U S SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-KSB  (Mark One)  xAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  oTransitional Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934  For the fiscal year ended December 31, 2006  Commission file number: 0-28031  PACIFIC FUEL CELL CORP. (Exact name of registrant as specified in its charter)  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 (Address, including zip code and telephone number, including area code, of registrants executive offices)  Securities registered under Section 12(b) of the Exchange Act: none  Securities registered under to Section 12(g) of the Exchange Act:  Common Stock (Title of class)  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesXNo  (Continued on Following Page)  1     Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.X  State issuers revenues for its most recent fiscal year. $-0-  State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days: $10,408,619 as of March 30, 2007.  State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: As of March 30, 2007, 69,795,396 shares of Common Stock were issued and outstanding.  Documents incorporated by reference: None   2     TABLE OF CONTENTS  FORM 10-KSB ANNUAL REPORT  PACIFIC FUEL CELL CORP.  PAGE  Facing Page Index  PART I Item 1.
Description of Business
4Item 2.
Description of Property
12Item 3.
Legal Proceedings
12Item 4.
Submission of Matters to a Vote of Security Holders
13  PART II Item 5.
Market for the Registrants Common Equity and Related Stockholder Matters
13Item 6.
Managements Discussion and Analysis of Financial Conditionand Results of Operations
14Item 7.
Financial Statements
20Item 8.
Changes in and Disagreements on Accounting and Financial Disclosure
37Item 8A.
Controls and Procedures
37   PART III Item 9.
Directors, Executive Officers, Promoters and Control Persons;Compliance with Section 16(a) of the Exchange Act
37Item 10.
Executive Compensation
39Item 11.
Security Ownership of Certain Beneficial Owners and Management
40Item 12.
Certain Relationships and Related Transactions
40  PART IV Item 13.
Exhibits and Reports on Form 8-K
41Item 14.
Principal Accountant Fees and Services
42  SIGNATURES
44     3     PART I  ITEM 1. DESCRIPTION OF BUSINESS.  HISTORY  Pacific Fuel Cell Corp. (we, us, our, or the Company) was incorporated under the laws of the State of Nevada on May 5, 1998, under the original name Magnum Ventures Inc. We changed our name on May 18, 1999 to RadioTower.com, Inc. Thereafter, in August 2001, we changed our name to our current name.  On July 2, 2001, we entered into a definitive agreement with Fullerene USA, Inc. (Fullerene), a privately held Nevada corporation, which contained various conditions subsequent prior to effectiveness, including completion of due diligence activities and other matters (the Fullerene Agreement). These conditions were subsequently satisfied. Effective August 28, 2001, we closed an acquisition of certain assets previously owned by Fullerene. The terms of the Fullerene Agreement provide for us to acquire an exclusive worldwide license (except for Japan) in Fullerenes proprietary fuel cell technology, including certain future acquired intellectual property, for use in transportation applications (the Assets). The licensing agreement expires upon the expiration of the underlying patent application, which is 17 years following the approval of the patent by the US
Patent and Trademark Office. Relevant thereto, on March 16, 2004, the United States Patent and Trademark Office issued Patent No. 6,706,431 to Fullerene.  In exchange for the Assets, we issued 30,100,000 shares of our restricted Common Stock, equal to ownership of approximately 51% of our then outstanding stock. The number of our authorized common shares was increased to 200,000,000 in July 2001 in conjunction with the Fullerene transaction.  Our initial business plan was to develop and produce low cost fuel cells for transportation. During 2002, we revised our business plan to emphasize the development and production of low cost fuel cells for personal electronics or other applications requiring small size and longevity of use. We revised our original business plan as a result of the costs associated with developing transportation related fuel cells, which exceeded our available capital. We may reinstate the elements of the original business plan if our current business plan proves successful, of which there can be no assurance. As of the date of this Report, we are focused on improving the production capability of our nanoMEA (described below), enhancing product performance, reducing product costs, designing market-ready products, developing volume-manufacturing capability, building customer and supplier relationships and marketing it to
potential customers. We are also continuing research to refine and improve our current nanoMEA.   4     DESCRIPTION OF CURRENT BUSINESS  On August 21, 2002, we entered into an agreement with the University of California (UCR), to develop a commercially viable fuel cell, exploiting our proprietary technology. On May 4, 2004, this agreement was extended through April 30, 2006, so long as we continued to make payments. On October 13, 2006, an amendment was executed with UCR requiring payments of $135,876, of which $50,229 has been paid as of the date of this Report. The balance of $50,252 was due on or before January 31, 2007, with an additional payment of $35,395 due on or before February 28, 2007. However, pursuant to the terms of this agreement, we are not obligated to tender payment until we receive an applicable invoice for the same. As of the date of this Report, we have not received any invoices from UCR for these payments. Once received, we intend to tender all amounts due. It is not anticipated that we will be
required to make any additional payments for any future extensions. In order to allow us to make the aforesaid payments, we borrowed funds from Fullerene, which were subsequently repaid in full. UCR, through its SMART program, provides matching funds for all direct costs applicable to development of the project. We applied for additional matching funds through this SMART program and have obtained a favorable decision and expect a grant of approximately $120,000 to be provided over the next two years. This also provides a multi-year relationship with UCR. All information we provide to UCR has been deemed confidential for a period of one (1) year after expiration or termination of the agreement.  As a result of the relationship with UCR, on November 10, 2003, we announced that a research team headed by Professor Yushan Yan of UCR had successfully developed a fuel cell using carbon nanotube-based electrodes. As a result of our research and development activities with UCR, we expect that the use of multi-walled carbon nanotubes as a platinum support for proton exchange membrane fuel cells will reduce the manufacturing cost of fuel cells through a decreased use of platinum. Current technology uses platinum, a precious metal, as the catalyst for hydrogen to separate into a proton and electron. Since platinum is a high cost metal in very limited production, it is cost prohibitive, preventing fuel cells from being economically viable even at high volume production. Our proposed method of producing fuel cells is expected to minimize or eliminate the use of platinum. If successful, the result will be
low cost fuel cells at high volume production levels.  On September 22, 2005, we announced that we completed the prototype of our proprietary nanostructured Membrane Electrode Assembly (nanoMEA), and thereafter began looking for partners for nanoMEA production. The new carbon nanomaterial based MEAs have shown excellent performance for both hydrogen and methanol fuel cells. For example, this technology uses 75% less platinum while exceeding the performance of current state of the art MEAs for methanol fuel cells. The carbon nanomaterials are used as the support of platinum or platinum alloy catalysts. Another major advantage of these carbon nanomaterials is their higher corrosion resistance and thus longer lifetime than carbon black.  On November 3, 2005, we announced that we had entered into an agreement with Bourns, Inc. (Bourns) to scale-up PFCEs new process for making electro-catalyst and nanoMEA products to commercial scale. Bourns, headquartered in Riverside, California, has been a manufacturer of electronics industry components for over 50 years. Their products are  5    used by the industrial, automotive, telecommunications, audio/visual, aerospace and other electronic industries.  On March 16, 2006, we announced that we had delivered production scale prototype nanoMEAs to an undisclosed customer. The delivered prototypes were produced in conjunction with our collaborative manufacturer, Bourns, Inc. The Bourns team, working with our scientific staff, successfully engineered our innovative process for making nanoMEAs to commercial scale. Based upon the success of our development efforts, we are currently engaged in discussions with Bourns to increase the scope and intensity of our collaborative efforts. However, as of the date of this Report, the terms of a definitive agreement have not been reached.  As of the date of this Report, we are focused on improving the production capability of our nanoMEA and marketing it to potential customers. We are also continuing research to refine and improve our current nanoMEA.  In December 2004, we opened our own laboratory. We pay $3,059 per month rent on this facility. We were able to accomplish this as a result of a financing described below. We are continuing our work with UCR and believe we have made significant progress. In April 2005, we announced that we had acquired certain rights to a new Carbon Nanotube Membrane Electrode Assembly (MEA) for hydrogen and methanol fuel cells. We filed a provisional patent application in the name of the co-inventors, Professor Yushan Yan, Dr. Wenzhen Li, Dr. Xin Wang, Mr. Zhongwei Chen, Mr. Mahesh Waje, Professor William Goddard and Dr. Weiqiao Deng, to protect this intellectual property. This new technology uses 75% less platinum, while significantly exceeding the performance of current state of the art MEAs for direct methanol fuel cells. MEAs can be assembled into a stack that consists of multiple layers of
