##### 



Securities and Exchange Commission
 Washington, D.C. 20549
 FORM 10-KSB/A
  x
    
    Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
  o
    
    Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 
  Power Efficiency Corporation
  Delaware
    
    22-3337365(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)3960 Howard Hughes Pkwy, Ste 460Las Vegas, NV
    
    89169(Address of Principal Executive Offices)
    
    (Zip Code)
 (702) 697-0377
  Common Stock, $.001 Par Value
 x o
 o
 o x
    DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



EXPLANATORY NOTE
  
    
    Item 9. Directors, Executive Officers, Promoters and Control Persons of the
Company is amended to properly reflect the rules adopted in the executive
compensation releases in Release Nos. 33-8732A and 33-8765.
    
    Item 10. Executive Compensation is amended to properly reflect the rules adopted
in the executive compensation releases in Release Nos. 33-8732A and 33-8765.




---



##### 



SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS




---



##### 



GLOSSARY OF TERMS
  Alternating Current (AC)
    
    A type of electrical current, the direction of which is reversed at regular
intervals or cycles; in the U.S. the standard is 120 reversals or 60 cycles per second;
typically abbreviated as AC.Ampere (amp)
    
    A unit of measure for an electrical current; the amount of current that flows in a
circuit; abbreviated as amp.Current (Electrical)
    
    The flow of electrical energy (electricity) in a conductor, measured in amperes.Cycle
    
    In an alternating current, the current goes from zero potential (or voltage) to a
maximum in one direction, back to zero, and then to a maximum potential (or voltage) in
the other direction. The number of complete cycles per second determines the current
frequency; in the U.S. the standard for alternating current is 60 cycles.Efficiency
    
    Efficiency is the ratio of work (or energy) output to work (or energy) input, and
cannot exceed 100 percent.Energy
    
    The capability of doing work.Horsepower (HP)
    
    A unit for measuring the power of motors or the rate of doing work. One horsepower
equals 33,000 foot-pounds of work per minute or 746 watts.Induction
    
    The production of an electric current in a conductor by the variation of a magnetic
field in its vicinity.Induction Motor
    
    The simplest and most rugged electric motor, it consists of a wound stator and a
rotor assembly. The AC induction motor is so named because the electric current flowing
in its secondary member (the rotor) is induced by the alternating current flowing in its
primary member (stator). The power supply is connected only to the stator. The combined
electromagnetic efforts of the two currents produce the force to create rotation.Inrush Current
    
    The current that flows at the instant of connection of a motor to the power source.
Usually expressed as a multiple of motor full-load current.Kilowatt (kW)
    
    A standard unit of electrical power equal to one thousand watts.Load
    
    The demand on an energy producing system. The energy consumption or requirement of a
piece or group of equipment.Motor
    
    A machine supplied with external energy that is converted into force and/or motion.Power
    
    The rate at which work is done, typically measured in watts or horsepower.Power Factor
    
    The ratio of watts to volt-amperes of an AC electric circuit.Soft-start
    
    Soft-start is the regulation of the supply voltage from an initial low value to full
voltage during the starting process.Torque (Motor)
    
    The rotating force provided by a motor. The units of torque may be expressed as
pound-foot, pound-inch (English system), or newton-meter (metric system).




---



##### 



Torque (Starting)
    
    This torque is what is available to initially get the load moving and begin its
acceleration.Transformer
    
    An electromagnetic device that changes the voltage of alternating current
electricity; it consists of an induction coil having a primary and secondary winding and
a closed iron core.Voltage
    
    The amount of electromotive force, measured in volts, that exists between two points.Watt
    
    The amount of power required maintaining a current of one ampere at a pressure of
one volt when the two are in phase with each other. One horsepower is equal to 746 watts.




---



##### 



PART I
 Item 1. Description of Business.
 Business Development
 Formation
  Business of the Company
 The Companys Principal Products
 Power Commander ® Power Genius Power Genius Power Genius
  . Power Genius Power Genius
 Power Genius
 
    
    The Power Geniusextends motor life, minimizes
maintenance, results in cooler running, reduces stress
and strain on the motor, and reduces stress and strain
on accompanying electrical and mechanical systems.
    
    The Power Geniusis the result of field and laboratory
engineering refinements undertaken since 1994. These
refinements enable the Power Geniusto offer a control
system which measures and monitors key motor operating
conditions and adapts motor operating parameters during
rapid changes in motor load, all without excessive
vibration, synchronization problems or other material
adverse effects to the motor or surrounding electrical
and mechanical systems.
    
    Paragon Consulting Services, a contractor for Nevada
Power Company, performed field tests on the Power
Geniusinstalled on two escalators and one elevator in
a major Las Vegas casino. The tests resulted in energy
savings of approximately 35% on the escalators and 21%
on the elevator.
    
    Medsker Electric, Inc., an independent electric motor
repair and test laboratory, performed a series of
inrush current and energy savings tests on the Power
Genius, then known as the Performance Controller.The
tests compared the Companys product to the products of
three competitors. In its conclusions, Medsker stated
that the Companys product exhibited twice the energy
savings of the next nearest competitor. In addition,
Medsker concluded that the product exhibited the best
soft-start performance, reducing the motor inrush
current by 71%. Finally, Medsker concluded that the
product was the simplest to install and test, and was
the best performer in terms of energy savings and
inrush current reduction.




---



##### 




    
    In addition to the tests performed by independent
laboratories, the Power Geniushas been tested by
numerous end users, original equipment manufacturers
(OEMs), and other utilities.
 Three-Phase Power Genius
 Power Genius Power
Genius
 Single-Phase Product
  Product Development
  
    
    Increased ease of installation and reduced technical support requirements. Instead of approximated and
manual adjustments during installation, which can require technical support from the Company, the
digitized unit will allow more simplified and precise adjustments by customers and third party
installers.
    
    Reduced product size, which is important for many installations.
    
    Input-output communications capabilities, so the device can communicate with external control systems.
    
    Increased functionality. With a microchip and software driving the Companys products, the Company
expects to be able to ultimately add new functionality to the products. These new functions may include
such things as:
 
    
    Recording and reporting of actual energy savings;
    
    Prediction of maintenance problems by reading and reporting on changes in the motors operating
characteristics; and
    
    More secure intellectual property protection through the use of secured chips and software.
 Marketing and Sales
 Power Genius
 Power Genius Power Genius Power Genius




---



##### 



Manufacturing and Distribution
    Competition
   Three-Phase Competition . Power Genius
 
    
    It combines soft start features with energy savings features in a single integrated unit that is CSA and
CE certified and achieves energy savings levels of up to 15% to 35% in independent, third party testing;
    
    Its circuitry is proprietary and protected by a patent. The Company has also filed one provisional patent;
    
    It has been tested extensively by utilities with documented energy savings;
    
    It is accepted by OEMs in the escalator and granulator industries.
 Single-Phase Competition .
 High Efficiency Motors . Power Genius




---



##### 



Source of Supply and Availability of Raw Materials
 Power Genius
 Customers
  Patents and Proprietary Rights
  
 
    
    the circuitry covered by the Companys patent more effectively reduces the motor vibration; and
    
    the circuitry eliminates most of the balance and synchronization problems that are created by
other energy saving motor controllers, including those that would eventually use the licensed
NASA technology upon the expiration of the underlying NASA patents.
  NASA License Agreement
   Power Commander ®




---



##### 



Government Regulation
  Deregulation of Electrical Energy
  Research and Development
  Effect of Environmental Regulations
  Employees
  Reports to Security Holders
   RISK FACTORS
 RISKS RELATED TO OUR BUSINESS
 Unless The Company Achieves Profitability and Related Positive Cash Flow, It May Not Be Able To
Continue Operations, And Its Auditors Have Questioned Its Ability To Continue As A Going Concern.




---



##### 



The Company Has A Limited Operating History, Has Experienced Recurring Losses And Has Limited
Revenue.
  The Companys Present Cash Flow Is Not Adequate To Pay Accrued Liabilities.
  The Companys Principal Obligations On Notes Payable Total $2,011,111 and This Indebtedness Is
Subject To Acceleration.
    The Company Does Not Have A Bank Line Of Credit And Substantially All Of Its Assets Are Pledged.
  The Company Will Require Additional Funds To Meet Its Cash Operating Expenses And Achieve Its
Current Business Strategy.




