U S SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934

[ ] Transitional Report Under Section 13 or 15(d) of the Securities Exchange Act
    of 1934

                   For the fiscal year ended December 31, 2005

                         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                              (I.R.S. Employer
 incorporation or organization)                             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. Yes  X   No
          ---     ---

                          (Continued on Following Page)

                                                                               1
<PAGE>

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. $52,076

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: $10,420,587 as of April 17, 2006.

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date:  As of April 17, 2006,  66,677,538
shares of Common Stock were issued and outstanding.

Documents incorporated by reference:  None


                                                                               2

<PAGE>


                                TABLE OF CONTENTS

                            FORM 10-KSB ANNUAL REPORT

                             PACIFIC FUEL CELL CORP.

                                                                            PAGE
                                                                            ----

Facing Page
Index

PART I
Item 1.  Description of Business...............................................4
Item 2.  Description of Property..............................................10
Item 3.  Legal Proceedings....................................................11
Item 4.  Submission of Matters to a Vote of Security Holders..................11

PART II
Item 5.  Market for the Registrant's Common Equity
              and Related Stockholder Matters.................................11
Item 6.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations.......................................12
Item 7.  Financial Statements.................................................17
Item 8.  Changes in and Disagreements on Accounting and Financial Disclosure..37
Item 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...............37
Item 10. Executive Compensation...............................................39
Item 11. Security Ownership of Certain Beneficial Owners and Management.......40
Item 12. Certain Relationships and Related Transactions.......................40

PART IV
Item 13. Exhibits and Reports on Form 8-K.....................................41
Item 14. Principal Accountant Fees and Services...............................42

SIGNATURES....................................................................44

                                                                               3

<PAGE>

                                     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.

DESCRIPTION OF CURRENT BUSINESS

     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
<PAGE>

     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. As of the date of this
report  we have  paid UCR  $231,500,  with the final  payment  of an  additional
$50,252 due May 1, 2006. 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  have  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  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

                                                                               5
<PAGE>

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 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.

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.  We intend to file a registration statement with the Securities and
Exchange  Commission  (the "SEC") under the  Securities Act of 1933, as amended,
"spinning off" Cellfoods as a separate public entity. There can be no assurances
that our  registration  statement  will be declared  effective by the SEC if and
when filed.

     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

                                                                               6
<PAGE>

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
(see Note 5 to our Financial Statements).  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 are in the process of amending  our  quarterly  reports for the quarters
ended  September  30,  2005,  June 30,  2005 and March 31,  2005 to reflect  the
accounting  for the  convertible  debentures  in  connection  with our financing
transactions.

     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.

                                                                               7

<PAGE>

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 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 call from our in-house staff.

     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 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.

                                                                               8
<PAGE>

     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 has 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)
     ---------------------------        ----------------------------------------

     Anuvu Incorporated                 "Carbon-X" PEMs
     Avista Labs                        Residential and small commercial
     Ballard Power Systems              Pressurized PEM's for vehicles, up to
                                             85kw, portable and stationary
     Casio                              PEM fuel cell for PDA
     DCH Technology, Inc.               12W-5kw fuel cell
     Energy Partners, L.C.              Stationary applications
     Hydrogenics                        Back-up power for cellular towers
     H Power                            PEM fuel cell for small portable system
     Hitachi                            PEM fuel cell for notebook computer
     Hoku Scientific                    MEA and membranes
     Lynntech                           Direct methanol fuel cell
     Manhattan Science                  Portable fuel cells
     Millennium Cell Inc.               Micro fuel cells
     MTI Micro Fuel Cells               Micro fuel cells
     NU Element, Inc.                   1 kw - 200kw fuel cell
     Nuvera Fuel Cells                  0.7kw - 60 kw fuel cell
     Plug Power                         Residential
     Proton Energy Systems, Inc.        Electrolyzers and regenerative fuel cell
                                             systems
     Schatz Energy Research             Automotive, portable
     Superior MicroPowders              Micro MEA

     This group of companies  specializes in Proton Exchange Membrane (PEM) Fuel
Cells and are therefore direct technology competitors.

     We have not included  automobile  companies  such as Mitsubishi and General
Motors 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.  However,  UTC Fuel Cells does have a major
push on  residential  fuel cell use and  therefore  must be  considered a future
competitor.  Any major company listed here should be considered a potential,  if
not actual, competitor because of its size.

                                                                               9
<PAGE>

     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) 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, 2005, 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 3 employees,  our current  officers
and directors. 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.  During our
fiscal year ended December 31, 2005, we also retained 2 independent  contractors
with expertise in the areas of fuel cells and web design.

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

                                                                              10
<PAGE>

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 $3,058.90.

     We have no other properties.

ITEM 3.  LEGAL PROCEEDINGS

     We are not a party to any pending legal proceedings.

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, 2005, 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 Price
                                               -----------------
         Quarter Ended                          High       Low
         -------------                         -----      -----

         March 31, 2004                        $0.94      $0.33
         June 30, 2004                         $0.63      $0.28
         September 30, 2004                    $0.40      $0.25
         December 31, 2004                     $0.46      $0.28

         March 31, 2005                        $0.31      $0.18
         June 30, 2005                         $0.23      $0.11
         September 30, 2005                    $0.47      $0.09
         December 31, 2005                     $0.67      $0.31

     As of April 14, 2006, the closing bid price of our Common Stock was $0.33

     (b) Holders. We have approximately 35 holders of record of our Common Stock
as of December 31, 2005, not including those shares held in "street name."

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<PAGE>

     (c) Dividends.  We did not pay any dividends on our Common Stock during the
two years ended December 31, 2005.  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 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,  2006.  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 $13,740 during our fiscal years
ended  December  31, 2005 and 2004,  respectively.  All of these  revenues  were
generated  through the operations of Cellfoods.  In addition,  we received grant
money of $99,901 from the UCR SMART program discussed above during 2004.