MEAs and a support structure, dependent on the fuel cell application. Overall performance of such fuel cells are expected to be well above industry norm data shown by other manufacturers. Additional development will continue in our laboratory at the UCR Research Park, utilizing this and other proprietary technologies owned or licensed by us.  On August 4, 2006, we closed a private offering of restricted shares of our Common Stock (the Shares). We received proceeds of $338,500 from the sale of 2,417,858 Shares ($0.14 per share). The Shares were sold to a total of 17 investors, including 2 accredited investors as that term is defined under Rule 501(a) of Regulation D as promulgated under the Securities Act of 1933, as amended.  Acquisition of Equipment  Effective December 18, 2006, pursuant to an Assignment and Assumption of Equipment Purchase Agreement, we were assigned all rights of TDM, L.L.C. relating to an Agreement dated August 22, 2006, as amended December 20, 2006, between SGL Technic Inc., a wholly owned subsidiary of SGL Technologies GmbH, a German company (SGL), and TDM, L.L.C. (TDM), wherein we acquired certain equipment on an as is basis. This equipment consists of two press machine sets (200 and 800 ton) plus auxiliary equipment, which is used for manufacturing of bi-polar plates. We have been developing the MEA business segment of the  6    fuel cell industry and have nanoMEA technology to enhance performance and durability. A fuel cell stack (essentially an electricity generator) consists of an MEA, GDL (gas diffusion layer) and bipolar plates. As such, management believes that this acquisition of equipment fits in with our proprietary technology.  The purchase price of the equipment was $200,000. As of the date of this Report, we have paid an aggregate of $100,000; $5,000 was previously paid by TDM. The balance of $95,000 shall become due on or before June 30, 2007. We intend to utilize the proceeds received from our recent private offering described below to pay this obligation.  This equipment acquisition allows us to expand our current business plan to begin to manufacture bipolar plates, which will provide us with the capability of marketing our own fuel cell components for the industry. We have moved the equipment to a new location approximately 5 miles from the equipments previous location in Willoughby, Ohio, and have retained manufacturing personnel. We have retained the services of two new employees, a director of sales and a director of manufacturing, both of whom have direct experience in the fuel cell business and manufacturing of bi-polar plate components. We are also engaged in discussions with various parties who have expressed an interest in providing us with additional equity capital to allow us to move forward.  To assist us in this business and allow us to meet our financial obligations that we assumed when we acquired these assets, we are currently engaged in a private offering of our Common Stock, wherein we are attempting to raise up to $300,000. Relevant thereto, as of the date of this Report we have issued an aggregate of 2,214,285 restricted shares of our Common Stock and received proceeds of $300,000 from the sale thereof ($0.14 per share). The Shares were sold to a total of 10 investors, all of whom were accredited investors as that term is defined under Rule 501(a) of Regulation D as promulgated under the Securities Act of 1933, as amended.  SGL Technic Inc. (SGL) discontinued its bi-polar plate manufacturing business. Current customers of SGL for the bipolar plates consist of many of the top fuel cell companies in the world, almost all of whom are potential customers for our MEA. In the event we are able to transfer sales and begin manufacturing, of which there can be no assurance, we expect to supply many of these customers.  Other Business  In April 2004, we, through PFCE Acquisition Corp, a Nevada corporation and our wholly owned subsidiary (Sub), and Cellfoods Corporation, a Nevada corporation (Cellfoods ), entered into an Agreement and Plan of Merger whereby Sub merged with and into Cellfoods, which survived as our wholly owned subsidiary. This merger was consummated on or about May 17, 2004.  Cellfoods is a development stage corporation that was organized in January 2003 engaged in the business of developing soybean powder for use in food preparation. Prior to the merger, Cellfoods reached an agreement with HEM Mutual Assurance LLC, Minneapolis,  7    Minnesota, an accredited investor (as that term is defined under Rule 501, Regulation D, promulgated under the Securities Act of 1933, as amended) to issue up to $1,000,000 in aggregate principal amount of convertible debentures pursuant to Rule 504 of Regulation D under the Securities Act of 1933, as amended. These Debentures were to be issued by Cellfoods in two separate convertible debentures of $997,000 and $3,000, respectively (hereinafter referred to in the aggregate as the Debentures). As a result of the merger, we assumed the obligations and benefits of Cellfoods, including Cellfoods obligation to issue the Debentures.  Because the conversion price of the Debentures was not fixed, and imposing the limit of 2,000,000 shares would require us to redeem any outstanding Debentures at a premium, we were required to bifurcate the embedded conversion option and account for it separately as a derivative instrument liability. This conversion option was initially valued at $423,634, using the Black-Scholes option pricing model. In valuing the option, we used an estimate of the volatility of our Common Stock price of 90%, based on a review of the historical volatility, an expected dividend yield of 0% and a risk-free rate of return of 3.92%, based on constant maturity rates published by the U.S. Federal Reserve, applicable to the remaining life of the Debentures.  The bifurcated embedded derivative instrument is marked to market at each reporting date, with any changes in its fair value charged or credited to income. On conversion, a pro rata portion of the bifurcated derivative instrument liability, marked to market as of the conversion date, together with the carrying value of the portion of the Debenture being converted, was credited to additional paid-in capital.  We received net proceeds of $863,100 after payment of deferred Debenture costs of $136,900. These deferred costs are initially being amortized over the five-year term of the Debentures. On conversion, a pro rata portion of the unamortized costs was deducted from the deemed proceeds of conversion that are credited to additional paid-in capital.  We had the right to redeem the Debentures on 30 days notice for 125% of the principal amount of the outstanding Debentures, plus accrued and unpaid interest. Relevant thereto, on October 24, 2005, we redeemed the remaining outstanding convertible Debentures placed with HEM. As a result, 26,992,462 shares of our Common Stock, representing the remaining shares being held in escrow under the debenture agreement were returned to us and were canceled. We issued an aggregate of 3,007,538 shares of our Common Stock from the conversion of these Debentures during the time they were outstanding.  We utilized the proceeds from this Debenture offering to open our own lab for purposes of developing the fuel cell prototype. In mid December 2004, our laboratory was ready for occupancy. It took much longer to complete modification and improvement inside the laboratory due to many elements, including mostly electrical power requirements, gas exhaust equipment and many other elements needed to be approved in inspections done by local officials.  Industry Overview  We believe that a fuel cell unit can replace conventional batteries because a fuel cell unit should provide longer usage at lower consumer cost. While no assurances can be provided that  8    this development will result in our generating revenues, our development to date is considered by management to be a significant step forward in the use of fuel cell technology.  Fuel cell acceptance appears to be accelerating. Large and small corporations, as well as the United States government, all appear convinced of the value of fuel cell technology. Despite all this activity, we have still not seen a commercial product that, in our opinion, is competitively priced with other forms of energy. We believe that, while fuel cell products will begin to proliferate, market acceptance will come only when prices fall to competitive levels.  There are currently several different technologies in use for fuel cell power generation. Each of these processes differs in methodology, suitable scale and efficiency. Our interest (and patent applications) is in the Proton Exchange Membrane (PEM) method that is very suitable for low temperature operation and Direct Methanol fuel cell (DMFC).  We have also entered into preliminary discussions with potential strategic partners to utilize our current technology position in order to assume a market leadership position in our target market of micro fuel cells. We have been seeking strategic partners, but we did not have conclusive data regarding our MEA prototype and we could not proceed to actual negotiations. Now that we have improved our prototype data, we intend to resume seeking potential strategic partners. However, as of the date of this Report, no agreements have been entered into and there are no assurances that such discussions or any such agreement will occur in the foreseeable future.  We have also investigated the possibility of using our proprietary fuel cell technology to provide electricity for small commercial establishments and households. Although we do not currently have the rights to utilize our fuel cell technology in this market, we believe that, if we decide to pursue this market, we can acquire such rights from Fullerene on advantageous terms. However, there can be no assurances that we will be able to acquire such rights in the future.  We believe our next step in the implementation of our business plan is to focus on improving the production capability of our nanoMEA and marketing it to potential customers Our initial marketing is expected to be through attendance at trade shows with follow up sales calls from our in-house staff.  In order to help jump-start the market for fuel cells and increase our manufacturing capability, we decided to begin manufacturing fuel cell components.  Fuel cell manufacturers have incurred unwarranted expense and diversion of management time in trying to manufacture each of the several components needed for their fuel cells. PFCE believes that our Company can create a viable, profitable business by utilizing proven manufacturing techniques in a dedicated environment. To this end we have started manufacturing bipolar plates in our plant in Willoughby, Ohio. We expect that our customers will include many prominent industrial firms, as well as leading independent fuel cell companies.  In July 2004, we received notice that we had been selected by the United States Department of Energy for a Phase I STTR (Small Business Technology Transfer) grant. The  9    initial grant in the amount of $100,000 was received in December 2004. We intend to apply for additional grant money from the United States government, as well as other potential sources, in the future. There are no assurances that our applications will be approved.  We also may seek to acquire additional related intellectual property. However, as of the date of this Report, no definitive agreements to acquire the same have been reached with any third party, other than previously reported.  In order to implement our business plan, we require additional funding and there is no assurance that adequate funds, whether through equity financing, debt financing or other sources, will be available when needed or on terms acceptable to us. As of the date of this Report, we have no definitive agreement with any investment banking firm, venture capital firm or any other source of funds who have made any commitment to us to provide any funding. Further, any such funding may result in significant dilution to existing stockholders. The inability to obtain sufficient funds from external sources when needed will have a material adverse affect on our results of operations and financial condition.  COMPETITION  Our major competitors and their respective products include, but are not limited to, the following:  COMPANY