---



##### 



The Companys Management Group Owns Or Controls A Significant Number Of The Outstanding Shares Of
Our Common Stock And Will Continue To Have Significant Ownership Of Our Voting Securities For The
Foreseeable Future.
  
    
    delay or prevent a change in the control;
    
    impede a merger, consolidation, takeover, or other transaction involving the Company; or
    
    discourage a potential acquirer from making a tender offer or otherwise attempting
to obtain control of the Company.
  The Companys License From NASA Has Expired.
  The Companys Business Depends Upon The Maintenance Of Our Proprietary Technology, And We Rely, In
Part, On Contractual Provisions To Protect Our Trade Secrets And Proprietary Knowledge.
   The Company Is Potentially Dependent On Third-Party Suppliers.




---



##### 



The Company Is Developing And Commercializing New Energy Saving Technologies And Products Which
Will Involve Uncertainty And Risks Related To Product Development And Market Acceptance.
  The Company Has Expanded Its Marketing Strategy.
  The Company Currently Depends On A Small Number Of Customers And Expect To Continue To Do So.
  Most Of The Companys Current And Potential Competitors Have Greater Name Recognition, Financial,
Technical And Marketing Resources, And More Extensive Customer Bases And Industry Relationships
Than We Do, All Of Which Could Be Leveraged To Gain Market Share To Our Detriment, Particularly In
An Environment Of Rapid Technological Change.
  Changes In Retail Energy Prices Could Affect The Companys Business.
  Loss Of Key Personnel Could Have Significant Adverse Consequences.




---



##### 



The Company Does Not Have Key Man Life Insurance.
  Delaware Law Limits The Liability Of Our Directors.
  The Company Has Elected Not To Adopt Various Voluntary Corporate Governance Measures, And As A
Result Stockholders May Have Limited Protections Against Interested Director Transactions,
Conflicts Of Interest And Similar Matters.
  Potential Product Liability Claims May Not Be Fully Covered By Insurance.
  RISKS RELATED TO OUR COMMON STOCK AND CAPITAL STRUCTURE
 Trading In Our Common Stock Over The Last 12 Months Has Been Limited, So Investors May Not Be Able
To Sell As Many Of Their Shares As They Want At Prevailing Prices.
  The Limited Public Trading Market May Cause Volatility In The Companys Stock Price.
  An Active And Visible Trading Market For Our Common Stock May Not Develop.
  
    
    Investors may have difficulty buying and selling or obtaining market quotations;




---



##### 




    
    Market visibility for our common stock may be limited; and
    
    A lack of visibility for our common stock may have a depressive effect on the market
price for our common stock.
  Penny Stock Regulations May Impose Certain Restrictions On Marketability Of The Companys
Securities.
   
    
    Control of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer;
    
    Manipulation of prices through prearranged matching of purchases and sales and false
and misleading press releases;
    
    Boiler room practices involving high pressure sales tactics and unrealistic price
projections by inexperienced sales persons;
    
    Excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
    
    The wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the inevitable collapse of
those prices with consequent investor losses.
  The Company May Never Pay Cash Dividends On Our Common Stock.




---



##### 



Sales Of Common Stock Under Rule 144 May Adversely Affect The Market Price Of Our Common Stock.
 Possible Resales under Rule 144.
    Exercise Of Outstanding Options And Warrants Will Dilute Ownership Of Outstanding Shares.
  The Companys Issuance Of Blank Check Preferred Stock Could Adversely Affect Our Common
Stockholders.
  Line of Credit




---



##### 



Item 2. Description of Property.
  Item 3. Legal Proceedings.
   Item 4. Submission of Matters to a Vote of Security Holders.




---



##### 



PART II
 Item 5. Market for Common Equity and Related Stockholder Matters.
 Market for Common Stock
   Twelve months Ended December 31, 2005
    
    
    High
    
    
    
    LowOctober 1, 2005  December 31, 2005
    
    
    $0.80
    
    
    
    $0.25July 1, 2005  September 30, 2005
    
    
    0.50
    
    
    
    0.22April 1, 2005  June 30, 2005
    
    
    0.25
    
    
    
    0.19January 1, 2005  March 31, 2005
    
    
    0.52
    
    
    
    0.22
 Twelve months Ended December 31, 2006
    
    
    High
    
    
    
    LowOctober 1, 2006  December 31, 2006
    
    
    $0.40
    
    
    
    $0.21July 1, 2006  September 30, 2006
    
    
    0.30
    
    
    
    0.18April 1, 2006  June 30, 2006
    
    
    0.43
    
    
    
    0.20January 1, 2006  March 31, 2006
    
    
    0.40
    
    
    
    0.20
    Number ofsecuritiesremaining availablefor future issuanceNumber of
    
    
    
    
    
    under 2000 Stocksecurities to be
    
    
    
    
    
    Option andissued upon
    
    Weighted average
    
    Restricted Stockexercise of
    
    exercise price of
    
    Plan (excludingoutstanding
    
    outstanding
    
    securitiesoptions, warrants
    
    options, warrants
    
    reflected in columnand rights (a)
    
    and rights (b)
    
    (a))(c)2000 Stock Option and
Restricted Stock Plan
approved by security
holders
    
    
    13,284,896
    
    
    
    $0.35
    
    
    
    6,715,104Equity compensation
plans not approved by
security holders
    
    
    0
    
    
    
    0.00
    
    
    
    0Total
    
    
    13,284,896
    
    
    
    $0.35
    
    
    
    6,715,104




---



##### 



Recent Sales of Unregistered Securities
 Sales Made to Summit Energy Ventures, Commerce Energy Group and Commonwealth Energy
Corporation
       Sales Made to Purchasers Other than Summit Energy Ventures, Commerce Energy Group and
Commonwealth Energy Corporation




---



##### 



Item 6. Managements Discussion and Analysis of Financial Condition and
Results of Operations or Plan of Operation.
 OVERVIEW
  Power Genius
 RESULTS OF OPERATIONS: FISCAL YEAR 2006 COMPARED TO FISCAL YEAR 2005
 REVENUES
  COST OF REVENUES




---



##### 



GROSS MARGIN
  OPERATING EXPENSES
 Research and Development Expenses
  Selling, General and Administrative Expenses




---



##### 



For the year ended December 31 (Unaudited)2006
    
    
    2005Total Revenues
    
    $
    188,811
    
    
    $
    276,405Total Cost of Product Revenues
    
    
    136,240
    
    
    
    245,789Gross Margin
    
    
    52,571
    
    
    
    30,616Costs and Expenses:Research and development
    
    
    513,449
    
    
    
    418,016Selling, general and administration
    
    
    2,016,069
    
    
    
    1,613,758SFAS 123 stock option expense*
    
    
    999,320
    
    
    
    683,533Other non-cash consideration*
    
    
    165,528
    
    
    
    27,549Depreciation and amortization
    
    
    34,028
    
    
    
    22,470Total Costs and Expenses
    
    
    3,728,394
    
    
    
    2,765,329Loss From Operations
    
    
    (3,675,823
    )
    
    
    (2,734,710
    )Other (Expense) Income:Cash interest (expense) income, net
    
    
    (305,501
    )
    
    
    (263,525
    )Non-cash interest (expense)
income, net*
    
    
    (1,039,451
    )
    
    
    (252,015
    )Total Other (Expense) Income
    
    
    (1,344,952
    )
    
    
    (515,540
    )Net Loss
    
    $
    (5,020,775
    )
    
    $
    (3,250,250
    )*Sum of non-cash compensation and
non-cash interest expense
    
    
    2,204,299
    
    
    
    963,097Net Loss excluding non-cash
compensation and non-cash interest
    
    $
    (2,816,476
    )
    
    $
    (2,287,153
    )
 Financial Condition, Liquidity, and Capital Resources: For the Year Ended December 31, 2006




---



##### 



Cash Requirements and Need for Additional Funds
   Recent Accounting Pronouncements




---



##### 



Item 7. Financial Statements and Supplementary Data.
 POWER EFFICIENCY CORPORATION
 FINANCIAL STATEMENTS
 DECEMBER 31, 2006 AND 2005




---



##### 



POWER EFFICIENCY CORPORATION
 DECEMBER 31, 2006 AND 2005
 INDEX
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Financial Statements:Balance Sheet
    