     During our fiscal year ended  December  31,  2005,  we  incurred  costs and
expenses totaling$572,572, compared to costs and expenses of $660,353 during our
fiscal year ended December 31, 2004, a decrease of $87,781.  In this regard, our
general and administrative costs increased during our fiscal year ended December
31,  2005 from  $102,999 in 2004,  to $317,944  during  2005,  due to  increased
marketing costs related to our new prototype, the rental cost of our lab that we
did not have to pay during 2004 and depreciation,  among other things.  Research
and  development  costs increased from $57,137 in 2004, to $112,135 in 2005, due
primarily to the  advancements  that we made during 2005.  Also during 2005,  we
incurred  a net  charge  of  $442,941  due to a change  in  value of  derivative
instruments  relating to those  Debentures  discussed  above in "Part I, Item I,
Description of Business."

     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 are

                                                                              12
<PAGE>

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
(see Note 5 to our Financial Statements included in this report). 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.

     At December 31,  2005,  the  remaining  outstanding  Debentures  were fully
redeemed.

     We are in the process of amending  our  quarterly  reports for the quarters
ended  September  30,  2005,  June 30,  2005 and March 31,  2005 to reflect  the
accounting  for the  convertible  debentures  in  connection  with our financing
transactions.

     As a result, we incurred a net loss of ($521,064)  (approximately $0.01 per
share),  compared  to a net loss of  ($546,712)  during  our  fiscal  year ended
December 31, 2004 (approximately $0.01 per share).  Because we generated nominal
revenues  during the year ended December 31, 2005 and 2004, 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.  We advanced UCR $70,000 for the first phase, which was
completed  during  February  2003.  During

                                                                              13
<PAGE>

March 2003, we paid UCR an additional  $61,266 to begin work on the second phase
of the research and development agreement.

     In February  2003,  we entered into an amendment  that extended the term of
this  agreement  through  February 29, 2004. On May 4, 2004,  this agreement was
extended  again,  through  April  30,  2006,  so  long as we  continued  to make
payments.  Pursuant to the terms of this agreement, as amended, we has agreed to
reimburse UCR for all costs and expenses incurred,  both direct and indirect, in
an amount not to exceed $181,271, pursuant to a budget agreed to by the parties.
As a result of the  amendment  extending  this  agreement  which was executed in
April 2004,  we are  required to make  additional  payments  totaling  $150,486,
including  $50,005,  which  was paid in May  2004,  $50,229,  which  was paid in
September  2005,  with  the  balance  of  $50,252  due  May 1,  2006.  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 have 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.  We expect to produce low cost fuel
cells at high volume production levels.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2005, we had $166,130 in cash.

     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,

                                                                              14
<PAGE>

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 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 were
canceled.  We issued an aggregate  of 3,007,538  shares of our Common Stock from
the conversion of these Debentures.

     During our fiscal year ended  December  31, 2004,  we also had  outstanding
loans in the  principal  amount of $60,000 and $10,000  due to  Fullerene,  USA,
Inc.,  our majority  stockholder.  In regard to the $60,000  loan, we originally
received  an  unsecured,  non-interest  bearing  loan for  $60,000  that was due
September  14,  2002.  On December  5, 2002,  this note was  cancelled  with the
consent of Fullerene and replaced  with a note  extending the due date to August
14, 2004.  As of the date of this report,  both of these notes have been paid in
full.

     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 initial  grant in the amount of $100,000 was awarded,  of
which $99,901 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.

                                                                              15
<PAGE>

     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.

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:

     o    The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions  that affect the reported
          amounts of assets and liabilities and disclosure of contingent  assets
          and  liabilities  at the  date  of the  financial  statements  and the
          reported amounts of revenue and expenses during the reporting  period.
          Actual results could differ from those estimates.

     o    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, 2005 and 2004 and for the years ended December 31, 2005 and 2004. During the
year  ended  December  31,  2005,  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.

                                                                              16
<PAGE>

     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.

     We are also  preparing to  participate  in a significant  effort to receive
additional government funding.  However, there can be no assurance that any such
funding will materialize.

     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 2005.

ITEM 7.  FINANCIAL STATEMENTS

                                                                              17
<PAGE>




                             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                                      6-18






















                                                                              18

<PAGE>












             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, 2005,  and the related
statements of operations,  changes in stockholders'  equity (deficit),  and cash
flows for the years ended December 31, 2005 and 2004, and the period from May 5,
1998  (inception)  to December  31, 2005.  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.  As  discussed  in Note 10 to the
financial   statements,   the  Company  has  suffered  significant  losses  from
operations.  This factor raises substantial doubt about the Company's ability to
continue  as a going  concern.  Management's  plans in regard to this matter are
also  discussed  in  Note  9.  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,  2005,  and the results of its
operations,  and its cash flows for the years ended  December 31, 2005 and 2004,
and the period from May 5, 1998  (inception) to December 31, 2005, in conformity
with accounting principles generally accepted in the United States of America.


s/Stark Winter Schenkein & Co., LLP

Stark Winter Schenkein & Co., LLP


Denver, Colorado
April 15, 2006

                                       1

                                                                              19

<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2005

                                     ASSETS

CURRENT ASSETS
  Cash                                                              $   166,130
  Prepaid expense                                                         5,545
                                                                    -----------
                      Total current assets                              171,675
                                                                    -----------
Property and Equipment, net                                              44,267
                                                                    -----------
Other Assets
  Rent security deposit                                                   3,059
  Deposit on equipment                                                  101,239
                                                                    -----------

                                                                    $   320,240
                                                                    ===========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                                  $    30,295
                                                                    -----------
                      Total current liabilities                          30,295
                                                                    -----------

STOCKHOLDERS' EQUITY
  Preferred stock, $0.01 par value,
     1,000,000 shares authorized, none outstanding                           --
  Common stock, $0.001 par value, 200,000,000
    shares authorized, 66,677,538 shares issued                          66,677
  Additional paid in capital                                          2,700,536
  (Deficit) accumulated during the development stage                 (2,477,268)
                                                                    -----------
                                                                        289,945
                                                                    -----------

                                                                    $   320,240
                                                                    ===========

    The accompanying notes are an integral part of the financial statements.