PRODUCT(S)Dana Corporation

Bipolar plateElectroChem, Inc.

MEAEntegris, 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  This group of companies specializes in MEA for Proton Exchange Membrane (PEM) Fuel Cells and Bipolar plate manufacturers and are therefore direct technology competitors  We have not included automobile companies such as Mitsubishi, General Motors Ford, Toyota, Nissan and others since their focus is directed towards transportation. Likewise, large industrial companies such as Siemans AG, UTC Fuel Cells (a United Technologies Company) and Teledyne Energy Systems were not included since their main focus appears to be larger power systems. Fuel cell system manufactures such as Plug Power, Hytrogen LLC, Hydrogenics, and Ballard are possible customers of ours. However, Dana and Entegris are our  10    only current competitors. Any major company listed here should be considered a potential, if not actual, competitor because of its size.  We are a relative newcomer to this group, but, while no assurances can be provided, we believe that our R&D strategy positions us to leapfrog the competition and finalize a commercially viable manufacturing prototype MEA in the next six months while continuing to improve the quality of our product, provided that we can raise the necessary capital to allow us to continue our research and development efforts. There are no assurances that we will be able to raise this additional capital.  TRADEMARKS/TRADENAMES  In November 2004, we filed a United States patent application with the United States Patent Office, Patent Pending Serial No. 60/622,732, bearing the title of Methanol Resistant Cathodic Catalyst for Direct Methanol Fuel Cells to patent a process of developing a fuel cell membrane using methanol. We filed a non-provisional (USSN 11/262,027) patent on October 27, 2005, which claimed priority to provisional patent application USSN 60/622,732. On that same date we filed a PCT (international) patent application claiming priority to that provisional patent application. Our application is currently in the patent pending stage.  In addition, during our fiscal year ended December 31, 2006, we submitted an additional patent application, USSN 60/661,770, filed March 15, 2005 (provisional), titled Carbon Nanotube Based Electrocatalysts for Fuel Cells. Our application is currently in the patent pending stage.  We currently do not have any registered trademarks or tradenames, although we expect this to change as we move towards the commercialization of our technology.  GOVERNMENT REGULATIONS  We are not subject to any extraordinary governmental regulations relating to our business.  EMPLOYEES  As of the date of this Report, we have 10 employees, including our two current officers, two managerial employees who are responsible for our new operations described above in PART I, Item 1, Description of Business, plus three independent contractors. Our operations are non-union. There has been no history of labor strikes or unrest at any of our facilities. We believe that our relationship with our employees is satisfactory. In addition, management believes that the available labor force in the geographic areas where our facilities are located are sufficient to support the expansion anticipated over the next 12 months. If and when we are in the financial position to do so, we intend to hire additional employees in the areas of research and development and marketing.   11     ITEM 2. DESCRIPTION OF PROPERTY.  We operate from our principal executive offices at 131 N. Tustin Ave., Suite 100, Tustin, CA 92780. We share this space pursuant to a verbal, month-to-month lease, with Belltec Industries, a company owned by George Suzuki, our President and a director. Our monthly rent is $600. This space consists of 700 square feet of executive office space. See PART III, Item 12, Certain Relationships and Related Transactions.  In addition, since December 2004, we have operated our own laboratory at 1201 Research Park Drive, Unit 500, Riverside CA 92507, which is in the UCR Research Park. This location consists of approximately 2,500 square feet. Approximately 50% of this leased space is used for actual laboratory floor, with the balance used for supporting offices and accommodations. The lease expires in September 2007. The monthly rent is $3,059.  Subsequent Event  Effective January 24, 2007, we entered into a lease agreement to lease property at 4413 Hamann Parkway, Willoughby, Ohio, where our new operations described in PART I, Item 1, Description of Business are now located. This space consists of 23,886 square feet of commercial space, including approximately 22,386 square feet of manufacturing space and approximately 1,500 for executive offices. The applicable lease term runs through February 28, 2009. Until February 1, 2008, our base monthly rent for this location is $5,994.75, plus utilities and taxes. On March 1, 2008, the base rent increases to $8,465.58 per month. The relevant lease provides for an option for us to renew this lease for an additional three (3) year term, provided that we have made rental payments in a timely manner. It also provides us with an option to purchase this location. To do, so, we are obligated to provide the
lessor of our intent to exercise this option in writing on or before Feb. 29, 2012. The purchase price is $925,000, provided that we exercise our option to renew.  We have no other properties.  ITEM 3. LEGAL PROCEEDINGS  We have been named as a defendant in a lawsuit pending in the Court of Common Pleas for Lake County, Ohio, captioned SKRL Tool & Die, Inc., et al. v. William Berwald, et al., Case No. 07-CV-000567. The case was filed on February 28, 2007.  In their complaint, Plaintiffs allege that two of their former employees  current employees of ours in our Willoughby, Ohio, manufacturing facility  possess confidential and proprietary trade secrets of SKRL pertaining to the manufacturing of bipolar plates for fuel cells. Plaintiffs have asserted against these employees and us claims for, among other things, unfair competition, misappropriation of trade secrets and tortious interference with business relationships and seek compensatory and punitive damages, as well as injunctive relief that would preclude the two former SKRL employees from continuing to be employed by us.   12     We believe these claims are without merit, in that the employees possess no trade secrets of SKRL, and moreover, we would have no use for such trade secrets, as our current employees (other than the two defendants) possess far more technological and marketing information in the industry than the SKRL employees would ever have been privy to. We are therefore vigorously defending the Companys interests, and believe the defense will ultimately be successful.  We are not a party to any other pending legal proceedings, nor are we aware of any other pending or threatened claims.  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  No matters were submitted to our shareholders during the three-month period ended December 31, 2006, or subsequent thereto.  PART II  ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS  Our Common Stock currently is listed for trading on the OTC BB under the symbol PFCE. The table below sets forth the reported high and low bid prices for the periods indicated. The bid prices shown reflect quotations between dealers, without adjustment for markups, markdowns or commissions, and may not represent actual transactions in the Companys securities.  Bid PriceQuarter Ended



