##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-KSB
  þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 o
    
    Transitional Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the fiscal year ended December 31, 2007
 Commission file number: 0-28031
 PACIFIC FUEL CELL CORP.
  Nevada
    
    80-0043875(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 131 N. Tustin Ave.
Suite 100
Tustin, CA 92780  (714) 564-1693
 Common
Stock, $0.001 par value
 o
 þ o




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o
 o þ




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##### 



TABLE OF CONTENTS
 FORM 10-KSB ANNUAL REPORT
 PACIFIC FUEL CELL CORP.
 PAGEFacing PageIndexPART IItem 1. Description of Business
    
    
    4Item 2. Description of Property
    
    
    8Item 3. Legal Proceedings
    
    
    8Item 4. Submission of Matters to a Vote of Security Holders
    
    
    8PART IIItem 5. Market for the Registrants Common Equity and Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities
    
    
    9Item 6. Managements Discussion and Analysis or Plan of Operation
    
    
    12Item 7. Financial Statements
    
    
    22Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    23Item 8A. Controls and Procedures
    
    
    23Item 8B. Other Information
    
    
    24PART IIIItem 9. Directors, Executive Officers, Promoters, Control Persons
and Corporate Governance;
Compliance with Section 16(a) of the Exchange Act
    
    
    25Item 10. Executive Compensation
    
    
    25Item 11. Security Ownership of
Certain Beneficial Owners
and Management and Related
Stockholder Matters
    
    
    25Item 12. Certain Relationships and
Related Transactions, and
Director Independence
    
    
    25PART IVItem 13. Exhibits and Reports on Form 8-K
    
    
    26Item 14. Principal Accountant Fees and Services
    
    
    27SIGNATURES
    
    
    29Exhibit 10.5Exhibit 10.6Exhibit 10.7Exhibit 10.8Exhibit 31Exhibit 32
   -3-




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PART I
 
 ITEM 1. DESCRIPTION OF BUSINESS
 CORPORATE HISTORY
  CURRENT BUSINESS
       BUSINESS DEVELOPMENT HISTORY
   -4-




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-5-




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INDUSTRY OVERVIEW
      COMPETITION
  COMPANY
    
    PRODUCT(S)Cell Impact AB
    
    Bipolar plateCentury Inc.
    
    Bipolar plateDana Corporation
    
    Bipolar plateElectroChem, Inc.
    
    MEAEntegris, Inc.
    
    Bipolar plateFuel Cell Components and Integrators, Inc.
    
    Bipolar plateGenCell Corporation
    
    Bipolar plateGrafTech
    
    Bipolar plateGore Fuel Cell
    
    MEAHoku Scientific
    
    MEA and membraneIon Power, Inc.
    
    MEAManhattan Science
    
    Portable fuel cellsPEMEAS
    
    MEA and membraneSuperior MicroPowders
    
    Micro MEA
   -6-




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INTELLECTUAL PROPERTY
      RESEARCH AND DEVELOPMENT
   -7-




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GOVERNMENT REGULATIONS
  EMPLOYEES
  
 ITEM 2. DESCRIPTION OF PROPERTY
    
 ITEM 3. LEGAL PROCEEDINGS
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   -8-




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PART II
 
 ITEM 5.
    
    MARKET FOR
REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
  BID PRICEQUARTER ENDED
    
    HIGH
    
    
    LOW2007 FISCAL YEARMarch 31, 2007
    
    $
    0.42
    
    
    $
    0.23June 30, 2007
    
    $
    0.36
    
    
    $
    0.26September 30, 2007
    
    $
    0.34
    
    
    $
    0.25December 31, 2007
    
    $
    0.29
    
    
    $
    0.202006 FISCAL YEARMarch 31, 2006
    
    $
    0.46
    
    
    $
    0.19June 30, 2006
    
    $
    0.34
    
    
    $
    0.13September 30, 2006
    
    $
    0.37
    
    
    $
    0.18December 31, 2006
    
    $
    0.30
    
    
    $
    0.19
  Holders
  Dividends
   -9-




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Securities Authorized for Issuance under Equity Compensation Plans
 Equity Compensation Plan Information
 Number ofsecurities to be
    
    
    Weighted-
    
    
    Number of securitiesissued upon
    
    
    average exercise
    
    
    remaining available forexercise of
    
    
    price of
    
    
    future issuance underoutstanding
    
    
    outstanding
    
    
    equity compensationoptions,
    
    
    options,
    
    
    plans (excludingwarrants and
    
    
    warrants and
    
    
    securities reflected inrights
    
    
    rights
    
    
    column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    -0-
    
    
    
    
    
    
    
    -0-Equity compensation
plans not approved
by security holders
    
    
    400,000
    *
    
    $
    0.17
    
    
    
    13,600,000
    **Total:
    
    
    400,000
    *
    
    $
    0.17
    
    
    
