**Securitiesand Exchange Commission**

**Washington,D.C. 20549**

 

**FORM10-KSB/A**

**AmendmentNo. 1**

 

**ý****Annualreport under Section 13 or 15(d) of the SecuritiesExchange Act of 1934**

 

**For thefiscal year ended December 31, 2004**

 

**o****Transition report under Section 13 or 15(d) of the SecuritiesExchange Act of 1934**

 

**For thetransition period from                   to                   **

 

**Commission File Number: 000-31805**

 

**PowerEfficiency Corporation**

(Nameof Small Business Issuer in its Charter)

 
| **Delaware**                                                             | ** ** | **22-3337365**                        |
|--------------------------------------------------------------------------|------------|---------------------------------------|
| (State  or Other Jurisdiction of  Incorporation or Organization)         |       | (I.R.S.  Employer Identification No.) |
|                                                                     |       |                                  |
| **3900  Paradise Rd. Ste 283****Las Vegas, NV**                          |       | **89109**                             |
| (Address  of Principal Executive Offices)                                |       | (Zip  Code)                           |
|                                                                     |       |                                  |
| **(702)  697-0377**                                                      |
| (Issuer’s  Telephone Number, Including Area Code)                   |
|                                                                     |
| **Securities Registered under Section 12(g) of the  Exchange Act:** |       |
|                                                                     |       |                                  |   |
| **Common Stock, $.001 Par Value**                                        | ** ** |
| (Title  of Class)                                                        |       |
|                                                                          |            |                                       |  |  |  |

 

Check whether theregistrant: (1) filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the past 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes  ý  No  o

 

Check if there is nodisclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB.  o

 

The issuer’s revenues for theyear ended December 31, 2004 were $284,373.

 

As of March 11, 2005,the aggregate market value of the common stock held by non-affiliates of theissuer was approximately $565,913. This amount is based on the closing price of$0.30 per share for the registrant’s stock as of such date.

 

On March 11, 2005 therewere 5,020,477 shares of the registrant’s common stock outstanding.

 

**Documents Incorporated by Reference**

 

None

 

 

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**EXPLANATORY NOTE**

 

This Amendment No. 1 on Form10-KSB/A to Power Efficiency Corporation’s (the “Company” or the “Registrant”)Annual Report on Form 10-KSB for the year ended December 31, 2004 (the “OriginalFiling”), which was filed with the Securities and Exchange Commission on March 31,2005, is being filed to amend the Original Filing as follows:

 

•                  Item 6. Management’s Discussion and Analysisis amended to properly reflect the Company’s Financial Condition, Liquidity andCapital Resources: For the Year Ended December 31, 2004 information.

 

•                  Item 7. Financial Statements is amended torevise the Cash Flow Statement to properly reflect the Company’s cash flows forthe year ended December 31, 2004.

 

This Amendment No. 1 isfiled pursuant to the Securities and Exchange Commission Release No. 34-50754which provides for 45 additional days beyond the date of the Original Filingfor the filing of the above.

 

As a result of theseamendments, the certifications pursuant to Section 302 of theSarbanes-Oxley Act of 2002, as filed as exhibits to the Original Filing, havebeen re-executed and re-filed as of the date of this Form 10-KSB/A.

 

Except for the amendmentsdescribed above, this Form 10-KSB/A does not modify or update other disclosuresin, or exhibits to, the Original Filing.

 

**Financial Condition, Liquidity, and Capital Resources: Forthe Year Ended December 31, 2004**

 

Sinceinception, the Registrant has financed its operations primarily through thesale of its equity securities. As of December 31, 2004 the Registrant hasreceived a total of approximately $6,254,800 from public and private offeringsof its equity securities, received approximately $445,386 under a bank line ofcredit (which was repaid during 2002), and received $1,000,000 under a line ofcredit with a shareholder (which was converted to Series A-1 PreferredConvertible shares during 2003). In October 2004, the Company received$1,464,806 in debt financing through a debt offering arranged by a placementagent, Pali Capital. Of this total, $300,000 plus accrued interest wasconverted from borrowings with the same shareholder as referenced above. As of December 31,2004 the Registrant had cash and cash equivalents of $392,471. In February 2005,the Registrant received an additional $125,000 in debt financing under thissame debt offering.