High



LowMarch 31, 2005



$
0.31



$
0.18June 30, 2005



$
0.23



$
0.11September 30, 2005



$
0.47



$
0.09December 31, 2005



$
0.67



$
0.31March 31, 2006



$
0.46



$
0.19June 30, 2006



$
0.34



$
0.13September 30, 2006



$
0.37



$
0.18December 31, 2006



$
0.30



$
0.19  As of March 20, 2007, the closing bid price of our Common Stock was $0.28.  (b) Holders. We have approximately 60 holders of record of our Common Stock as of March 30, 2007, not including those shares held in street name.  (c) Dividends. We did not pay any dividends on our Common Stock during the two years ended December 31, 2006. Pursuant to the laws of the State of Nevada, a corporation may not issue a distribution if, after giving its effect, the corporation would not be able to pay its  13    debts as they became due in the usual course of business, or such corporations total assets would be less than the sum of their total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. As a result, management does not foresee that we will have the ability to pay a dividend on our Common Stock in the fiscal year ended December 31, 2007. See PART II, Item 7, Financial Statements.  ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of
which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.  We generated nominal revenues of $52,076 and $0.00 during our fiscal years ended December 31, 2005 and 2006, respectively. All of these revenues were generated through the operations of Cellfoods.  During our fiscal year ended December 31, 2006, we incurred costs and expenses totaling$492,850, compared to costs and expenses of $572,572 during our fiscal year ended December 31, 2005, a decrease of $79,722. In this regard, our general and administrative costs increased during our fiscal year ended December 31, 2006 from $317,944 in 2005 to $431,699 during 2006 due to our efforts to acquire our new business operations described above PART I, Item 1, Description of Business. Research and development costs decreased from $122,135 in 2005 to $50,229 during 2006 due primarily to deferred costs due UCR. However, during our fiscal year ended December 31, 2005, we incurred $62,021 in costs of sales attributable to Cellfoods operations, as well as charges of $36,000 due to stock compensation, $16,706 in extinguishment of outstanding debentures and $17,557 (net) resulting from a change in value
of derivative instruments, which charges were not incurred during 2006.  As a result, we incurred a net loss of ($492,134) (approximately $0.01 per share), compared to a net loss of ($521,064) during our fiscal year ended December 31, 2005 (approximately $0.01 per share). Because we generated nominal revenues during the year ended  14    December 31, 2006 and 2005, the following is our Plan of Operation, rather than a comparison of results of operations.  PLAN OF OPERATION  Our initial business plan was to develop and produce low cost fuel cells for transportation. During 2002, we revised our business plan to emphasize the development and production of low cost fuel cells for personal electronics or other applications requiring small size and longevity of use. We have revised our original business plan as a result of the costs associated with developing transportation related fuel cells, which exceeded our available capital. We may reinstate the elements of the original business plan if our current business plan proves successful, of which there can be no assurance. As of the date of this Report, we are focused on improving the production capability of our nanoMEA, enhancing product performance, reducing product costs, designing market-ready products, developing volume-manufacturing capability, and building customer and supplier relationships and marketing it to potential
customers. We are also continuing research to refine and improve our current nanoMEA.  On August 21, 2002, we entered into an agreement with the University of California (UCR), to develop a commercially viable fuel cell, exploiting our proprietary technology. On May 4, 2004, this agreement was extended through April 30, 2006, so long as we continued to make payments. On October 13, 2006, an amendment was executed with UCR requiring payments of $135,876, of which $50,229 has been paid as of the date of this Report. The balance of $50,252 was due on or before January 31, 2007, with an additional payment of $35,395 due on or before February 28, 2007. However, pursuant to the terms of this agreement, we are not obligated to tender payment until we receive an applicable invoice for the same. As of the date of this Report, we have not received any invoices from UCR for these payments. Once received, we intend to tender all amounts due. It is not anticipated that we will be
required to make any additional payments for any future extensions. In order to allow us to make the aforesaid payments, we borrowed funds from Fullerene, which were subsequently repaid in full. UCR, through its SMART program, provides matching funds for all direct costs applicable to development of the project. We applied for additional matching funds through this SMART program and have obtained a favorable decision and expect a grant of approximately $120,000 to be provided over the next two years. This also provides a multi-year relationship with UCR. All information we provide to UCR has been deemed confidential for a period of one (1) year after expiration or termination of the agreement.  As a result of the relationship with UCR, on November 10, 2003, we announced that a research team headed by Professor Yushan Yan of UCR had successfully developed a fuel cell using carbon nanotube-based electrodes. As a result of our research and development activities with UCR, we expect that the use of multi-walled carbon nanotubes as a platinum support for proton exchange membrane fuel cells will reduce the manufacturing cost of fuel cells through a decreased use of platinum. Current technology uses platinum, a precious metal, as the catalyst for hydrogen to separate into a proton and electron. Since platinum is a high cost metal in very limited production, it is cost prohibitive, preventing fuel cells from being economically viable even at high volume production. Our proposed method of producing fuel cells is expected to  15    minimize or eliminate the use of platinum. We expect to produce low cost fuel cells at high volume production levels.  Acquisition of Equipment  Effective December 18, 2006, pursuant to an Assignment and Assumption of Equipment Purchase Agreement, we were assigned all rights of TDM, L.L.C. relating to an Agreement dated August 22, 2006, as amended December 20, 2006, between SGL Technic Inc., a wholly owned subsidiary of SGL Technologies GmbH, a German company (SGL), and TDM, L.L.C. (TDM), wherein we acquired certain equipment on an as is basis. This equipment consists of two press machine sets (200 and 800 ton) plus auxiliary equipment, which is used for manufacturing of bi-polar plates. We have been developing the MEA business segment of the fuel cell industry and have nanoMEA technology to enhance performance and durability. A fuel cell stack (essentially an electricity generator) consists of an MEA, GDL (gas diffusion layer) and bipolar plates. As such, management believes that this acquisition of
equipment fits in with our proprietary technology.  The purchase price of the equipment was $200,000. As of the date of this Report, we have paid an aggregate of $100,000; $5,000 was previously paid by TDM. The balance of $95,000 shall become due on or before June 30, 2007. We intend to utilize the proceeds received from our recent private offering described below to pay this obligation.  This equipment acquisition allows us to expand our current business plan to begin to manufacture bipolar plates, which will provide us with the capability of marketing our own fuel cell components for the industry. We have moved the equipment to a new location approximately 5 miles from the equipments previous location in Willoughby, Ohio, and have retained manufacturing personnel. We have retained the services of two new employees, a director of sales and a director of manufacturing, both of whom have direct experience in the fuel cell business and manufacturing of bi-polar plate components. We are also engaged in discussions with various parties who have expressed an interest in providing us with additional equity capital to allow us to move forward.  SGL Technic Inc. (SGL) discontinued its bi-polar plate manufacturing business. Current customers of SGL for the bipolar plates consist of many of the top fuel cell companies in the world, almost all of whom are potential customers for our MEA. In the event we are able to transfer sales and begin manufacturing, of which there can be no assurance, we expect to supply many of these customers.  LIQUIDITY AND CAPITAL RESOURCES  At December 31, 2006, we had $113,727 in cash.  In August 2006, we closed a private offering of restricted shares of our Common Stock (the Shares). We received proceeds of $338,500 from the sale of 2,417,858 Shares ($0.14 per share). The Shares were sold to a total of 17 investors, including 2 accredited investors as that  16    term is defined under Rule 501(a) of Regulation D as promulgated under the Securities Act of 1933, as amended.  In April 2004, we, through PFCE Acquisition Corp, a Nevada corporation and our wholly owned subsidiary (Sub), and Cellfoods Corporation, a Nevada corporation (Cellfoods ), entered into an Agreement and Plan of Merger whereby Sub merged with and into Cellfoods, which survived as our wholly owned subsidiary. This merger was consummated on or about May 17, 2004.  Cellfoods is a development stage company that was organized in January 2003, engaged in the business of developing soybean powder for use in food preparation.  Prior to the merger, Cellfoods reached an agreement with HEM Mutual Assurance LLC, Minneapolis, Minnesota, an accredited investor (as that term is defined under Rule 501, Regulation D, promulgated under the Securities Act of 1933, as amended) to issue up to $1,000,000 in aggregate principal amount of convertible debentures pursuant to Rule 504 of Regulation D under the Securities Act of 1933, as amended. These Debentures were to be issued by Cellfoods in two separate convertible debentures of $997,000 and $3,000, respectively (hereinafter referred to in the aggregate as the Debentures). As a result of the merger, we assumed the obligations and benefits of Cellfoods, including Cellfoods obligation to issue the Debentures.  The conversion price for the Debentures was (a) the lesser of $0.75 and one hundred twenty-five percent (125%) of the average of the closing bid price per share of our Common Stock during the five (5) trading days immediately preceding the Closing (as defined in the Purchase Agreement); and (b) one hundred percent (100%) of the average of the five (5) lowest closing bid prices per share of our Common Stock during the forty (40) trading days immediately preceding the Conversion Date; provided, however, that the aggregate maximum number of shares of Common Stock that the First Debenture and Second Debenture may be converted into is Two Million (2,000,000) shares (the Maximum Conversion); and further provided, however, that upon the Maximum Conversion, we could (a) increase the Maximum Conversion or (b) redeem the unconverted amount of the First Debenture and Second Debenture in whole or in
part at one hundred fifteen percent (115%) of the unconverted amount of such Debentures being redeemed plus accrued interest thereon. The conversion price and number of shares of Common Stock issuable upon conversion of the Debentures was subject to adjustment for stock splits and combinations and other dilutive events. The Debentures could not be converted, however, if after conversion the holder would beneficially own more than 5% of our outstanding Common Stock, unless the holder waives this limitation by giving us 75 days notice of the waiver.  The Debentures bore interest at 1% per year and would have matured in five years. Interest was payable in cash or shares of our Common Stock, at the option of the holders of the Debentures. We had the right to redeem the Debentures on 30 days notice for 125% of the principal amount of the outstanding Debentures, plus accrued and unpaid interest. Relevant thereto, on October 24, 2005, we redeemed the remaining outstanding convertible debentures placed with HEM. As a result, 26,992,462 shares of our Common Stock, representing the remaining shares being held in escrow under the debenture agreement were returned to us and  17    were canceled. We issued an aggregate of 3,007,538 shares of our Common Stock from the conversion of these Debentures.  We believe that we currently have sufficient funds available for us to continue to implement our business plan for the next 12 months. However, we estimate that we will require an additional $2.5 million in additional debt or equity capital to fully implement our business plan in the future and there are no assurances that we will be able to raise this capital when needed. However, while there are no definitive agreements in place as of the date of this Report, we are currently engaged in various discussions with interested parties to provide these funds or otherwise enter into a strategic alliance to provide such funding. The inability to obtain sufficient funds from external sources when needed will have a material adverse affect on our results of operations and financial condition.  Subsequent Event  In January 2007, we issued an aggregate of 2,214,285 restricted shares of our Common Stock (the Shares). We received proceeds of $300,000 from the sale thereof ($0.14 per share). The Shares were sold to a total of 10 investors, all of whom were accredited investors as that term is defined under Rule 501(a) of Regulation D as promulgated under the Securities Act of 1933, as amended. We relied upon the exemption from registration afforded by Regulation D and Section 4/2, promulgated under the Securities Act of 1933, as amended, to issue the Shares. The proceeds from this offering have been used for our new operations described in PART I, Item 1, Description of Business above.  On January 24, 2007, the Company entered into a new lease agreement for 23,886 square feet of commercial space located at 4413 Hamann Parkway, Willoughby, Ohio. The lease is for two years starting on March 1, 2007 and ending February 28, 2009. The future minimum payments received under the lease are $59,947, $96,644 and $16,931 for 2007, 2008 and 2009, respectively.  In March of 2007, the Company entered into a settlement arrangement regarding a deposit on equipment in the amount of $101,239. The Company returned the equipment to the vendor for a restocking fee of $31,239, which is recorded in general and administrative expense as of December 31, 2006, and the difference of $70,000 will be remitted to the Company in 2007.  CRITICAL ACCOUNTING POLICIES AND ESTIMATES  We have identified critical accounting policies that, as a result of judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operations involved, could result in material changes to our financial position or results of operations under different conditions or using different assumptions. The most critical accounting policies and estimates are:  
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make  18    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.  Details regarding our use of these policies and the related estimates are described in the accompanying consolidated financial statements as of December 31, 2006 and for the years ended December 31, 2006 and 2005. During the year ended December 31, 2006, there have been no material changes to our critical accounting policies that impacted our consolidated financial condition or results of operations.  TRENDS  Since our announcement of the successful development of a carbon nanotube support base fuel cell electrode in November 2003, we have been receiving a significant amount of attention from the investment community. Stock volume has increased and we have received indications of interest from investors. There have also been significant hits on our web site from investment firms. In this regard, while there are no assurances, we are hopeful that we will be able to raise approximately $2.5 million in additional funding in order to allow us to produce and demonstrate to fuel cell manufacturers a commercially viable prototype. See Liquidity and Capital Resources, above.  We are currently in preliminary discussions with entities that have told us they can raise funds for our Company. However, there can be no assurance that any investment will materialize.  We also expect that our new laboratory will continue to function as a hub to attract additional researchers from the University of California at Riverside, which is on the path to become a leader in the nano-technology field. We believe that there are many potential useful applications of nano-technology that can be expected in the immediate future, including fuel cells and flat panel displays. Also at this laboratory, functional prototypes will be made before bringing in manufacturers. Our plan is to have the manufacturers inspect the prototype, once completed, in order to generate their own test production unit. If successful, manufacturing can commence producing products in quantity in less than 12 months. We foresee the initial application to be a battery replacement for cell phones, mobile notebook computers/laptops and other applicable applications. This segment is known as the micro fuel cell
market. We expect that these fuel cells will eventually be produced like modular computer chips and components.  In order to help jump-start the market for fuel cells and increase our manufacturing capability, in late 2006 we decided to begin manufacturing fuel cell components.   19     Fuel cell manufacturers have incurred unwarranted expense and diversion of management time in trying to manufacture each of the several components needed for their fuel cells. We believe that we can create a viable, profitable business by utilizing proven manufacturing techniques in a dedicated environment. To this end we have started manufacturing bipolar plates in our plant in Willoughby, Ohio. We expect that our customers will include many prominent industrial firms, as well as leading independent fuel cell companies.  We believe that the reason that the fuel cell market is not rapidly expanding at this time is due to high manufacturing costs and lack of successful applications. We believe that a robust fuel cell market is inevitable, due to the advantages of low pollution and independence from fossil fuels. Major automobile, industrial and power supply companies are heavily involved in research and development activities of fuel cell technology and many have announced prototypes and commercial models. However, there has not been a major commercial breakthrough, which we attribute to the high cost of the products and the lack of consumer proven reliability. While no assurances can be provided, once the problem of high costs is resolved, we expect the micro fuel cell market to increase significantly.  INFLATION  Although our operations are influenced by general economic conditions, we do not believe that inflation had a material affect on our results of operations during 2006.  ITEM 7. FINANCIAL STATEMENTS  20     PACIFIC FUEL CELL CORP. (A DEVELOPMENT STAGE COMPANY) TABLE OF CONTENTS  Page  Report of Independent Registered Public Accounting Firm
1  Balance Sheet
2  Statements of Operations
3  Statement of Changes in Stockholders Equity (Deficit)
4  Statements of Cash Flows
5  Notes to Financial Statements
6-15                21      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  Shareholders and Board of Directors Pacific Fuel Cell Corp.  We have audited the accompanying consolidated balance sheet of Pacific Fuel Cell Corp. (a development stage company) as of December 31, 2006, and the related statements of operations, changes in stockholders equity, and cash flows for the years ended December 31, 2006 and 2005, and the period from May 5, 1998 (inception) to December 31, 2006. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered significant losses from operations. This factor raises substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pacific Fuel Cell Corp. (a development stage company) as of December 31, 2006, and the results of its operations, and its cash flows for the years ended December 31, 2006 and 2005, and the period from May 5, 1998 (inception) to December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.  Stark Winter Schenkein & Co., LLP  s/Stark Winter Schenkein & Co., LLP  Denver, Colorado March 22, 2007  1  22      PACIFIC FUEL CELL CORP. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEET DECEMBER 31, 2006  ASSETSCURRENT ASSETSCash