    13,600,000
    **
 
 *
    
    The Corporations 2008 Stock Incentive Plan (the Plan) was
approved by the Board of Directors on February 29, 2008. Under
its original terms, 6,000,000 shares of Common Stock were
reserved for future issuance under the Plan. On February 29,
2008, options to purchase a total of 200,000 shares of Common
Stock were granted to each of our three directors. On March 25,
2008, Yushan Yan resigned from his position as a director, and
the options to purchase 200,000 shares held by him expired
unexercised and became available for future grant.**
    
    On April 2, 2008, the Plan was amended to reflect 16,000,000
shares of Common Stock reserved under the Plan. The amount that
remains available excludes 2,000,000 shares granted to George
Suzuki on April 2, 2008. Our Board of Directors has authorized
future grants, provided George Suzuki continues to be employed
by the Company to the respective future grant dates, of an
additional 2,000,000 shares on each of July 1, 2008; October 1,
2008 and January 1, 2009.   -10-




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Recent Sales of Unregistered Securities
     Date
    
    Original Principal Amt.
    
    
    Conversion Price
    
    
    Maturity12/12/2007
    
    $
    50,000
    
    
    $
    0.10
    
    
    
    12/12/200801/07/2008
    
    $
    20,000
    
    
    $
    0.10
    
    
    
    01/07/200902/01/2008
    
    $
    30,000
    
    
    $
    0.10
    
    
    
    02/01/200902/25/2008
    
    $
    50,000
    
    
    $
    0.10
    
    
    
    02/25/200903/19/2008
    
    $
    50,000
    
    
    $
    0.10
    
    
    
    03/19/200904/08/2008
    
    $
    50,000
    
    
    $
    0.10
    
    
    
    04/08/2009
   -11-




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ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
  PLAN OF OPERATION
      -12-




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  
    
    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
    
    Fair value of instruments. Our financial instruments consist of
accounts receivable, accounts payable and long term debt. The fair
value of financial instruments approximate their recorded values. Fair
value of loans payable to stockholders and balances of bank lines of
credit, in the circumstances, are not reasonably determinable.
  INFLATION
  RISK FACTORS
 History of Losses May Continue, Which May Result in Curtailing of Operations.
   -13-




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Our Independent Registered Public Accounting Firm Has Expressed
Substantial Doubt About the Companys ability to Continue as a Going
Concern, Which May Hinder the Ability to Obtain Future Financing.
  Continuing to Execute our Business Plan Will Require Additional Sources of
Capital, and Raising Capital Could Result in Dilution to Existing
Stockholders or Other Adverse Effects on Stockholders.
  Our Customers Purchase Orders Are Subject to Cancellation.
  A Significant Number of Shares of Common Stock Recently Became Available
for Sale, which Could Depress the Market Price of Our Stock
  The Company Faces Strong Competition in Its Markets, Which Could Make It
Difficult for the Company to Generate Revenues.
   -14-




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Ability of Major Stockholders to Exercise Control.
  We Have Pledged All of Our Assets to Secure Loans Provided to the Company,
And Will Require Additional Near-Term Financing to Service Our
Indebtedness and Other Liquidity Requirements.
      -15-




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The Company Intends to Issue Additional Securities, Including Common
Stock.
  We Depend On a Few Customers.
  We Have a Small Finance and Accounting Staff and a Failure to Maintain an
Effective System of Internal Controls Could Expose Us to Potential
Liabilities.
  Dependence on Suppliers May Affect the Ability of the Company to Conduct
Business.
  The Company Could Fail to Develop New Products to Compete in Industries
Characterized by Rapidly Changing Technologies, Resulting in Decreased
Revenues.
   -16-




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The Companys Ability to Continue to Operate is Tied to Its Ability to
Attract and Retain Customers.
  The Risk of Low Priced Securities May Affect the Market Value of the
Common Stock.
     -17-




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Failure To Remain Current In Reporting Requirements Could Result In
Delisting From the Over-The-Counter Bulletin Board.
     -18-




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We May Not Be Able to Keep Up With Rapid Technological Changes, Which
Could Make Our Products and Services Obsolete.
  Litigation Could Result In Significant Costs and Distraction of
Management.
  Our Success and Ability to Compete Depends Upon Our Ability to Secure and
Protect Our Intellectual Property.
  Claims that We Infringe Third-Party Proprietary Rights Could Result in
Significant Expenses or Restrictions on our Ability to Provide Solutions.
   -19-




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We May Not Effectively Manage the Growth Necessary to Execute Our Business
Plan, Which Could Adversely Affect our Results.
  Our Potential for Success Depends On Our Ability to Maintain and Expand
Our Sales Channels.
  If Government Regulation of the Companys Business Changes, We May Need to
Change the Manner in Which We Conduct Business or Incur Greater Operating
Expenses.
  The Companys Potential for Success Is Largely Dependent on the Abilities
of Its Management and Employees.
   -20-




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Any Required Expenditures as a Result of Indemnification Will Result in
Increased Expenditures.
   The Companys Common Stock Price May be Volatile.
  
    
    price and volume fluctuations in the overall stock market from
time to time;
    
    significant volatility in the market price and trading volume
of securities of companies in the same business as the Company;
    
    changes in regulatory policies with respect to the business of
the Company;
    
    actual or anticipated changes in the Companys earnings or
fluctuations in operating results.
  
    
    general economic conditions and trends;  
    
    departure of key personnel; or  
    
    lack of funding. Due to the continued potential volatility of the Companys common stock price, among other
things, it may become the target of securities litigation in the future. Securities litigation
could result in substantial costs and divert managements attention and resources from the business  -21-




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ITEM 7.
    
