##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the quarterly period ended March 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-028031
 
 PACIFIC FUEL CELL CORP.
 (Exact name of registrant as specified in its charter)
 
 Nevada
    
    80-004875(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 131 N. Tustin Ave., Suite 100, Tustin, CA 92780
(Address of Principal Executive Office)
 714-564-1693
(Registrants telephone number, including area code)
 
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
  o þ




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##### 



TABLE OF CONTENTS
 PagePART IFINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    1Consolidated Balance Sheets, March 31, 2008 (Unaudited) and December 31, 2007
    
    
    1Consolidated Statements of Operations for the Three months Ended March 31, 2008 and 2007 and from May 5, 1998 (Inception) to March 31, 2008 (Unaudited)
    
    
    2Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 and from May 5, 1998 (Inception) to March 31, 2008 (Unaudited)
    
    
    3Notes to the Unaudited Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    7Item 3.
Quantitative and Qualitative Disclosures About Market Risks
    
    
    9Item 4T. Controls and Procedures
    
    
    9PART IIOTHER INFORMATIONItem 1. Legal Proceedings
    
    
    10Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    10Item 3. Defaults Upon Senior Securities
    
    
    10Item 4. Submission of Matters to a Vote of Security Holders
    
    
    10Item 5. Other Information
    
    
    11Item 6. Exhibits
    
    
    11SIGNATURES
    
    
    12EXHIBIT INDEX
    
    
    13Exhibit 31.1Exhibit 32.1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS.
 PACIFIC FUEL CELL CORP.
(A Development Stage Company)
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCURRENT ASSETS:Cash
    
    $
    32,045
    
    
    $
    25,755Accounts receivable, net
    
    
    35,982
    
    
    
    132,723Inventories
    
    
    41,788
    
    
    
    19,896Prepaid expenses
    
    
    
    
    
    
    4,007Total current assets
    
    
    109,815
    
    
    
    182,381PROPERTY, PLANT AND EQUIPMENT, net at cost
    
    
    542,593
    
    
    
    565,140OTHER ASSETS:Security deposits
    
    
    9,054
    
    
    
    9,054$
    661,462
    
    
    $
    756,575LIABILITIES AND
STOCKHOLDERS (DEFICIT) EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    398,607
    
    
    $
    265,312Convertible note payable, related party
    
    
    200,000
    
    
    
    50,000Accrued interest  related party
    
    
    3,059
    
    
    
    Current portion of capital lease obligations
    
    
    58,695
    
    
    
    58,196Deferred rent
    
    
    12,354
    
    
    
    12,354Total current liabilities
    
    
    672,715
    
    
    
    385,862CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION
    
    
    257,762
    
    
    
    263,748Total liabilities
    
    
    930,477
    
    
    
    649,610STOCKHOLDERS
(DEFICIT) EQUITY:Preferred stock; $0.01 par value, 1,000,000 shares authorized,
none issued and outstanding
    
    
    
    
    
    
    Common stock; $0.001 par value, 200,000,000 shares authorized,
75,210,248 shares issued and outstanding
    
    
    75,210
    
    
    
    75,210Additional paid-in capital
    
    
    4,506,618
    
    
    
    4,408,502(Deficit) accumulated during the development stage
    
    
    (4,850,843
    )
    
    
    (4,376,747
    )(269,015
    )
    
    
    106,965$
    661,462
    
    
    $
    756,575
   1




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##### Table of Contents



PACIFIC FUEL CELL CORP.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 For the PeriodMay 5, 1998For the Three Months
    
    
    (Inception) throughMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008REVENUES:Product sales
    
    $
    86,305
    
    
    $
    
    
    
    $
    583,875Grants
    
    
    
    
    
    
    
    
    
    
    99,90186,305
    
    
    
    
    
    
    
    683,776COST OF SALES
    
    
    195,934
    
    
    
    118,327
    
    
    
    1,162,422GROSS (LOSS)
    