                                       2

                                                                              20

<PAGE>

<TABLE>
                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
                                                                                         FOR THE PERIOD
                                                            YEAR ENDED      YEAR ENDED     MAY 5, 1998
                                                           DECEMBER 31,    DECEMBER 31,   (INCEPTION) TO
                                                               2005            2004      DECEMBER 31, 2005
                                                           ------------    ------------    ------------
                                                                            (RESTATED)
<S>                                                        <C>             <C>             <C>
REVENUE
  Sales                                                    $     52,076    $     13,740    $     71,988
  Grants                                                             --          99,901          99,901
                                                           ------------    ------------    ------------
                                                                 52,076         113,641         171,889
                                                           ------------    ------------    ------------
COSTS AND EXPENSES
  Cost of goods sold                                             62,021          20,266          82,287
  General and administrative                                    317,944         102,999         974,750
  Research and development                                      122,135          57,137         250,327
  Stock compensation                                             36,000          36,800         312,800
  Amortization                                                      209             210          12,064
  Change in value of derivative instruments, net                 17,557         442,941         460,498
  Loss on extinguishment of debentures                           16,706              --          16,706
  Loss on asset impairment                                           --              --         510,667
  Loss on disposal of property and equipment                         --              --           3,391
                                                           ------------    ------------    ------------
                                                                572,572         660,353       2,623,490
                                                           ------------    ------------    ------------

OPERATING (LOSS)                                               (520,496)       (546,712)     (2,451,601)
                                                           ------------    ------------    ------------
OTHER INCOME (EXPENSE)
  Interest income                                                 4,050           2,460           6,510
  Interest expense                                               (4,618)        (43,115)        (66,334)
  Foreign currency transaction gain (loss)                           --              --            (168)
  Other                                                              --              --          (1,175)
                                                           ------------    ------------    ------------
                                                                   (568)        (40,655)        (61,167)
                                                           ------------    ------------    ------------
NET (LOSS) BEFORE EXTRAORDINARY ITEM                           (521,064)       (587,367)     (2,512,768)

EXTRAORDINARY ITEM, Gain on forgiveness
   of debt, net of income taxes of $12,070                           --              --          23,430
                                                           ------------    ------------    ------------
NET (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)                 (521,064)       (587,367)     (2,489,338)

INCOME TAX EXPENSE (BENEFIT)                                         --              --         (12,070)
                                                           ------------    ------------    ------------

NET (LOSS)                                                 $   (521,064)   $   (587,367)   $ (2,477,268)
                                                           ============    ============    ============
PER SHARE INFORMATION:

WEIGHTED AVERAGE SHARES OUTSTANDING -
        BASIC AND DILUTED                                    66,593,264      64,798,220      43,280,369
                                                           ============    ============    ============
NET (LOSS) PER COMMON SHARE (BASIC & DILUTED)
         (Loss) from operations                            $      (0.01)   $      (0.01)   $      (0.06)
         Extraordinary item                                $         --    $         --    $         --
                                                           ------------    ------------    ------------
                                                           $      (0.01)   $      (0.01)   $      (0.06)
                                                           ============    ============    ============

</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       3

                                                                              21

<PAGE>

<TABLE>
                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                MAY 5, 1998 (INCEPTION) THROUGH DECEMBER 31, 2005

<CAPTION>
                                                                                                         (Deficit)
                                                       Common Stock                        Common       Accumulated
                                                  ---------------------    Additional       Stock       During the
                                                     Shares     Amount  Paid in Capital Subscriptions Development Stage   Total
                                                  ----------  ---------   -----------    -----------     -----------    ----------
<S>                                                <C>        <C>         <C>            <C>             <C>           <C>
Issuance of stock for cash at $0.006 per share
  (net of issuance costs)                          3,000,000  $   3,000   $    15,118    $        --     $        --   $    18,118

Issuance of stock for repayment of advances
  at $0.007 per share                              2,250,000      2,250        12,750             --              --        15,000

Net (loss) for the period                                 --         --            --             --         (31,065)      (31,065)
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Balance at December 31, 1998                       5,250,000      5,250        27,868             --         (31,065)        2,053
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Issuance of stock for purchase of domain
  name at $0.007 per share                         9,750,000      9,750        55,250             --              --        65,000

Issuance of stock for
  cash at $0.007 per share                         3,750,000      3,750        21,250             --              --        25,000

Issuance of stock subscriptions for
  cash at $0.007 per share                                --         --            --         19,000              --        19,000

Issuance of stock subscriptions as
  payment of wages at $0.007 per share                    --         --            --         11,000              --        11,000

Net (loss) for the year                                   --         --            --             --        (156,309)     (156,309)
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Balance at December 31, 1999                      18,750,000     18,750       104,368         30,000        (187,374)      (34,256)
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Issuance of stock pursuant to stock
   subscriptions                                   4,500,000      4,500        25,500        (30,000)             --            --

Net (loss) for the year                                   --         --            --             --        (278,728)     (278,728)
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Balance at December 31, 2000                      23,250,000     23,250       129,868             --        (466,102)     (312,984)
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Issuance of stock for license
   agreement at $0.015 per share                  30,100,000     30,100       421,400             --              --       451,500

Cancellation of common stock as
  condition of license agreement                  (2,000,000)    (2,000)           --             --              --        (2,000)

Issuance of stock for cash at $0.001 per share     6,000,000      6,000            --             --              --         6,000

Stock compensation related to issuance
  of stock below fair market value                        --         --        84,000             --              --        84,000

Stock compensation related to issuance
  of stock warrant to acquire license                     --         --       100,000             --              --       100,000

Issuance of stock for cash at  $0.10 per share       520,000        520        51,480             --              --        52,000

Issuance of stock for debt forgiveness
  from shareholders at $0.094 per share            1,070,000      1,070        99,980             --              --       101,050