    FINANCIAL STATEMENTS
 PACIFIC FUEL CELL CORP.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheet
    
    
    F-2Consolidated Statements of Operations
    
    
    F-3Consolidated Statement of Changes in Stockholders Equity (Deficit)
    
    
    F-4Consolidated Statements of Cash Flows
    
    
    F-5Notes to Consolidated Financial Statements
    
    F-6 to F-20
  -22-




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F-1




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ASSETSCURRENT ASSETS:Cash
    
    $
    25,755Accounts receivable, net
    
    
    132,723Inventories
    
    
    19,896Prepaid expenses
    
    
    4,007Total current assets
    
    
    182,381Property and equipment, net
    
    
    565,140Security deposits
    
    
    9,054$
    756,575LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    265,312Convertible note payable, related party
    
    
    50,000Current portion of capital lease obligations
    
    
    58,196Deferred rent
    
    
    12,354Total current liabilities
    
    
    385,862Capital lease obligations, net of current portion
    
    
    263,748649,610STOCKHOLDERS EQUITY:Preferred stock; $0.01 par value, 1,000,000 shares authorized,
none issued and outstanding
    
    
    Common stock; $0.001 par value, 200,000,000 shares authorized,
75,210,248 shares issued and outstanding
    
    
    75,210Additional paid-in capital
    
    
    4,408,502(Deficit) accumulated during the development stage
    
    
    (4,376,747
    )106,965$
    756,575
   F-2




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For the PeriodMay 5, 1998For the Year Ended
    
    
    (Inception) throughDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007REVENUES:Product sales
    
    $
    425,582
    
    
    $
    
    
    
    $
    497,570Grants
    
    
    
    
    
    
    
    
    
    
    99,901425,582
    
    
    
    
    
    
    
    597,471COST OF SALES
    
    
    884,201
    
    
    
    
    
    
    
    966,488GROSS (LOSS)
    
    
    (458,619
    )
    
    
    
    
    
    
    (369,017
    )OPERATING EXPENSES:General and administrative
    
    
    721,166
    
    
    
    431,699
    
    
    
    2,117,384Research and development
    
    
    108,356
    
    
    
    50,229
    
    
    
    408,912Stock compensation
    
    
    
    
    
    
    
    
    
    
    312,800Depreciation and amortization
    
    
    64,186
    
    
    
    10,922
    
    
    
    97,404Change in value of derivative instruments, net
    
    
    
    
    
    
    
    
    
    
    460,498Loss on extinguishment of debentures
    
    
    
    
    
    
    
    
    
    
    16,706Loss on asset impairment
    
    
    
    
    
    
    
    
    
    
    510,667Loss on disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    3,391893,708
    
    
    
    492,850
    
    
    
    3,927,762(LOSS) FROM OPERATIONS
    
    
    (1,352,327
    )
    
    
    (492,850
    )
    
    
    (4,296,779
    )OTHER INCOME (EXPENSE):Interest income
    
    
    648
    
    
    
    1,091
    
    
    
    8,249Interest expense
    
    
    (5,666
    )
    
    
    (375
    )
    
    
    (72,375
    )Interest expense, noncash financing cost
    
    
    (50,000
    )
    
    
    
    
    
    
    (50,000
    )Foreign currency transaction gain (loss)
    
    
    
    
    
    
    
    
    
    
    (168
    )Other
    
    
    
    
    
    
    
    
    
    
    (1,174
    )(55,018
    )
    
    
    716
    
    
    
    (115,468
    )(LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
    
    
    (1,407,345
    )
    
    
    (492,134
    )
    
    
    (4,412,247
    )INCOME TAX EXPENSE (BENEFIT)
    
    
    
    
    
    
    
    
    
    
    (12,070
    )(LOSS) BEFORE EXTRAORDINARY ITEM
    
    
    (1,407,345
    )
    
    
    (492,134
    )
    
    
    (4,400,177
    )EXTRAORDINARY ITEM, Gain on forgiveness of debt,
net of income taxes of $12,070
    
    
    
    
    
    
    
    
    
    
    23,430NET (LOSS)
    
    $
    (1,407,345
    )
    
    $
    (492,134
    )
    
    $
    (4,376,747
    )PER SHARE INFORMATION:WEIGHTED AVERAGE SHARES OUTSTANDING -
BASIC AND DILUTED
    
    
    73,699,343
    
    
    
    67,844,828NET (LOSS) PER COMMON SHARE  BASIC AND DILUTED:(LOSS) BEFORE EXTRAORDINARY ITEM
    
    $
    (0.02
    )
    
    $
    (0.01
    )EXTRAORDINARY ITEM
    
    
    
