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                                                                   EXHIBIT 10.38

                             SUBSCRIPTION AGREEMENT


         This Subscription Agreement (hereinafter the "Agreement") is entered
into this 8th day of January, 2004, by and between Raymond J. Skiptunis
("Skiptunis") and Power Efficiency Corporation ("PEC").

         WHEREAS, Skiptunis desires to purchase from PEC, and PEC desires to
sell to Skiptunis, shares of PEC's common stock as described below;


         NOW, THEREFORE, in consideration of the foregoing and of the promises
and covenants contained herein, it is hereby covenanted and agreed as follows:

1.       Agreed Subscription; Purchase Price. Skiptunis hereby purchases from
         PEC 107,773 newly issued shares of PEC's common stock (the "Shares")
         for the purchase price of $71,130.61 (approximately $0.66 per share;
         the closing price of PEC's common stock on December 9, 2003). The
         purchase price shall be paid to PEC by the cancellation of $71,130.61
         of deferred salary owed by PEC to Skiptunis pursuant to Skiptunis's
         Employment Agreement dated November 7, 2002. The debt hereby cancelled
         consists of:

         a.       $71,103.61 of deferred salary (entire existing balance)
                  accrued pursuant to the Employment Agreement between Mr.
                  Skiptunis and PEC dated November 7, 2002.


2.       Acknowledgments; Economic Risk; No Liquidity. Skiptunis understands and
         agrees that the purchase of the Shares is not a liquid investment. In
         particular and in addition to the representations in Section 3 hereof,
         Skiptunis recognizes, acknowledges and agrees that:

         a.       Skiptunis must bear the economic risk of investment in the
                  Shares for an indefinite period of time since the Shares have
                  not been registered under the Securities Act of 1933, as
                  amended (the "Securities Act") or applicable state securities
                  laws ("State Acts"), and, therefore, cannot be transferred or
                  sold unless either they are subsequently registered under the
                  Securities Act and applicable State Acts, or an exemption from
                  registration is available and a favorable opinion of counsel
                  to that effect is obtained.

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         b.       Although there is a limited public market for the Company's
                  Common Stock, which is thinly traded on the National
                  Association of Securities Dealers' Over the Counter Bulletin
                  Board ("OTCBB") under the symbol "PREF", the Shares are being
                  issued in a private transaction exempt from the registration
                  requirements of the Securities Act and therefore cannot be
                  freely resold. The Shares are restricted securities. The
                  Shares may be resold in accordance with the provisions of
                  Securities Act Rule 144.

3.       Representations. Skiptunis represents to, and agrees with the Company
         that:

         a.       Skiptunis has carefully reviewed and understands the risks of
                  and other considerations relating to a purchase of the Shares.

         b.       Skiptunis is acquiring the Shares for which he hereby
                  subscribes as principal for his own investment account, and
                  not (1) with a view to the resale or distribution of all or
                  any part thereof, or (2) on behalf of another person. No
                  person other than the undersigned will have a direct or
                  indirect interest in the Shares subscribed for hereby.

         c.       Skiptunis consents to the placement of a legend on any
                  certificate(s) evidencing the Shares stating that such
                  securities have not been registered under the Securities Act
                  and setting forth or referring to the restrictions on
                  transferability and sale thereof. Skiptunis is aware that the
                  Company will make a notation in its appropriate records with
                  respect to the restrictions on the transferability of such
                  securities.

4.       Terms of Subscription and Closing.

         a.       This subscription, upon acceptance by the Company, shall be
                  binding upon the heirs, executors, administrators, successors
                  and assigns of Skiptunis.

         b.       This Agreement shall be construed in accordance with and
                  governed by the laws of the State of Delaware, without giving
                  effect to conflict of laws principles.

                     [Signature page to immediately follow.]

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         IN WITNESS WHEREOF, the parties hereto have executed this Subscription
Agreement dated January 8, 2004.


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<S>                                                     <C>
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POWER EFFICIENCY CORPORATION, a Delaware Corporation    Raymond J. Skiptunis, individually

By: _______________________________                     ___________________________________
Name:  Richard Koch
Title:  Chief Executive Officer

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