SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C. 20549




FORM
10-Q




x QUARTERLY REPORT UNDER
SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934




For the
quarterly period ended: March 31, 2009




OR




o 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.)3960
      Howard Hughes Pkwy, Suite 460
              Las
      Vegas, NV 89169
              (Address
      of Principal Executive Offices)
            
            (702)
      697-0377
              (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 Company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes xNo  o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
      Accelerated filer o
              Accelerated
      filer o
              Non
      Accelerated filer o
              Smaller
      reporting company x




Indicate
by check mark whether the Company is a shell company (as defined in Rule 12b-2
of the Exchange Act).


Yes oNo x




The
number of shares of common stock outstanding as of May 13, 2009 was
43,255,441.




Transitional
Small Business Disclosure Format (check
one):   Yes  oNo  x




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes oNo o









POWER
EFFICIENCY CORPORATION


FORM
10-Q INDEX




PART
      I - FINANCIAL INFORMATIONITEM
      1. Financial StatementsCondensed
      Balance Sheet as of March 31, 2009 and December 31, 2008
                
                3Condensed
      Statements of Operations for the three months ended March 31, 2009 and
      2008
                
                4Condensed
      Statements of Cash Flows for the three months ended March 31, 2009 and
      2008
                
                5Notes
      to Condensed Financial Statements
                
                6-11ITEM
      2. Management's Discussion and Analysis Of Financial Condition and Results
      of Operations
                
                12-20ITEM
      3. Quantitative and Qualitative Disclosure About Market
    Risk
                
                20ITEM
      4T. Controls and Procedures
                
                20Part
      II — OTHER INFORMATIONITEM
      1. Legal Proceedings
                
                21ITEM
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                
                21ITEM
      3. Defaults Upon Senior Securities
                
                21ITEM
      4. Submission of Matters to a Vote of Security Holders
                
                21ITEM
      5. Other Information
                
                21ITEM
      6. Exhibits
                
                22Signatures
                
                23Certification of Chief Executive Officer as
      AdoptedCertification
      of Chief Financial Officer as Adopted




2




PART
I. FINANCIAL INFORMATION


Item
1. Financial Statements





POWER
EFFICIENCY CORPORATION


CONDENSED
BALANCE SHEET


Unaudited




March
      31,
              2009
            
            
            December
      31,
              2008ASSETSCURRENT
      ASSETS:Cash
            
            $
            1,201,903
            
            
            $
            2,100,013Accounts
      receivable, net
            
            
            37,484
            
            
            
            44,159Inventory
            
            
            360,073
            
            
            
            246,020Prepaid
      expenses and other current assets
            
            
            115,312
            
            
            
            47,165Total Current
    Assets
            
            
            1,714,772
            
            
            
            2,437,357PROPERTY
      AND EQUIPMENT, Net
            
            
            132,764
            
            
            
            144,967OTHER
      ASSETS:Patents,
      net
            
            
            64,075
            
            
            
            64,711Deposits
            
            
            38,206
            
            
            
            38,206Goodwill
            
            
            1,929,963
            
            
            
            1,929,963Total Other
Assets
            
            
            2,032,244
            
            
            
            2,032,880Total
      Assets
            
            $
            3,897,780
            
            
            $
            4,615,204LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
            
            $
            548,330
            
            
            $
            555,789Dividends
      payable
            
            
            233,333
            
            
            
            -Total Current
      Liabilities
            
            
            781,663
            
            
            
            555,789LONG
      TERM LIABILITIESWarrant
      liability
            
            
            1,511,305
            
            
            
            -Deferred
      rent
            
            
            11,726
            
            
            
            12,668Total
      Long Term Liabilities
            
            
            1,523,031
            
            
            
            12,668Total
      Liabilities
            
            
            2,304,694
            
            
            
            568,457STOCKHOLDERS'
      EQUITY:Series
      B Convertible Preferred  Stock, $.001 par value,10,000,000
      shares authorized, 140,000issued
      or outstanding in 2009 and 2008
            
            
            140
            
            
            
            140Common
      stock, $.001 par value, 140,000,000 sharesauthorized,
      43,255,441 issued and outstandingin
      2009 and 2008
            
            
            43,255
            
            
            
            43,255Additional
      paid-in capital
            
            
            34,357,384
            
            
            