    
    
    
    $
    (0.02
    )
    
    $
    (0.01
    )
   F-3




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(Deficit )AccumulatedDeferred
    
    
    Common
    
    
    During theCommon Stock
    
    
    Additional
    
    
    Stock
    
    
    Stock
    
    
    DevelopmentShares
    
    
    Amount
    
    
    Paid in Capital
    
    
    Compensation
    
    
    Subscriptions
    
    
    Stage
    
    
    TotalIssuance of stock for cash at $0.006 per share,
(net of issuance costs)
    
    
    3,000,000
    
    
    $
    3,000
    
    
    $
    15,118
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    18,118Issuance of stock for repayment of advances
at $0.007 per share
    
    
    2,250,000
    
    
    
    2,250
    
    
    
    12,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Net (loss) for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,065
    )
    
    
    (31,065
    )Balance at December 31, 1998
    
    
    5,250,000
    
    
    
    5,250
    
    
    
    27,868
    
    
    
    
    
    
    
    
    
    
    
    (31,065
    )
    
    
    2,053Issuance of stock for purchase of domain
name at $0.007 per share
    
    
    9,750,000
    
    
    
    9,750
    
    
    
    55,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,000Issuance of stock for cash at $0.007 per share
    
    
    3,750,000
    
    
    
    3,750
    
    
    
    21,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000Issuance of stock subscriptions for
cash at $0.007 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,000
    
    
    
    
    
    
    
    19,000Issuance of stock subscriptions as
payment of wages at $0.007 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,000
    
    
    
    
    
    
    
    11,000Net (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (156,309
    )
    
    
    (156,309
    )Balance at December 31, 1999
    
    
    18,750,000
    
    
    
    18,750
    
    
    
    104,368
    
    
    
    
    
    
    
    30,000
    
    
    
    (187,374
    )
    
    
    (34,256
    )Issuance of stock pursuant to stock subscriptions
    
    
    4,500,000
    
    
    
    4,500
    
    
    
    25,500
    
    
    
    
    
    
    
    (30,000
    )
    
    
    
    
    
    
    Net (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (278,728
    )
    
    
    (278,728
    )Balance at December 31, 2000
    
    
    23,250,000
    
    
    
    23,250
    
    
    
    129,868
    
    
    
    
    
    
    
    
    
    
    
    (466,102
    )
    
    
    (312,984
    )Issuance of stock for license
agreement at $0.015 per share
    
    
    30,100,000
    
    
    
    30,100
    
    
    
    421,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    451,500Cancellation of common stock as
condition of license agreement
    
    
    (2,000,000
    )
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,000
    )Issuance of stock for cash at $0.001 per share
    
    
    6,000,000
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000Stock compensation related to issuance
of stock below fair market value
    
    
    
    
    
    
    
    
    
    
    84,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,000Stock compensation related to issuance
of stock warrant to acquire license
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Issuance of stock for cash at $0.10 per share
    
    
    520,000
    
    
    
    520
    
    
    
    51,480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,000Issuance of stock for debt forgiveness
from shareholders at $0.094 per share
    
    
    1,070,000
    
    
    
    1,070
    
    
    
    99,980
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,050Liabilities converted into contributed capital
    
    
    
    
    
    
    
    
    
    
    179,610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    179,610Net (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (219,441
    )
    
    
    (219,441
    )Balance at December 31, 2001
    
    
    58,940,000
    
    
    
    58,940
    
    
    
    1,066,338
    
    
    
    
    
    
    
    
    
    
    
    (685,543
    )
    
    
    439,735Issuance of stock for cash at $0.047 per share
    
    
    1,000,000
    
    
    
    1,000
    
    
    
    45,819
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,819Issuance of stock for services at $0.03 per share
    
    
    1,500,000
    
    
    
    1,500
    
    
    
    43,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,000Issuance of stock for cash at $0.05 per share
    
    
    2,000,000
    
    
    
    2,000
    
    
    
    98,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Discount on loan payable  related party
    
    
    
    
    
    
    
    
    
    
    8,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,300Net (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (579,912
    )
    
    
    (579,912
    )Balance at December 31, 2002
    
    
    63,440,000
    
    
    
    63,440
    
    
    
    1,261,957
    
    
    
    
    
    
    
    
    
    
    
    (1,265,455
    )
    
    
    59,942Net (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,382
    )
    
    
    (103,382
    )Balance at December 31, 2003
    
    
    63,440,000
    
    
    
    63,440
    
    
    
    1,261,957
    
    
    
    
    
    
    
    
    
    
    
    (1,368,837
    )
    
    
    (43,440
    )Debenture conversion at $0.01 per share
    
    
    300,008
    
    
    
    300
    
    
    
    111,486
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,786Debenture conversions between $0.30 and $0.48
per share and retirement of debenture
    
    
    2,657,246
    
    
    
    2,657
    
    
    
    1,018,043
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,020,700Contributed services
    
    
    
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000Purchase of Cellfoods
    
    
    
    
    
    
    
    
    