    
    (109,629
    )
    
    
    (118,327
    )
    
    
    (478,646
    )OPERATING EXPENSES:General and administrative
    
    
    237,840
    
    
    
    187,650
    
    
    
    2,355,224Research and development
    
    
    
    
    
    
    98,352
    
    
    
    408,912General and
administrative stock compensation
    
    
    3,616
    
    
    
    15,000
    
    
    
    316,416Depreciation and amortization
    
    
    22,546
    
    
    
    6,816
    
    
    
    119,950Change in value of derivative instruments, net
    
    
    
    
    
    
    
    
    
    
    460,498Loss on extinguishment of debentures
    
    
    
    
    
    
    
    
    
    
    16,706Loss on asset impairment
    
    
    
    
    
    
    
    
    
    
    510,667Loss on disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    3,391264,002
    
    
    
    307,818
    
    
    
    4,191,764(LOSS) FROM OPERATIONS
    
    
    (373,631
    )
    
    
    (426,145
    )
    
    
    (4,670,410
    )OTHER INCOME (EXPENSE):Interest income
    
    
    2
    
    
    
    200
    
    
    
    8,251Interest expense
    
    
    (4,681
    )
    
    
    
    
    
    
    (76,783
    )Interest
expense, related party
    
    
    (2,786
    )
    
    
    
    
    
    
    (3,059
    )Interest expense, noncash financing cost
    
    
    (93,000
    )
    
    
    
    
    
    
    (143,000
    )Foreign currency transaction gain (loss)
    
    
    
    
    
    
    
    
    
    
    (168
    )Other
    
    
    
    
    
    
    
    
    
    
    (1,174
    )(100,465
    )
    
    
    200
    
    
    
    (215,933
    )(LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
    
    
    (474,096
    )
    
    
    (425,945
    )
    
    
    (4,886,343
    )INCOME TAX EXPENSE (BENEFIT)
    
    
    
    
    
    
    
    
    
    
    (12,070
    )(LOSS) BEFORE EXTRAORDINARY ITEM
    
    
    (474,096
    )
    
    
    (425,945
    )
    
    
    (4,874,273
    )EXTRAORDINARY ITEM, Gain on forgiveness of debt,
net of income taxes of $12,070
    
    
    
    
    
    
    
    
    
    
    23,430NET (LOSS)
    
    $
    (474,096
    )
    
    $
    (425,945
    )
    
    $
    (4,850,843
    )Per Share Information:Weighted average shares outstanding 
basic and diluted
    
    
    75,210,248
    
    
    
    72,280,470Net (loss) per common share  basic and diluted:(Loss) before
extraordinary item
    
    $
    (0.01
    )
    
    $
    (0.01
    )Extraordinary item
    
    
    
    
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )
   2




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PACIFIC FUEL CELL CORP.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 For the PeriodMay 5, 1998For the Three Months
    
    
    (Inception) throughMarch 31,
    
    
    March 31,2008
    
    
    2007
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss)
    
    $
    (474,096
    )
    
    $
    (425,945
    )
    
    $
    (4,850,843
    )Adjustments to reconcile net (loss) to net cash
(used in) operating activities:Depreciation and amortization
    
    
    22,546
    
    
    
    6,816
    
    
    
    119,950Stock compensation
    
    
    3,616
    
    
    
    15,000
    
    
    
    514,416Interest
expense, non-cash financing cost
    
    
    93,000
    
    
    
    
    
    
    
    148,239Contributed services to capital
    
    
    1,500
    
    
    
    1,500
    
    
    
    19,500Reserve for uncollectible accounts receivable
    
    
    
    
    
    
    
    
    
    
    36,298Extraordinary item
    
    
    
    
    
    
    
    
    
    
    35,500Loss on disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    3,391Non-cash derivative expenses
    
    
    
    
    
    
    
    
    
    
    657,465Interest expense converted to loan payable
    
    
    
