, a structure which enables anode supported SOFCs (connected by metallic plates) to be flatter and easier to seal, thereby improving the performance of the cell and making them easier and cheaper to manufacture.  The Company has already been granted patents for the same invention in Australia and South Africa and has applied for patents in Canada, Europe and Japan.

The second patent has been granted in Europe for an electrically conductive metal surface treatment for a ceramic-metallic SOFC design.  The patent has already been granted in Australia and the USA and the Company has applied for patents in five other countries.  This technology of coating the stainless steel used in a fuel cell stack with oxide, allows the plates to be more conductive and hence produce more efficient power.

CFCL now has a total of 50 patents in 28 patent families, each family representing a single invention covered in multiple jurisdictions.  These patent families cover inventions relating to SOFC materials, cell and stack configurations, fuel processing, stack thermal management and system control technologies.

These two new patents are examples of the Company's broad experience with a range of fuel cell designs and materials, having successfully designed, built and operated both all-ceramic and metal-ceramic composite kW-size fuel cell stacks.  This broad experience gives the Company a wide range of expertise and background knowledge to continually improve the Company's fuel cells rather than specialising in just metal-ceramic or all-ceramic designs.  The Company looks forward to announcing further technical improvements over the coming months. 

Management Appointments

In July 2006, two senior managers joined CFCL's UK office, a reflection of the Company's increased focus on commercialising its technology and scaling up production, particularly in the European market.

Mike Atkinson joined the Company in a new position of Manager, Capital Projects and will report to Brendan Dow, Chief Executive Officer.  He will also form part of the Executive Management Team.  Mike will be responsible for managing CFCL's capital works projects, in particular its new powder plant and the fuel cell manufacturing plant.  Mike has had extensive international commercial and engineering experience in managing major capital projects in high technology industries.  He joins CFCL from six years at Johnson Matthey where he was responsible for managing the construction and commissioning of Johnson Matthey's dedicated fuel cell manufacturing facility in the UK, from site selection and factory construction, through to equipment procurement and commissioning and factory operations.

Simon Howard joins the Company as Powder Manufacturing Engineer.  Simon is a specialist ceramics engineer with 17 years experience in engineering and technologist roles in ceramic manufacturing companies, including Morgan Electro Ceramics, Fairey Industrial Ceramics, Wedgwood, and Twyfords Bathrooms.