    
    53,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,196Shares issued for services at $0.46 per share
    
    
    80,000
    
    
    
    80
    
    
    
    36,720
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,800Net (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (587,367
    )
    
    
    (587,367
    )Balance at December 31, 2004 (restated)
    
    
    66,477,254
    
    
    
    66,477
    
    
    
    2,487,402
    
    
    
    
    
    
    
    
    
    
    
    (1,956,204
    )
    
    
    597,675Contributed services
    
    
    
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000Conversion of stock agreement at $0.25 per share
    
    
    100,000
    
    
    
    100
    
    
    
    24,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000Debenture conversion at $0.215 per share
and retirement of debenture
    
    
    50,284
    
    
    
    50
    
    
    
    160,784
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,834Shares issued for services at $0.43 per share
    
    
    50,000
    
    
    
    50
    
    
    
    21,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,500Net (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (521,064
    )
    
    
    (521,064
    )Balance at December 31, 2005
    
    
    66,677,538
    
    
    
    66,677
    
    
    
    2,700,536
    
    
    
    
    
    
    
    
    
    
    
    (2,477,268
    )
    
    
    289,945Contributed services
    
    
    
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000Issuance of stock for cash at $0.14 per share
    
    
    2,417,858
    
    
    
    2,418
    
    
    
    336,081
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    338,499Shares issued for services at $0.30 per share
    
    
    200,000
    
    
    
    200
    
    
    
    59,800
    
    
    
    (45,000
    )
    
    
    
    
    
    
    
    
    
    
    15,000Shares issued for services at $0.276 per share
    
    
    500,000
    
    
    
    500
    
    
    
    137,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138,000Net (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (492,134
    )
    
    
    (492,134
    )Balance at December 31, 2006
    
    
    69,795,396
    
    
    
    69,795
    
    
    
    3,239,917
    
    
    
    (45,000
    )
    
    
    
    
    
    
    (2,969,402
    )
    
    
    295,310Issuance of stock for cash at $0.14 per share
    
    
    2,142,852
    
    
    
    2,143
    
    
    
    297,857
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,000Issuance of stock for cash at $0.25 per share
    
    
    3,272,000
    
    
    
    3,272
    
    
    
    814,728
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    818,000Contributed services
    
    
    
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,000
    
    
    
    
    
    
    
    
    
    
    
    45,000Beneficial conversion feature of convertible note
payable, related party
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000Net (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,407,345
    )
    
    
    (1,407,345
    )Balance, December 31, 2007
    
    
    75,210,248
    
    
    $
    75,210
    
    
    $
    4,408,502
    
    
    $
    
    
    
    $
    
    
    
    $
    (4,376,747
    )
    
    $
    106,965
   F-4




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##### Table of Contents



For the PeriodMay 5, 1998For the Year Ended
    
    
    (Inception) throughDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss)
    
    $
    (1,407,345
    )
    
    $
    (492,134
    )
    
    $
    (4,376,747
    )Adjustments to reconcile net (loss) to net cash
(used in) operating activities:Depreciation and amortization
    
    
    64,186
    
    
    
    10,922
    
    
    
    98,010Stock compensation
    
    
    45,000
    
    
    
    147,000
    
    
    
    510,800Beneficial conversion feature of convertible
note payable, related party
    
    
    50,000
    
    
    
    
    
    
    
    55,239Contributed services to capital
    
    
    6,000
    
    
    
    6,000
    
    
    
    18,000Reserve for uncollectible accounts receivable
    
    
    
    
    
    
    
    
    
    
    36,298Extraordinary item
    
    
    
    
    
    
    
    
    
    
    35,500Loss on disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    3,391Non-cash derivative expenses
    
    
    
    
    
    
    
    
    
    
    657,465Interest expense converted to loan payable
    
    
    
    
    
    
    
    
    
    
    12,684Deposit  restocking fee
    
    
    
    
    
    
    31,239
    
    
    
    31,239Loss on impairment of property and equipment
    
    
    
    
    
    
    
    
    
    
    510,167Changes in current assets and liabilities:Accounts receivable
    
    
    (132,723
    )
    
    
    
    
    
    
    (132,723
    )Inventories
    
    
    (19,896
    )
    
    
    
    
    
    
    (19,896
    )Prepaid expenses
    
    
    (948
    )
    
    
    2,486
    
    
    
    (3,507
    )Security deposits
    
    
    (5,995
    )
    
    
    
    
    
    
    (9,054
    )Accounts payable and accrued expenses
    
    
    237,433
    
    
    
    (2,415
    )
    
    
    299,344Deferred rent
    
    
    12,354
    
    
    
    
    
    
    
    12,354Net cash (used in) operating activities
    
    
    (1,151,934
    )
    
    
    (296,902
    )
    
    
    (2,261,436
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of fixed assets
    
    
    (165,155
    )
    
    
    
    
    
    
    (224,754
    )Net cash received in purchase of Cellfoods
    
    
    
    
    
    
    
    
    
    
    16,898Deposit on equipment
    
    
    70,000
    
    
    