$
113,727Prepaid expense


3,059Total current assets


116,786Property and Equipment, net


33,345Other AssetsRent security deposit


3,059Deposit on equipment


170,000$
323,190LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable

$
27,880Total current liabilities


27,880STOCKHOLDERS EQUITYPreferred stock, $0.01 par value,1,000,000 shares authorized, none outstanding


Common stock, $0.001 par value, 200,000,000shares authorized, 69,795,396 shares issued


69,795Additional paid in capital


3,239,917Deferred stock compensation


(45,000
)(Deficit) accumulated during the development stage


(2,969,402
)295,310$
323,190   2  23     PACIFIC FUEL CELL CORP. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS  YEAR ENDEDDECEMBER 31,2006



YEAR ENDEDDECEMBER 31,2005



FOR THE PERIODMAY 5, 1998(INCEPTION) TODECEMBER 31, 2006REVENUESales

$




$
52,076



$
71,988Grants












99,901




52,076




171,889COSTS AND EXPENSESCost of goods sold







62,021




82,287General and administrative


431,699




307,712




1,396,218Research and development


50,229




122,135




300,556Stock compensation







36,000




312,800Depreciation and amortization


10,922




10,441




33,218Change in value of derivative instruments, net







17,557




460,498Loss on extinguishment of debentures







16,706




16,706Loss on asset impairment












510,667Loss on disposal of property and equipment












3,391492,850




572,572




3,116,341OPERATING (LOSS)


(492,850
)



(520,496
)



(2,944,452
)OTHER INCOME (EXPENSE)Interest income


1,091




4,050




7,601Interest expense


(375
)



(4,618
)



(66,709
)Foreign currency transaction gain (loss)












(168
)Other












(1,175
)716




(568
)



(60,451
)NET (LOSS) BEFORE EXTRAORDINARY ITEM


(492,134
)



(521,064
)



(3,004,902
)EXTRAORDINARY ITEM, Gain on forgivenessof debt, net of income taxes of $12,070












23,430NET (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)


(492,134
)



(521,064
)



(2,981,472
)INCOME TAX EXPENSE (BENEFIT)












(12,070
)NET (LOSS)

$
(492,134
)


$
(521,064
)


$
(2,969,402
)PER SHARE INFORMATION:WEIGHTED AVERAGE SHARES OUTSTANDINGBASIC AND DILUTED


67,844,828




66,593,264




46,115,903NET (LOSS) PER COMMON SHARE (BASIC & DILUTED)(Loss) from operations

$
(0.01
)


$
(0.01
)


$
(0.06
)Extraordinary item

$




$




$
$
(0.01
)


$
(0.01
)


$
(0.06
)  3  24     PACIFIC FUEL CEL CORP. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT) MAY 5, 1998 (INCEPTION) THROUGH DECEMBER 31, 2006  Common StockShares



Amount



Additional

Paid in Capital



Deferred Stock

Compensation



Common Stock

Subscriptions



(Deficit)

Accumulated

During the

Development 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 advancesat $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 domainname at $0.007 per share

9,750,000




9,750




55,250



















65,000Issuance of stock forcash at $0.007 per share

3,750,000




3,750




21,250



















25,000Issuance of stock subscriptions forcash at $0.007 per share





















19,000









19,000Issuance of stock subscriptions aspayment 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 stocksubscriptions

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 licenseagreement at $0.015 per share

30,100,000




30,100




421,400



















451,500Cancellation of common stock ascondition 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 issuanceof stock below fair market value











84,000



















84,000Stock compensation related to issuanceof 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 forgivenessfrom shareholders at $0.094 per share

1,070,000




1,070




99,980



















101,050Liabilities converted into contributedcapital











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 partyrecorded as contributed capital











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 @ $0.01 per share

300,008




300




111,486



















111,786Debenture conversion @ between $0.30 and $0.48 per share

2,657,246




2,657




1,018,043



















1,020,700Contributed services to capital











6,000



















6,000Purchase of Cellfoods











53,196



















53,196Shares issued for services @ $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 to capital











6,000



















6,000Conversion of stock agreement @ $0.25 per share

100,000




100




24,900



















25,000Debenture conversion @ $0.215 per share

50,284




50




160,784



















160,834Shares issued for services @ $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 @ $0.30 per share

200,000




200




59,800




(45,000
)













15,000Shares issued for services @ $0.276 per share

500,000




500




137,500



















138,000Net (loss) for the period


























(492,134
)



(492,134
)Balance at December 31, 2006

69,795,396



$
69,795



$
3,239,917



$
(45,000
)







$
(2,969,402
)


$
295,310 4  25     PACIFIC FUEL CELL CORP. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS  YEAR ENDEDDECEMBER 31,2006



YEAR ENDEDDECEMBER 31, 2005



FOR THE PERIODMAY 6, 1998(INCEPTION) TODECEMBER 31, 2006OPERATING ACTIVITIESNet (loss)



$
(492,134
)


$
(521,064
)


$
(2,969,402
)Adjustments to reconcile net (loss) to net cash(used) in operating activities:Stock compensation