            35,307,119Accumulated
      deficit
            
            
            (32,825,693
            )
            
            
            (31,303,767
            )Total Stockholders'
      Equity
            
            
            1,575,086
            
            
            
            4,046,747Total
      Liabilities and Stockholders' Equity
            
            $
            3,879,780
            
            
            $
            4,615,204





Accompanying
notes are an integral part of the financial statements




3




POWER
EFFICIENCY CORPORATION


CONDENSED
STATEMENTS OF OPERATIONS


Unaudited





For
      the threemonthsended
              March
      31,2009
            
            
            2008REVENUES
            
            $
            47,147
            
            
            $
            133,695COST
      OF REVENUES
            
            
            28,808
            
            
            
            98,163GROSS
      PROFIT
            
            
            18,339
            
            
            
            35,532COSTS
      AND EXPENSES:Research
      and development
            
            
            247,044
            
            
            
            161,398Selling,
      general and administrative
            
            
            1,057,406
            
            
            
            789,573Depreciation
      and amortization
            
            
            19,315
            
            
            
            14,847Total
      Costs and Expenses
            
            
            1,323,765
            
            
            
            965,818LOSS
      FROM OPERATIONS
            
            
            (1,305,426
            )
            
            
            (930,286
            )OTHER
      INCOME:Interest
      income
            
            
            9,085
            
            
            
            42,130Total
      Other Income
            
            
            9,085
            
            
            
            42,130NET
      LOSS
            
            
            (1,296,341
            )
            
            
            (888,156
            )DIVIDENDS
      PAID OR PAYABLE ON SERIES B PREFERED STOCK
            
            
            233,333
            
            
            
            221,768NET
      LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
            
            $
            (1,529,674
            )
            
            $
            (1,102,924
            )BASIC
      AND FULLY DILUTED LOSSPER
      COMMON SHARE
            
            $
            (0.04
            )
            
            $
            (0.03
            )WEIGHTED
      AVERAGE COMMON SHARESOUTSTANDING,
      BASIC
            
            
            43,255,441
            
            
            
            40,393,007




Accompanying
      notes are an integral part of the financial statements




4




POWER
EFFICIENCY CORPORATION


CONDENSED
STATEMENTS OF CASH FLOWS


Unaudited


For
      the three monthsended
              March
      31,2009
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
            
            $
            (1,296,341
            )
            
            $
            (888,156
            )Adjustments
      to reconcile net loss to net cash used for operating
      activities:Depreciation
      and amortization
            
            
            19,315
            
            
            
            14,847Warrants
      and options issued to employees and consultants
            
            
            83,399
            
            
            
            207,000Warrants
      issued to investors
            
            
            485,919
            
            
            
            -Provision
      for bad debt
            
            
            (11,342
            )
            
            
            -Changes
      in assets and liabilities:Accounts
      receivable, net
            
            
            18,017
            
            
            
            (19,780
            )Inventory
            
            
            (114,053
            )
            
            
            (1,679
            )Prepaid
      expenses and other current assets
            
            
            (68,147
            )
            
            
            (72,481
            )Deposits
            
            
            -
            
            
            
            41,430Accounts
      payable and accrued expenses
            
            
            (7,459
            )
            
            
            (86,981
            )Customer
      deposits
            
            
            -
            
            
            
            (1,605
            )Deferred
      rent
            
            
            (942
            )
            
            
            -Net
      Cash Used in Operating Activities
            
            
            (891,634
            )
            
            
            (807,405
            )CASH
      FLOWS FROM INVESTING ACTIVITIESCosts
      related to patent applications
            
            
            -
            
            
            
            (12,661
            )Purchases
      of property and equipment
            
            
            (6,476
            )
            
            
            (35,764
            )Net
      Cash Used in Investing Activities
            
            
            (6,476
            )
            
            
            (48,425
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of equity securities
            
            
            -
            
            
            
            280,000Net
      Cash Provided by Financing Activities
            
            
            -
            
            
            
            280,000Decrease
      in cash
            
            
            (898,110
            )
            
            
            (575,830
            )Cash
      at beginning of period
            
            
            2,100,013
            
            
            
            5,086,378Cash
      at end of period
            
            $
            1,201,903
            
            
            $
            4,510,548




Accompanying
notes are an integral part of the financial statements




5




NOTE
1 - BASIS OF PRESENTATION




The
accompanying financial statements have been prepared by the Company, without an
audit. In the opinion of management, all adjustments have been made, which
include normal recurring adjustments necessary to present fairly the condensed
financial statements. Operating results for the three months ended March 31,
2009 are not necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. The Company
believes that the disclosures provided are adequate to make the information
presented not misleading. These unaudited condensed financial statements should
be read in conjunction with the audited financial statements and related notes
included in the Company’s Annual Report for the year ended December 31, 2008 on
Form 10-K and Form S-1.