    (100,000
    )
    
    
    (131,239
    )Investment in mineral claims
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Net cash (used in) investing activities
    
    
    (95,155
    )
    
    
    (100,000
    )
    
    
    (344,095
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of notes payable, related party
    
    
    50,000
    
    
    
    
    
    
    
    335,462Payments on notes payable, related parties
    
    
    
    
    
    
    
    
    
    
    (71,083
    )Deferred debenture costs
    
    
    
    
    
    
    
    
    
    
    (136,000
    )(Payments) proceeds of convertible redeemable debentures
    
    
    
    
    
    
    
    
    
    
    776,855Payments on capital lease obligations
    
    
    (8,882
    )
    
    
    
    
    
    
    (8,882
    )Net proceeds from issuance of common stock
    
    
    1,118,000
    
    
    
    344,498
    
    
    
    1,734,934Net cash provided by financing activities
    
    
    1,159,118
    
    
    
    344,498
    
    
    
    2,631,286Net increase (decrease) in cash
    
    
    (87,971
    )
    
    
    (52,404
    )
    
    
    25,755CASH AT BEGINNING OF YEAR
    
    
    113,726
    
    
    
    166,130
    
    
    
    CASH AT END OF YEAR
    
    $
    25,755
    
    
    $
    113,726
    
    
    $
    25,755SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    5,393
    
    
    $
    375
    
    
    $
    5,768Cash paid for income taxes
    
    $
    
    
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:Property and equipment acquired under capital leases
    
    $
    330,825
    
    
    $
    
    
    
    $
    330,825Issuance of stock for purchase of assets
    
    $
    
    
    
    $
    
    
    
    $
    516,500Issuance of convertible debentures
    
    $
    
    
    
    $
    
    
    
    $
    (808,728
    )Conversion of accrued interest and debt
    
    $
    
    
    
    $
    
    
    
    $
    308,344
   F-5




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##### Table of Contents



PACIFIC FUEL CELL CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
 Note 1. ORGANIZATION AND BASIS OF PRESENTATION
 Organization
      Development Stage Enterprise
  Principles of Consolidation
   F-6




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##### Table of Contents



Going Concern
   Reclassification
   F-7




---



##### Table of Contents



Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
  Fair Value of Financial Instruments
  Cash
   Concentrations of Credit Risk
   F-8




---



##### Table of Contents



Accounts Receivable
  Inventories
  Property and Equipment
   F-9




---



##### Table of Contents



Long-Lived Assets
  Convertible Debt
  Revenue Recognition
  Research and Development
   F-10




---



##### Table of Contents



Stock-Based Compensation
  Income Taxes
  ,

  F-11




---



##### Table of Contents



Net (Loss) per Common Share
  Segment Information
  Recent Accounting Pronouncements
 In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115. (SFAS 159) SFAS 159 permits companies to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be measured at fair value and establishes
presentation and disclosure requirements designed to facilitate comparisons between companies that choose different
measurement attributes for similar types of assets and liabilities. The provisions of SFAS 159 will become effective
as of the beginning of the fiscal year that begins January 1, 2008. The adoption of these new requirements is not
expected to have a material effect on the Companys financial position, results of operations, or cash flows. In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations. SFAS 141R establishes principles and
requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R also provides
guidance for recognizing and measuring the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the
business combination. The guidance will become effective as of the beginning of the Companys fiscal year beginning
after December 15, 2008. The Company has not yet determined the impact, if any, of SFAS 141R on its consolidated
financial statements. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan
amendment of ARB No. 51. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective as of the beginning of the
Companys fiscal year beginning after December 15, 2008. The Company has not yet determined the impact, if any, of
SFAS 160 on its consolidated financial statements. In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. The
new standard is intended to improve financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their effects on an entitys financial
position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet
determined the impact, if any, of SFAS 161 on its consolidated financial statements.  F-12




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##### Table of Contents



Note 3. PROPERTY AND EQUIPMENT
  Accumulated
    
    
    Net BookCost
    
    
    Depreciation
    
    
    ValueFurniture and
equipment
    
    $
    305,288
    
    
    $
    (73,402
    )
    
    $
    231,886Equipment under
capital leases
    
    
    345,400
    
    
    
    (12,146
    )
    
    
    333,254$
    650,688
    
    
    $
    (85,548
    )
    
    $
    565,140
 Note 4. CONVERTIBLE NOTE PAYABLE, RELATED PARTY
   Note 5. CAPITAL LEASE OBLIGATIONS
    F-13




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##### Table of Contents



2008
    
    $
    78,2862009
    
    
    76,7752010
    
    
    76,7752011
    
    
    76,7752012
    
    
    63,239Thereafter
    
    
    14,765386,615Less:Amount representing interest
    
    
    (64,671
    )321,944Less:Current portion
    
    
    (58,196
    )$
    263,748
  Note 6. STOCKHOLDERS EQUITY (DEFICIT)
 Preferred Stock
  Common Stock
  
    
    Services with a value of $6,000 were contributed to capital.
    
