We upgrade our rating on VIASPACE from Neutral to Speculative Buy following the recent weakness in the share price, better than expected revenues, and the accelerating interesting surrounding the use of portable fuel cells in consumer electronics among the large OEMs. Also, we are upgrading our 2006E and 2007E revenues estimates as the Company should see momentum following the recent agreements with Raytheon and L3. We set our price target at $0.85. Since our initiation, the Company’s share price has declined approximately 50% in spite of the better-than-expected 3Q 2006 results. Although the current valuation remains challenging, we believe that the stock is an attractive bet on the potentially very significant portable fuel cell battery market and homeland security spending. In our view, the Company’s attractiveness is a function of the fact that it holds patents rights to some key DMFC technologies and is well-positioned to play a key role as a cartridge supplier should the market for portable fuel cells take off. Over the last six months, the Company has made significant progress in positioning itself as a cartridge supplier to some large OEMs including Samsung (6405.KS: 38,000) and LG (3550.KS: 28,800). The bottom line is that VIASPACE is a long-term bet on a still fledging but potentially high-growth market, where the Company’s patent portfolio skews the risk profile in investors’ favor.

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Dutton Associates is one of the largest independent investment research firms in the U.S. Its 31 senior analysts are primarily CFAs and have expertise in many industries. Dutton Associates provides continuing analyst coverage of over 140 enrolled companies, and its research, estimates, and ratings are carried in all the major databases serving institutions and online investors.

The cost of enrollment in our one-year continuing research program is US $35,000 prepaid for 4 Research Reports, typically published quarterly, and requisite Research Notes. Dutton Associates received US$35,000 from the Company for 4 Research Reports with coverage commencing on 8/17/06. The Firm does not accept any equity compensation. Our principals and analysts are prohibited from owning or trading in securities of covered companies. The views expressed in this research report accurately reflect the analyst's personal views about the subject securities or issuer. Neither the analyst's compensation nor the compensation received by us is in any way related to the specific ratings or views contained in this research report or note. Please read full disclosures and analyst background at www.jmdutton.com before investing.