The
preparation of condensed financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.




NOTE
2 - GOING CONCERN:




The
accompanying financial statements have been prepared assuming the Company is a
going concern, which assumption contemplates the realization of assets and
satisfaction of liabilities in the normal course of business.  The
Company suffered recurring losses from operations, and a recurring deficiency of
cash from operations, including a cash deficiency of approximately $892,000 from
operations, for the three months ended March 31, 2009.  While the
Company appears to have adequate liquidity at March 31, 2009, there can be no
assurances that such liquidity will remain sufficient.




These
factors raise substantial doubt about the Company's ability to continue as a
going concern.  The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amount of liabilities that might be necessary should the Company
be unable to continue in existence.  Continuation of the Company as a
going concern is dependent upon achieving profitable operations in the long-term
and raising additional capital to support existing operations for at least the
next twelve months.  Management's plans to achieve profitability
include developing new products, obtaining new customers and increasing sales to
existing customers.




NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Except as
disclosed in Note 10 below, there were no significant changes to the Company’s
significant accounting policies as disclosed in Note 2 of the Company’s
financial statements included in the Company’s Annual Report of Form 10-K for
the year ended December 31, 2008.





6





New
Accounting Pronouncements:




In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities”, which provides companies with an option to report selected
financial assets and liabilities at fair value. The objective of SFAS
No. 159 is to reduce both complexity in accounting for financial
instruments and the volatility in earnings caused by measuring related assets
and liabilities differently. SFAS No. 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. SFAS No. 159 is effective for the Company as of
January 1, 2008.  The adoption of SFAS No. 159 did not have a
material effect on our operating results or financial position.





In
December 2007, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 141R,
Business Combinations(“SFAS
No. 141R”), which replaces SFAS No. 141.SFAS No. 141R, among
other things, establishes principles and requirements for how an acquirer entity
recognizes and measures in its financial statements the identifiable assets
acquired (including intangibles), the liabilities assumed and any noncontrolling
interest in the acquired entity. Additionally, SFAS No. 141R requires that all
transaction costs will be expensed as incurred and is effective for financial
statements issued for fiscal years beginning after December 15, 2008. The
adoption of SFAS No. 141R had no impact on the Company’s condensed
financial statements.





In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160, Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB No. 51(“SFAS 160”). This Statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. In addition to the
amendments to ARB 51, this Statement amends SFAS 128, Earnings per Share;so that
earnings-per-share data will continue to be calculated the same way those data
were calculated before this Statement was issued. This Statement is effective
for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. The Company will apply the provisions of SFAS 160
to any noncontrolling interests acquired after the effective date.





In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities — an amendment of FASB Statement No. 133(“SFAS
No. 161”). SFAS No. 161 requires enhanced disclosures related
to derivative and hedging activities and thereby seeks to improve the
transparency of financial reporting. Under SFAS No. 161, entities are
required to provide enhanced disclosure related to (i) how and why an
entity uses derivative instruments (ii) how derivative instruments and related
hedge items are accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities(“SFAS No. 133”), and its
related interpretations; and (iii) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. SFAS No. 161 must be applied prospectively to all derivative
instruments and non-derivative instruments that are designated and qualify as
hedging instruments and related hedged items accounted for under SFAS
No. 133 for all financial statements issued for fiscal years and interim
periods beginning after November 15, 2008 with early application
encouraged. The adoption of SFAS No. 161 had no material impact on the
Company’s condensed financial statements.




7





NOTE
4 – INVENTORIES





Inventories
are valued at the lower of cost (first-in, first-out) or market.  The
Company reviews inventory for impairments to net realizable value whenever
circumstances arise.  Such circumstances may include, but are not
limited to, the discontinuation of a product line or re-engineering certain
components making certain parts obsolete.  Management has determined a
reserve for inventory obsolescence is not necessary at March 31, 2009 or
2008.





