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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

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

For the quarterly period ended: June 30, 2001

OR

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

For the transition period from ___________ to ___________

Commission File No.  0-31805

POWER EFFICIENCY CORPORATION
(Exact Name of Small Business Issuer as Specified in its Charter)

|Delaware
(State or Other Jurisdiction of
Incorporation or Organization)                 |  | 22-3337365
(I.R.S. Employer Identification No.)                
|--------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------
|                                                                                        |  |                                                                
|                                                                                        |  |                                                                
|4220 Varsity Drive, Suite E
Ann Arbor, MI 48108
(Address of Principal Executive Office) |  | (734) 975-9111
(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 Securities Exchange 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 been subject to such filing requirements for the past 90 days. Yes  No  X

The number of shares outstanding of the Issuer's Common Stock, $.001 Par Value, as of June 30, 2001 was 6,522,120.

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                                                                                                              | Page
|           |                                                                                                                                    |     
|           | Item 1.  Financial Statements (Unaudited)                                                                                          |     
|           |                                                                                                                                    |     
|           | Condensed Balance Sheets as of June 30, 2001 and December 31, 2000                                                                 | 3   
|           |                                                                                                                                    |     
|           | Condensed Statements of Operations for the three months ended June 30,
  2001 and 2000 and six months ended June 30, 2001 and 2000 | 4   
|           |                                                                                                                                    |     
|           | Condensed Statements of Cash Flows for the six months ended June 30, 2001 and 2000                                                 | 5   
|           |                                                                                                                                    |     
|           | Notes to Consolidated Financial Statements                                                                                         | 6   
|           |                                                                                                                                    |     
|           | Item 2.  Management's Discussion and Analysis or Plan of Operation                                                                 | 7/8 
|           |                                                                                                                                    |     
|Part II.   | OTHER INFORMATION                                                                                                                  |     
|           |                                                                                                                                    |     
|           | Item 1.  Legal Proceedings                                                                                                         | 9   
|           |                                                                                                                                    |     
|           | Item 2.  Changes in Securities and Use of Proceeds                                                                                 | 9   
|           |                                                                                                                                    |     
|           | Item 5.  Other Information                                                                                                         | 9   
|           |                                                                                                                                    |     
|           | Item 6.  Exhibits and Reports on Form 8-K                                                                                          | 9   
|           |                                                                                                                                    |     
|SIGNATURES | 10                                                                                                                                

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PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Power Efficiency Corporation
Condensed Balance Sheets
June 30, 2001 and December 31, 2000