    Deferred compensation of $45,000 was amortized to expense.
    
    5,414,852 shares of common stock were issued for net aggregate cash of
$1,118,000.
    
    $50,000 was recorded to additional paid-in capital for the beneficial
conversion feature of the convertible note payable, related party.
  F-14




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##### Table of Contents




    
    Services with a value of $6,000 were contributed to capital.
    
    2,417,858 shares of common stock were issued for aggregate net cash of
$338,499.
    
    700,000 shares of common stock were issued for services totaling
$197,300 of which $45,000 was deferred and recognized ratably during
2007.
  
    
    Stock options for 100,000 shares of common stock were exercised,
generating net cash proceeds of $5,000. The difference between the
fair market value of $25,000 and the option price is deemed to be
stock compensation expense for research and development costs.
    
    Services with a value of $6,000 were contributed to capital.
    
    50,000 shares of common stock were issued for services at the fair
market value of $21,500.
    
    Debenture conversion and extinguishment of $160,834.
  
    
    2,957,254 shares of common stock were issued for conversion of a
debenture and related costs in the amount of $1,132,486, inclusive of
derivative costs for $793,728 of debentures converted.
    
    80,000 shares of common stock were issued for legal services valued at
their fair market value of $36,800.
    
    Additional paid-in capital was increased by $53,196, the fair market
value of cash ($16,898) and receivables ($36,298) acquire from
Cellfoods.
    
    Services with a value of $6,000 were contributed to capital.
   
    
    1,000,000 shares of common stock were issued for net aggregate cash of
$46,819.
    
    1,500,000 shares of common stock were issued for an investor relations
contract, valued at $45,000, the fair market value of the shares on
the date of the agreement.
    
    2,000,000 shares of common stock were issued for net aggregate cash of
$100,000.
    
    Increased additional paid-in capital for the discount on loan payable
  related party in the amount of $8,300.
  F-15




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##### Table of Contents




    
    30,100,000 shares of common stock were issued in exchange for a license.
    
    2,000,000 shares of common stock were cancelled pursuant to the terms
of the agreement to obtain the license.
    
    6,000,000 shares of common stock were issued to a related party for net
cash of $6,000 and compensation expense of $84,000, the difference
between the fair market value of the stock and the cash proceeds.
    
    520,000 shares of common stock were issued for net cash of $52,000.
    
    100,000 common stock warrants with a fair value of $100,000 were issued
as compensation for a license.
    
    1,070,000 shares of common stock were issued in exchange for debt
forgiveness of $101,050.
    
    Shareholders of the Company converted $179,610 of liabilities into
contributed capital.
  
    
    4,500,000 shares of common stock were issued for common stock
subscribed in 1999.
  
    
    9,750,000 shares of common stock were issued for the domain asset and
domain name RadioTower.com. These shares were valued at $65,000,
which was the fair market value of the shares on the date the shares
were issued.
    
    Issued 3,750,000 shares of common stock to various investors for cash
of $25,000 in a private placement pursuant to Regulation D, Rule 504.
    
    Stock subscriptions for 2,850,000 shares of common stock were accepted
for cash of $19,000 pursuant to Regulation S. These shares were
issued during February 2000.
    
    Stock subscriptions for 1,650,000 shares of common stock were accepted
in exchange for unpaid wages of $11,000 pursuant to Regulation S.
These shares were issued during February 2000.
  F-16




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##### Table of Contents




    
    3,000,000 shares of common stock to various investors for aggregate
net cash of $18,118 in a private placement pursuant to Regulation D,
Rule 504.
    
    2,250,000 shares of common stock were issued for repayment of advances
aggregating $15,000.
 Note 7. INCOME TAXES
  2007
    
    
    2006Current:
    
    $
    
    
    
    $
    Deferred
    
    
    
    
    
    
    $
    
    
    
    $
    
   2007
    
    
    2006Federal tax benefit at statutory rate
    
    
    34
    %
    
    
    34
    %State tax benefit at statutory rate
    
    
    9
    
    
    
    9Change in valuation allowance
    
    
    (43
    )
    
    
    (43
    )
    %
    
    
    
    %
  2007Deferred tax assets (liabilities)Net operating loss carry forward
    
    $
    1,116,900Property and equipment
    
    
    (11,463
    )Net deferred tax asset before valuation allowance
    
    
    1,105,437Less valuation allowance
    
    
    (1,105,437
    )Net deferred tax asset
    
    $
    
   F-17




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##### Table of Contents



Note 8. RELATED PARTY TRANSACTIONS
  Note 9. COMMITMENTS AND CONTINGENCIES
 Indemnities and Guarantees
   Litigation
 SKRL Tool & Die, Inc., et al. v. William Berwald, et
al.
  F-18




---



##### Table of Contents



Equipment Purchase Agreements
   Operating Leases
   Research and Development Agreement
     F-19




---



##### Table of Contents



Note 10. SUBSEQUENT EVENTS
       F-20




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##### Table of Contents



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  
 ITEM 8A.
    
