**SECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

**FORM 10–QSB**

**(Mark One)**

   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended            March 31, 2003          

**OR**

   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                        

Commission File Number            0–31805          

| **POWER EFFICIENCY CORPORATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       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| (Exact Name        of Small Business Issuer as Specified in its Charter)**Delaware****22-3337365**(State or Other      Jurisdiction of(I.R.S. EmployerIncorporation      or Organization)Identification      No.)  **4220 Varsity      Drive, Suite E      Ann Arbor, MI 48108** **(734) 975-9111** (Address of Principal Executive      Offices) (Issuer's Telephone Number,      Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has beensubject to such  filing requirements for the past 90 days.

Yes    X                      No ___

The number of shares outstanding of the Issuer’s Common Stock, $.001 ParValue, as of May 10, 2003 was 6,827,009.

Transitional Small Business Disclosure Format (check one):

Yes                             No   X  

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**POWER EFFICIENCY CORPORATION    FORM 10-QSB INDEX**
PART        I – FINANCIAL INFORMATION             ITEM        1.     Financial Statements                Condensed        Balance Sheet as of March 31, 2003  3             Condensed        Statements of Operations for the three months ended March 31, 2003   4             Condensed        Statements of Cash Flows for the three months ended March 31, 2003 and        2002   5             Notes        to Condensed Financial Statements  6-7          ITEM        2.     Management’s Discussion and Analysis        Or Plan of Operation   8-10          ITEM        3.     Controls and Procedures  10          Part        II — OTHER INFORMATION             ITEM        1.     Legal Proceedings  10          ITEM        2.     Changes in Securities and Use of Proceeds  10          ITEM        3.     Defaults Upon Senior Securities  11          ITEM        4.     Submission of Matters to a Vote of Security        Holders  11          ITEM        5.     Other Information  11          ITEM        6.     Exhibits and Reports on Form 8-K  11          Signatures  12          Certification        of Chief Executive Officer as Adopted  13          Certification        of Chief Financial Officer as Adopted  14 
 

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**PART I.**     **FINANCIAL  INFORMATION**

**Item 1.**     **Financial Statements**

**POWER EFFICIENCY CORPORATION    CONDENSED BALANCE SHEET**
  **Unaudited**   **March      31, 2003**    ASSETS    CURRENT        ASSETS:       Cash        and cash equivalents $4,655    Accounts        receivable, net  88,331    Inventory  471,349    Prepaid        expenses  8,245          Total        Current Assets  572,580             PROPERTY        AND EQUIPMENT, Net   108,935              OTHER        ASSETS:       Deposits  15,500    Patents,        net  14,747    Goodwill,        net  1,929,963    Customer        contracts, manuals and sales literature, net  100,502    Website        and customer list, net  15,388          Total        Other Assets  2,185,035             Total        Assets $2,757,615             LIABILITIES        AND STOCKHOLDERS’ EQUITY             CURRENT        LIABILITIES:       Accounts        payable and accrued expenses $577,181    Accrued        salaries and payroll taxes  213,545          Total        Current Liabilities  790,726          LONG-TERM        LIABILITIES       Stockholder        and former officers’ loans payable  423,675          Total        Liabilities  1,214,401    STOCKHOLDERS’        EQUITY:       Preferred        Stock, $.001 par value, 10,000,000 shares authorized          authorized,        2,346,233 shares issued and outstanding  2,346    Common        stock, $.001 par value, 50,000,000 shares          6,713,120        issued and outstanding  6,713    Additional        paid-in capital  11,817,930    Accumulated        deficit  (10,283,775)         Total        Stockholders’ Equity  1,543,214    Total        Liabilities and Stockholders’ Equity $2,757,615    
Accompanying notes are an integral part of the financial statement

 

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**POWER EFFICIENCY CORPORATION    CONDENSED STATEMENTS OF OPERATIONS   Unaudited**
  **For      the three months ended       March 31,**   **2003** **2002**     REVENUES $160,843 $139,142     COSTS AND EXPENSES          Cost of sales  74,708  71,945    Manufacturing costs  54,798  52,851    Research and development  98,465  83,547    Selling, general and administration  334,091  213,575    Depreciation and amortization  33,585  31,429           Total Costs and Expenses  595,647  453,347     LOSS FROM OPERATIONS  (434,804) (314,205)    OTHER (EXPENSE)          Interest expense  (4,688) (18,363)          Total Other Expenses  (4,688) (18,363)    NET LOSS $(439,492)$(334,068)    BASIC AND DILUTED LOSS PER COMMON SHARE $(.07)$(.05)    WEIGHTED AVERAGE COMMON SHARES OUTSTANDING          OUTSTANDING, BASIC AND DILUTED  6,650,920  6,523,120     
Accompanying notes are an integral  part of the financial statements