    
    F-2Statements of Operations
    
    
    F-3Statements of Changes in Stockholders Equity
    
    
    F-4Statements of Cash Flows
    
    
    F-5Notes to Financial Statements
    
    
    F-6 - F-27




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 
   F-1




---



##### 



POWER EFFICIENCY CORPORATION
   ASSETSCURRENT ASSETS:Cash
    
    $
    1,693,584Accounts receivable, net of reserve and allowance of $40,916
    
    
    32,193Inventories, net
    
    
    117,639Prepaid expenses and other current assets
    
    
    70,468Total Current Assets
    
    
    1,913,884PROPERTY AND EQUIPMENT, Net
    
    
    76,056OTHER ASSETS:Deposits
    
    
    33,875Patents, net
    
    
    33,811Goodwill
    
    
    1,929,963Inventories  long-term, net
    
    
    39,213Deferred financing costs, net
    
    
    11,2282,048,090$
    4,038,030LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    537,133Accrued salaries and payroll taxes
    
    
    47,970Notes payable  Arens Investment Company, net
    
    
    10,087Total Current Liabilities
    
    
    595,190LONG-TERM LIABILITIES:Notes Payable - 2008, net
    
    
    1,397,927Total Long-Term Liabilities
    
    
    1,397,927Total Liabilities
    
    
    1,993,117COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Series A-1 Convertible Preferred Stock, $0.001 par value
10,000,000 shares autorized, none issued or outstanding
    
    
    Common stock, $0.001 par value, 100,000,000 shares
authorized, 35,042,009 shares issued and oustanding
    
    
    35,042Additional paid-in capital
    
    
    24,927,839Accumulated deficit
    
    
    (22,917,968
    )Total Stockholders Equity
    
    
    2,044,913$
    4,038,030
 See report of independent registered public accounting firm and notes to financial statements.
    
    F-2




---



##### 



POWER EFFICIENCY CORPORATION
 Year Ended December 31,2006
        
    2005REVENUES
    
    $
    188,811
    
    
    $
    276,405COMPONENTS OF COST OF SALES:Material, labor and overhead
    
    
    136,240
    
    
    
    245,789GROSS MARGIN
    
    
    52,571
    
    
    
    30,616COSTS AND EXPENSES:Research and development
    
    
    567,591
    
    
    
    418,016Selling, general and administrative
    
    
    3,118,233
    
    
    
    1,641,307Depreciation and amortization
    
    
    34,028
    
    
    
    22,470Total Costs and Expenses
    
    
    3,719,852
    
    
    
    2,081,793LOSS FROM OPERATIONS
    
    
    (3,667,281
    )
    
    
    (2,051,177
    )OTHER INCOME (EXPENSE):Interest income
    
    
    9,243
    
    
    
    13,847Interest expense
    
    
    (1,354,195
    )
    
    
    (529,387
    )Total Other Expenses, Net
    
    
    (1,344,952
    )
    
    
    (515,540
    )LOSS BEFORE PROVISION FOR TAXES
    
    
    (5,012,233
    )
    
    
    (2,566,717
    )PROVISION FOR TAXES
    
    
    (8,542
    )
    
    
    (3,846
    )NET LOSS
    
    $
    (5,020,775
    )
    
    $
    (2,570,563
    )BASIC AND FULLY DILUTED LOSS PER COMMON
SHARE
    
    $
    (0.20
    )
    
    $
    (0.18
    )WEIGHTED AVERAGE COMMON SHARES
OUTSTANDINGBASIC
    
    
    25,150,386
    
    
    
    14,254,029
 See report of independent registered public accounting firm and notes to financial statements.
    
    F-3




---



##### 



POWER EFFICIENCY CORPORATION
 Additional
    
    
    
    
    
    TotalCommon Stock
    
    Preferred Stock
    
    Paid-in
    
    Accumulated
    
    StockholdersShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Deficit
    
    EquityBalance, January 1, 2005
    
    
    5,020,418
    
    
    $
    5,020
    
    
    
    3,328,737
    
    
    $
    3,329
    
    
    $
    16,386,611
    
    
    $
    (15,326,630
    )
    
    $
    1,068,330Issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    1,385,542
    
    
    
    1,386
    
    
    
    238,638
    
    
    
    
    
    
    
    240,024Issuance of common stock
    
    
    14,500,000
    
    
    
    14,500
    
    
    
    
    
    
    
    
    
    
    
    1,360,633
    
    
    
    
    
    
    
    1,375,133Common stock issued upon conversion
of preferred stock
    
    
    3,918,848
    
    
    
    3,919
    
    
    
    (4,714,279
    )
    
    
    (4,715
    )
    
    
    796
    
    
    
    
    
    
    
    Warrants and options issued in connection
with services from consultants and vendors
and the forgiveness of indebtedness
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140,502
    
    
    
    
    
    
    
    140,502Warrants and options issued in connection
with the issuance of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,487,891
    
    
    
    
    
    
    
    1,487,891Expenses related to issuance of
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (425,894
    )
    
    
    
    
    
    
    (425,894
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,570,563
    )
    
    
    (2,570,563
    )Balance, December 31, 2005
    
    
    23,439,266
    
    
    $
    23,439
    
    
    
    
    
    
    $
    
    
    
    $
    19,189,177
    
    
    $
    (17,897,193
    )
    
    $
    1,315,423Issuance of common stock
    
    
    11,000,008
    
    
    
    11,000
    
    
    
    
    
    
    
    
    
    
    
    3,199,300
    
    
    
    
    
    
    
    3,210,300Common stock issued upon exercise of
warrants
    
    
    602,735
    
    
    
    603
    
    
    
    
    
    
    
    
    
    
    
    (603
    )
    
    
    
    
    
    
    Warrants and options issued in connection
with the issuance of common stock and debt
securities and to employees and consultants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,569,965
    
    
    
    
    
    
    
    2,569,965Expenses related to issuance of
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,000
    )
    
    
    
    
    
    
    (30,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,020,775
    )
    
    
    (5,020,775
    )Balance, December 31, 2006
    
    
    35,042,009
    
    
    $
    35,042
    
    
    
    
    
    
    $
    
    
    
    $
    24,927,839
    
    
    $
    (22,917,968
    )
    
    $
    2,044,913
 See report of independent registered public accouning firm and notes to financial statements.
    
    F-4




---



##### 



POWER EFFICIENCY CORPORATION
 Year Ended December 31,2006
    
    2005CASH FLOWS PROVIDED BY (USED FOR):operating activities:Net loss
    
    $
    (5,020,775
    )
    
    $
    (2,570,563
    )Adjustments to reconcile net loss to net cash
used for operating activities:Bad debt expense
    
    
    11,470
    
    
    
    14,963Depreciation and amortization
    
    
    34,028
    
    
    
    22,470Loss on disposition of fixed assets
    
    
    585
    
    
    
    Debt discount related to issuance of debt securities
    
    
    1,039,451
    
    
    
    252,015Amortization of deferred financing costs
    
    
    70,364
    
    
    
    80,584Warrants and options issued in connection with settlements, services from
consultants, vendors, the forgiveness of indebtedness, the issuance
of debt, and to employees and consultants
    
    
    1,074,848
    
    
    
    140,502Common Stock issued for consulting services
    
    
    90,000
    
    
    
    Changes in certain assets and liabilities:Accounts receivable
    
    
    26,464
    
    
    
    (53,556
    )Inventory
    
    
    14,487
    
    
    
    16,478Prepaid expenses and other
    
    
    (3,206
    )
    
    
    (65,337
    )Deposits
    
    
    (33,875
    )
    
    
    Restricted cash related to payment of indebtedness
    
    
    (4,688
    )
    
    
    215,033Other assets
    
    
    
    
    
    
    (6,339
    )Accounts payable and accrued expenses
    
    
    (55,454
    )
    
    
    (46,685
    )Customer deposits
    
    
    (5,105
    )
    
    
    5,105Accrued salaries and payroll taxes
    
    
    4,682
    
    
    
    (85,179
    )Net Cash Used for Operating Activities
    
    
    (2,756,724
    )
    
    
    (2,080,509
    )investing activities:Purchase of property, equipment and other assets
    
    
    (90,567
    )
    
    
    (4,613
    )Net Cash Used for Investing Activities
    
    
    (90,567
    )
    
    
    (4,613
    )financing activities:Deferred financing costs
    
    
    
    
    
    
    (63,457
    )Proceeds from issuance of equity securities, net of costs
    
    
    3,180,000
    
    
    
    2,677,153Proceeds from issuance of debt securities
    
    
    2,000,000
    
    
    
    125,000Proceeds from line of credit
    
    
    1,500,000
    
    
    
    Note payable from legal settlement with former landlord, net
    
    
    
    
    
    
    38,297Payments on notes payable
    
    
    (1,648,245
    )
    
    
    Payments on line of credit
    
    
    (1,500,000
    )
    
    
    Payments on loans to stockholders, officers and
former officers
    
    
    
    
    
    
    (75,222
    )Net Cash Provided by Financing Activities
    
    
    3,531,755
    
    
    
    2,701,771INCREASE IN CASH
    
    
    684,464
    
    
    
    616,649CASHBeginning of year
    
    
    1,009,120
    
    
    
    392,471End of year
    
    $
    1,693,584
    
    
    $
    1,009,120
 See report of independent registered public accounting firm and notes to financial statements.
    