|                                                                                                                                          |   | (Unaudited)   |   |   |                   |  
|----------------------------------------------------------------------------------------------------------------------------------------- | - | ------------- | - | - | ----------------- | -
|                                                                                                                                          |   | June 30, 2001 |   |   | December 31, 2000 |  
|Assets                                                                                                                                    |   |               |   |   |                   |  
|                                                                                                                                          |   |               |   |   |                   |  
|Current Assets                                                                                                                            |   |               |   |   |                   |  
|Cash and Equivalents                                                                                                                      | $ | 84,511        |   | $ | 8,492             |  
|Accounts Receivable - Trade Net of Reserve of $5,000                                                                                      |   | 198,638       |   |   | 114,166           |  
|Inventory                                                                                                                                 |   | 505,951       |   |   | 526,454           |  
|Prepaid Expenses                                                                                                                          |   | 443           |   |   | 443               |  
|Total Current Assets                                                                                                                      |   | 789,543       |   |   | 649,555           |  
|                                                                                                                                          |   |               |   |   |                   |  
|PROPERTY AND EQUIPMENT - Net                                                                                                              |   | 145,902       |   |   | 132,315           |  
|                                                                                                                                          |   |               |   |   |                   |  
|OTHER ASSETS                                                                                                                              |   |               |   |   |                   |  
|Deposits                                                                                                                                  |   | 15,500        |   |   | 6,000             |  
|Patent Application Costs - Net                                                                                                            |   | 12,872        |   |   | 17,089            |  
|Deferred Financing Costs                                                                                                                  |   | 43,555        |   |   | 51,936            |  
|Goodwill - Net                                                                                                                            |   | 539,017       |   |   | 558,154           |  
|Customer Contracts and Literature                                                                                                         |   | 175,888       |   |   | 197,426           |  
|Website and Customer List - Net                                                                                                           |   | 96,177        |   |   | 119,260           |  
|Total Other Assets                                                                                                                        |   | 883,009       |   |   | 949,865           |  
|                                                                                                                                          |   |               |   |   |                   |  
|Total Assets                                                                                                                              | $ | 1,818,454     |   | $ | 1,731,735         |  
|                                                                                                                                          |   |               |   |   |                   |  
|Liabilities and Stockholders' (Deficit) Equity                                                                                            |   |               |   |   |                   |  
|                                                                                                                                          |   |               |   |   |                   |  
|Current Liabilities                                                                                                                       |   |               |   |   |                   |  
|Line of Credit Agreement                                                                                                                  | $ | 310,387       |   | $ | 277,887           |  
|Accounts Payable and Accrued Expenses                                                                                                     |   | 152,104       |   |   | 485,695           |  
|Accrued Salaries and Payroll Taxes                                                                                                        |   | 49,922        |   |   | 51,611            |  
|Stockholder Loan Payable                                                                                                                  |   | --            |   |   | 100,000           |  
|Total Current Liabilities                                                                                                                 |   | 512,413       |   |   | 915,193           |  
|                                                                                                                                          |   |               |   |   |                   |  
|Long Term Liabilities                                                                                                                     |   |               |   |   |                   |  
|Stockholder Note Payable (Subordinated)                                                                                                   |   | 300,000       |   |   | --                |  
|Total Liabilities                                                                                                                         |   | 812,413       |   |   | 915,193           |  
|                                                                                                                                          |   |               |   |   |                   |  
|Stockholders' Equity                                                                                                                      |   |               |   |   |                   |  
|Preferred Stock, .001 par value, 1,000,000 shares
    authorized, none outstanding                                                        |   |               |   |   |                   |  
|Common Stock, .001 par value, 9,000,000 authorized,
    6,522,120 and 6,043,370 issued and outstanding in
    2001 and 2000, respectively |   | 6,523         |   |   | 6,043             |  
|Additional Paid-in Capital                                                                                                                |   | 3,482,340     |   |   | 2,743,175         |  
|Accumulated Deficit                                                                                                                       |   | (2,482,822    | ) |   | (1,932,676        | )
|Total Stockholders' Equity                                                                                                                |   | 1,006,041     |   |   | 816,542           |  
|                                                                                                                                          |   |               |   |   |                   |  
|Total Liabilities and Stockholders' Equity                                                                                                | $ | 1,818,454     |   | $ | 1,731,735         |  

See Notes to Condensed Financial Statements

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Power Efficiency Corporation
Condensed Statement of Operations

|                                              |   | Three Months Ended
June 30, |   |   | Six Months Ended
June 30, |  
|--------------------------------------------- | - | --------------------------- | - | - | ------------------------- | -
|                                              |   | 2001                        |   |   | 2000                      |  
|                                              |   |                             |   |   |                           |  
|REVENUES                                      | $ | 212,408                     |   | $ | --                        |  
|                                              |   |                             |   |   |                           |  
|COSTS AND EXPENSES:                           |   |                             |   |   |                           |  
|Cost of Sales                                 |   | 122,905                     |   |   | --                        |  
|Research and Development                      |   | 61,600                      |   |   | --                        |  
|Manufacturing                                 |   | 59,878                      |   |   | --                        |  
|Selling, General and Administrative           |   | 242,882                     |   |   | 16,495                    |  
|Depreciation and Amortization                 |   | 46,242                      |   |   | 6,584                     |  
|Total Costs and Expenses                      |   | 533,507                     |   |   | 23,079                    |  
|                                              |   |                             |   |   |                           |  
|LOSS BEFORE PROVISION FOR
  INCOME TAXES      |   | (321,099                    | ) |   | (23,079                   | )
|                                              |   |                             |   |   |                           |  
|PROVISION FOR INCOME TAXES                    |   | --                          |   |   | 200                       |  
|                                              |   |                             |   |   |                           |  
|NET LOSS                                      | $ | (321,099                    | ) | $ | (23,279                   | )
|                                              |   |                             |   |   |                           |  
|LOSS PER COMMON SHARE                         | $ | (0.05                       | ) | $ | (0.05                     | )
|                                              |   |                             |   |   |                           |  
|WEIGHTED AVERAGE COMMON 
  SHARES OUTSTANDING |   | 6,440,000                   |   |   | 4,384,000                 |  