    
    
    
    
    
    
    
    12,684Deposit  restocking fee
    
    
    
    
    
    
    
    
    
    
    31,239Loss on impairment of property and equipment
    
    
    
    
    
    
    
    
    
    
    510,167Changes in operating assets and liabilities:Accounts receivable
    
    
    96,741
    
    
    
    
    
    
    
    (35,982
    )Inventories
    
    
    (21,892
    )
    
    
    
    
    
    
    (41,788
    )Prepaid expenses
    
    
    4,007
    
    
    
    (939
    )
    
    
    Security deposits
    
    
    
    
    
    
    (7,928
    )
    
    
    (9,054
    )Accounts payable and accrued expenses
    
    
    133,569
    
    
    
    157,034
    
    
    
    433,746Accrued interest  related party
    
    
    2,786
    
    
    
    
    
    
    
    3,059Deferred rent
    
    
    
    
    
    
    
    
    
    
    12,354Net cash (used in) operating activities
    
    
    (138,223
    )
    
    
    (254,462
    )
    
    
    (2,399,659
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of fixed assets
    
    
    
    
    
    
    (27,120
    )
    
    
    (224,754
    )Net cash received in purchase of Cellfoods
    
    
    
    
    
    
    
    
    
    
    16,898Refund deposit on equipment
    
    
    
    
    
    
    70,000
    
    
    
    (131,239
    )Investment in mineral claims
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Net cash provided by (used in) investing
activities
    
    
    
    
    
    
    42,880
    
    
    
    (344,095
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of notes payable, related party
    
    
    150,000
    
    
    
    
    
    
    
    485,462Payments on notes payable, related parties
    
    
    
    
    
    
    
    
    
    
    (71,083
    )Deferred debenture costs
    
    
    
    
    
    
    
    
    
    
    (136,000
    )(Payments) proceeds of convertible redeemable debentures
    
    
    
    
    
    
    
    
    
    
    776,855Payments on capital lease obligations
    
    
    (5,487
    )
    
    
    
    
    
    
    (14,369
    )Net proceeds from issuance of common stock
    
    
    
    
    
    
    608,000
    
    
    
    1,734,934Net cash provided by financing activities
    
    
    144,513
    
    
    
    608,000
    
    
    
    2,775,799NET INCREASE IN CASH
    
    
    6,290
    
    
    
    396,418
    
    
    
    32,045CASH AT BEGINNING OF PERIOD
    
    
    25,755
    
    
    
    113,727
    
    
    
    CASH AT END OF PERIOD
    
    $
    32,045
    
    
    $
    510,145
    
    
    $
    32,045
   3




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PACIFIC FUEL CELL CORP.
(A DEVELOPMENT STAGE COMPANY)
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2008
 (Unaudited)
 NOTE 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
 Basis of Presentation
    Net (Loss) per Common Share
   4




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NOTE 2. GOING CONCERN
  NOTE 3. CONVERTIBLE NOTE PAYABLE, RELATED PARTY
  NOTE 4. CAPITAL LEASE OBLIGATIONS
  2008
    
    $
    70,1632009
    
    
    76,7752010
    
    
    76,7752011
    
    
    76,7752012
    
    
    63,239Thereafter
    
    
    14,765378,492Less: amount representing interest
    
    
    (62,035
    )316,457Less: current portion
    
    
    (58,695
    )Long-term portion
    
    $
    257,762
   5




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NOTE 5 COMMITMENTS AND CONTINGENCIES
  NOTE 6. STOCKHOLDERS (DEFICIT)
 2008 Stock Incentive Plan
  Options
  NOTE 7. SUBSEQUENT EVENTS
    6




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Plan of Operations
       7




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Liquidity and Capital Resources
       Trends
     8




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RESULTS OF OPERATIONS
 Three months ended March 31, 2008 and 2007
    Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4T. CONTROLS AND PROCEDURES.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
   9




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Date
    
    Principal Amt.
    