153,000




36,000




465,800Amortization of discount on loan payable














5,239Contributed services to capital









6,000




12,000Reserve for uncollectible accounts receivable














36,298Extraordinary item














35,500Loss on disposal of property and equipment














3,391Non cash derivative debenture costs









182,477




657,465Depreciation and amortization




10,922




10,441




33,824Interest expense converted to loan payable














12,684Deposit - restocking fee




31,239









31,239Loss on impairment of assets














510,167Changes in:Prepaid research and development









18,752




Inventory held by vendor









9,621




Discount on loan














3,061Prepaid expense




2,486




3,860




(2,559
)Accounts receivable














(3,059
)Accounts payable




(2,414
)



(7,900
)



58,850Net cash (used in) operating activities




(296,902
)



(261,813
)



(1,109,502
)INVESTING ACTIVITIESPurchase of fixed assets









(54,708
)



(59,599
)Cash received in purchase of Cellfoods














16,898Deposit on equipment




(100,000
)



44,761




(201,239
)Investment in mineral claims














(5,000
)Net cash (used in) investing activities




(100,000
)



(9,947
)



(248,940
)FINANCING ACTIVITIESProceeds from loans payable  shareholders














285,462Payments on loans payable  shareholders














(11,083
)Deferred debenture costs














(136,000
)(Payments) proceeds of convertible redeemable debentures









(223,145
)



776,855Payments on loan payable - related parties














(60,000
)Proceeds from stock sales, net of issuance costs




344,498




15,500




616,935Net cash provided by (used in) financing activities




344,498




(207,645
)



1,472,169Net increase (decrease) in cash




(52,403
)



(479,405
)



113,727CASH AT BEGINNING OF PERIOD




166,130




645,535




CASH AT END OF YEAR



$
113,727



$
166,130



$
113,727SUPPLEMENTAL CASH FLOW INFORMATIONCash paid for interest



$
375



$




$
375Cash paid for income taxes



$
0



$




$
2,400SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH FINANCING AND INVESTING ACTIVITIESDiscount on loan payable - related party



$




$




$
8,300Issuance of stock for purchase of license agreement



$




$




$
451,500Accrued interest



$




$
(129
)


$
(1,679
)Convertible redeemable debentures



$




$
(15,000
)


$
(808,728
)Conversion of accrued interest into contributed capital



$




$




$
179,610Cancellation of 2,000,000 shares at par value



$




$




$
2,000Issuance of stock for repayment of advances



$




$




$
116,050Conversion of accrued interest into promissory notes



$




$




$
12,684Issuance of stock for purchase of domain asset



$




$




$
65,000  5  26     PACIFIC FUEL CELL CORP. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2006  Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Organization  Pacific Fuel Cell Corp. (the Company) was incorporated in the State of Nevada on May 5, 1998. During 1999 the Company purchased the domain name Radiotower.com to use as an internet portal that provided free online directories of radio stations. During 2001 the Company abandoned this business plan.  Effective August 3, 2001 the Company acquired a license from Fullerene USA, Inc. (Fullerene), a related party, in exchange for 30,100,000 shares of common stock. Subsequently, it was determined the carrying value of the license exceeded its fair value and accordingly, loss on impairment was recorded. Subsequent to this acquisition the Company changed its name to Pacific Fuel Cell Corp.  In April, 2004, the Company, through PFCE Acquisition Corp, a Nevada corporation and our wholly owned subsidiary (Sub), and Cellfoods Corporation, a Nevada corporation (Cellfoods ), entered into an Agreement and Plan of Merger whereby Sub merged with and into Cellfoods, which survived as our wholly owned subsidiary. This merger was consummated on or about May 17, 2004.  Cellfoods is a development stage company that was organized in January 2003, engaged in the business of developing soybean powder for use in food preparation. Cellfoods had assets and liabilities as of the acquisition date of cash of $16,898.  Consolidation  The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany accounts and balances have been eliminated in consolidation  Use of 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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.  Cash and cash equivalents  For purposes of balance sheet classification and the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.  6  27      Revenue recognition  In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.  To date the Company has not generated significant operating revenues.  Research and development  Research and development costs are charged to operations when incurred. For the years ended December 31, 2006, 2005, and the period May 5, 1998 (inception) to December 31, 2006, the Company incurred research and development costs of $50,229, $122,135 and $300,556, respectively (see Note 4).  Stock-based compensation  The Company accounted for equity-based compensation arrangements in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and complied with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation. All equity-based awards to non-employees were accounted for at their fair value in accordance with SFAS No. 123. Under APB No. 25, compensation expense was based upon the difference, if any, on the date of grant, between the fair value of the Companys stock and the exercise price. Pro forma information regarding the Companys net (loss) and net (loss) per share was required by SFAS No. 123 and had been determined as if the Company had accounted for its employee stock options under the fair value method prescribed by SFAS No. 123.  Effective the beginning of the first quarter of the year ended December 31, 2006, the Company adopted the provisions of SFAS 123R. It had no effect on the Company.  Fair value of financial instruments  Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2006. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for financial instruments because they are short term in nature, their carrying amounts approximate fair values, and they are payable on demand  7  28     Net (loss) per common share  The Company follows SFAS 128, Earnings Per Share. Basic earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. During the periods when they are anti-dilutive, common stock equivalents, if any, are not considered in the computation.  Segment information  The Company follows SFAS 131, Disclosure about Segments of an Enterprise and Related Information. Certain information is disclosed, per SFAS 131, based on the way management organizes financial information for making operating decisions and assessing performance. The Company currently operates in one business segment and will evaluate additional segment disclosure requirements as it expands operations.  Impairment of long-lived assets  The Company periodically reviews the carrying amount of its identifiable intangible assets to determine whether current events or circumstances warrant adjustments to such carrying amounts. If an impairment adjustment is deemed necessary, such loss is measured by the amount that the carrying value of such assets exceeds their fair value. Considerable management judgment is necessary to estimate the fair value of assets; accordingly, actual results could vary significantly from such estimates. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value less costs to sell.  Equipment  Equipment is stated at cost. Depreciation is provided by the Company on the straight line method over the assets estimated useful lives of five years. During the years ended December 31, 2005 and 2006, depreciation amounted to $10,441 and $10,922 respectively.  The Company entered into a settlement arrangement regarding a deposit on equipment in the amount of $101,239. The Company returned the equipment to the vendor for a restocking fee of $31,239, which is recorded in general and administrative expense as of December 31, 2006, and the difference of $70,000 will be remitted to the Company in 2007.  8   29     Income Taxes  The Company follows SFAS 109 Accounting for Income Taxes for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.  Recent Pronouncements  In June 2006, the Financial Accounting Standards Board (FASB) issued FIN 48, Accounting for Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109, which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions. This Interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in an income tax return. FIN 48 presents a two-step process for evaluating a tax position. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, based on the technical merits of the position. The second step is to measure the benefit to be recorded from tax positions that meet the more-likely-than-not recognition threshold, by determining the
largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement, and recognizing that amount in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently in the process of evaluating the effect, if any, the adoption of FIN 48 will have on its consolidated results of operations, financial position, or cash flows.  In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS No. 157 also requires expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS No. 157 is effective for financial statements issued in fiscal years beginning after November 15, 2007 and to interim periods within those fiscal years. The Company is currently in the process of evaluating the effect, if any, the adoption of SFAS No. 157 will have on its consolidated results of
operations, financial position, or cash flows.  9  30     In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 was issued in order to eliminate the diversity in practice surrounding how public companies quantify financial statement misstatements. SAB No. 108 requires that registrants quantify errors using both a balance sheet (iron curtain) approach and an income statement (rollover) approach then evaluate whether either approach results in a misstated amount that, when all relevant quantitative and qualitative factors are considered, is material. SAB No. 108 is effective for fiscal years ending after November 15, 2006. The Company has adopted the bulletin during 2006. The adoption did not have a material effect on its consolidated results of operations, financial
position, or cash flows.  Note 2. GOING CONCERN  The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company reported net losses of $492,134 and $521,064 and for the years ended December 31, 2006 and 2005 respectively, as well as reporting net losses of $ $2,969,402 from inception (May 5, 1998) to December 31, 2006. Additional capital and/or borrowings will be necessary in order for the Company to continue in existence until attaining and sustaining profitable operations.  The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.  Note 3. LICENSE  The Company signed a licensing agreement on August 28, 2001, with Fullerene for an exclusive worldwide license (excluding Japan) to make, use, and sell fuel cells solely for use in transportation applications. The licensing agreement expires upon the expiration of the underlying patent application, which is 17 years upon the approval of the patent by the United States Patent and Trademark Office. As of the date of the audit report the patent application had not been approved. In exchange, the Company issued 30,100,000 shares of common stock to Fullerene. The asset was recorded at the fair market value of the shares of $451,500 and was subsequently written off as an impairment loss.  Note 4. RESEARCH AND DEVELOPMENT AGREEMENT  On August 21, 2002, the Company entered into an agreement with the University of California (the University) to develop a commercially viable fuel cell, exploiting the Companys proprietary technology. The Company advanced the University $70,000 for the first phase, which was completed during February 2003. During March 2003 the Company advanced the University an additional $61,266 to begin work on the second phase of the research and development agreement.  10  31      On October 13, 2006, a new amendment was executed specifying $50,229 that was to be paid upon signing, which has been paid. $50,252 for the period of May 1, 2006 to April 30, 2007 will be due on January 31, 2007; and, $35,395 for the period June 29, 2005 to May 10, 2007 will be due on February 28, 2007. However, pursuant to the terms of this agreement, we are not obligated to tender payment until we receive an applicable invoice for the same. As of the date of this report, we have not received any invoices from UCR for these payments. Once received, we intend to tender all amounts due. To date, the Company has paid UCR a total of $268,996.The Company will renegotiate the remaining amounts and due dates. Also, no invoices have been presented by UCR to the Company. UCR, through its SMART program, provides matching funds for all direct costs applicable to development of the project.
The Company has applied for additional matching funds through this SMART program and has obtained a favorable decision and expects a grant of approximately $120,000 to be provided over the next two years. This also provides a multi-year relationship with UCR. All information the Company provides to UCR has been deemed confidential for a period of one (1) year after expiration or termination of the agreement.  For the years ended December 31, 2006, 2005 and the period from inception to December 31, 2006, the Company has charged $50,229, $122,135, and $330,556 respectively, to operations related to this agreement.  Note 5. STOCKHOLDERS (DEFICIT)  Common stock  During the period May 5, 1998 (inception) to December 31, 1998 the following equity transactions occurred:  
Issued 3,000,000 shares of common stock to various investors for cash of $20,000 in a private placement pursuant to Regulation D, Rule 504. Issuance costs were $1,882. 
Issued 2,250,000 shares of common stock for repayment of advances aggregating $15,000.  During the year ended December 31, 1999 the following equity transactions occurred:  
Issued 9,750,000 shares of common stock in consideration 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.  11  32      
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.  During the year ended December 31, 2001 the following equity transactions occurred:  
Issued 30,100,000 shares of common stock in exchange for a license agreement (Note 3). One of the conditions in the license agreement was that certain shareholders had to surrender 2,000,000 shares of common stock for cancellation. 
Issued 6,000,000 shares of common stock for cash of $6,000 to a related party. Because the stock was issued below its fair market value on the date the agreement was reached the Company recognized compensation expense of $84,000. 
Issued 520,000 shares of common stock at $0.10 a share for cash of $52,000. 
Recorded stock compensation expense of $100,000 related to a licensing agreement (Note 3). 
Issued 1,070,000 shares of common stock in exchange for debt forgiveness of $101,050. 
Shareholders of the Company converted $179,610 of liabilities into contributed capital.  During the year ended December 31, 2002 the following equity transactions occurred:  
Issued 1,000,000 shares of common stock for cash aggregating $46,819. 
Entered into a six-month agreement with a former officer of the Company for investor relation services in exchange for 1,500,000 shares of its common stock. These shares were valued at their fair market value of $45,000 on the date the Company agreed to issue the shares. 
Issued 2,000,000 shares of common stock for cash aggregating $100,000. 
The Company recorded the original discount on loan payable  related party as a capital contribution of $8,300.  During the year ended December 31, 2003, the Company had no equity transactions.  During the year ended December 31, 2004, the following equity transactions occurred.  
Escrowed 30,000,000 shares of common stock for debenture conversion of which 2,957,254 shares were valued at a fair market value of $1,132,486 inclusive of derivative costs for $793,728 of debentures converted. 
Issued 80,000 shares for legal services valued at their fair market value of $36,800. 
Received cash of $16,898 and receivables of $36,298 in Cellfoods acquisition 
Services with a value of $6,000 were contributed to capital.  12  33     During the year ended December 31, 2005, the following equity transactions occurred.  
Stock option was exercised for 100,000 shares of common stock for the option price 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.  
Issued 50,000 shares to Websoft LLC for services at market value, or $21,500.  
Debenture conversion of $160,834.  During the year ended December 31, 2006, the following equity transactions occurred.  
Services with a value of $6,000 were contributed to capital.  
Issued 2,417,858 shares of common stock for cash aggregating $338,500.  
Issued 700,000 shares of common stock for services totaling $197,300 of which ($45,000) is deferred.  Note 6. INCOME TAXES  The Company accounts for income taxes under SFAS 109, Accounting for Income Taxes, which requires use of the liability method. SFAS 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.  Reconciliation of the Federal statutory income tax rate of 34% to the effective rate is as follows:  Federal statutory income tax rate

