PRESS RELEASES

U.S. RISKS MISSING THE BOAT IN MICRO-POWER FUEL CELLS
“Low Awareness Ceding Crucial, New Market to Japan, Others, States PolyFuel CEO”

MOUNTAIN VIEW, CA – May 4, 2005 – The president of U.S.-based PolyFuel, Inc. warned last week that U.S. companies are in danger of completely missing the boat in micro-power fuel cells through a sheer lack of market awareness. Micro-power fuel cells are an emerging technology – the subject of considerable interest in Europe, Japan, Korea, and elsewhere in Asia – that are expected by technologists in those countries to supplant or replace batteries in increasingly power-hungry portable devices such as laptops and mobile phones. He made these remarks at a conference focused on Small Fuel Cells that took place last week in Washington, D.C.

“We continue to be astonished that most thought and market leaders in the U.S. are indifferent to, or completely unaware of, the substantive and growing investment being made in Asia – and more recently in Europe – in the development of small, portable fuel cells, and the widespread awareness in those markets – even with the person on the street – of the technology and its promise,” said Jim Balcom, PolyFuel president and CEO. “It’s like all of us who care anything about this market domestically are in this room.”

Micro-power fuel cells utilize replaceable fuel – typically methanol – that in the presence of catalysts and a carefully engineered membrane, produce enough electricity to power small electronic devices such as mobile phones, PDAs, or portable computers. What makes them attractive is the promise of more power and longer run times than is available from conventional batteries.

Balcom said that the Japanese and Koreans are especially sensitive to what some have called the “coming power crisis” in portable electronics. “You can walk into most movie theaters in Japan and find banks of public charging stations for cell phones. And the Japanese have coined the term ‘power-eater’ to describe personal electronic devices that gobble up power like they were connected to the mains. It’s no wonder that portable fuel cells were the cover story in a recent issue of Nikkei Electronics Asia. But here, the silence is almost deafening.”

Balcom attributes part of the current lack of awareness of the coming market need to a several-year lag in consumer technology adoption in the U.S. versus Asia and Europe. “Watching broadcast video on a cell phone – a perfect example of a ‘power-eater’ application – is one of the ‘next big things’ desired by the Tokyo ‘salaryman’,” said Balcom, “but here we’re mostly just talking.”

Balcom, whose company PolyFuel makes what many insiders consider to be the most advanced membrane for methanol fuel cells, lives with this disconnect on a daily basis. “The interest in our membrane is so high in Asia – and increasingly in Europe – that it dominates our activities. We are already working with a number of major Japanese and Korean manufacturers, and we expect prototypes to be available within the next 12 to 24 months. I fear, however, that by the time the trendy applications take root here in the U.S., the design and manufacture of micro-power fuel cells will be firmly entrenched offshore. That ship will have sailed. In North America, only those of us with critical enabling technology will participate.” This scenario, said Balcom, is not unlike that of Lithium ion batteries, whose technologies were predominantly developed in the U.S. but commercialized first in Japan.

What is needed in the U.S., said Balcom, is greatly increased market awareness. “The portable fuel cell market is going to happen, and it going to happen in the next two to three years,” he maintained. “The press, analysts, and relevant business planners have to start connecting the dots – to see that what is happening now with Japanese consumers can lead to huge U.S. market opportunities. They also have to realize that the technological challenges – like better membranes – or regulatory ones – like permitting methanol cartridges on commercial aircraft – are being knocked off one by one. Now, it’s time to become attuned to the market opportunities, start talking about them, and to say ‘nay’ to the naysayers.”

Finally, Balcom cautioned that too narrow of a market focus can also leave us waiting at the dock. “The holy grail in fuel cells is an automotive design that with electric motors can eliminate the need for internal combustion engines in cars or other vehicles, without any decrease in vehicle performance or increase in price. The expertise gained from developing portable fuel cells will be directly applicable to the designs, materials, and manufacturing processes necessary for stationary or automotive fuel cells, and can even, perhaps, provide transferable economies of scale.” Balcom predicted that the leading suppliers to the automotive fuel cell market, when it emerges, will be those suppliers that “paid their dues” in portable cells.

About PolyFuel

PolyFuel is a world leader in engineered membranes that provide breakthrough performance in fuel cells for portable electronic and automotive applications. The state of the art of fuel cells is essentially that of the membrane, and PolyFuel’s leading-edge, hydrocarbon-based membranes enable a new generation of fuel cells that for the first time can deliver on the long-awaited promise of clean, long-running, and cost-effective portable power. The state of the art of fuel cells is essentially that of the membrane, and PolyFuel’s leading-edge, hydrocarbon-based membranes enable a new generation of fuel cells that for the first time can deliver on the long-awaited promise of clean, long-running, and cost-effective portable power.

PolyFuel’s unmatched capability to rapidly translate the system-level requirements of fuel cell designers and manufacturers into engineered polymer nano-architectures has led to its introduction of best-in-class hydrocarbon membranes for both portable direct methanol fuel cells (DMFC) and for automotive hydrogen fuel cells. Such capability – based on PolyFuel’s over 165 combined years of fuel cell experience, world-class polymer nano-architects, and a fundamental patent position covering more than 15 different inventions – also makes PolyFuel an essential development partner and supplier to any company seeking to advance the state of the art in fuel cells. Polymer electrolyte fuel cells built with PolyFuel membranes can be smaller, lighter, longer-running, more efficient, less expensive and more robust than those made with other membrane materials.

PolyFuel was spun out of SRI International (formerly Stanford Research Institute) in 1999, after 14 years of applied membrane research. The company is based in Mountain View, California, and is privately held. Investors include Mayfield, Ventures West, CDP Capital – Private Equity, Technology Partners, Intel Capital, Chrysalix Energy, Conduit Ventures, KTB Ventures, Hotung Venture Partners, Yasuda Enterprise Development, and BiNEXT, a part of the Daesung Group.

Editors’ Note: All trademarks and registered trademarks are those of their respective companies. Additional background information is available at www.roeder-johnson.com.