Liabilities converted into contributed
  capital                                                 --         --       179,610             --              --       179,610

Net (loss) for the year                                   --         --            --             --        (219,441)     (219,441)
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Balance at December 31, 2001                      58,940,000     58,940     1,066,338             --        (685,543)      439,735
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Issuance of stock for cash at $0.047 per share     1,000,000      1,000        45,819             --              --        46,819

Issuance of stock for services at $0.03 per share  1,500,000      1,500        43,500             --              --        45,000

Issuance of stock for cash at $0.05 per share      2,000,000      2,000        98,000             --              --       100,000

Discount on loan payable - related party
  recorded as contributed capital                         --         --         8,300             --              --         8,300

Net (loss) for the year                                   --         --            --             --        (579,912)     (579,912)
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Balance at December 31, 2002                      63,440,000     63,440     1,261,957             --      (1,265,455)       59,942

Net (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             --              --       111,786
Debenture conversion @ between $0.30
   and $0.48 per share                             2,657,246      2,657     1,018,043             --              --     1,020,700
Contributed services to capital                           --         --         6,000             --              --         6,000
Purchase of Cellfoods                                     --         --        53,196             --              --        53,196
Shares issued for services @ $0.46 per share          80,000         80        36,720             --              --        36,800
Net (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)      597,675
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Contributed services to capital                           --         --         6,000             --              --         6,000
Conversion of stock agreement @ $0.25 per share      100,000        100        24,900             --              --        25,000
Debenture conversion @ $0.215 per share               50,284         50       160,784             --              --       160,834
Shares issued for services @ $0.43 per share          50,000         50        21,450             --              --        21,500
Net (loss) for the year                                   --         --            --             --        (521,064)     (521,064)
                                                  ----------  ---------   -----------    -----------     -----------    ----------
Balance at December 31, 2005                      66,677,538  $  66,677   $ 2,700,536    $        --     $(2,477,268)  $   289,945
                                                  ==========  =========   ===========    ===========     ===========   ===========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       4
                                                                              22

<PAGE>

<TABLE>
                            PACIFIC FUEL CELL CORP.
                         (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS


                                                                                             FOR THE PERIOD
                                                                  YEAR ENDED     YEAR ENDED    MAY 5, 1998
                                                                 DECEMBER 31,   DECEMBER 31,  (INCEPTION) TO
                                                                    2005           2004      DECEMBER 31, 2005
                                                                 -----------    -----------     -----------
                                                                                 (RESTATED)
<S>                                                              <C>            <C>             <C>
OPERATING ACTIVITIES
    Net (loss)                                                   $  (521,064)   $  (587,367)    $(2,477,268)
    Adjustments to reconcile net (loss) to net cash
      (used) in operating activities:
         Stock compensation                                           36,000         36,800         312,800
         Amortization of discount on loan payable                         --             --           5,239
         Contributed services to capital                               6,000          6,000          12,000
         Reserve for uncollectible accounts receivable                    --         36,298          36,298
         Extraordinary item                                               --             --          35,500
         Loss on disposal of property and equipment                       --             --           3,391
         Non cash derivative debenture costs                         182,477        464,988         657,465
         Amortization and depreciation                                10,441             --          22,902
         Interest expense converted to loan payable                       --             --          12,684
         Loss on impairment of assets                                     --             --         510,167
    Changes in:
         Prepaid research and development                             18,752         (8,541)             --
         Inventory held by vendor                                      9,621         (9,621)             --
         Discount on loan                                                 --          3,061           3,061
         Prepaid expense                                               3,860         (8,905)         (5,045)
         Rent security deposit                                            --         (3,059)         (3,059)
         Accounts payable - related party                                 --         (3,652)             --
         Accounts payable                                             (7,900)        32,547          61,264
                                                                 -----------    -----------     -----------
Net cash (used in) operating activities                             (261,813)       (41,451)       (812,601)
                                                                 -----------    -----------     -----------
INVESTING ACTIVITIES
  Purchase of fixed assets                                           (54,708)            --         (59,599)
  Cash received in purchase of Cellfoods                                  --         16,898          16,898
  Deposit on Equipment                                                44,761       (146,000)       (101,239)
  Investment in mineral claims                                            --             --          (5,000)
                                                                 -----------    -----------     -----------
Net cash (used in) investing activities                               (9,947)      (129,102)       (148,940)
                                                                 -----------    -----------     -----------
FINANCING ACTIVITIES
  Proceeds from loans payable - shareholders                              --             --         285,462
  Payments on loans payable - shareholders                                --             --         (11,083)
  Deferred debenture costs                                                --       (136,000)       (136,000)
  (Payments) proceeds of convertible redeemable debentures          (223,145)     1,000,000         776,855
  Payments on loan payable - related parties                              --        (60,000)        (60,000)
  Proceeds from stock sales, net of issuance costs                    15,500             --         272,437
                                                                 -----------    -----------     -----------
Net cash provided by (used in) financing activities                 (207,645)       804,000       1,127,671
                                                                 -----------    -----------     -----------

              Net increase (decrease) in cash                       (479,405)       633,447         166,130

CASH AT BEGINNING OF YEAR                                            645,535         12,088              --
                                                                 -----------    -----------     -----------
CASH AT END OF YEAR                                              $   166,130    $   645,535     $   166,130
                                                                 ===========    ===========     ===========

SUPPLEMENTAL CASH FLOW INFORMATION
  Cash paid for interest                                         $        --    $        --     $        --
                                                                 ===========    ===========     ===========
  Cash paid for income taxes                                     $        --    $        --     $        --
                                                                 ===========    ===========     ===========

SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH FINANCING AND INVESTING ACTIVITIES