    F-5




---



##### 



POWER EFFICIENCY CORPORATION
 
 
 
 Power Genius
   
 Use of Estimates:
 Inventories:
 Accounts Receivable:
 Research and Development:
 Property, Equipment and Depreciation:
 F-6




---



##### 



POWER EFFICIENCY CORPORATION
 Website and Amortization:
 Shipping and Handling Costs:
 Deferred Financing Costs:
 Patents:
 Revenue Recognition:
 Loss Per Common Share:
  Accounting for Stock Based Compensation:
 F-7




---



##### 



POWER EFFICIENCY CORPORATION
  Product Warranties:
 Provision for Income Taxes:
  Goodwill:
 Advertising:
 F-8




---



##### 



POWER EFFICIENCY CORPORATION
 New Accounting Pronouncements:  Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
 Accounting for Uncertainty in Income
Taxes
 Financial Statement Reclassifications:
 F-9




---



##### 



POWER EFFICIENCY CORPORATION
 
    
  Prepaid insurance
    
    $
    29,019Prepaid expenses
    
    
    41,449Prepaid expenses and other current assets
    
    $
    70,468
 
  Machinery and equipment
    
    $
    86,341Office furniture and equipment
    
    
    23,520109,860Less: Accumulated depreciation
    
    
    33,804Property and Equipment, Net
    
    $
    76,056
  F-10




---



##### 



POWER EFFICIENCY CORPORATION
 
  
  Patents
    
    $
    42,675Less: Accumulated amortization
    
    
    8,864Intangible Assets, Net
    
    $
    33,811
    2007
    
    $
    9922008
    
    
    9922009
    
    
    9922010
    
    
    9922011
    
    
    992Thereafter
    
    
    28,851$
    33,811
 
    F-11




---



##### 



POWER EFFICIENCY CORPORATION
 
   County
    
    2006
    
    2005Canada
    
    
    
    
    
    
    24
    %Mexico
    
    
    
    
    
    
    7
    %Sweden
    
    
    3
    %
    
    
    1
    %
 
  Work in process
    
    $
    21,442Raw materials
    
    
    152,378Reserve for inventory obsolescence
    
    
    (16,968
    )$
    156,852
 
   2006
    
    2005Statutory rate
    
    
    (34
    )%
    
    
    (34
    )%State income tax  all states
    
    
    (6
    )%
    
    
    (6
    )%(40
    )%
    
    
    (40
    )%Current year valuation allowance
    
    
    40
    %
    
    
    40
    %Benefit for income taxes
    
    
    0
    %
    
    
    0
    %
 F-12




---



##### 



POWER EFFICIENCY CORPORATION
 
 
  AverageWarrants
    
    Exercise PriceWarrants outstanding at January 1, 2005
    
    
    2,580,702
    
    
    $
    0.77Issued during 2005
    
    
    10,678,657
    
    
    
    0.39Expired during 2005
    
    
    (7,142
    )
    
    
    14.00Warrants outstanding at December 31, 2005
    
    
    13,252,217
    
    
    
    0.45Issued during 2006
    
    
    10,821,576
    
    
    
    0.36Exercised during 2006
    
    
    (1,701,063
    )
    
    
    0.20Warrants outstanding at December 31, 2006
    
    
    22,372,730
    
    
    $
    0.42
   F-13




---



##### 



POWER EFFICIENCY CORPORATION
 
 
  AverageShares
    
    Exercise PriceOptions outstanding and exercisable at January 1, 2005
    
    
    3,172,732
    
    
    $
    2.00Granted during 2005
    
    
    11,250,000
    
    
    
    0.27Cancelled during 2005
    
    
    (1,857,396
    )
    
    
    0.72Expired during 2005
    
    
    (94,973
    )
    
    
    8.46Options outstanding and exercisable at December 31, 2005
    
    
    12,470,363
    
    
    $
    0.46Granted during 2006
    
    
    5,587,500
    
    
    
    0.24Cancelled during 2006
    
    
    (3,259,592
    )
    
    
    0.45Expired during 2006
    
    
    (63,375
    )
    
    
    14.00Options outstanding and exercisable at December 31, 2006
    
    
    14,734,896
    
    
    $
    0.33
      F-14




---



##### 



POWER EFFICIENCY CORPORATION
 
 Share Based Compensation Payments:
    2006
    
    2005Net loss  as reported
    
    $
    (5,050,775
    )
    
    $
    (2,570,563
    )Required adjustment to net loss
    
    
    1,074,848
    
    
    
    Net loss  pro forma
    
    $
    (3,975,927
    )
    
    $
    (2,570,563
    )Loss per common share  as reported
    
    
    (0.20
    )
    
    
    (0.18
    )Loss per common share  pro forma
    
    
    (0.16
    )
    
    
    (0.18
    )
 F-15




---



##### 



POWER EFFICIENCY CORPORATION
 
 
 Leases:
  Year2007
    
    $
    138,7842008
    
    
    142,7202009
    
    
    147,0762010
    
    
    151,5112011
    
    
    25,375$
    605,466
  Patent License Agreements:
  F-16




---



##### 



POWER EFFICIENCY CORPORATION
 
 Litigation:
 Subcontractors:
  Investment Advisory Agreements:
   F-17




---



##### 



POWER EFFICIENCY CORPORATION
 
    
    F-18




---



##### 



POWER EFFICIENCY CORPORATION
 
  
  2006
    
    2005Interest
    
    $
    314,750
    
    
    $
    241,691Income/Franchise Taxes
    
    $
    8,542
    
    
    $
    3,846
 
   F-19




---



##### 



POWER EFFICIENCY CORPORATION
 
      F-20




---



##### 



POWER EFFICIENCY CORPORATION
   
 
  F-21




---



##### 



POWER EFFICIENCY CORPORATION
    
  F-22




---



##### 



POWER EFFICIENCY CORPORATION
      F-23




---



##### 



POWER EFFICIENCY CORPORATION
 
      F-24




---



##### 





POWER EFFICIENCY CORPORATION








F-25




---



##### 





POWER EFFICIENCY CORPORATION

























F-26




---



##### 





POWER EFFICIENCY CORPORATION








st


F-27




---



##### 



Item 8.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.
 Item 8A.
    
    Controls and Procedures.
     Item 8B.
    
    Other Information.None.
 PART III
 Item 9.
    
    Directors, Executive Officers, Promoters and Control Persons of the Company.
 INFORMATION ABOUT THE COMPANYS EXECUTIVE OFFICERS AND DIRECTORS
  DirectorName
    
    Age
    
    Since
    
    PositionSteven Z. Strasser
    
    58
    
    2002
    
    Chairman, Chief Executive OfficerJohn (BJ) Lackland
    
    36
    
    2002
    
    Director, Chief Financial Officer, and SecretaryRaymond J. Skiptunis
    
    64
    
    2002
    
    Director, Chairman of the Audit CommitteeGeorge Boyadjieff
    
    68
    
    2006
    
    Director, Senior Technical AdvisorDouglas M. Dunn
    
    64
    
    2006
    
    DirectorRichard Morgan
    
    61
    
    2007
    
    DirectorGary Rado
    
    65
    
    2005
    
    Director




---



##### 



Director Independence
  Steven Strasser
   John (BJ) Lackland
  Raymond J. Skiptunis
 George Boyadjieff 
   Dr. Douglas Dunn 




---



##### 



Richard Morgan 
 Gary Rado
 Board of Directors and Committees of the Board
    Audit Committee
  
    
    selects the independent auditors, considering independence and effectiveness;
    
    discusses the scope and results of the audit with the independent auditors and reviews with
management andthe independent auditors our interim and year-end operating results;
    
    considers the adequacy of our internal accounting controls and audit proceeds;
    
    reviews and approves all audit and non-audit services to be performed by the independent
auditors; and
    
    administers the whistleblower policy.