Inventories
are comprised as follows:





March
      31,
              2009
            
            
            December
      31,
              2008Raw
      materials
            
            $
            167,601
            
            
            $
            178,698Finished
      Goods
            
            
            192,472
            
            
            
            67,322Inventories
            
            $
            360,073
            
            
            $
            246,020






NOTE
5 – GOODWILL





In
accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets", previously recognized intangible assets deemed to have
indefinite useful lives were tested by management for impairment during fiscal
2008 and 2007 utilizing a two-step test.  An annual goodwill
impairment test is performed by management in addition to quarterly goodwill
impairment analyses.





The first
part of the test is to compare the Company’s fair market value (the number of
the Company’s common shares outstanding multiplied by the closing stock price on
the date of the test), to the book value of the Company (the Company’s total
stockholders’ equity, as of the date of the test).  If the fair market
value of the Company is greater than the book value, no impairment exists as of
the date of the test.  However, if book value exceeds fair market
value, the Company must perform part two of the test, which involves
recalculating the implied goodwill by repeating the acquisition analysis that
was originally used to calculate goodwill, using purchase accounting as if the
acquisition happened on the date of the test, to calculate the implied goodwill
as of the date of the test.





The
Company’s most recent impairment analysis was performed on March 31, 2009, on
the Company’s single reporting unit.  As of March 31, 2009, the
Company’s market cap was $12,967,632, and the Company’s book value was
$1,575,086.  As of December 31, 2008, the Company’s market cap was
$8,651,088, and the Company’s book value was $4,046,747.  Based on
this, management concluded that no impairment exists as of March 31, 2009 or
December 31, 2008.





Circumstances
may arise in which the Company will perform an impairment test in addition to
its annual and quarterly analyses.  An example of one of these
circumstances would be a sudden sharp drop in the Company’s stock price not as a
result of market conditions.




8




NOTE
6 – EARNINGS PER SHARE





The
Company accounts for its earnings per share in accordance with SFAS No.128,
which requires presentation of basic and diluted earnings per share.  Basic
earnings per share is computed by dividing income or loss attributable to common
shareholders by the weighted average number of common shares outstanding for the
reporting period.  Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts, such as stock
options, to issue common stock were exercised or converted into common
stock.





Three
      Months
              Ended
              March
      31, 2009
            
            
            Three
      Months
              Ended
              March
      31, 2008Net
      loss attributable to common shareholders, as reported
            
            $
            (1,529,674
            )
            
            $
            (1,102,924
            )Basic
      weighted average number of common shares outstanding, as
      reported
            
            
            43,255,441
            
            
            
            40,393,007Dilutive
      effect of stock options, as reported
            
            
            -
            
            
            
            -Diluted
      weighted average number of common shares outstanding, as
      reported
            
            
            43,255,441
            
            
            
            40,393,007Basic
      and diluted loss per share, as reported
            
            $
            (0.04
            )
            
            $
            (0.03
            )





For the
three months ended March 31, 2009, warrants and options to purchase
45,334,676 shares of common stock at per share exercise prices ranging from
$0.11 to $19.25 were not included in the computation of diluted loss per share
because inclusion would have been anti-dilutive. For the three months ended
March 31, 2008, warrants and options to purchase 44,114,864 shares of
common stock at per share exercise prices ranging from $0.11 to $19.25 were not
included in the computation of diluted loss per share because inclusion would
have been anti-dilutive.




NOTE
8 – STOCK-BASED COMPENSATION





At March
31, 2009, the Company had two stock-based compensation plans.  Readers
should refer to Note 12 of the Company’s financial statements, which are
included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, for additional information related to these stock-based
compensation plans. There were 360,000 warrants and 1,400,000 options granted in
the three months ended March 31, 2009.  The fair value of these
warrants and options was approximately $36,000 and $241,000 at issuance,
respectively.  There were 280,000 warrants and 600,000 options granted
in the three months ended March 31, 2008.  The fair value of these
warrants and options was approximately $90,000 and $155,000 at issuance,
respectively.  No stock options were exercised in the periods ending
March 31, 2009 and 2008.  The Company accounts for stock option
grants in accordance with FASB Statement 123(R), Share-Based Payment.
Compensation costs related to share-based payments recognized in the Condensed
Statements of Income were $83,339 and $207,000 for the periods ended
March 31, 2009 and 2008, respectively.