  Discount on loan payable - related party                       $        --    $        --     $     8,300
                                                                 ===========    ===========     ===========
  Issuance of stock for purchase of license agreement            $        --    $        --     $   451,500
                                                                 ===========    ===========     ===========
  Accrued interest                                               $      (129)   $    (1,550)    $    (1,679)
                                                                 ===========    ===========     ===========
  Convertible redeemable debentures                              $   (15,000)   $  (793,728)    $  (808,728)
                                                                 ===========    ===========     ===========
  Conversion of accrued interest into contributed capital        $        --    $        --     $   179,610
                                                                 ===========    ===========     ===========
   Cancellation of 2,000,000 shares at par value                 $        --    $        --     $     2,000
                                                                 ===========    ===========     ===========
  Issuance of stock for repayment of advances                    $        --    $        --     $   116,050
                                                                 ===========    ===========     ===========
  Conversion of accrued interest into promissory notes           $        --    $        --     $    12,684
                                                                 ===========    ===========     ===========
  Issuance of stock for purchase of domain asset                 $        --    $        --     $    65,000
                                                                 ===========    ===========     ===========

</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       5
                                                                              23

<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


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") in exchange for 30,100,000  shares of common stock.  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.

Revenue recognition

                                       6

                                                                              24
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

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, 2005,  2004 and the period May 5, 1998  (inception) to
December 31,  2005,  the Company  incurred  research  and  development  costs of
$122,135, $57,137, and $250,327, respectively (see Note 3).

Stock-based compensation

The Company  accounts for equity  instruments  issued to employees  for services
based on the fair value of the equity instruments issued and accounts for equity
instruments  issued  to other  than  employees  based  on the fair  value of the
consideration received or the fair value of the equity instruments, whichever is
more reliably measurable.

The Company  accounts for stock based  compensation in accordance with Statement
of Financial  Accounting  Standards  ("SFAS") 123,  "Accounting  for Stock-Based
Compensation."  The provisions of SFAS 123 allow companies to either expense the
estimated  fair value of stock  options or to continue  to follow the  intrinsic
value method set forth in Accounting  Principles  Board Opinion 25,  "Accounting
for Stock Issued to Employees"  ("APB 25") but disclose the pro forma effects on
net income (loss) had the fair value of the options been  expensed.  The Company
has  elected to  continue  to apply APB 25 in  accounting  for its stock  option
incentive plans.

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, 2005. 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

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

                                       7

                                                                              25
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

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.

Derivative financial instruments

The Company does not use derivative instruments to hedge exposures to cash flow,
market, or foreign currency risks.

The Company reviews the terms of convertible debt and equity  instruments issued
to determine whether there are embedded  derivative  instruments,  including the
embedded conversion option, that are required to be bifurcated and accounted for
separately as a derivative  financial  instrument.  In  circumstances  where the
convertible  instrument contains more than one embedded  derivative  instrument,
including  the  conversion  option,  that  is  required  to be  bifurcated,  the
bifurcated  derivative  instruments  are  accounted  for as a  single,  compound
derivative instrument. Also, in connection with the sale of convertible debt and
equity instruments,  The Company may issue freestanding options or warrants that
may,  depending  on their  terms,  be  accounted  for as  derivative  instrument
liabilities,  rather  than as equity.  The  Company  may also  issue  options or
warrants to  non-employees  in connection with consulting or other services they
provide.

In certain  circumstances,  the  ability to  physical  or  net-share  settle the
conversion option may not be deemed to be within the control of the company.  In
such circumstances,  the embedded  conversion option or freestanding  options or
warrants are required to be accounted for as a derivative  financial  instrument
liability.

Derivative financial instruments are initially measured at their fair value. For
derivative  financial  instruments  that are accounted for as  liabilities,  the
derivative  instrument  is  initially  recorded  at its fair  value  and is then
re-valued at each  reporting  date,  with changes in the fair value  reported as
charges or credits to income. For option-based derivative financial instruments,
we  use  the  Black-Scholes   option  pricing  model  to  value  the  derivative
instruments.

The discount  from the face value of the  convertible  debt  resulting  from the
allocation of part or all of the proceeds to derivative  financial  instruments,
together with the stated interest on the debt instrument,  is amortized over the
life of the instrument  through  periodic  charges to income,  usually using the
effective interest method.

The classification of derivative instruments, including whether such instruments
should be recorded as  liabilities or as equity,  is  re-assessed  periodically,
including at the end of each reporting period. If re-classification is required,
the fair value of the derivative  instrument,  as of the determination  date, is
re-classified. Any previous charges or

                                       8

                                                                              26
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

credits to income for changes in the fair value of the derivative instrument are
not reversed.  Derivative  instrument  liabilities are classified in the balance
sheet as current or non-current  based on whether or not net-cash  settlement of
the  derivative  instrument  could be  required  within 12 months of the balance
sheet date.

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.

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 March 2006,  Financial  Accounting Standards Board (FASB) issued Statement of
Financial  Accounting  Standards  (SFAS) No. 156,  "Accounting  for Servicing of
Financial  Assets--an  amendment of FASB Statement No. 140," with respect to the
accounting for separately recognized servicing assets and servicing liabilities.
This Statement:

                                       9

                                                                              27
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


     1.   Requires  an  entity  to  recognize  a  servicing  asset or  servicing
          liability each time it undertakes an obligation to service a financial
          asset by entering into a servicing contract in certain situations.

     2.   Requires all  separately  recognized  servicing  assets and  servicing
          liabilities to be initially measured at fair value, if practicable.

     3.   Permits an entity to choose either the amortization method or the fair
          value  measurement  method  for each  class of  separately  recognized
          servicing assets and servicing liabilities.

     4.   At its  initial  adoption,  permits  a  one-time  reclassification  of
          available-for-sale  securities to trading  securities by entities with
          recognized  servicing  rights,   without  calling  into  question  the
          treatment of other  available-for-sale  securities under SFAS No. 115,
          provided that the available-for-sale securities are identified in some
          manner as offsetting the entity's exposure to changes in fair value of
          servicing  assets or servicing  liabilities  that a servicer elects to
          subsequently measure at fair value.

     5.   Requires  separate  presentation  of  servicing  assets and  servicing
          liabilities  subsequently  measured at fair value in the  statement of
          financial  position  and  additional  disclosures  for all  separately
          recognized servicing assets and servicing liabilities.