 

Netcash used for operating activities for the twelve months ended December 31,2004 was $1,396,151 which primarily consisted of: a net loss of $2,465,631;less allowances for inventory obsolescence of $29,484, depreciation andamortization of $116,294, loss on disposition of fixed assets of $31,036,amortization of debt discounts of $97,000, warrants and options issued inconnection with settlements, services from consultants and vendors, theforgiveness of indebtedness and the issuance of debt of $550,969, an increasein restricted cash related to a note payable of $219,721, decreases in accountsreceivable of $1701, inventory of $143,396 and prepaid expenses and other of $13,079.In addition, these amounts were partially offset by an increase in accountspayable and accrued expenses of $142,830 and accrued salaries and payroll taxesof $84,841.

 

Netcash used for operating activities for the twelve months ended December 31,2003 was $2,028,798 which primarily consisted of: a net loss of $3,016,717;less allowances for bad debts and customer returns of $17,000, allowances forinventory obsolescence of $100,000 and impairment of customer contracts of$40,948, depreciation and amortization of $120,700, additional paid in capital related to issuance of stock options of $77,158,common stock issued for services of $614,991, interest converted to debt of$46,896 and decreases in accounts receivable of $31,511 and inventory of$43,353. In addition, these amounts were partially offset by an increase inprepaid expenses of $18,832 and deposits of $2,646, and decreases in accountspayable and accrued expenses of $63,866 and accrued salaries and payroll taxesof $19,294.

 

Netcash used in investing activities for fiscal year 2004 was $10,187, compared to$42,617 in fiscal year 2003.  The amount for fiscal year 2004 consisted ofthe purchase of property, equipment and other assets of $14,657, which wasoffset by the proceeds from the sale of property, equipment and other assets of$4,470.  The amount for fiscal year 2003entirely consisted of the purchase of property, equipment and other assets.

 

Netcash provided by financing activities for fiscal year 2004 was $1,513,300 whichprimarily consisted of proceeds from the issuance of debt securities of $300,000,from which a $15,000 fee was paid, the issuance of additional debt securitiesof $1,150,000, from which a fee of $115,000 was paid. These amounts were offsetby an increase in deferred financing costs of $117,885 and the payment on loansfrom stockholders of $40,000.  Net cashprovided by financing activities for fiscal year 2003 was $2,099,215, whichprimarily consisted of proceeds from the issuance of equity securities of$1,131,965, net of costs, and advances from line of credit of $1,000,000;off-set by deferred financing costs of $32,750.

 

TheRegistrant expects to experience growth in its operating expenses, particularlyin research and development and selling, general and administrative expenses,for the foreseeable future in order to execute its business strategy. As aresult, the Registrant anticipates that operating expenses will constitute amaterial use of any cash resources.

 

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**POWER EFFICIENCY CORPORATION**