 

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**POWER EFFICIENCY CORPORATION    CONDENSED STATEMENTS OF CASH FLOWS   Unaudited**
  **For      the three months ended       March 31,**   **2003** **2002**     CASH FLOWS FROM OPERATING ACTIVITIES:                   Net loss $(439,492)$(334,068)Adjustments to reconcile net loss to net cash from operating activities used for operating activities:                      Depreciation and amortization  33,585  31,429    Write-off of bad debts  (3,817) —    Changes in assets and liabilities: (increase) decrease             Accounts receivable  2,723  (83,188)      Inventory  32,674  57,755       Prepaid expenses  1,383  (5,918)      Increase        (Decrease)             Accounts payable and accrued expenses  11,739  182,920       Accrued salaries and payroll taxes  35,625  —     Net Cash Used in Operating Activities  (325,582) (151,070)                CASH FLOWS FROM INVESTING ACTIVITIES          Purchase of fixed assets  (6,160) (1,504)    Net Cash Used in Investing Activities  (6,160) (1,504)                CASH FLOWS FROM FINANCING ACTIVITIES:          Proceeds from issuance of equity securities, net of costs  74,001  —    Loans from stockholders and former officers  4,688  117,822     Net Cash Provided by Financing Activities  78,689  117,822     Decrease in cash and cash equivalents  (253,053) (34,752)    Cash and cash equivalents at beginning of period  257,708  35,245     Cash and cash equivalents at end of period $4,655 $493     
Accompanying notes are an integral  part of the financial statements

 

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**POWER EFFICIENCY CORPORATION    NOTES TO THE CONDENSED FINANCIAL STATEMENTS  (Unaudited)**

**NOTE 1 — BASIS OF PRESENTATION**

The accompanying financial statements have been prepared by the Company, without an audit. In the opinion of management, all adjustments have been made, which include normal recurring adjustments necessary to present fairly the condensed financial statements.  Operating results for the three months ended March 31, 2003 are not necessarily indicative of the operating results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles  generally accepted in the United States of America have been condensed or omitted. The Company believes that the disclosures provided are adequate to make the information presented not misleading. Certain amounts in the financial statements have been reclassified from  prior period presentations. These unaudited condensed financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report for the year ended December 31, 2002 on Form 10-KSB.
The preparation of condensed financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and  liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
**NOTE 2 — GOING CONCERN:**

The accompanying financial statements have been prepared assuming the Company is a going concern, which assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses  from operations, and there is a deficiency in tangible net worth of approximately $(515,000). The Company experienced a $(325,000) deficiency from operations, continues to have negative cash flow from operations and lacks sufficient liquidity to continue operations. The  Company is currently in negotiations on a $1,000,000 line of credit but there can be no assurance that the company will close this transaction or secure another line of credit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The  financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount of liabilities that might be necessary should the Company be unable to continue in existence. Continuation of the Company as a going  concern is dependent upon achieving profitable operations. Management’s plans to achieve profitability include developing new products, obtaining new customers and increasing sales to existing customers. Management also plans to raise additional capital through equity  issuance or other types of financing. Management has raised additional capital through issuance of Series A-1 Convertible Preferred Stock in the amount of $2,500,000 to Summit Energy Ventures, LLC during 2002.
 

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**POWER EFFICIENCY CORPORATION    NOTES TO THE CONDENSED FINANCIAL STATEMENTS   (Unaudited)**

**NOTE 3 — NET LOSS PER SHARE**

Basic per share amounts are computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding during the year. Diluted per share amounts incorporate the incremental shares issuable upon the assumed  exercise of the Company’s stock options and warrants and assumed conversion of convertible securities. Such incremental amounts have been excluded from the calculation since their effect would be anti-dilutive. Such stock options, warrants and conversions could potentially  dilute earnings per share in the future.
**NOTE 4 — STOCKHOLDERS’ EQUITY:**

In March 2003, the Company received approximately $67,000 from the exercise of warrants to purchase 120,000 shares of the Company’s Common Stock and $7,000 from a private sale of 12,500 shares of the Company’s Common Stock as part of a private placement  that the company is currently conducting.
 

