Dynamic Fuel Systems Inc.

December 23, 2009 13:40 ET

Dynamic Provides Update Re California Initiatives and Other Prior Disclosure

PICKERING, ONTARIO--(Marketwire - Dec. 23, 2009) - Dynamic Fuel Systems Inc. (TSX VENTURE:DYA) ("Dynamic" or the "Corporation") is pleased to provide an update on the status of various previous announcements and outstanding matters, in particular: (a) the previously announced California testing initiatives; (b) the Corporation's previously announced joint venture project with Alliance Recovery Corporation ("ARVY"); (c) the status of litigation matters disclosed in the Corporation's annual and quarterly financial statement filings; and (d) the prior issuance of shares in settlement of outstanding debt. This update is being provided at the request of the TSX Venture Exchange (the "Exchange") and in accordance with the Corporation's continuous disclosure obligations.

On January 12, 2009, Dynamic announced certain initiatives in the State of California. In particular, it announced that three Jetstar™ units had been shipped and installed on a private fleet for the purposes of testing and demonstrating compliance with the State of California's emission reduction targets. It was initially anticipated that those units would be operated for a period of roughly two to three months, following which the Air Pollution Control District of the San Joaquin Valley (which had conducted initial baseline emission testing of these units (prior to installation of the Jetstar™)) would be asked to re-evaluate the emissions of these three vehicles. Testing of these three vehicles has experienced some delays and is ongoing. In order to adequately complete test runs and provide sufficient data, a significant amount of miles must be covered by these trucks. As the Jetstar™ units were placed on vehicles that have been underutilized due to economic slowdowns in 2009, the production of the necessary data in order to prepare a report to the District has not been completed and such data continues to be compiled. The testing methodology is also currently being reviewed in order to ensure the accuracy of results and relevance to applicable environmental regulatory authorities. As it is Dynamic's understanding that CARB (California Air Resources Board) is also still in the process of establishing benchmarks for testing, actual results and further testing may be required once such benchmarks are established. The Corporation is in the process of re-establishing contact with CARB to determine any required new program parameters and to confirm CARB's commitment to this further testing. The Corporation is unable to provide a reliable estimate on the timing for completion of this testing and evaluation, but will provide further updates as they become available.

In the Corporation's press release dated April 23, 2008, the Corporation announced a joint project to develop a Dynamic hydrogen generator with adequate capacity to be successfully retrofitted to a reciprocating engine used in electrical generation at ARVY's showcase installation. This joint project was intended to convert ARVY's conventional reciprocating engines into a hybrid that subsequently would be replicated in all showcase engines and subsequent installations in the US and around the world. Although discussions concerning this project continued after this initial announcement, no substantial progress has been made on this project, primarily due to the financial constraints of both parties. Although the Corporation continues to have interest in pursuing a project with ARVY, the Corporation does not anticipate proceeding with this previously announced transaction unless and until the financial constraints of both companies are addressed. To the extent that any change in circumstance or intention occurs on this project, further announcements will be provided when applicable.

As noted in the Corporation's Management Discussion & Analysis for the period ended September 30, 2008, the Corporation is presently involved in a litigation dispute with Synergic Distribution Inc. and Paul Bearance. It should be noted that the Corporation's previous disclosure concerning this litigation matter initially indicated that the damages claimed by the Corporation under this action were $1,000,000. That figure was in error, as the total damages claimed are in the aggregate of $3,500,000. The counterclaim by the defendant was for damages in excess of $4,000,000. This matter remains outstanding. The Corporation intends to vigorously pursue this claim and to defend the counter-claim, which it considers to be completely without merit.

The Corporation also announces that it has filed, for Exchange approval the settlement of $63,000 of debt through the prior issuance of 300,000 common shares of the Corporation at a deemed price of $0.21 per common share and that the Exchange has advised that it has no objection to this issuance. This shares for debt settlement was to an Arm's Length Party. There was not a new Control Person as a result of the issuance of the shares for debt. The shares that are the subject of this settlement had been previously issued by the Company on July 23, 2008 without the applicable hold period as required by the Exchange's Policies. This transaction had been disclosed in the Corporation's historical financial statements.

About Dynamic Fuel Systems Inc.

Dynamic Fuel Systems Inc. is a Pickering, Ontario based energy sector company engaged in the manufacture, distribution, installation and marketing of a transportable hydrogen generator retrofit targeted for use in the heavy tractor trailer industry. Its flagship product, the Jetstar™, is a patent-pending aftermarket retrofit solution that provides combustion enhancement by mixing hydrogen and oxygen into a vehicle's intake air to provide the engine with a more complete burn of the fuel in its internal combustion engine. Its business was founded in 2001 and more information about its products can be viewed at its website at www.dynamicfuel.com

Except for statements of historical fact relating to the Corporation, certain information contained herein constitutes forward-looking statements. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Corporation undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of the release.

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