<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION


                             Washington, D.C. 20549


                          FORM 10-QSB (AMENDMENT NO. 1)

                 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

                                       OR

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


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

                 Delaware                               22-3337365
      (State or Other Jurisdiction of      (I.R.S. Employer Identification No.)
      Incorporation or Organization)


        4220 Varsity Drive, Suite E                   (734) 975-9111
            Ann Arbor, MI 48108                (Issuer's Telephone Number,
  (Address of Principal Executive Office)          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   X     No
    -----      -----

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

Transitional Small Business Disclosure Format (check one):  Yes        No   X
                                                                -----     -----



================================================================================


<PAGE>


                          POWER EFFICIENCY CORPORATION
                                FORM 10-QSB INDEX

<TABLE>
<S>              <C>                                                                                          <C>

PART I.          FINANCIAL INFORMATION                                                                         Page

                 Item 1.    Financial Statements (Unaudited)

                            Condensed Balance Sheets as of September 30, 2001 and December 31,
                            2000                                                                                3

                            Condensed Statements of Operations for the three months ended
                            September 30, 2001 and 2000 and nine months ended September 30,
                            2001 and 2000                                                                       4

                            Condensed Statements of Cash Flows for the nine months ended
                            September 30, 2001 and 2000                                                         5

                            Notes to Consolidated Financial Statements                                         6/7

                 Item 2.    Management's Discussion and Analysis or Plan of Operation                          8/9

PART II.         OTHER INFORMATION

                 Item 1.    Legal Proceedings                                                                   10

                 Item 2.    Changes in Securities                                                               10

                 Item 3     Defaults upon Senior Securities                                                     10

                 Item 4     Submission of Matters to Security Holders                                           10

                 Item 5     Other Information                                                                   10

                 Item 6     Exhibits and Reports on Form 8-K                                                    10

SIGNATURES                                                                                                      11

</TABLE>



                                       -2-

<PAGE>
                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                          Power Efficiency Corporation
                            Condensed Balance Sheets
                    September 30, 2001 and December 31, 2000
<TABLE>
<CAPTION>

                                                                          (Unaudited)
                                                                      September 30, 2001         December 31, 2000
                                                                     ----------------------    -----------------------
                               Assets                                       (Restated)                 (Restated)
<S>                                                                  <C>                       <C>

Current Assets
  Cash and Equivalents                                                $             14,549      $               8,492
  Accounts Receivable - Trade Net of Reserve of $5,000                             240,551                    114,166
  Inventory                                                                        551,111                    526,454
  Prepaid Expenses                                                                  16,893                        443
                                                                     ----------------------    -----------------------
          Total Current Assets                                                     823,104                    649,555
                                                                     ----------------------    -----------------------

PROPERTY AND EQUIPMENT - Net                                                       159,590                    132,315
                                                                     ----------------------    -----------------------

OTHER ASSETS
   Deposits                                                                         15,500                      6,000
   Patent Application Costs - Net                                                   12,872                     17,089
   Deferred Financing Costs                                                         38,427                     51,936
   Goodwill - Net                                                                1,965,480                  2,072,043
   Customer Contracts and Literature                                               165,118                    197,426
   Website and Customer List - Net                                                  84,636                    119,260
                                                                     ----------------------    -----------------------
          Total Other Assets                                                     2,228,033                  2,463,754
                                                                     ----------------------    -----------------------

Total Assets                                                          $          3,264,727      $           3,245,624
                                                                     ======================    =======================

           Liabilities and Stockholders' (Deficit) Equity

Current Liabilities
   Line of Credit Agreement                                           $            385,387      $             277,887
   Accounts Payable and Accrued Expenses                                           418,492                    485,695
   Accrued Salaries and Payroll Taxes                                               51,263                     51,611
   Stockholder Loan Payable                                                             --                    100,000
                                                                     ----------------------    -----------------------
          Total Current Liabilities                                                855,142                    915,193

Long Term Liabilities
   Stockholder Note Payable (Subordinated)                                         350,000                         --
                                                                     ----------------------    -----------------------
          Total Liabilities                                                      1,205,142                    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                                                      6,522                      6,043
   Additional Paid-in Capital                                                    8,866,559                  7,950,094
   Accumulated Deficit                                                          (6,813,496)                (5,625,706)
                                                                     ----------------------    -----------------------
          Total Stockholders' Equity                                             2,059,585                  2,330,431
                                                                     ----------------------    -----------------------

Total Liabilities and Stockholders' Equity                            $          3,264,727      $           3,245,624
                                                                     ======================    =======================
</TABLE>

See Notes to Condensed Financial Statements

                                      -3-
<PAGE>


                          Power Efficiency Corporation
                        Condensed Statement of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>
                                              Three Months           Three Months           Nine Months         Nine Months
                                                 Ended                  Ended                 Ended                Ended
                                              September 30,          September 30,         September 30,        September 30,
                                          --------------------   ---------------------   -----------------   ------------------
                                                 2001                    2000                  2001                2000
                                              (Restated)                                    (Restated)
                                          --------------------   ---------------------   -----------------   ------------------
<S>                                       <C>                    <C>                     <C>                 <C>