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**ITEM 2.**     **MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

**OVERVIEW**

The Registrant generates revenues from a single business segment: the design, development, marketing and sale of proprietary solid state electrical components designed to reduce energy consumption in alternating current induction motors.
The Registrant began generating revenues from sales of its patented Power Commander1 line of motor controllers in late 1995. As of March 31, 2003, the Registrant had total stockholders’ equity of $1,543,214 primarily due to the Registrant’s sale of 2,346,233 shares  of Series A-1 Convertible Preferred stock to Summit Energy Ventures, LLC in June 2002, which resulted in Summit owning a 28% fully diluted stake in the Registrant. In addition, in August 2000, the Registrant purchased the assets of Percon, formerly the largest distributor  of the Registrant’s products. The transaction was accounted for as a purchase and the Registrant’s Statements of Operations includes Percon’s results of operations since the date of acquisition. The consolidation of the operations of both entities allowed the Registrant to  integrate the administrative, sales, marketing and manufacturing operations of Percon. Percon had developed sales contacts with major OEM’s in the elevator/escalator industry and transferred those agreements to the Registrant as part of the Asset Agreement.
**RESULTS OF OPERATIONS: FOR THE  THREE MONTHS ENDED MARCH 31, 2003 AND 2002**

**REVENUES**

Revenues for the three months ended March 31, 2003, were $160,843 compared to $139,142 for the three months ended March 31, 2002, an increase of $21,701, or 15.6%.
**COST OF REVENUES**

Cost of revenues, which includes costs related to raw materials and manufacturing costs, for the three months ended March 31, 2003, increased $4,710 to $129,506 from $124,796 or a 3.8% increase as compared to the three months ended March 31, 2002. The increase  in cost of revenues was primarily attributed to the increase in revenues and offset by an overall reduction in the cost of materials from the Registrant’s suppliers.
**OPERATING EXPENSES**

**Research and Development Expenses**

Research and development expenses were $98,465 for the three months ended March 31, 2003, as compared to $83,547, representing a $14,918 or a 17.9%, increase compared to the same period ended March 31, 2002. The development of the low cost, low horsepower  Platform A product family, the single-phase controller, and the fast-reaction integrator board continues to contribute to the higher costs of research and development costs.
 

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**Selling, General and Administrative Expenses**

Selling, general and administrative expenses were $334,091 for the three months ended March 31, 2003, an increase of $120,516 or 56% as compared to the three months ended March 31, 2002. The increase in selling, general and administrative expenses was due to the  recognition of deferred compensation expense, increases in rent, consulting fees, intangible asset amortization expenses, a one-time bank charge and stockholder relations fees, offset by significantly lower legal and professional fees.
**Financial Condition, Liquidity, and Capital Resources: For the Quarter Ended March 31, 2003**

Since inception, the Registrant has financed its operations primarily through the sale of its equity securities and using bank borrowings. As of March 31, 2003, the Registrant has received a total of approximately $4,831,261 from public and private offerings of its equity  securities and received approximately $445,386 under a bank line of credit, which was repaid during 2002. As of March 31, 2003, the Registrant had cash and cash equivalents of $4,655.
Cash used for operating activities for the three months ended March 31, 2003 was $325,582, which primarily consisted of: a net loss of $439,492; less depreciation and amortization of $33,585, offset by decreases in accounts receivable of $2,723 and inventory of  $32,674; and increases in accounts payable and accrued expenses of $47,364. Net cash used for operating activities in for the three months ended March 31, 2002 was $151,070, which primarily consisted of: a net loss of $334,068; less depreciation and amortization of $31,429;  increases in accounts receivable of $83,188 and prepaid expenses of $5,918, offset by a decrease in inventory of $57,755; and increases in accounts payable and accrued expenses of $182,920. Cash used in investing activities for the first quarter of the current fiscal year was  $6,160, compared to $1,504 in the first quarter of last fiscal year. The amounts for both years consisted of the purchase of fixed assets. Net cash provided by financing activities for the first quarter of fiscal year 2003 was $78,689, which primarily consisted of proceeds from the  exercise of stock warrants from the issuance of equity securities. During the first quarter of fiscal year 2002, net cash provided from financing activities was $117,822, which were loans from stockholders and officers.
The Registrant expects to experience growth in its operating expenses, particularly in research and development and selling, general and administrative expenses, for the foreseeable future in order to execute its business strategy. As a result, the Registrant anticipates that  operating expenses will constitute a material use of any cash resources.
Since capital resources are insufficient to satisfy the Registrant’s liquidity requirements, management intends to sell additional equity or debt securities or obtain debt financing. The Registrant is currently in the process of negotiating a $1,000,000 debt facility with  Summit Energy Ventures, LLC. The Board of Directors has approved the terms of the proposed financing but the Registrant is currently waiting for Summit’s investment committee to approve the financing. According to the terms of the proposed financing, the outstanding  balance would accrue interest at a rate of 15 percent and would be convertible into Series A Preferred Stock at a price per share of $0.183 if, after seven (7) days notice by Summit, the outstanding balance is not paid off. The outstanding balance will be due on December 31,  2003 and will be secured by all of the Registrant’s assets. The Registrant is also currently meeting with many different potential equity investors and believes it can raise additional funds through private placements of equity.
 