---



##### 



Compensation Committee
  
    
    recommends to the board of directors the compensation level of the executive officers;
    
    reviews and makes recommendations to our board of directors with respect to our equity incentive plans;
    
    establishes and reviews general policies relating to compensation and benefits of our employees.
 Committee Interlocks and Insider Participation
    CODE OF ETHICS
  Item 10.      Executive Compensation.
 Summary Compensation Table




---



##### 



SUMMARY COMPENSATION TABLE
 NonqualifiedStock
    
    Option
    
    Non-Equity
    
    Deferred
    
    All OtherBonus
    
    Awards
    
    Awards
    
    Incentive Plan
    
    Compensation
    
    CompensationName and principal position
    
    Year
    
    Salary ($)
    
    ($)
    
    ($)
    
    ($)
    
    Compensation ($)
    
    Earnings ($)
    
    ($)
    
    Total ($)Steven Z. Strasser(1)
    
    
    2006
    
    
    $
    288,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    288,750Chairman and Chief
    
    
    2005
    
    
    $
    275,000
    
    
    
    
    
    
    
    
    
    
    $
    2,218,566
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,493,566Executive Officer
    
    
    2004
    
    
    $
    60,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    60,000John (BJ) Lackland (2)
    
    
    2006
    
    
    $
    183,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    183,750Director and Chief
    
    
    2005
    
    
    $
    175,000
    
    
    
    
    
    
    
    
    
    
    $
    1,003,908
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,178,908Financial Officer
    
    
    2004
    
    
    $
    60,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Robert M. Murray (3)
    
    
    2006
    
    
    $
    175,000
    
    
    
    
    
    
    
    
    
    
    $
    670,000
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    845,000Chief Operating Officer
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 1. Effective June 1, 2005, Mr. Strasser entered into an employment contract with the Company. Mr.
Strasser agreed to have his first years salary paid $60,000 in cash and options to purchase
1,612,500 shares of common stock at an exercise price equal to not less than market at date of
grant in lieu of remaining cash vesting quarterly over one year. Mr. Strasser was also granted an
additional 3,000,000 options on June 1, 2005 as part of his employment contract.2. Effective June 1, 2005, Mr. Lackland entered into an employment contract with the Company. Mr.
Lackland agreed to have his first years salary paid $120,000 in cash and options to purchase
412,500 shares of common stock at an exercise price equal to market at date of grant in lieu of
remaining cash vesting quarterly over one year. Mr. Lackland was also granted an additional
1,800,000 options on June 1, 2005 as part of his employment contract.3. Mr. Murray resigned effective January 5, 2007 and all of Mr. Murrays stock options were
cancelled as of this date. Narrative Disclosure to Summary Compensation Table
   Common StockName
    
    Salary(1)
    
    Bonus(4)
    
    Options(5)Steven Strasser
    
    $
    275,000
    (2)
    
    
    
    
    
    
    3,000,000BJ Lackland
    
    $
    175,000
    (3)
    
    
    
    
    
    
    1,800,000
 
 (1)
    
    To be increased annually by at least 5% of prior year.(2)
    
    First years salary to be paid $60,000 in cash and options to purchase 1,612,500 shares of
Common Stock at an exercise price equal to not less than market at date of grant in lieu of
remaining cash vesting quarterly over one year.




---



##### 



(3)
    
    First years salary to be paid $120,000 in cash and options to purchase 412,500 shares of
Common Stock at an exercise price equal to market at date of grant in lieu of remaining cash
vesting quarterly over one year.(4)
    
    At the Boards discretion.(5)
    
    Vesting evenly and quarterly over five years. Outstanding equity awards
 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 OPTION AWARDS
    
    STOCK AWARDSEquityEquity
    
    IncentiveEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incentive
    
    Plan Awards:Incentive
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    Plan Awards:
    
    Market orPlan Awards:
    
    
    
    
    
    
    
    
    
    of
    
    Market
    
    Number of
    
    Payout ValueNumber of
    
    Number of
    
    
    
    
    
    
    
    
    
    Shares
    
    Value of
    
    Unearned
    
    of UnearnedNumber of
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    or Units
    
    Shares or
    
    Shares,
    
    Shares, UnitsSecurities
    
    Underlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    of Stock
    
    Units of
    
    Units or
    
    or OtherUnderlying
    
    Unexercised
    
    Unexercised
    
    Option
    
    
    
    
    
    That
    
    Stock
    
    Other Rights
    
    Rights ThatUnexercised
    
    Options
    
    Unearned
    
    Exercise
    
    Option
    
    Have Not
    
    That Have
    
    That Have
    
    Have NotOptions (#)
    
    (#)
    
    Options
    
    Price
    
    Expiration
    
    Vested
    
    Not Vested
    
    Not Vested
    
    VestedName
    
    Exercisable
    
    Unexercisable
    
    (#)
    
    ($)
    
    Date
    
    (#)
    
    ($)
    
    (#)
    
    (#)Steven Strasser
    
    
    1,022,727
    
    
    
    1,550,002
    
    
    
    
    
    
    $
    0.22
    
    
    
    5/31/2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,693,773
    
    
    
    399,998
    
    
    
    
    
    
    $
    0.20
    
    
    
    5/31/2015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    550,000
    
    
    
    50,000
    
    
    
    
    
    
    $
    0.65
    
    
    
    11/28/2015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BJ Lackland
    
    
    1,042,500
    
    
    
    1,170,000
    
    
    
    
    
    
    $
    0.20
    
    
    
    5/31/2015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    325,000
    
    
    
    50,000
    
    
    
    
    
    
    $
    0.65
    
    
    
    11/28/2015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Robert M. Murray(1)
    
    
    
    
    
    
    2,500,000
    
    
    
    
    
    
    $
    0.25
    
    
    
    4/16/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 1.
    
    Mr. Murray resigned effective January 5, 2007 and all of Mr. Murrays stock options were
cancelled as of this date. Stock Option Plan Narrative Disclosure
  2000 Stock Option and Restricted Stock Plan, or the 2000 Plan
  Share Reserve
 Administration
 Eligibility




---



##### 



Options
 Stock Awards
 Adjustments upon Merger or Change in Control
 
    
    assumption or substitution of, or adjustment to, each outstanding award;
    
    acceleration of the vesting of options and stock appreciation rights;
    
    termination of any restrictions on stock awards or cash awards; or
    
    cancellation of awards in exchange for a cash payment to the participant.
 Amendment and Termination
 Compensation of Directors Summary Table
 DIRECTOR COMPENSATION
 Fees
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    Non-QualifiedEarned or
    
    
    
    
    
    
    
    
    
    Incentive
    
    DeferredPaid in
    
    Stock
    
    
    
    
    
    Plan
    
    Compensation
    
    AllCash
    
    Awards
    
    Option Awards
    
    Compensation
    
    Earnings
    
    OtherName (a)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    Compensation ($)
    
    Total ($)Raymond J. Skiptunis
    
    $
    6,000
    
    
    
    
    
    
    $
    39,038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    45,038George Boyadjieff
    
    
    
    
    
    
    
    
    
    $
    26,025
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    26,025Douglas M. Dunn
    
    
    
    
    
    
    
    
    
    $
    26,025
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    26,025Richard Morgan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gary Rado
    
    
    
    
    
    
    
    
    
    $
    8,675
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,675
 Narrative to Director Compensation




---



##### 



Compensation Disclosure and Analysis
  
    
    The members and role of our Compensation Committee;
    
    Our compensation-setting process; and
    
    Our compensation decisions for fiscal year 2006.
   
    
    the Companys overall performance;
    
    the individual executives performance and responsibilities; and
    
    market conditions that affect executive salary.
  