See Notes to Condensed Financial Statements

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Power Efficiency Corporation
Condensed Statements of Cash Flows (Unaudited)

|                                               |  | Six Months Ended
June 30, 2001 |          | Six Months Ended
June 30, 2000 |  
|---------------------------------------------- |  | ------------------------------ | -------- | ------------------------------ | -
|                                               |  |                                |          |                                |  
|Cash Flow from Operating Activities            |  |                                |          |                                |  
|Net Loss                                       |  |                                |          |                                | $
|                                               |  |                                |          |                                |  
|Adjustments to reconcile Net Cash:             |  |                                |          |                                |  
|Depreciation and Amortization                  |  |                                | 92,484   |                                |  
|Accounts Receivable - Trade                    |  |                                | (84,472  | )                              |  
|Inventory - Raw Materials/Finished Goods       |  |                                | 20,503   |                                |  
|Accounts Payable and Accrued Expenses          |  |                                | (335,279 | )                              |  
|Total Adjustments                              |  |                                |          |                                |  
|Net Cash Provided by (Used in) Operations      |  |                                |          |                                |  
|                                               |  |                                |          |                                |  
|Cash Flow From Investing Activities            |  |                                |          |                                |  
|Equipment Purchases                            |  |                                | (29,716  | )                              |  
|Deposit                                        |  |                                | (9,500   | )                              |  
|Net Cash Used in Investing Activities          |  |                                |          |                                |  
|                                               |  |                                |          |                                |  
|Cash Flow From Financing Activities            |  |                                |          |                                |  
|Note Stockholder                               |  |                                | (100,000 | )                              |  
|Proceeds from issuance of Equity Securities    |  |                                | 754,645  |                                |  
|Costs related to issuance of Equity Securities |  |                                | (15,000  | )                              |  
|Notes Payable Bank                             |  |                                | 32,500   |                                |  
|Note Payable Stockholder - Long Term           |  |                                | 300,000  |                                |  
|Net Cash Provided by Financing Activities      |  |                                |          |                                |  
|                                               |  |                                |          |                                |  
|Net Increase in Cash                           |  |                                |          |                                | $
|                                               |  |                                |          |                                |  
|Non Cash Investing Activities                  |  |                                |          |                                |  
|Common stock issued in connection with         |  |                                |          |                                |  
|settlement of accounts payable                 |  |                                |          |                                | $
|                                               |  |                                |          |                                |  
|Summary:                                       |  |                                |          |                                |  
|Cash Balance At End Of Period                  |  |                                |          |                                | $
|Cash Balance At Beginning Of Period            |  |                                |          |                                |  
|Net Increase In Cash                           |  |                                |          |                                | $

See Notes to Condensed Financial Statements

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POWER EFFICIENCY CORPORATION NOTES
TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

|1. | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The accompanying unaudited financial statements, which are for interim periods, do not include all disclosures required to be presented in the annual financial statements.  These unaudited financial statements should be read in conjunction with the financial statements and the footnotes thereto for the year ended December 31, 2000 contained in Power Efficiency Corporation's (the "Company") Form 10-SB Registration Statement, as amended from time to time, as filed with the Securities and Exchange Commission.  The June 30, 2001 balance sheet was derived from unaudited financial statements, and does not include all disclosures required by generally accepted accounting principles.                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | INTERIM PERIODS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial statements.  The results of operations for the three and six months ended June 30, 2001 are not necessarily indicative of the results to be expected for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3. | GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The accompanying condensed interim 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 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 on 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.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | PER SHARE DATA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Per share data was computed by dividing net loss by the weighted average number of shares outstanding during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | LINE OF CREDIT AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On May 1, 2001 the Company renegotiated its line of credit agreement with the bank to extend the expiration date of its line of up to $750,000 to October 31, 2001.  All inventory, accounts receivable, equipment and instruments collateralize the line of credit agreement.  The bank has a general lien on all corporate assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|6. | STOCKHOLDER LOAN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On May 24, 2001 the Company received a $300,000 loan from a stockholder.  The note is due on May 24, 2003 and is subordinated to Bank One.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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| | Item 2.  Management's Discussion and Analysis or Plan of Operation