Adoption of this  Statement is required as of the  beginning of the first fiscal
year that begins after January 15, 2006.  The adoption of this  statement is not
expected to have a material impact on the Company's financial statements.

In February 2006, the FASB issues SFAS No. 155,  "Accounting  for Certain Hybrid
Financial  Instruments--an  amendment of FASB  Statements No. 133 and 140." This
amends  SFAS  No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities,"  and No. 140,  "Accounting for Transfers and Servicing of Financial
Assets and  Extinguishments  of  Liabilities."  This Statement  resolves  issues
addressed in SFAS No. 133 Implementation Issue No. D1, "Application of Statement
133 to Beneficial Interests in Securitized Financial Assets."

This Statement:

     a.   Permits fair value  remeasurement for any hybrid financial  instrument
          that  contains an embedded  derivative  that  otherwise  would require
          bifurcation

     b.   Clarifies which interest-only strips and principal-only strips are not
          subject to the requirements of SFAS No. 133

     c.   Establishes  a  requirement  to  evaluate   interests  in  securitized
          financial   assets  to  identify   interests  that  are   freestanding
          derivatives or that are hybrid  financial  instruments that contain an
          embedded derivative requiring bifurcation

     d.   Clarifies  that   concentrations   of  credit  risk  in  the  form  of
          subordination are not embedded derivatives

                                       10

                                                                              28
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


     e.   Amends  SFAS No. 140 to  eliminate  the  prohibition  on a  qualifying
          special-purpose  entity from holding a derivative financial instrument
          that pertains to a beneficial  interest other than another  derivative
          financial instrument.

This  Statement is effective  for all financial  instruments  acquired or issued
after the first fiscal year that begins after January 15, 2006.

The fair value  election  provided for in paragraph  4(c) of this  Statement may
also be applied upon adoption of this Statement for hybrid financial instruments
that  had been  bifurcated  under  paragraph  12 of SFAS  No.  133  prior to the
adoption of this Statement. Earlier adoption is permitted as of the beginning of
our fiscal year, provided we have not yet issued financial statements, including
financial statements for any interim period, for that fiscal year. Provisions of
this  Statement  may be  applied  to  instruments  that we  hold at the  date of
adoption on an instrument-by-instrument basis.

The Company is currently reviewing the effects of adoption of this statement but
it is not expected to have a material impact on its financial statements.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3." This
Statement  replaces APB Opinion No. 20,  "Accounting  Changes,"  and SFAS No. 3,
"Reporting Accounting Changes in Interim Financial  Statements," and changes the
requirements  for the  accounting  for, and reporting of, a change in accounting
principle.  This  Statement  applies  to all  voluntary  changes  in  accounting
principle. It also applies to changes required by an accounting pronouncement in
the unusual instance that the pronouncement does not include specific transition
provisions. When a pronouncement includes specific transition provisions,  those
provisions should be followed.

SFAS No. 154 is effective for accounting  changes and corrections of errors made
in fiscal  years  beginning  after  January  15,  2005.  It will only affect the
financial  statements  of the  Company  if  there  is a  change  any  accounting
principle. At this time, no such changes are contemplated or anticipated.

In December 2004, the FASB issued SFAS No. 123(R),  "Share-Based Payments." SFAS
No. 123 (R) requires all entities to recognize compensation expense in an amount
equal to the fair value of share-based payments such as stock options granted to
employees.  SFAS  No.  123 (R) is  effective  for  the  first  reporting  period
beginning  after  January 15,  2005.  The adoption of FAS 123 (R) did not have a
material impact on the financial statements.

Restatement

The Company is in the process of amending the quarterly reports for the quarters
ended  September  30,  2005,  June 30,  2005 and March 31,  2005 to reflect  the
accounting  for

                                       11

                                                                              29
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005


the  convertible   debentures  in  connection   with  the  Company's   financing
transactions (see notes 4 and 5).


Note 2.  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 (See Note 6).

On  September  13,  2001,  the Company  signed an  exclusive  worldwide  license
(excluding Japan) to acquire all intellectual  property,  present and future, of
Winz Co.,  Ltd.  in  exchange  for a stock  purchase  warrant  (See Note 6). The
acquisition of these rights was recorded as stock compensation  expense based on
the fair value of the  warrant of  $100,000,  since the rights  acquired  had no
readily determinable fair market value.

Note 3.  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.

In February 2003 the Company  entered into an amendment  which extended the term
of this agreement  through February 29, 2004. On May 4, 2004, this agreement was
extended again, through April 30, 2006, so long as the Company continues to make
payments.  Pursuant to the terms of this agreement,  as amended, the Company has
agreed to  reimburse  UCR for all costs and expenses  incurred,  both direct and
indirect, in an amount not to exceed $181,271, pursuant to a budget agreed to by
the parties.  As a result of the amendment  extending this  agreement  which was
executed in April 2004,  the  Company is  required to make  additional  payments
totaling  $150,486,  including  $50,005,  which was paid in May 2004, $, $50,229
which was paid in September  2005,  with the balance of $50,252 due May 1, 2006.
It is not  anticipated  that the Company will be required to make any additional
payments  for any future  extensions.  In order to allow the Company to make the
aforesaid  payments,  the  Company  borrowed  funds from

                                       12
                                                                              30
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

Fullerene,  which were  subsequently have repaid in full. 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, 2005,  2004 and the period from  inception to
December  31,  2005,  the  Company has charged  $122,135,  $57,137 and  $250,327
respectively,  to  operations  related  to this  agreement.  Prepaid  expense at
December 31, 2005 includes  $5,545,  respectively,  for research and development
services to be provided.