9




NOTE
9 – MATERIAL AGREEMENTS





In 2007,
the Company entered into a manufacturing service agreement with Sanmina-Sci
Corporation (“Sanmina-Sci”) for the production of digital units and digital
circuit boards.  Pursuant to this agreement, the Company will purchase
an amount of digital units, subject to certain minimum quantities, from
Sanmina-Sci equal to an initial firm order agreed upon by the Company and
Sanmina-Sci and subsequent nine-month requirements forecasts.  The
initial term of the contract was one year, and upon expiration of the initial
term, the contract continues on a year to year basis until one party gives
notice to terminate.  At the present time the Company is not able to
determine if the actual purchases will be in excess of these minimum
commitments, or if any potential liability will be incurred.





On March
11, 2009, the Company entered into a consulting agreement with one of the
Company’s directors, Greg Curhan.  The agreement is for a term of 12
months and calls for Mr. Curhan to provide investment and marketing related
services for the Company.  Mr. Curhan will receive $3,000 per month
and 360,000 warrants to purchase the Company’s common stock, at an exercise
price of $0.11 per share, under the terms of this agreement.  The
warrants vest equally over the term of the agreement.





NOTE
10 – WARRANT LIABILITY





On
January 1, 2009, the Company adopted EITF 07-5, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock.  The
Company determined that some of its warrants contained an anti-dilution
provision.  As a result, the Company reclassified 5,696,591 of its
common stock warrants to warrant liability, under long term liabilities, and
resulting in a cumulative adjustment to accumulated deficit as of January 1,
2009 of $225,585.





The
Company accounts for its warrant liability in accordance with SFAS
157.  SFAS No. 157 emphasizes that fair value is a market-based
measurement, not an entity-specific measurement. Therefore, a fair value
measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability. As a basis for
considering market participant assumptions in fair value measurements, SFAS
No. 157 establishes a fair value hierarchy that distinguishes between
market participant assumptions based on market data obtained from sources
independent of the reporting entity (observable inputs that are classified
within Levels 1 and 2 of the hierarchy) and the reporting entity’s own
assumptions about market participant assumptions (unobservable inputs classified
within Level 3 of the hierarchy).





The
Company has valued its warrant liability using a Black-Scholes model (Level 3
inputs) containing the following assumptions:  volatility 295%,
risk-free rate 1.43%, term 15 months.  The Company recorded a non-cash
loss related to these warrants of $485,919 for the three months ended March 31,
2009, which was expensed and recorded in selling, general and administrative
expenses.




10





The
following reconciles the warrant liability for the three months ended March 31,
2009:





Beginning
      balance, January 1, 2009
            
            $
            1,025,386Unrealized
      loss on derivative liability
            
            
            485,919Ending
      balance, March 31, 2009
            
            $
            1,511,306





NOTE
11 – INCOME TAXES





The
Company utilizes the asset and liability method of accounting for income taxes
pursuant to SFAS No. 109, Accounting for Income Taxes".  SFAS No. 109
requires the recognition of deferred tax assets and liabilities for both the
expected future tax impact of differences between the financial statement and
tax basis of assets and liabilities, and for the expected future tax benefit to
be derived from tax loss and tax credit carryforwards.  SFAS No. 109
additionally requires the establishment of a valuation allowance to reflect the
likelihood of realization of deferred tax assets.  The Company has
evaluated the net deferred tax asset taking into consideration operating results
and determined that a full valuation allowance should be
maintained.





In May
2007, the FASB issued FASB Staff Position FIN 48-1, “Definition of Settlement in FASB
Interpretation No. 48”.  FIN 48-1 provides guidance on how to
determine whether a tax position is effectively settled for the purpose of
recognizing previously unrecognized tax benefits.  FIN 48-1 is
effective retroactively to January 1, 2007.  Under FIN 48, the impact
of an uncertain tax position taken or expected to be taken on an income tax
return must be recognized in the financial statements at the amount that is more
likely than not to be sustained upon audit by the relevant taxing authority. An
uncertain income tax position will not be recognized in the financial statements
unless it is more likely than not of being sustained. The implementation of FIN
48 and FIN 48-1 did not have a material impact on the Company’s financial
position, results of operations or cash flows.