    
    We did not increase base salaries for the named executive officers, and there is no plan to do so in fiscal 2007.
    
    In 2006, no bonuses were awarded to the named executive officers.
    
    In 2006, only one then-named executive officer received a stock option grant, and these
grants were subsequently canceled upon the executive officers resignation.
 Limitation of Liability and Indemnification of Directors and Officers




---



##### 



Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
 STOCK OWNERSHIP
  Name and Address of
    
    
    
    
    
    Percent ofTitle of Class
    
    Beneficial Owner(1)
    
    Shares Owned
    
    Shares Owned(10)Common Stock
    
    Steven Strasser, CEO, Chairman of the Board
    
    
    15,706,240
    (2)
    
    
    22.78
    %Common Stock
    
    John (BJ) Lackland, CFO, Director
    
    
    1,607,500
    (3)
    
    
    2.33
    %Common Stock
    
    Raymond J. Skiptunis, Director
    
    
    397,824
    (4)
    
    Less than 1%Common Stock
    
    Gary Rado, Director
    
    
    150,000
    (5)
    
    Less than 1%Common Stock
    
    George Boyadjieff, Director
    
    
    2,050,000
    (6)
    
    
    2.97
    %Common Stock
    
    Douglas Dunn, Director
    
    
    100,000
    (7)
    
    Less than 1%Common Stock
    
    Richard Morgan, Director
    
    
    25,000
    (8)
    
    Less than 1%Common Stock
    
    Summit Energy Ventures, LLC
    
    
    8,803,901
    (2)
    
    
    12.77
    %Common Stock
    
    Sarkowski Family L.P.
    
    
    5,429,689
    
    
    
    7.88
    %Common Stock
    
    Ron Boyer
    
    
    4,364,154
    
    
    
    6.33
    %Common Stock
    
    Commerce Energy Group
    
    
    3,838,333
    (9)
    
    
    5.57
    %Common Stock
    
    All Executive Officers and Directors as a
Group (6 persons)
    
    
    20,036,564
    
    
    
    29.06
    %
 
 (1)
    
    Information in this table regarding directors and executive officers is based on information
provided by them. Unless otherwise indicated in the footnotes and subject to community
property laws where applicable, each of the directors and executive officers has sole voting
and/or investment power with respect to such shares. The address for each of the persons
reported in the table other than Commerce Energy Group is in care of Power Efficiency
Corporation at 3960 Howard Hughes Pkwy, Ste 460, Las Vegas, Nevada 89169.(2)
    
    Includes 8,803,901 common shares and common shares subject to options and warrants
exercisable within 60 days of the date hereof held by Summit, in which Steven Strasser is one
of two members, and 5,735,671 common shares subject to options and warrants which are
presently exercisable or will become exercisable within 60 days of the date hereof. Mr.
Strasser was also granted an additional 2,221,449 common shares subject to options and
warrants which will become exercisable after 60 days of the date hereof. Mr. Strassers
options and warrants expire on various dates from May, 2010 through November, 2015.(3)
    
    Includes 1,607,500 common shares and common shares subject to options and warrants presently
exercisable or will become exercisable within 60 days of the date hereof. Mr. Lackland was
also granted an additional 980,000 common shares subject to options which will become
exercisable after 60 days of the date hereof. Mr. Lacklands options and warrants expire on
various dates from May, 2010 through November, 2015.(4)
    
    Includes 375,285 common shares subject to options and warrants presently exercisable or will
become exercisable within 60 days of the date hereof. Mr. Skiptunis options and warrants
expire on various dates from October, 2014 through January, 2017.(5)
    
    Includes 150,000 common shares subject to options presently exercisable or will become
exercisable within 60 days of the date hereof. Mr. Rados options expire on various dates
from September, 2015 through January, 2017.(6)
    
    Includes 1,050,000 common shares subject to options and warrants presently exercisable or
will become exercisable within 60 days of the date hereof. Mr. Boyadjieffs options and
warrants expire on various dates from April, 2010 through January, 2017.(7)
    
    Includes 100,000 common shares subject to options presently exercisable or which will become
exercisable within 60 days of the date hereof. Dr. Dunns options expire on various dates
from May 2016 through January, 2017.(8)
    
    Includes 25,000 common shares subject to options presently exercisable or which will become
exercisable within 60 days of the date hereof. Mr. Morgans options expire January, 2017.




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##### 



(9)
    
    Includes 589,284 common shares subject to warrants presently exercisable or which will become
exercisable within 60 days of the date hereof, as well as 3,249,049 common shares owned by
Commerces wholly owned subsidiary, Commonwealth Energy Corporation. Commerce was also
granted 98,995 common shares subject to warrants which will become exercisable after 60 days
of the date hereof. Commerces warrants expire on various dates from October 2009 through
November 2011.(10)
    
    The percentage for common stock includes all common shares subject to options and warrants
exercisable within 60 days of the date hereof. Item 12. Certain Relationships, Related Transactions and Director Independence.
 Relationship with EMTUCK, LLC and Northwest Power Management, Inc
  Relationship with Steven Strasser and Summit
   
 
 
 
 
 Relationship with John (BJ) Lackland
   Relationship with Commonwealth Energy Corporation and Commerce Energy Group




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Item 13. Exhibits.




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Item 14. Principal Accountant Fees and Services.




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SIGNATURES
  power efficiency corporationDated: May 14, 2007
    By:
    /s/ STEVEN STRASSERSteven Strasser, President and ChiefExecutive Officer
and Chairman of the BoardDated: May 14, 2007
    By:
    /s/ JOHN LACKLANDJohn Lackland, Chief Financial
Officer andDirector  Dated: May 14, 2007
    By:
    /s/ Gary RadoGary Rado, DirectorDated: May 14, 2007
    By:
    /s/ George boydjieffGeorge Boyadjieff, DirectorDated: May 14, 2007
    By:
    /s/ Douglas  DunnDr. Douglas Dunn, DirectorDated: May 14, 2007
    By:
    /s/ Richard MorganRichard Morgan, DirectorDated: May 14, 2007
    By:
    /s/ Raymond J. SkiptunisRaymond J. Skiptunis, Director




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##### 



EXHIBIT INDEX
 Description of Document
 ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Companys
Annual Report on Form 10-SB filed on October 20, 2000.3.2
    
    Amendment to the Certificate of Incorporation of the Company dated June 5, 2002, incorporated by
reference to Exhibit 3.1 to Companys Current Report on Form 8-K filed on June 18, 2002.3.3
    
    Amendment to the Certificate of Incorporation of the Company dated July 6, 2005; incorporated by
reference to Exhibit 3.3 to the Companys Form SB-2 Registration Statement filed October 25, 2005.3.4
    
    Amendment to the Certificate of Incorporation of the Company dated October 13, 2005; incorporated by
reference to Exhibit 3.4 to the Companys Form SB-2 Registration Statement filed October 25, 2005.3.5
    
    Amended and Restated By-laws of the Company dated March 23, 2004; incorporated by reference to Exhibit
3.1 to Companys Quarterly Report on Form 10-QSB filed on May 14, 2004.4.1
    
    Stock Purchase Agreement dated June 14, 2002, incorporated by reference to Exhibit 4.1 to Companys
Current Report on Form 8-K filed on June 18, 2002.4.2
    
    Registration Rights Agreement dated June 14, 2002, incorporated by reference to Exhibit 4.4 to Companys
Current Report on Form 8-K filed on June 18, 2002.4.3
    
    Certificate of Designation dated June 13, 2002, incorporated by reference to Exhibit 4.5 to Companys
Current Report on Form 8-K filed on June 18, 2002.4.4
    
    Certificate of Amendment of Certificate of Designation of Series A Convertible Preferred Stock of Power
Efficiency Corporation, incorporated by reference to Exhibit 4.2 to Companys Current Report on Form 8-K
filed on May 25, 2003.4.5
    
    Specimen common stock Certificate of the Company, incorporated by reference to Exhibit 4.5 to the
Companys Form SB-2/A Registration Statement filed December 8, 2005.4.6
    