REVENUES                                  $            309,122   $              40,284   $         676,580   $           41,066
                                          --------------------   ---------------------   -----------------   ------------------

COSTS AND EXPENSES:
  Cost of Sales                                        174,925                  21,493             377,137               21,493
  Research and Development                              83,520                  75,164             212,294               75,664
  Selling, General, Administrative
  and Manufacturing                                    382,836               3,746,327           1,054,071            3,788,788
  Depreciation and Amortization                         70,579                  45,128             214,969               58,296
                                          --------------------   ---------------------   ------------------ -------------------
          Total Costs and Expenses                     711,860               3,888,112           1,858,470            3,944,241
                                          --------------------   ---------------------   ------------------ -------------------

LOSS BEFORE PROVISION FOR
  INCOME TAXES                                        (402,738)             (3,847,828)         (1,181,890)          (3,903,175)

PROVISION FOR INCOME TAXES
                                                         5,700                     200               5,900                  200
                                          --------------------   ---------------------   ------------------  ------------------

NET LOSS
                                          $           (408,438)  $          (3,848,028)  $      (1,187,790)  $       (3,903,375)
                                          --------------------   ---------------------   ------------------  ------------------

BASIC LOSS PER COMMON
SHARE                                     $              (0.06)  $               (0.83)  $           (0.18)  $            (0.87)

                                          ====================   =====================   ==================  ==================

AVERAGE COMMON
  SHARES OUTSTANDING                                 6,522,000               4,634,000           6,470,000            4,467,000

                                          ====================   =====================   ==================  ==================
</TABLE>

See Notes to Condensed Financial Statements

                                      -4-
<PAGE>
                          Power Efficiency Corporation
                 Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>

                                                             Nine Months Ended                  Nine Months Ended
                                                            September 30, 2001                  September 30, 2000
                                                     ---------------------------------- -----------------------------------
                                                                  (Restated)
<S>                                                  <C>               <C>              <C>            <C>

Cash Flow from Operating Activities
   Net Loss                                                            $    (1,187,790)                $       (3,903,375)
   Adjustments to reconcile Net Cash:
   Depreciation and Amortization                           214,969                           58,296
   Additional paid in capital relating
    to repricing and issuance of stock options               --                           3,649,776
   Issuance of Stock Options                                47,300                            --
   Debt Restructuring
                                                           130,000                            --
Changes in certain assets and liabilities:
  (Increase) decrease in:
   Accounts Receivable                                    (126,385)                          (9,407)
   Deposits                                                 (9,500)                          (2,000)
   Inventory - Raw Materials/Finished Goods                (24,657)                         (17,132)
   Prepaid Expenses                                        (16,450)                            (443)
  Increase (decrease) in:
   Accounts Payable and Accrued Expenses                   (67,550)                        (123,394)
                                                       -------------                     ------------
Total Adjustments                                                              147,727                          3,555,696
                                                                        ---------------                 -------------------
Net Cash Used for Operating Activities                                      (1,040,063)                          (347,679)
                                                                        ---------------                 -------------------

Cash Flow From Investing Activities
   Equipment Purchases                                                         (51,025)                             --
                                                                        ---------------                 -------------------

Cash Flow From Financing Activities
   Notes Payable - stockholders                            250,000
   Proceeds from issuance of Equity Securities             754,645                          350,152
   Line of credit agreement                                107,500                           15,682
   Expenses associated with issuance of equity                                                 --
    Securities                                             (15,000)
                                                     ---------------                    -------------
Net Cash Provided by Financing Activities                                    1,097,145                            365,834
                                                                     ------------------               ---------------------

Net Increase in Cash                                                   $         6,057                 $           18,155
                                                                     ==================               =====================

Summary:
   Cash Balance At End Of Period                                       $        14,549                 $           17,805
   Cash Balance At Beginning Of Period                                           8,492                               (350)
                                                                     ------------------               ---------------------
   Net Increase In Cash                                                $         6,057                 $           18,155
                                                                     ==================               =====================

Non-Cash Investing and Financing Activities
Common stock issued March 15, 2001 in connection
   with extinguishment of stockholder note payable
                                                                       $       230,000                 $        --
                                                                     ==================               =====================

Common stock issued June 19, 2001 in connection
   with professional services rendered                                 $        30,000                 $        --
                                                                     ==================               =====================

Common stock issued August 7, 2000 in connection
   with acquisition of certain assets and
   liabilities of Performance Control, L.L.C.                          $       --                      $        2,669,388
                                                                     ==================               =====================
</TABLE>

See Notes to Condensed Financial Statements

                                      -5-
<PAGE>

                       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-KSB Annual
          Report and Form 10-SB Registration Statement, as amended from time to
          time, as filed with the Securities and Exchange Commission. The
          September 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 nine months ended
          September 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 issuances 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 October 31, 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 January 31, 2002. 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. On August 30, 2001 and September 12, 2001, the Company
          received additional loans of $25,000 each from the same stockholder.
          These loans are due on June 1, 2003 and are subordinated to Bank One.