Note 4.  Convertible Debentures

In May 2004, Cellfoods completed a private placement with an accredited investor
(as defined under Rule 501,  Regulation D, promulgated  under the Securities Act
of 1933, as amended) to issue up to $1,000,000 in the aggregate principal amount
of  convertible  debentures,  pursuant  to Rule 504 of  Regulation  D under  the
Securities  Act of 1933,  as amended.  Pursuant to the terms of the merger,  the
Company has assumed the  obligations  and benefits of  Cellfoods,  including the
obligation under the Debenture agreement.

The debentures were initially issued as two separate debentures in the amount of
$997,000 and $3,000,  respectively.  The $3,000  debenture  was converted by the
holder  immediately  after issuance at its stated  conversion price of $0.01 per
share. A portion of the proceeds received, equal to the fair value of the shares
issued on conversion of $111,786,  was allocated to this  debenture and credited
to additional paid-in capital.

The $997,000 debenture bears interest at 1% per annum and matures in five years.
The holder may elect to take  interest  payments  in cash or common  stock.  The
debenture is convertible to common stock at any time at the option of the holder
at a conversion price equal to the lesser of:

     a)   $0.603 (the lesser of $0.75 and 125% of the average of the closing bid
          prices  during  the  five  trading  days  immediately   preceding  the
          closing), or

     (b)  100% of the average of the five lowest  closing bid prices  during the
          40 trading days preceding the conversion date.

If the company  issues or sells common stock or issues  options or warrants at a
price per share less than the market price of our common stock at the time,  the
conversion

                                       13

                                                                              31
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

price is  reduced,  based on a  formula.  The  number  of shares to be issued on
conversion of both  debentures is capped at 2,000,000.  However,  if that cap is
reached,  the  company  can  either  (a)  increase  the  cap or (b)  redeem  the
unconverted amount of the debentures at 115% plus accrued interest.  The Company
may also  redeem the  debentures  on 30 days  notice at 125% of the  outstanding
principal, plus accrued interest.

Because the conversion  price is not fixed,  and imposing the limit of 2,000,000
shares  would  require the  Company to redeem any  outstanding  debentures  at a
premium, the Company is 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
(see Note 5). 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,  is credited
to additional paid-in capital.

The  Company  received  net  proceeds  of  $863,100  after  payment of  deferred
debenture costs of $136,900. These deferred costs were initially being amortized
over the five year term of the debentures.  On conversion, a pro rata portion of
the  unamortized  costs is deducted from the deemed  proceeds of conversion that
are credited to additional paid-in capital.

At  December  31,  2005,  the  convertible  debentures  were fully  redeemed  or
converted to common stock.


Note 5. Derivative Financial Instrument Liabilities

As described in Note 4, the embedded  conversion option related to the Company's
convertible debentures has been bifurcated and accounted for separately.

The Company uses the  Black-Scholes  option  pricing model to value the embedded
conversion option components of any bifurcated embedded  derivative  instruments
that are  recorded  as  derivative  liabilities.  See Note 4 related to embedded
derivative instruments that have been bifurcated from convertible debentures.

In valuing the embedded  conversion option component of the bifurcated  embedded

                                       14

                                                                              32
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

derivative  instruments,  at the time they were issued and at December 31, 2005,
the Company used the market price of our common stock on the date of  valuation,
an expected  dividend yield of 0%, the remaining period to the repayment date of
the convertible debentures,  an estimate of the volatility of common stock price
of 90%, based on a review of the historical volatility,  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.

At December 31, 2005, the bifurcated  embedded  derivative  instruments were all
paid or converted.


Note 6.  STOCKHOLDERS' (DEFICIT)

Common stock
------------

During the period May 5, 1998  (inception)  to December  31, 1998 the  following
equity transactions occurred:

     o    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.

     o    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:

     o    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.

     o    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.

     o    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.

     o    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:

     o    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

                                       15

                                                                              33
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

          shareholders had to surrender 2,000,000 shares of common
          stock for cancellation.

     o    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.

     o    Issued  520,000  shares of  common  stock at $0.10 a share for cash of
          $52,000.

     o    Recorded stock compensation expense of $100,000 related to a licensing
          agreement (Note 3).

     o    Issued   1,070,000  shares  of  common  stock  in  exchange  for  debt
          forgiveness of $101,050.

     o    Shareholders  of the Company  converted  $179,610 of liabilities  into
          contributed capital.

During  the year ended  December  31,  2002 the  following  equity  transactions
occurred:

     o    Issued 1,000,000 shares of common stock for cash aggregating $46,819.

     o    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.

     o    Issued 2,000,000 shares of common stock for cash aggregating $100,000.

     o    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  transaction
occurred.

     o    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.

     o    Issued  80,000 shares for legal  services  valued at their fair market
          value of $36,800.

     o    Received  cash of $16,898  and  receivables  of  $36,298 in  Cellfoods
          acquisition

     o    Services with a value of $6,000 were contributed to capital.

During the year ended  December  31,  2005,  the  following  equity  transaction
occurred.

     o    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.

                                       16

                                                                              34
<PAGE>

                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

     o    Services with a value of $6,000 were contributed to capital.

     o    Issued 50,000  shares to Websoft LLC for services at market value,  or
          $21,500.

     o    Debenture conversion of $160,834.


Note 7.  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.

The types of  temporary  differences  between  the tax basis of assets and their
financial  reporting  amounts  that give rise to a  significant  portion  of the
deferred tax asset are as follows:

                                               Reconciling          Tax
                                                   Item            Effect
                                               -----------        --------
Net operating loss carry forward                $705,000          $240,000
                                                ========          ========

The net operating loss carry forward will expire through 2025 and may be limited
due to a significant change in ownership during 2001. The deferred tax asset has
been fully reserved at December 31, 2005.

The change in the valuation allowance for the deferred tax asset during the year
ended December 31, 2005 was $34,000.


Note 8.  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,

                                       17

                                                                              35
<PAGE>
                             PACIFIC FUEL CELL CORP.
                          (A DEVELOPMENT STAGE COMPANY)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005

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 year ended  December 31,  2005,  the Company has paid  Fullerene  USA
$6,000 per quarter for financial management expenses.

We share office 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.