34.00%Valuation allowance

(34.00)%%  The tax effects of temporary differences and net operating losses that give rise to significant portions of deferred tax assets and liabilities consisted of the following:  13   34      2006Deferred Tax assets (liabilities)Net operating loss carry forward

$


577,927Less valuation allowance




(577,927
)Net deferred tax asset

$


   At December 31, 2006, the Company has Federal net operating loss carry forwards of approximately $1,699,786, which expire through 2025. The change in the valuation allowance for the deferred tax asset during the year ended December 31, 2006, was $157,126.  Note 7. RELATED PARTY TRANSACTIONS  During the period from May 5, 1998 (inception) to December 31, 1998, business associates of the then sole officer and director of the Company (sole officer), advanced the Company $15,000. The funds were used to pay for management fees, a legal retainer and to reduce the other payable to a related party. These advances were repaid through the issuance of 2,250,000 shares.  During the period from May 5, 1998 (inception) to December 31, 2001 shareholders of the Company loaned the Company an aggregate of $225,462. During the year ended December 31, 2000, the Company converted these advances into promissory notes, bearing interest at 9% and due on June 30, 2001. The face value of the promissory notes includes accrued interest of $12,684. During 2001, $101,050 was converted into common stock and $179,610 was contributed to capital.  During the year ended December 31, 2003, the Company had $3,652, of for travel and administrative expenses paid by an officer and director on behalf of the Company. The $3,652 was paid to the officer and director during the year ended December 31, 2004.  During the years ended December 31, 2006 and 2005, the Company paid Fullerene USA $6,000 per quarter for financial management services.  Note 8. COMMITMENTS AND CONTINGENCIES  Effective December 18, 2006, pursuant to an Assignment and Assumption of Equipment Purchase Agreement, the Company was assigned all rights of TDM, LLC relating to an Agreement dated August 22, 2006, as amended December 20, 2006, between SGL Technic Inc., a wholly owned subsidiary of SGL Technologies GmbH, a German company (SGL), and TDM, LLC (TDM) wherein the Company acquired certain equipment on an as is basis. This equipment consists of two press machine sets (200 and 800 ton) plus auxiliary equipment, which is used for manufacturing of bi-polar plates. The purchase price of the equipment is $200,000. To date, the Company has paid $100,000. The balance of $100,000 is due on or before June 30, 2007.  14  35     The Company has an operating lease for its laboratory through September 2007. future minimum lease payments for 2007 are $27,530.  Note 9. SUBSEQUENT EVENTS  On January 24, 2007, the Company sold an aggregate of 2,214,285 restricted shares of Common Stock at approximately $0.14 per share for proceeds of $300,000. On February 28, 2007 the Company was named as a defendant in a lawsuit pending in the Court of Common Pleas for Lake County, Ohio, captioned SKRL Tool & Die, Inc., et al. v. William Berwald, et al., Case No. 07-CV-000567. In their complaint, Plaintiffs allege that two of their former employees  current employees of the Company in Willoughby, Ohio, manufacturing facility  possess confidential and proprietary trade secrets of SKRL pertaining to the manufacturing of bipolar plates for fuel cells. Plaintiffs have asserted against these employees and us claims for, among other things, unfair competition, misappropriation of trade secrets and tortuous interference with business relationships and seek compensatory and punitive damages, as well as injunctive relief that would preclude the two former SKRL employees from continuing to be employed by the
Company . The Company believes these claims are without merit, in that the employees possess no trade secrets of SKRL, and moreover, the Company would have no use for such trade secrets, as its current employees (other than the two defendants) possess far more technological and marketing information in the industry than the SKRL employees would ever have been privy to. The Company is, therefore, vigorously defending the Companys interests, and believe the defense will ultimately be successful. The Company also intends to file a counterclaim against the Plaintiffs in this matter.  On January 24, 2007 the Company entered into a new lease agreement for 23,886 square feet of commercial space located at 4413 Hamann Parkway, Willoughby, Ohio. The lease is for two years starting on March 1, 2007 and ending February 28, 2009. The future minimum payments required under the lease are $59,947, $96,644 and $16,931 for 2007, 2008 and 2009 respectively.          15   36     ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE.  None.  ITEM 8A. CONTROLS AND PROCEDURES  Evaluation of Disclosure Controls and Procedures  Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure.  Within the 90 days prior to the filing date of this report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. This evaluation was done under the supervision and with the participation of our Principal Executive Officer. Based upon that evaluation, he concluded that our disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to satisfy our disclosure obligations under the Exchange Act.  Changes in Internal Controls  There were no changes in our internal controls or in other factors that could significantly affect those controls since the most recent evaluation of such controls.  PART III  ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.  Our directors and officers as of the date of this Report are as follows:  Name
Age
Position  George Suzuki
64
President, Director  Ken K. Inouye
64
Secretary, Treasurer, Director  Dr. Yushan Yan
43
Director    37     Directors are elected for one-year terms or until the next annual meeting of shareholders and until their successors are duly elected and qualified. Our officers are appointed by our Board of Directors and serve at the pleasure of the Board, subject to any rights under employment agreements.  There are no family relationships among the officers and directors. There is no arrangement or understanding between us (or any of our directors or officers) and any other person pursuant to which such person was or is to be selected as a director or officer.  RESUMES  George Suzukiassumed his positions with us upon effectiveness of the Fullerene Agreement in August 2001. In addition to his positions with us, since January 1991, Mr. Suzuki has been CEO of Beltec Industries, Inc., Tustin, CA, a privately held company engaged in the sale of air purification systems. Also, from August 1986 through September 1996, Mr. Suzuki was President of Unibell International Co. Ltd., Tustin, CA, a privately held real estate company engaged in land development and investment. Mr. Suzuki devotes approximately 90% of his business time to our business affairs.  Ken K. Inouyeassumed his positions with us upon effectiveness of the Fullerene Agreement in August 2001. In addition to his positions with us, since 1979 Mr. Inouye has been CEO of Advanced American Technology, Inc., Los Angeles, CA, a privately held technology consulting firm. Mr. Inouye devotes approximately 50% of his business time to our business affairs.  Dr. Yushan Yanwas appointed as a director of our Company in November 2004. In addition to his positions with us, since July 1998, Dr. Yan has been a Professor at the University of California, Riverside. He received a Bachelor of Science degree in Chemical Physics in 1988 from the University of Science and Technology of China. He also received a Masters degree in Chemical Engineering in 1995 from the California Institute of Technology and a Ph.D in Chemical Engineering in 1997, also from the California Institute of Technology. Dr. Yan is considered a leading authority on proton conductive membranes and nanostructured electrodes. Dr. Yan devotes a minimum of 10 hours per month to our business activities.  MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS  Our operations are managed under the supervision of our Board of Directors, which has the ultimate responsibility for the establishment and implementation of our general operating philosophy, objectives, goals and policies.  During fiscal 2006, our Board of Directors did not have any formal meetings, but did take action in four (4) instances by unanimous consent. However, our directors, who are also our officers, work together on a daily basis.   38     During fiscal 2006, the Board of Directors had no committees. Management intends to establish both an Audit Committee and Compensation Committee once we begin to generate significant revenues in the future.  ITEM 9B. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT  Section 16(a) of the Securities Exchange Act of 1934 requires the Companys officers, directors and person who own more than 10% of the Companys Common Stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. All of the aforesaid persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. During our fiscal year ended December 31, 2006, there were no changes in the holdings of any of our officers and directors, or our principal shareholders. Therefore, no reports were required to be filed.  ITEM 10. EXECUTIVE COMPENSATION.  REMUNERATION  The following table reflects all forms of compensation for services to us for the years ended December 31, 2006, 2005 and 2004, of our chief executive officer, as well as those persons who received in excess of $100,000 in annual compensation from us during the aforesaid time. SUMMARY COMPENSATION TABLE  Annual