11





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





FORWARD
LOOKING STATEMENTS





This
report and the documents incorporated into this report contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the “PSLRA”), including, but not limited to, statements relating to the
Company’s business objectives and strategy. Such forward-looking statements are
based on current expectations, management beliefs, certain assumptions made by
the Company’s management, and estimates and projections about the Company’s
industry. Words such as “anticipates,” “expects,” “intends,” “plans,”
“believes,” “seeks,” “estimates,” “forecasts,” “is likely,” “predicts,”
“projects,” “judgment,” variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict with respect to timing, extent,
likelihood and degree of occurrence. Therefore, actual results and outcomes may
differ materially from those expressed, forecasted, or contemplated by any such
forward-looking statements.




Factors
that could cause actual events or results to differ materially include, but are
not limited to, the following: continued market acceptance of the Company’s
products; the Company’s ability to expand and/or modify its products on an
ongoing basis; general demand for the Company’s products, intense competition
from other developers, manufacturers and/or marketers of energy reduction and/or
power saving products; the Company’s negative net tangible book value; the
Company’s negative cash flow from operations; delays or errors in the Company’s
ability to meet customer demand and deliver products on a timely basis; the
Company’s lack of working capital; the Company’s need to upgrade its facilities;
changes in laws and regulations affecting the Company and/or its products; the
impact of technological advances and issues; the outcomes of pending and future
litigation and contingencies; trends in energy use and consumer behavior;
changes in the local and national economies; and other risks inherent in and
associated with doing business in an engineering and technology intensive
industry. See “Management’s Discussion and Analysis or Plan of Operation.” Given
these uncertainties, investors are cautioned not to place undue reliance on any
such forward-looking statements.




Unless
required by law, the Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. However, readers should carefully review the risk factors
set forth in other reports or documents that the Company files from time to time
with the Securities and Exchange Commission (the “SEC”), particularly Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on
Form 8-K.





12




OVERVIEW




The
Company generates revenues from a single business segment: the design,
development, marketing and sale of proprietary solid state electrical components
designed to reduce energy consumption in alternating current induction
motors.




The
Company began generating revenues from sales of its patented MEC line of motor
controllers in late 1995. As of March 31, 2009, the Company had total
stockholders’ equity of $1,808,419 primarily due to (i) the Company’s sale of
140,000 shares of Series B Convertible Preferred Stock in a private offering
from October of 2007 through January of 2008, (ii) the Company’s sale of
12,950,016 shares of common stock in a private stock offering from November of
2006 through March of 2007, (iii) the Company’s sale of 14,500,000 shares of
common stock in a private stock offering in July and August of 2005, (iv) the
Company’s sale of 2,346,233 shares of Series A-1 Convertible Preferred stock to
Summit Energy Ventures, LLC in June of 2002 and (v) the conversion of notes
payable of approximately $1,047,000 into 982,504 shares of Series A-1
Convertible Preferred Stock in October of 2003.  All of the Company’s
Series A-1 Convertible Preferred Stock was converted into the Company’s Common
Stock in 2005.





Because
of the nature of our business, the Company makes significant investments in
research and development for new products and enhancements to existing
products.  Historically, the Company has funded its research and
development efforts through cash flow primarily generated from debt and equity
financings.  Management anticipates that future expenditures in
research and development will continue at current levels.





The
Company’s results of operations for the quarter ended March 31, 2009 were marked
by a significant decrease in revenues and an increase in its loss from
operations that are more fully discussed in the following section “Results of
Operations for the Three Months Ended March 31, 2009 and 2008”.  Sales
cycles for our products are generally lengthy and can range from less than a
month to well over one year, depending on customer profile.  Larger
original equipment manufacturer (“OEM”) deals and sales to larger end users
generally take a longer period of time, whereas sales through channel partners
may be closed within a few weeks.  Because of the complexity of this
sales process, a number of factors that are beyond the control of the Company
can delay the closing of transactions.





13




RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008.