The following discussion is designed to provide a review of the financial condition and results of operations of Power Efficiency Corporation (the "Company"). This discussion should be read in conjunction with the financial statements and related notes.

Forward-Looking Statements:

This discussion and analysis of financial condition and results of operations, and other sections of this report, contain forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the industrial and commercial motor industry, the economy, and about the Company itself. Words such as "anticipates," "believes," "estimates," "judgment," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," variations of such words and similar expressions are intended to identify such forward-looking statements.  These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Risk Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed, implied or forecasted in such forward-looking statements.

Risk Factors include, but are not limited to, demand for products and services; the degree of competition by competitors; changes in tax laws; changes in prices, levies and assessments; the impact of technological advances and issues; governmental and regulatory policy changes; the outcomes of pending and future litigation and contingencies; trends in customer behavior; the ability to raise capital and maintain financing sources; development of the Company's products; and changes in the national economy. These are representative of the Risk Factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement. The Company undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

Results of Operations:

Revenues. Revenues for the three months ended June 30, 2001 was $212,408 compared to no revenue for the prior year comparable quarter, an increase of $212,408.  Revenues for the six months ended June 30, 2001 were $367,458 compared to $782 of miscellaneous income for the prior year comparable six months, an increase of $366,676. The increase in revenue was principally attributable to the completion of performance testing by clients and the conversion of the test units into purchases.

Cost of revenues. Cost of revenues for the three months ended June 30, 2001 was $122,905, or 58% of revenues.  Cost of revenues for the six months ended June 30, 2001 was $202,212, or 55% of revenues.  The Company recorded no costs in the comparable periods of the prior year.  The increase in Cost of Revenues was due to the increased volume in sales.

Research and development. Research and development expenses were $61,600, or 29% of revenues, for the three months ended June 30, 2001.  Research and development expenses were $128,774, or 35% of revenues as compared to $500, or 64% of revenues, for the six months ended June 30, 2001 and June 30, 2000, respectively, due to increased research and development activity after the acquisition of Performance Control, LLC.

Selling, general, manufacturing and administrative. Selling, general, manufacturing and administrative expenses increased to $302,760, or 143% of revenues, for the three months ended June 30, 2001 and increased to $493,934, or 134% of revenues for the six months ended June 30, 2001, from $42,361, or 5419% of revenues, for the six months ended June 30, 2000. The
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | increase in expenses was primarily due to increases in sales and marketing expenses and an increase in administrative personnel from two to eight.  There was additional travel due to new customers in the Asia-Pacific region and substantial administrative fees for professional services due to the filing of the Form 10-SB.

As a result, the Company incurred a net loss of $321,099 during the three months ended June 30, 2001, compared to a net loss of $23,279 during the three months ended June 30, 2000.  The Company incurred a net loss $550,146 during the six months June 30, 2001 compared to a net loss of $55,447 during the six months ended June 30, 2000.

Financial Condition, Liquidity, and Capital Resources:

Since inception, the Company has financed its operations primarily through the sale of equity securities and using bank borrowings. As of June 30, 2001, the Company has received a total of approximately $2,250,000 from public and private offerings of its equity securities and received approximately $310,387 under a bank line of credit. As of June 30, 2001, the Company had cash and cash equivalents of $84,511.

Cash used in operating activities for the six months ended June 30, 2001, was $856,910.  Cash received from operating activities for the six months ended June 30, 2000, was $1,348. In addition, the Company borrowed $300,000 from a stockholder on May 24, 2001.  Cash provided by operating activities in the six months ended June 30, 2001 reflected a net loss of $550,146.  In 2000, cash used in operating activities reflected a net loss of $55,447.