STATEMENTS OF CASH FLOWS

 
| ** **                                                                                                                                                                      | ** ** | **Year Ended December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                                                                                      | ** ** | **2004**                         | ** ** | **2003** | ** ** |
| CASH FLOWS PROVIDED BY (USED FOR):                                                                                                                                              |       |                             |       |   |   |
|   OPERATING  ACTIVITIES:                                                                                                                                                   |       |                             |       |   |   |
| Net loss                                                                                                                                                                        |       | $                                | (2,465,631 | ) | $ | (3,016,717 | ) |
| Adjustments to reconcile net loss to net  cash used for operating activities:                                                                                                   |       |                             |       |   |   |
| Bad debt expense                                                                                                                                                                |       | 5,493                            |       | 17,000 |   |
| Inventory obsolescence reserve                                                                                                                                                  |       | 29,484                           |       | 100,000 |   |
| Impairment of customer contracts                                                                                                                                                |       | 20,141                           |       | 40,948 |   |
| Depreciation and amortization                                                                                                                                                   |       | 116,294                          |       | 120,700 |   |
| Loss on disposition of fixed assets                                                                                                                                             |       | 31,036                           |       | — |   |
| Debt discount related to issuance of debt  securities                                                                                                                           |       | 97,000                           |       | — |   |
| Warrants and options issued in connection  with settlements, services from former employees, consultants and vendors,  the forgiveness of indebtedness and the issuance of debt |       | 550,969                          |       | — |   |
| Issuance of stock options below market  value                                                                                                                                   |       | —                           |       | 77,158 |   |
| Common stock issued for services                                                                                                                                                |       | 34,819                           |       | 614,991 |   |
| Accrued interest on converted debt                                                                                                                                              |       | —                           |       | 46,896 |   |
| Changes in certain assets and liabilities:                                                                                                                                      |       |                             |       |   |   |
| (Increase) decrease in:                                                                                                                                                         |       |                             |       |   |   |
| Accounts receivable                                                                                                                                                             |       | 1,701                            |       | 31,511 |   |
| Inventory                                                                                                                                                                       |       | 143,369                          |       | 43,353 |   |
| Prepaid expenses and other                                                                                                                                                      |       | 13,079                           |       | (18,832 | ) |
| Restricted cash related to payment of  indebtedness                                                                                                                             |       | (219,721                         | )          | — |   |
| Deposits                                                                                                                                                                        |       | 18,146                           |       | (2,646 | ) |
| Increase (decrease) in:                                                                                                                                                         |       |                             |       |   |   |
| Accounts payable and accrued expenses                                                                                                                                           |       | 142,830                          |       | (63,866 | ) |
| Accrued salaries and payroll taxes                                                                                                                                              |       | 84,841                           |       | (19,294 | ) |
| Net Cash Used for Operating Activities                                                                                                                                          |       | (1,396,150                       | )          | (2,028,798 | ) |
|                                                                                                                                                                            |       |                             |       |   |   |
|   INVESTING  ACTIVITIES:                                                                                                                                                   |       |                             |       |   |   |
| Purchase of property, equipment and other  assets                                                                                                                               |       | (14,657                          | )          | (42,617 | ) |
| Proceeds from the sale of property,  equipment and other assets                                                                                                                 |       | 4,470                            |       | — |   |
| Net Cash Used for Investing Activities                                                                                                                                          |       | (10,187                          | )          | (42,617 | ) |
|                                                                                                                                                                            |       |                             |       |   |   |
|   FINANCING  ACTIVITIES:                                                                                                                                                   |       |                             |       |   |   |
| Deferred financing costs                                                                                                                                                        |       | (117,885                         | )          | (32,750 | ) |
| Proceeds from issuance of equity securities,  net of costs                                                                                                                      |       | 181,045                          |       | 1,131,965 |   |
| Proceeds from issuance of debt securities,  net of costs                                                                                                                        |       | 1,464,806                        |       | — |   |
| Advances from line of credit agreement                                                                                                                                          |       | —                           |       | 1,000,000 |   |
| Loans from stockholders, officers, and  former officers                                                                                                                         |       | 25,334                           |       | — |   |
| Payments on loans to stockholders, officers  and former officers                                                                                                                |       | (40,000                          | )          | — |   |
| Net Cash Provided by Financing Activities                                                                                                                                       |       | 1,513,300                        |       | 2,099,215 |   |
|                                                                                                                                                                            |       |                             |       |   |   |
| INCREASE IN CASH                                                                                                                                                                |       | 106,963                          |       | 27,800 |   |
|                                                                                                                                                                            |       |                             |       |   |   |
| CASH                                                                                                                                                                            |       |                             |       |   |   |
| Beginning of year                                                                                                                                                               |       | 285,508                          |       | 257,708 |   |
|                                                                                                                                                                            |       |                             |       |   |   |
| End of year                                                                                                                                                                     |       | $                                | 392,471    |   | $ | 285,508 |   |

 
| *See  report of independent registered public accounting firm and notes to  financial statements.* | ** ** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|------------|

 

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**SIGNATURES**

 

In accordance with Section 13or 15(d) of the Exchange Act, the Registrant caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.

 

**POWER EFFICIENCY CORPORATION**

 

 
| *Dated:    April 5, 2005* | *By:*    | */s/  Steven Strasser*                                     |   |
|------------------------------------------|----------|------------------------------------------------------------|--------|
|                                     |     | *Steven  Strasser, President and  Chief Executive Officer* |
| * *                                 | * * |
| *Dated:    April 5, 2005* | *By:*    | */s/ John  Lackland*                                       |   |
|                                     |     | *John  Lackland, Interim Chief  Financial Officer*         |

 

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