    Agreement dated April 22, 2005, between the Company and Summit Energy Ventures, LLC, for the issuance of
preferred stock and warrants; incorporated by reference to Exhibit 4.6 to the Companys Form SB-2
Registration Statement filed October 25, 2005.4.7
    
    Agreement dated April 22, 2005, between the Company and Commerce Energy Group, Inc., for the issuance of
preferred stock and warrants; incorporated by reference to Exhibit 4.7 to the Companys Form SB-2
Registration Statement filed October 25, 2005.4.8
    
    Letter of Intent dated April 18, 2005, between the Company and Joseph Stevens & Company, Inc., with
respect to the private offering of common stock and warrants; incorporated by reference to Exhibit 4.8 to
the Companys Form SB-2 Registration Statement filed October 25, 2005.5.1
    
    Opinion of Ellenoff Grossman & Schole, LLP as to the legality of the Companys common stock, incorporated
by reference to Exhibit 5.1 to the Companys Form SB-2 Registration Statement filed April 25, 2007.10.1
    
    Lease Agreement for Companys Ann Arbor, Michigan facility dated February 16, 1996, incorporated by
reference to Exhibit 10(c) to Companys Annual Report on Form 10-SB filed on October 20, 2000.10.2
    
    Stock Purchase Warrant dated June 14, 2002, incorporated by reference to Exhibit 4.2 to Companys Current
Report on Form 8-K filed on June 18, 2002.10.3
    
    Amended and Restated Stockholders Agreement dated June 14, 2002, incorporated by reference to Exhibit
4.3 to Companys Current Report on Form 8-K filed on June 18, 2002.10.4
    
    United States Patent #5,821,726, incorporated by reference to Exhibit 10(g) to Companys Annual Report on
Form 10-SB filed on October 20, 2000.10.5
    
    1994 Stock Option Plan, incorporated by reference to Exhibit 10(i) to Companys Annual Report on Form
10-SB filed on October 20, 2000.10.6
    
    Patent License Agreement (DN-858) with NASA, incorporated by reference to Exhibit 10.10 to Companys
Amended Annual Report on Form 10-SB/A filed on October 26 2001.10.7
    
    Patent License Agreement (DE-256) with NASA incorporated by reference to Exhibit 10.11 to Companys
Amended Annual Report on Form 10-SB/A filed on October 26 2001.10.8
    
    Settlement and Release Agreement with NASA incorporated by reference to Exhibit 10.12 to Companys
Amended Annual Report on Form 10-SB/A filed on October 26 2001.




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##### 



10.9
    
    Modification No. 1 to Patent License Agreement (DE-256) with NASA, incorporated by reference to Exhibit
10.13 to Companys Amended Annual Report on Form 10-SB/A filed on October 26 2001.10.10
    
    Product Warranty, incorporated by reference to Exhibit 10.16 to Companys Amended Annual Report on Form
10-SB/A filed on October 26 2001.10.11
    
    Test Report from Medsker Electric, Inc., incorporated by reference to Exhibit 10.17 to Companys Amended
Annual Report on Form 10-SB/A filed on October 26 2001.10.12
    
    Test Report from Oak Ridge National Laboratory, incorporated by reference to Exhibit 10.18 to Companys
Amended Annual Report on Form 10-SB/A filed on October 26 2001.10.13
    
    Test Report from Oregon State University  The Motor Systems Resource Facility, incorporated by
reference to Exhibit 10.19 to Companys Amended Annual Report on Form 10-SB/A filed on October 26 2001.10.14
    
    Test Report from Otis Elevator Co., incorporated by reference to Exhibit 10.20 to Companys Amended
Annual Report on Form 10-SB/A filed on October 26 2001.10.15
    
    Employment Agreement with Stephen Shulman, incorporated by reference to Exhibit 10.23 to Companys
Amended Annual Report on Form 10-SB/A filed on October 26 2001.10.16
    
    Employment Agreement with Nicholas Anderson, incorporated by reference to Exhibit 10.24 to Companys
Amended Annual Report on Form 10-SB/A filed on October 26 2001.10.17
    
    Employment Agreement with Raymond J. Skiptunis, incorporated by reference to Exhibit 10.24 to Companys
Annual Report on Form 10-KSB filed on March 31, 2003.10.18
    
    Revolving Credit Note dated May 8, 2003, incorporated by reference to Exhibit 10.1 to Companys Current
Report on Form 8-K filed May 25, 2003.10.19
    
    Security Agreement dated May, 2003, incorporated by reference to Exhibit 10.2 to Companys Current Report
on Form 8-K filed May 25, 2003.10.20
    
    Certificate of Amendment of Warrant, incorporated by reference to Exhibit 10.4 to Companys Current
Report on Form 8-K filed May 25, 2003.10.21
    
    Employment Agreement with Richard Koch dated June 9, 2003, incorporated by reference to Exhibit 10.1 to
Companys Current Report on Form 8-K filed June 20, 2003.10.22
    
    Settlement and Release Agreement with Raymond J. Skiptunis dated June 9, 2003, incorporated by reference
to Exhibit 10.2 to Companys Current Report on Form 8-K filed June 20, 2003.10.23
    
    Employment Agreement with Raymond J. Skiptunis dated June 9, 2003 incorporated by reference to Exhibit
10.3 to Companys Current Report on Form 8-K filed June 20, 2003.10.24
    
    Employment Agreement with Keith Collin dated November 13, 2003, incorporated by reference to Exhibit 10.1
to Companys Quarterly Report on Form 10-QSB filed November 14, 2003.10.25
    
    Employment Agreement with Thomas Mills dated October 6, 2003, incorporated by reference to Exhibit 10.2
to Companys Quarterly Report on Form 10-QSB filed November 14, 2003.10.26
    
    Subscription Agreement with Nicholas Anderson dated September 30, 2003, incorporated by reference to
Exhibit 10.3 to Companys Quarterly Report on Form 10-QSB filed November 14, 2003.10.27
    
    Settlement Agreement with Nicholas Anderson dated September 30, 2003, incorporated by reference to
Exhibit 10.4 to Companys Quarterly Report on Form 10-QSB filed November 14, 2003.10.28
    
    Settlement Agreement and Mutual General Release with Stephen L. Shulman and Summit Energy Ventures, LLC
dated October 3, 2003, incorporated by reference to Exhibit 10.5 to Companys Quarterly Report on Form
10-QSB filed November 14, 2003.10.29
    
    Promissory Note granted to Stephen Shulman dated September 15, 2003 incorporated by reference to Exhibit
10.6 to Companys Quarterly Report on Form 10-QSB filed November 14, 2003.10.30
    
    Amendment to the Amended and Restated Stockholders Agreement among Anthony Caputo, Nicholas Anderson,
Philip Elkus, Stephen Shulamn, Performance Control, LLC, Summit Energy Ventures, LLC and Power Efficiency
Corporation dated September 22, 2003, incorporated by reference to Exhibit 10.7 to Companys Quarterly
Report on Form 10-QSB filed November 14, 2003.10.31
    
    Regulation S Stock Purchase Agreement with Starz Investments Limited dated April 23, 2003, incorporated
by reference to Exhibit 10.9 to Companys Quarterly Report on Form 10-QSB filed November 14, 2003.10.32
    
    Addendum to the Regulation S Stock Purchase Agreement dated June 13, 2003 incorporated by reference to
Exhibit 10.10 to Companys Quarterly Report on Form 10-QSB filed November 14, 2003.10.33
    
    Warrant Agreement with Summit Energy Ventures, LLC dated February 26, 2004, incorporated by reference to




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##### 



Exhibit 10.33 to Companys Current Report on Form 8-K filed February 27, 2004.10.34
    
    Consulting Agreement with Raymond Skiptunis dated September 22, 2003, incorporated by reference to
Exhibit 10.35 to Companys Annual Report on Form 10-KSB filed March 10, 2004.10.35
    
    Business Property Lease with Arens Investment Company dated November 1, 2003, incorporated by reference
to Exhibit 10.36 to Companys Annual Report on Form 10-KSB filed March 10, 2004.10.36
    
    Subscription Agreement with Richard Koch dated December 23, 2003, incorporated by reference to Exhibit
10.37 to Companys Annual Report on Form 10-KSB filed March 10, 2004.10.37
    