    CONTROLS AND PROCEDURES
  Evaluation of Disclosure Controls and Procedures
  Evaluation of Internal Controls
  Changes in Internal Controls
   -23-




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##### Table of Contents



ITEM 8B.
    
    OTHER INFORMATION
 Item 1.01 Entry into a Material Definitive Agreement.
        Item 5.02 Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
 ,
 rd
      -24-




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##### Table of Contents



PART III
 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
   
 ITEM 10. EXECUTIVE COMPENSATION.
  
 ITEM 11.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
  
 ITEM 12.
    
    CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
   -25-




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##### Table of Contents



PART IV
 
 ITEM 13.
    
    EXHIBITS AND REPORTS ON
FORM 8-K
 Exhibits
 Exhibit No.
    
    Description10.5
    
    Form of one-year Secured Convertible Promissory Notes.No. 1 Issued to George Suzuki in the original principal
amount of $50,000, dated December 12, 2007.No. 2 Issued to George Suzuki in the original principal
amount of $20,000, dated January 7, 2008.No. 3 Issued to George Suzuki in the original principal
amount of $30,000, dated February 1, 2008.No. 4 Issued to George Suzuki in the original principal
amount of $50,000, dated February 25, 2008.No. 5 Issued to George Suzuki in the original principal
amount of $50,000, dated March 19, 2008No. 6 Issued to George Suzuki in the original principal
amount of $50,000, dated April 8, 200810.6
    
    Form of Stock Option Grants issued to Directors of the
Corporation approved February 29, 2008.
 Grantee
    
    Amount (shrs.)
    
    Exercise Price
    
    Grant DateYushan Yan
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08Michael Swanberg
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08George Suzuki
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08
 10.7
    
    Terms and Conditions of Salary Accrual for George Suzuki as
approved April 2, 2008.10.8
    
    Form of Restricted Stock Purchase Agreement by and between the
Corporation and George Suzuki for
2,000,000 shares of Common Stock dated April 2, 2008.24
    
    Power of
Attorney (included in the signature page of this report).31
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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##### Table of Contents



Exhibit No.
    
    Description2.1*
    
    Corporate Charter2.2*
    
    Articles of Incorporation2.3*
    
    Amendment to Articles of Incorporation2.4*
    
    Bylaws2.5**
    
    Amendment to Articles of Incorporation10.1**
    
    Agreement between the Company and Fullerene, USA, Inc.10.2***
    
    Lease Agreement  Riverside Laboratory10.3****
    
    Agreement between the Company and Bourns, Inc.10.4*****
    
    Lease Agreement dated January 24, 2007.
 
 *
    
    Filed with the Securities and Exchange Commission in the Exhibits to
Form 10-SB filed on November 10, 1999, and are incorporated by reference
herein.**
    
    Filed with the Securities and Exchange Commission in the Exhibits to
Form 8-K filed on September 6, 2001, and are incorporated by reference
herein.***
    
    Filed with the Securities and Exchange Commission in the Exhibits to
Form 10-KSB filed on April 8, 2005, and is incorporated by reference
herein.****
    
    Filed with the Securities and Exchange Commission in the Exhibits to
Form 10-KSB filed on April 18, 2006, and is incorporated by reference
herein.*****
    
    Filed with the Securities and Exchange Commission in the Exhibits to
Form 10-KSB filed on April 2, 2007, and is incorporated by reference
herein. Reports on Form 8-K
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES.
  Audit Fees
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##### Table of Contents



Audit-Related Fees
  Tax Fees
  All Other Fees
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##### Table of Contents



SIGNATURES
  PACIFIC FUEL CELL CORP.
(Registrant)By:
    /s/ George SuzukiGeorge Suzuki, President,Chief Executive Officer and
Chief Financial Officer POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ George Suzuki

George Suzuki
    
    President, Chief Executive Officer,
Chief Financial Officer and
Director (principal executive officer,
principal financial and accounting officer)
    
    April 12, 2008/s/ Michael Swanberg
    
    Director
    
    April 12, 2008Michael Swanberg
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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.5
    
    Form of one-year Secured Convertible Promissory Notes payable to
the order of George Suzuki:No. 1 Original principal amount of $50,000, dated December 12,
2007.No. 2 Original principal amount of $20,000, dated
January 7, 2008.No. 3 Original principal amount of $30,000, dated February 1,
2008.No. 4 Original principal amount of $50,000, dated February 25,
2008.No. 5 Original principal amount of $50,000, dated
March 19, 2008.10.6
    
    Form of Stock Option Grants issued to Directors of the Corporation
approved February 29, 2008.
 Grantee
    
    Amount (shrs.)
    
    Exercise Price
    
    Grant DateYushan Yan
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08Michael Swanberg
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08George Suzuki
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08
 10.7
    
    Terms and Conditions of Salary Accrual for George Suzuki as
approved April 2, 2008.10.8
    
    Form of Restricted Stock Purchase Agreement by and between the
Corporation and George Suzuki for:2,000,000 shares of Common Stock dated April 2, 2008.24
    
    Power of
Attorney (included in the signature page of this report).31
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.