    
    Conversion Price
    
    
    Maturity01/07/2008
    
    $
    20,000
    
    
    $
    0.10
    
    
    
    01/07/200902/01/2008
    
    $
    30,000
    
    
    $
    0.10
    
    
    
    02/01/200902/25/2008
    
    $
    50,000
    
    
    $
    0.10
    
    
    
    02/25/200903/19/2008
    
    $
    50,000
    
    
    $
    0.10
    
    
    
    03/19/200904/08/2008
    
    $
    50,000
    
    
    $
    0.10
    
    
    
    04/08/200904/22/2008
    
    $
    50,000
    
    
    $
    0.10
    
    
    
    04/22/200905/06/2008
    
    $
    50,000
    
    
    $
    0.10
    
    
    
    05/06/2009
     
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   10




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ITEM 5. OTHER INFORMATION
   
 ITEM 6. EXHIBITS
  Exhibit No.
    
    Description10.1(1)
    
    Form of one-year Secured Convertible Promissory Notes.No. 1
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated December 12, 2007.No. 2
    
    Issued to George Suzuki in the original principal amount of $20,000,
dated January 7, 2008.No. 3
    
    Issued to George Suzuki in the original principal amount of $30,000,
dated February 1, 2008.No. 4
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated February 25, 2008.No. 5
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated March 19, 2008.No. 6
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated April 8, 2008.No. 7
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated April 22, 2008.No. 8
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated May 6, 200810.2(1)
    
    Form of Stock Option Grants.
 Grantee
    
    Amount (shrs.)
    
    
    Exercise Price
    
    
    Grant DateYushan Yan
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08Michael Swanberg
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08George Suzuki
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08
 10.3(1)
    
    Terms and Conditions of Salary Accrual for George Suzuki10.4(1)
    
    Form of Restricted Stock Purchase Agreement by and between the Corporation and George Suzuki
for 2,000,000 shares of Common Stock dated April 2, 2008.10.5(1)
    
    2008 Stock Incentive Plan, as amended.31.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Filed with the Securities and Exchange Commission in the Exhibits to Form 10-KSB
filed on April 14, 2008 and is incorporate by reference herein  11




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SIGNATURE
  PACIFIC FUEL CELL CORP.May 20, 2008
    /s/ George SuzukiGeorge SuzukiPresident, Chief Executive Officer andChief Financial Officer  12




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EXHIBIT INDEX
 Exhibit No.
    
    Description10.1(1)
    
    Form of one-year Secured Convertible Promissory Notes.No. 1
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated December 12, 2007.No. 2
    
    Issued to George Suzuki in the original principal amount of $20,000,
dated January 7, 2008.No. 3
    
    Issued to George Suzuki in the original principal amount of $30,000,
dated February 1, 2008.No. 4
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated February 25, 2008.No. 5
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated March 19, 2008.No. 6
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated April 8, 2008.No. 7
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated April 22, 2008.No. 8
    
    Issued to George Suzuki in the original principal amount of $50,000,
dated May 6, 200810.2(1)
    
    Form of Stock Option Grants.
 Grantee
    
    Amount (shrs.)
    
    
    Exercise Price
    
    
    Grant DateYushan Yan
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08Michael Swanberg
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08George Suzuki
    
    
    200,000
    
    
    $
    0.17
    
    
    
    2/29/08
 10.3(1)
    
    Terms and Conditions of Salary Accrual for George Suzuki10.4(1)
    
    Form of Restricted Stock Purchase Agreement by and between the Corporation and George Suzuki
for 2,000,000 shares of Common Stock dated April 2, 2008.10.5(1)
    
    2008 Stock Incentive Plan, as amended.31.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Filed with the Securities and Exchange Commission in the Exhibits to Form 10-KSB filed on April 14, 2008 and is incorporate by reference herein.  13