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**Cash Requirements and Need for Additional Funds**

The Registrant anticipates a substantial need for cash to fund its working capital requirements. In accordance with the Registrant’s prepared expansion plan, it is the opinion of management that approximately $1.3 million will be required to cover operating expenses,  including, but not limited to, marketing, sales and operations during the next six months.
**ITEM 3. CONTROLS AND PROCEDURES**

**(a) Evaluation of Disclosure Controls and Procedures.**The Company’s principal executive officer and principal financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and  15d-14(c)) on February 12, 2003, have concluded that, based on such evaluation, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company particularly during the period in which this Quarterly  Report on Form 10-QSB was being prepared.
**(b) Changes in Internal Controls.**There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, nor were there any significant deficiencies or material  weaknesses in the Company’s internal controls. Accordingly, no corrective actions were required or undertaken.
**PART II — OTHER INFORMATION**

**ITEM 1.**     **LEGAL PROCEEDINGS**

Following the Company’s earlier termination of his employment agreement, on October 10, 2002, Stephen Shulman, the former President and Chief Executive Officer of the Company, filed a demand for arbitration with the American Arbitration Association (“AAA”)  requesting payments from the Company aggregating approximately $528,653 pursuant to the provisions of his employment agreement with the Company. The AAA has established hearing dates for September 2003. The Company has accrued approximately $102,000 related to  deferred wages and expenses. The Company believes that it has meritorious defenses to these claims.
**ITEM 2.**     **CHANGES IN SECURITIES AND USE OF PROCEEDS**

In March 2003, the Company issued 132,500 shares of the Company’s Common Stock for $74,000 in private placement transactions. The sales were made to accredited investors and were exempt from registration under the Securities Act pursuant to Rule 506 of  Regulation D. The purchasers were accredited investors, most of which consisted of holders of the Company’s warrants that were issued in connection with a private placement the Company conducted in 2000.
 

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**ITEM 3.**     **DEFAULTS UPON SENIOR SECURITIES**

None.
**ITEM 4.**     **SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

None
**ITEM 5.**     **OTHER INFORMATION**

None
**ITEM 6.**     **EXHIBITS AND REPORTS ON FORM 8-K**
 (a) Exhibits.      99.1CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   (b) Reports on Form 8-K.          No        reports on Form 8-K were filed during the quarter covered by this Form        10-QSB.
 

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**SIGNATURES**

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized   POWER EFFICIENCY CORPORATION(Registrant)                   Date: May 13, 2003  By: Raymond J. Skiptunis    President and Chief Executive Officer               Date: May 13, 2003  By: Raymond J. Skiptunis    Chief Financial Officer (Principal Financial and Accounting Officer) 
 

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**CERTIFICATION OF CHIEF EXECUTIVE OFFICER AS ADOPTEDPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Raymond J. Skiptunis, certify that:

 
 1.I have reviewed this quarterly report on Form 10-QSB of Power Efficiency Corporation;    2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;    3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;    4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;    5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and    6.The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.           By: Raymond      J. Skiptunis  Date:      May 13, 2003  CHIEF EXECUTIVE OFFICER      (PRINCIPAL EXECUTIVE OFFICER) 
 

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**CERTIFICATION OF CHIEF EXECUTIVE OFFICER AS ADOPTEDPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Raymond J. Skiptunis, certify that:

 
 1.I have reviewed this quarterly report on Form 10-QSB of Power Efficiency Corporation;    2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;    3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;    4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;    5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and    6.The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.           By: Raymond J.      Skiptunis  Date:      May 13, 2003  CHIEF FINANCIAL OFFICER      (PRINCIPAL EXECUTIVE OFFICER) 
 

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