The Company 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 Company anticipates that operating expenses, as well as planned increases in inventory expenditures, will constitute a material use of any cash resources.

Management believes that its existing cash and cash equivalents are insufficient to meet the Company's anticipated cash needs for the next six months.  Since capital resources are insufficient to satisfy the Company's liquidity requirements, Management intends to sell additional equity securities or debt securities or obtain debt financing. The Company has not made arrangements to obtain additional financing and there is no assurance that financing, if required, will be available in amounts or on terms acceptable to Management.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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PART II.   OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is involved with certain claims and counterclaims related to litigation for breach of contract arising out of the manufacture and assembly of certain electronic component parts.  The Company has accrued approximately $21,300 at June 30, 2001 related to these claims.  In the opinion of management, after consultation with legal counsel, the outcome of such matter is not expected to have a material adverse effect on the Company's financial position or results of operations.

Item 2.  Changes in Securities

From May 16, 2000 to March 7, 2001, the Company sold units consisting of one share of common stock and one common stock purchase warrant ("Units") pursuant to a private placement memorandum, solely to accredited investors, as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933.  The Units were sold for $1.00 per Unit.  On April 25, 2001, the Company sold 25,000 units to an accredited investor for $25,000 in reliance on Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933.

On May 14, 2001, the Company sold 118,750 shares of common stock for $400,000 to an accredited investor, as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933.  The shares were sold in reliance on Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933.

On June 19, 2001, the Company issued 10,000 shares of common stock for payment of fees.  The total fees that were set aside in exchange for the stock were equal to $30,000.  The shares were issued in reliance on Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933.

Item 5.  Other Information

ADDITION TO MANAGEMENT.  On March 12, 2001, Douglas C. Finch was hired as Vice-President of Operations.  Mr. Finch was President of Plastigage Corporation, a manufacturer of extruded and injection molded plastic automotive components from 1999 to 2000.  He spent five years with Enprotech, a subsidiary of Itochu Corporation involved in merger and acquisitions.  He also spent two years managing REM Technologies, also a subsidiary of Itochu Corporation, that manufactured high-speed electric motors and power electronics.  Mr. Finch received a BSc and Masters in Aeronautical Engineering from Massachusetts Institute of Technology and an MBA in 1991 from Harvard Graduate School of Business Administration.  Mr. Finch has no beneficial ownership of common stock.

Item 6.  Exhibits and Reports on Form 8-K

(a)          Exhibits.  The following documents are filed as exhibits to this report on Form 10-QSB:

| | Exhibit No. | Document                                                                                                                                             
| | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |             |                                                                                                                                                      
| | 3.1         | Certificate of Incorporation.  Previously filed as an exhibit to the Company's Form 10-SB filed on October 20, 2000.  Here incorporated by reference.
| |             |                                                                                                                                                      
| | 3.2         | Bylaws. Previously filed as an exhibit to the Company's Form 10-SB filed on October 20, 2000.  Here incorporated by reference.                       

(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

|Date:  August 14, 2001 | POWER EFFICIENCY CORPORATION
(Registrant)
By:s/Stephen L. Shulman                             
|---------------------- | ----------------------------------------------------------------------------------------------
|                       | Stephen L. Shulman
     President and Chief Executive Officer                                 
|                       |                                                                                               
|                       |                                                                                               
|Date:  August 14, 2001 | By:s/Arthur N. Smith                                                                          
|                       | Arthur N. Smith
     Chief Financial Officer (Principal Financial
     and Accounting Officer)

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EXHIBIT INDEX

|Exhibit No. |  | Document                                                                                                                                             
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                      
|3.1         |  | Certificate of Incorporation.  Previously filed as an exhibit to the Company's Form 10-SB filed on October 20, 2000.  Here incorporated by reference.
|            |  |                                                                                                                                                      
|3.2         |  | Bylaws. Previously filed as an exhibit to the Company's Form 10-SB filed on October 20, 2000.  Here incorporated by reference.