Long-Term CompensationCompensation

AwardsName and Principal Position

Year

Salary ($)

Bonus ($)

Restricted Stock Awards ($)

Stock Option Awards ($)

Securities underlying options/ SARS (#)

Non-Equity Incentive Plan Compensation

Non-qualified Deferred Compensation Earnings

All Other Compensation ($)

Total Compensation ($)George Suzuki, President, CEO, director


2006


0


$15,000


0


0


0


0


0


0


$15,0002005


0


0


0


0


0


0


0


0


02004


0


0


0


0


0


0


0


0


0  During our fiscal years ended December 31, 2005 and 2006, we paid Fullerene USA $6,000 per calendar quarter for financial management expenses. Messrs. Suzuki and Inouye, two of our officers and each of whom is a director, each own 40.2% of Fullerenes issued and outstanding common stock.  We have adopted a policy whereby we reimburse officers and directors for out of pocket expenses incurred by each of them in the performance of their relevant duties. We reimbursed our President, George Suzuki the aggregate amount of $4,882 for out of pocket expenses incurred during our fiscal year ended December 31, 2006. We did not reimburse any other officer or director for any such expenses during the fiscal year ended December 31, 2006.  We have no stock plan for employees, but may adopt one in the future.   39     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.  The table below lists the beneficial ownership of our voting securities by each person known by us to be the beneficial owner of more than 5% of such securities, as well as by all our directors and officers as of the date of this Report. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.  Name and Address ofBeneficial Owner



Amount and Nature ofBeneficial Ownership



Percentof ClassFullerene USA, Inc.1721 Garvey Ave., #AAlhambra, CA 91803



29,100,000
(1)


41.7
%Stephen G. Godwin11854 Darlington Ave., #304Los Angeles, CA 90049



6,000,000
(1)


8.6
%All Directors and ExecutiveOfficers as a Group (3 persons)



29,100,000
(1)


41.7
%   (1)
Messrs. Suzuki and Inouye, two of our officers and each of whom is a director, each own 40.2% of Fullerenes issued and outstanding common stock. Further, in addition to the 6 million shares owned by Mr. Godwin referenced above, he owns approximately 19.4% interest in Fullerene USA, Inc.  ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.  During the years ended December 31, 2005 and 2006, we paid Fullerene USA, Inc. our majority stockholder, $6,000 per quarter for financial management expenses. Messrs. Suzuki and Inouye, two of our officers and each of whom is a director, each own 40.2% of Fullerenes issued and outstanding common stock.  In addition, we operate our business from offices at 131 N. Tustin Ave., Suite 100, Tustin, CA 92780. We share this space pursuant to a verbal, month-to-month sublease with Belltec Industries, a company owned by George Suzuki, our President and a director. Our monthly rent is $600. This space consists of 700 square feet of executive office space. See PART I, Item 2, Description of Property.  Except as stated above or as stated elsewhere, no member of management, executive officer or security holder had any direct or indirect interest in any other transaction with us.   40     PART IV  ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.  (a)
Exhibits. The following exhibits are attached to this Report:  Exhibit No.

Description10.4

Lease Agreement dated January 24, 200731.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  Following are a list of exhibits which we previously filed in other reports which we filed with the SEC, including the Exhibit No., description of the exhibit and the identity of the Report where the exhibit was filed.  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. _____________________ * 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.   41     ****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.  (b)
Reports on Form 8-K.  We did not file any reports on Form 8-K during the three month period ended December 31, 2006.  Subsequent Events  On or about January 24, 2007, we filed a report on Form 8-K advising that effective December 18, 2006, pursuant to an Assignment and Assumption of Equipment Purchase Agreement, we were assigned all rights of TDM L.L.C. relating to an Agreement datedAugust 22, 2006, as amended December 20, 2006, between SGL Technic Inc., a wholly owned subsidiary of SGL Technologies GmbH, a German company (SGL), and TDM, LLC (TDM),wherein we acquired certain equipment on an as is basis. This equipment consists of two press machine sets (200 and 800 ton) plus auxiliary equipment, which is used for manufacturing of bi-polar plates. We have been developing the MEA business segment of the fuel cell industry and have nanoMEA technology to enhance performance and durability.
A fuel cell stack (essentially an electricity generator) consists of an MEA, GDL (gas diffusion layer) and bipolar plates. As such, management believes that this acquisition of equipment fits in with our proprietary technology. The purchase price of the equipment was $200,000 (US), all of which has been paid except for the balance of $95,000, which shall become due on or before June 30, 2007.  This equipment acquisition allows us to expand our current business plan to begin to manufacture bipolar plates, which will provide us with the capability of marketing our own fuel cell components for the industry.  On or about February 2, 2007 we filed a report on Form 8-K, advising that on January 24, 2007, we issued an aggregate of 2,214,285 restricted shares of our Common Stock (the Shares). We received proceeds of $300,000 from the sale thereof ($0.14 per share). The Shares were sold to a total of 10 investors, all of whom were accredited investors as that term is defined under Rule 501(a) of Regulation D as promulgated under the Securities Act of 1933, as amended.  ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.  Our Board of Directors reviews and approves audit and permissible non-audit services performed by its independent accountants, as well as the fees charged for such services. In our review of non-audit service fees and its appointment of Stark Winter Schenkein & Co., LLP as our independent accountants, our Board of Directors considered whether the provision of such services is compatible with maintaining independence. All of the services provided and fees charged by Stark Winter Schenkein & Co., LLP, in fiscal years ended December 31, 2006, were approved by our Board of Directors.   42     Audit Fees  The aggregate fees billed by Stark Winter Schenkein & Co., LLP for professional services for the audit of our annual financial statements and the reviews of the financial statements included in our quarterly reports on Form 10-QSB for 2006 and 2005 were $23,650 and $22,000, respectively, net of expenses.  Audit-Related Fees  There were no other fees billed by during the last two fiscal years for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements and not reported under Audit Fees above.  Tax Fees  The aggregate fees billed during the last two fiscal years for professional services rendered for tax compliance for fiscal years ended December 31, 2006 and 2005 were $3,250 and $2,900, respectively.  All Other Fees  There were no other fees billed by Stark Winter Schenkein & Co., LLP during the last two fiscal years for products and services provided.  43     SIGNATURES  In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on April 1, 2007.  PACIFIC FUEL CELL CORP.

(Registrant)





By:s/George Suzuki

George Suzuki, President  In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 1, 2007.   s/George Suzuki

George Suzuki, Directors/Ken K. Inouye

Ken InouyeDr. Yushan Yan, Director