Note 9. GOING CONCERN

The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going  concern.  The Company  reported net losses of $521,064
and $587,367 for the years ended  December  31, 2005 and 2004  respectively,  as
well as reporting net losses of $2,477,268 from inception (December 24, 1997) to
December 31, 2005.  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.

                                       18

                                                                              36
<PAGE>


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  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  significant  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              62         President, Director

      Ken K. Inouye              62         Secretary, Treasurer, Director

      Dr. Yushan Yan             41         Director

                                                                              37
<PAGE>

     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  Suzuki  assumed 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. Inouye,  assumed 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  Yan,  was  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  2005,  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.

     During fiscal 2005,  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.

                                                                              38
<PAGE>

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, 2005,  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, 2005,  2004 and 2003,  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.

<TABLE>
                           SUMMARY COMPENSATION TABLE

<CAPTION>
                                                  Long Term Compensation
                                             ---------------------------------
                       Annual Compensation            Awards           Payouts
                      ---------------------  ------------------------  -------
                                     Other
                                     Annual  Restricted   Securities            All Other
   Name and                          Compen-   Stock      Underlying    LTIP     Compen-
  Principal           Salary  Bonus  sation   Award(s)   Options/SARS  Payouts   sation
  Position      Year   ($)     ($)     ($)      ($)           (#)        ($)       ($)
--------------  ----  ------  -----  ------  ----------  ------------  -------  ---------
<S>             <C>   <C>     <C>    <C>     <C>               <C>     <C>      <C>
George Suzuki,  2003  $    0  $   0  $    0  $        0        0       $     0  $       0
Chairman,       2004  $    0  $   0  $    0  $        0        0       $     0  $       0
President       2005  $    0  $   0  $    0  $        0        0       $     0  $       0

</TABLE>

     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 $1,219 for out of pocket  expenses  incurred  during  our  fiscal  year ended
December 31, 2005.  We did not  reimburse  any other officer or director for any
such expenses during the fiscal year ended December 31, 2005.

     On August 1, 2003,  we entered  into a  consulting  agreement,  as amended,
whereby Dr. Xin Wang acted as our Vice  President  and  Director of Research and
Development. The term of the original agreement was through August 31, 2004, and
provided for annual compensation of $30,000. Additionally, we issued to Dr. Wang
a two-year  option to  purchase up to 100,000  shares of our Common  Stock at an
exercise price of $.05 per share.  Further,  if during the term of the agreement
we construct a successful fuel cell  prototype,  Dr. Wang was to have received a
second  option  to  purchase  up to  100,000  shares of our  Common  Stock at an
exercise  price  of

                                                                              39
<PAGE>

$.05 per share, as well as a bonus equal to 5% of any additional funds (up to $1
million) which we raise after development of the successful fuel cell prototype.
Relevant  thereto,  we paid Dr. Wang the sums of $7,542 and $ 12,712 during 2004
and 2005, respectively.  Dr. Wang was not engaged in any fund raising activities
on our behalf. He resigned his positions with our Company in April 2005 and as a
result,  the  additional  option to purchase  100,000  shares  described  above,
terminated.

     We have no stock plan for employees, but may adopt one in the future.

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.

                                                                    Percent
        Name and Address of              Amount and Nature of          of
          Beneficial Owner               Beneficial Ownership        Class
          ----------------               --------------------        -----

    Fullerene USA, Inc.                      29,100,000(1)           43.6%
    1721 Garvey Ave., #A
    Alhambra, CA 91803

    Stephen G. Godwin                         6,000,000(1)            9.0%
    11854 Darlington Ave., #304
    Los Angeles, CA 90049

    All Directors and Executive              29,100,000(1)           43.9%
    Officers as a Group (3 persons)

-----------------------

(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  year  ended   December   31,   2003,   $3,652  of  travel  and
administrative  expenses was paid by an officer and director on our behalf. This
balance was repaid to the officer and  director  during the year ended  December
31, 2004.

     During the year ended  December 31, 2005, 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 who is a director,
each own 40.2% of Fullerene's issued and outstanding common stock.

                                                                              40
<PAGE>

     At December 31, 2003, we had outstanding  loans in the principal amounts of
$60,000 and $10,000 due to Fullerene,  USA, Inc., our majority  stockholder.  In
regard to the $60,000 loan, we  originally  received an unsecured,  non-interest
bearing loan for $60,000 that was due  September  14, 2002. On December 5, 2002,
this note was  cancelled  with the consent of Fullerene and replaced with a note
extending the due date to August 14, 2004. Both of these notes were paid in full
during our fiscal year ended December 31, 2004.

     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."

     As of December 31, 2004, we owed one of our officers and  directors  $3,652
for  travel  and  administrative  expenses  paid by this  person on our  behalf.
Subsequently, all balances due were paid.

     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.

                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits. The following exhibits are attached to this Report:

Exhibit No.   Description
-----------   -----------

   10.3       Agreement between the Company and Bourns, Inc.

   31.1       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.

                                                                              41
<PAGE>

    2.1*      Corporate Charter
    2.2*      Articles of Incorporation
    2.3*      Amendment of Articles of Incorporation
    2.4*      Bylaws
    2.5**     Amendment to Articles of Incorporation
   10.1**     Agreement between the Company and Fullerene, USA, Inc.
   10.2***    Lease Agreement - Riverside laboratory
---------------------

* 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.

(b) Reports on Form 8-K.

     In the last fiscal  quarter of the fiscal year ended  December 31, 2005, we
did not file any reports on Form 8-K.

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, 2005, were
approved by our board of directors.

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 2005 and  2004,  were  $22,000  and  $24,013,  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.

                                                                              42
<PAGE>

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, 2005
and 2004 were $2,900 and $1,500, 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
<PAGE>


                                   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 18, 2006.

                                        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 18, 2006.


s/ George Suzuki
-----------------------------------
George Suzuki, Director


s/ Ken Inouye
-----------------------------------
Ken K. Inouye, Director


-----------------------------------
Dr. Yushan Yan, Director


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