                                      -6-
<PAGE>

7.        DEBT RESTRUCTURING

          On March 15, 2001, the Company settled a loan payable to a Stockholder
          in the amount of $100,000, plus interest thereon, and the option to
          purchase 75,000 shares of common stock for 125,000 shares of common
          stock. The Company accounted for this transaction as a capital
          transaction between related parties during the first quarter of 2001.
          The difference of $130,000 between the fair value of the equity
          interest and the carrying amount of the payable was recognized as a
          loss by the Company and is included in selling, general and
          administrative expenses.

8.        FILING OF SEC FORM 10-KSB FOR FISCAL YEAR 2001-APRIL 2002

          In conjunction with the Company's filing of its Form 10-KSB for the
          year ended December 31, 2001 with the United Sates Securities and
          Exchange Commission (the "SEC") on or about April 1, 2002, certain
          modifications were made to previously filed financial statements for
          2000 and the first, second and third quarters of 2001. Such
          modifications related primarily to the valuation of the Performance
          Control acquisition, the valuation of the repriced options, the value
          of options issued during the periods and settlement of a loan payable
          for common stock.




                                      -7-
<PAGE>

          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. In addition, recent
          events relating to the terrorist attacks on September 11, 2001 and
          other terrorist activities have created significant global economic
          and political uncertainties that may have material and adverse effects
          on financial markets, the economy, and demand for the Company's
          services and products. 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 September 30, 2001 were
          $309,122 compared to $40,284 for the prior year comparable quarter, an
          increase of $268,838. Revenues for the nine months ended September 30,
          2001 were $676,580 compared to $41,066 for the nine months ended
          September 30, 2000, an increase of $635,514. The increase in revenues
          was principally attributable to the completion of performance testing
          by certain customers and the conversion of the test units into
          purchases.

          Cost of Revenues: Cost of revenues for the three months ended
          September 30, 2001 was $174,925, or 56.6% of revenues. Cost of
          revenues for the nine months ended September 30, 2001 was $377,137, or
          55.7% of revenues.

          Research and Development: Research and development expenses were
          $83,520, or 27% of revenues, for the three months ended September 30,
          2001, as compared to $75,164, or 186.6% of revenues, for the three
          months ended September 30, 2000. Research and development expenses
          were $212,294, or 31.4% of revenues, as compared to $75,664, or 184.3%
          of revenues, for the nine months ended September 30, 2001 and
          September 30, 2000, respectively. The increase is due in part to
          additional research and development activity after the acquisition of
          Performance Control, L.L.C.

                                      -8-
<PAGE>

          Selling, General, Administrative and Manufacturing: Selling, general,
          administrative and manufacturing expenses decreased to $382,836, or
          123.9% of revenues, for the three months ended September 30, 2001,
          from $3,746,327 (including $3,649,776 due to repricing and issuance of
          stock options), or 9,300% of revenues, for the three months ended
          September 30, 2000, and decreased to $1,054,071, or 155.8% of
          revenues, for the nine months ended September 30, 2001 from $3,788,788
          (including $3,649,776 due to repricing and issuance of stock options)
          or 9,226% of revenues, for the nine months ended September 30, 2000.
          The decrease in expenses was primarily due to the repricing in the
          issuance of stock options for the period ended September 30, 2000.

          The Company incurred a net loss of $408,438 during the three months
          ended September 30, 2001, compared to a net loss of $3,848,028 during
          the three months ended September 30, 2000. The Company incurred a net
          loss of $1,187,790 during the nine months ended September 30, 2001,
          compared to a net loss of $3,903,375 during the nine months ended
          September 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
          September 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 $385,387 under a bank line of credit. As of
          September 30, 2001, the Company had cash and cash equivalents of
          $14,549.

          Cash used in operating activities for the nine months ended September
          30, 2001, was $1,040,063. Cash used in operating activities for the
          nine months ended September 30, 2000 was $347,679. In addition, the
          Company borrowed $350,000 from a stockholder. Cash used in operating
          activities for the nine months ended September 30, 2001 reflected a
          net loss of $1,187,790. For the nine months ended September 30, 2000,
          cash used in operating activities reflected a net loss of $3,903,375.

          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
          6 months. Since capital resources are insufficient to satisfy the
          Company's liquidity requirements, management intends to seek 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.



                                      -9-
<PAGE>


                           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 through September 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
           Not applicable

Item 3.    Defaults upon Senior Securities
           Not applicable

Item 4.    Submission of Matters to a vote of Security Holders
           Not Applicable

Item 5.    Other Information

On July 1, 2001, the Company executed a three-year lease for office space in New
Hyde Park, New York. The annual payments under this lease are approximately
$61,000. The space is used by the Company to service the New York metropolitan
area, which contains the largest concentration of elevators in the United
States.

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.



                                      -10-
<PAGE>


                                   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:  September 6, 2002                 /s/ Raymond J. Skiptunis
                                         ---------------------------------------
                                         By:  Raymond J. Skiptunis
                                         President; Chief Executive Officer and
                                         Chief Financial Officer


                                      -11-


<PAGE>



                                  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.