    Subscription Agreement with Raymond Skiptunis dated January 8, 2004, incorporated by reference to Exhibit
10.38 to Companys Annual Report on Form 10-KSB filed March 10, 2004.10.38
    
    Subscription Agreement with Leonard Bellezza dated February 16, 2004, incorporated by reference to
Exhibit 10.39 to Companys Annual Report on Form 10-KSB filed March 10, 2004.10.39
    
    Letter agreement with Pali Capital, Inc. dated February 25, 2004, incorporated by reference to Exhibit
10.40 to Companys Annual Report on Form 10-KSB filed March 10, 2004.10.40
    
    Amended and Restated 2000 Stock Option and Restricted Stock Plan dated February 23, 2004, incorporated by
reference to Exhibit 10.41 to Companys Annual Report on Form 10-KSB filed March 10, 2004.10.41
    
    Amended and Restated 1994 Stock Option Plan, incorporated by reference to Exhibit 10.42 to Companys
Annual Report on Form 10-KSB filed March 10, 2004.10.42
    
    Line of Credit Agreement with Summit Energy Ventures, LLC, incorporated by reference to Exhibit 10.1 to
Companys Current Report on Form 8-K filed May 5, 2004.10.43
    
    Single Phase Licensing Agreement with Commerce Energy Group, incorporated by reference to Exhibit 10.1 to
Companys Quarterly Report on Form 10-QSB filed November 15, 2004.10.44
    
    Settlement and Consulting Agreement with Ray Skiptunis dated September 27, 2004, incorporated by
reference to Exhibit 10.45 to the Companys Annual Report on Form 10-KSB filed on March 31, 2005.10.45
    
    Settlement Agreement with Richard Koch dated December 15, 2004, incorporated by reference to Exhibit
10.46 to the Companys Annual Report on Form 10-KSB filed on March 31, 2005.10.46
    
    Management Agreement with Northwest Power Management, Inc. dated November 18, 2004, incorporated by
reference to Exhibit 10.47 to the Companys Annual Report on Form 10-KSB filed on March 31, 2005.10.47
    
    Business Property Lease Amendment involving Glenborough LLC and Northwest Power Management, Inc. dated
February 7, 2005, incorporated by reference to Exhibit 10.48 to the Companys Annual Report on Form
10-KSB filed on March 31, 2005.10.48
    
    Settlement and Consulting Agreement with Keith Collin dated September 27, 2004, incorporated by reference
to Exhibit 10.49 to the Companys Annual Report on Form 10-KSB filed on March 31, 2005.10.49
    
    Settlement Agreement with Tom Mills dated December 21, 2004, incorporated by reference to Exhibit 10.50
to the Companys Annual Report on Form 10-KSB filed on March 31, 2005.10.50
    
    Business Property Sublease with Famair, Inc. dated February 11, 2005, incorporated by reference to
Exhibit10.51 to the Companys Annual Report on Form 10-KSB filed on March 31, 2005.10.51
    
    Placement Agency Agreement Dated as of June 1, 2005, between the Company and Joseph Stevens & Co., Inc.;
incorporated by reference to Exhibit 10.51 to the Companys Form SB-2 Registration Statement filed
October 25, 2005.10.52
    
    Form of Placement Agent Warrant issued pursuant to Exhibit 10.51; incorporated by reference to Exhibit
3.2 to Companys Current Report on Form 8-K Filed on July 15,200510.53
    
    Form of Investor Warrant; incorporated by reference to Exhibit 3.1 to Companys Current Report on Form
8-k filed on July 15, 200510.54
    
    Consulting agreement with George Boyadjieff, dated June 9, 2005; incorporated by reference to Exhibit
10.54 to the Companys Form 10-KSB filed on March 31, 200610.55
    
    Consulting agreement with Steven Blum dated February 21, 2006; incorporated by reference to Exhibit 10.55
to the Companys Form 10-KSB filed on March 31, 200610.56
    
    Consulting agreement with CEO Cast, Inc, dated January 2, 2006; incorporated by reference to Exhibit
10.56 to the Companys Form 10-KSB filed on March 31, 200610.57
    
    Letter agreement with USBX Advisory Services, LLC, dated January 6, 2006; incorporated by reference to
Exhibit 10.57 to the Companys Form 10-KSB filed on March 31, 200610.58
    
    Employment agreement with Steven Strasser dated June 1, 2005; incorporated by reference to Exhibit 8.1 to
the Companys Current Report of Form 8-K filed July 13, 2005.




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##### 



10.59
    
    Employment agreement with John Lackland dated June 1, 2005; incorporated by reference to Exhibit 8.2 to
the Companys Current Report on Form 8-K filed on July 13, 2005.10.60
    
    Employment agreement with Nicholas Anderson dated June 1, 2005; incorporated by reference to Exhibit 8.3
to the Companys Current Report on Form 8-K filed on July 13, 2005.10.61
    
    Interim financing agreement with EMTUCK, LLC dated April 18, 2006; incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K filed on April 24, 2006.10.62
    
    Promissory note granted to EMTUCK, LLC dated April 19, 2006; incorporated by reference to Exhibit 10.2 to
the Companys Current Report on Form 8-K filed on April 24, 2006.10.63
    
    Security agreement with EMTUCK, LLC dated April 19, 2006; incorporated by reference to Exhibit 10.3 to
the Companys Current Report on Form 8-K filed on April 24, 2006.10.64
    
    Form of EMTUCK Warrant; incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form
8-K filed on April 24, 2006.10.65
    
    Promissory note granted to EMTUCK, LLC dated May 19, 2006; incorporated by reference to Exhibit 10.2 to
the Companys Current Report on Form 8-K filed on May 26, 2006.10.66
    
    Form of Pali Note Extension Consent Letter dated October 23, 2006; incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K filed on October 27, 2006.10.67
    
    Form of Securities Purchase Agreement, dated November 30, 2006; incorporated by reference to Exhibit 10.1
to the Companys Current Report on Form 8-K filed on December 5, 2006.10.68
    
    Form of Note, dated November 30, 2006; incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed on December 5, 2006.10.69
    
    Form of Debt Warrant; incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form
8-K filed on December 5, 2006.10.70
    
    Form of Equity Warrant; incorporated by reference to Exhibit 4.3 to the Companys Current Report on Form
8-K filed on December 5, 2006.13.1
    
    Annual Report on Form 10-KSB for the year ended December 31, 2004, incorporated by reference filed on
March 31, 2005.13.2
    
    Amended Annual Report on Form 10-KSB/A for the year ended December 31, 2004, incorporated by reference
filed on September 21, 2005.13.3
    
    Quarterly Report on Form 10-QSB for the three and six months ended June 30, 2005, incorporated by
reference filed on August 15, 2005.20.1
    
    Registration Statement on Form SB-2, incorporated by reference filed on December 20, 2005.20.2
    
    Post Effective Amendment No. 1 to Form SB-2 Registration Statement, incorporated by reference filed on
September 19, 2006.20.3
    
    Post Effective Amendment No. 2 to Form SB-2 Registration Statement, incorporated by reference filed on
April 30, 2007.20.4
    
    Registration Statement on Form SB-2, incorporated by reference filed on April 25, 2007.22.1
    
    Proxy Statement on Form DEF 14A, incorporated by reference filed on May 4, 2007.23.1
    
    Consent of Sobel & Co., LLC, Independent Registered Public Accounting Firm, incorporated by reference to
Exhibit 23.1 to the Companys Post Effective Amendment No. 2 to Form SB-2 Registration Statement filed on
May 4, 2007.23.2
    
    Consent of Ellenoff Grossman & Schole, LLP (included in Exhibit 5.1).24.1
    
    Power of Attorney incorporated by reference to Exhibit 24.1 to the Companys Post Effective Amendment No.
1 to Form SB-2 Registration Statement filed on September 19, 2006.31.1
    
    Certification of Steven Strasser pursuant to Section 302 of the Sarbanes-Oxley Act of 2002; filed herewith31.2
    
    Certification of John Lackland pursuant to Section 302 of the Sarbanes-Oxley Act of 2002; filed herewith32.1
    
    Certification of Steven Strasser pursuant to Section 906 of the Sarbanes Oxley Act of 2002; filed herewith32.2
    
    Certification of John Lackland pursuant to Section 906 of the Sarbanes Oxley Act of 2002; filed herewith