The
following table sets forth certain line items in our condensed statement of
operations as a percentage of total revenues for the periods
indicated:





Three
      Months
              Ended
              March
      31, 2009
            
            
            Three
      Months
              Ended
              March
      31, 2008Revenues
            
            
            100.0
            %
            
            
            100.0
            %Cost
      of revenues
            
            
            61.1
            
            
            
            73.4Gross
      profit
            
            
            38.9
            
            
            
            26.6Costs
      and expenses:Research
      and development
            
            
            524.0
            
            
            
            120.7Selling,
      general and administrative
            
            
            2,242.8
            
            
            
            590.6Depreciation
      and amortization
            
            
            41.0
            
            
            
            11.1Total
      expenses
            
            
            2,807.8
            
            
            
            722.4Loss
      from operations
            
            
            (2,769.0
            )
            
            
            (695.8
            )Other
      income
            
            
            19.3
            
            
            
            31.5Net
      loss
            
            
            (2,749.7
            )
            
            
            (664.3
            )Dividends
      paid or payable on Series B Preferred Stock
            
            
            494.9
            
            
            
            165.8Net
      loss attributable to common shareholders
            
            
            (3,244.4
            )
            
            
            (825.0
            )




REVENUES




Total
revenues for the three months ended March 31, 2009 were approximately $47,000
compared to $134,000 for the three months ended March 31, 2008, a decrease of
$90,000 or 67%. This decrease is mainly attributable to a decrease in sales
in the elevator and escalator market in the first quarter of
2009.  Specifically, escalator manufacturer and service provider sales
fell to approximately $35,000 for the three months ended March 31, 2009, from
$127,000 for the three months ended March 31, 2008.  Sales of the
analog product to one escalator manufacturer and service provider, which is one
of the Company’s largest customers, slowed during this period in anticipation of
release of their private label version of our digital product.  The
digital product is being tested and evaluated for use on a retrofit and OEM
basis by this customer.  The digital product offers greater features
and functionality compared to the analog product, making it more attractive as
an OEM product.  For the three months ended March 31, 2009, industrial
and other sales, of which all but one order consisted of digital units, was
approximately 24% of total sales, and escalator and elevator sales, which
consisted of a mix of digital units and analog units, were approximately 76% of
total sales.





COST
OF REVENUES




Total
cost of revenues, which includes material and direct labor and overhead for the
three months ended March 31, 2009 was approximately $29,000 compared to
approximately $98,000 for the three months ended March 31, 2008, a decrease of
$69,000 or 70%.  This decrease is mainly attributable to a decrease in
sales in the elevator and escalator market in the first quarter of
2009.  As a percentage of revenue, total cost of sales decreased to
approximately 61% for the three months ended March 31, 2009 compared to
approximately 73% for the three months ended March 31, 2008.  The
decrease in the costs as a percentage of sales was primarily due to the Company
increasing its prices on certain units, which resulted in higher margins during
the first quarter of 2009, and an increase in the sale of digital units, which
have higher average margins than analog units.




14





GROSS
PROFIT





Gross
profit for the three months ended March 31, 2009 was approximately $18,000
compared to approximately $36,000 for the three months ended March 31, 2008, a
decrease of $18,000 or 50%.  This decrease is mainly attributable to a
decrease in sales in the elevator and escalator market in the first quarter of
2009.  As a percentage of revenue, gross profit increased to
approximately 39% for the three months ended March 31, 2009 compared to
approximately





OPERATING
EXPENSES




Research
and Development Expenses




Research
and development expenses were approximately $247,000 for the three months ended
March 31, 2009, as compared to approximately $161,000 for the three months ended
March 31, 2008, an increase of $86,000 or 53%.  This increase is mainly
attributable to the Company’s continued research and development efforts on its
digital controller for both its single-phase and three-phase products, including
additional personnel in the Company’s research and development department, which
resulted in higher salaries and related payroll costs, as well as new product
testing and certification expenses.





Selling,
General and Administrative Expenses




Selling,
general and administrative expenses were approximately $1,057,000 for the three
months ended March 31, 2009, as compared to $790,000 for the three months ended
March 31, 2008, an increase of $267,000 or 34%. The increase in selling, general
and administrative expenses compared to the prior year was primarily due to the
Company’s adoption of SFAS 133 and EITF 07-5, which resulted in the Company
recording an additional non cash loss of $485,919 during the three months ending
March 31, 2009.  No such expenses were recorded during the three
months ending March 31, 2008.  This increase was partially offset by a
decrease in costs related to SFAS 123R.





Financial
Condition, Liquidity, and Capital Resources





The
accompanying financial statements have been prepared assuming the Company is a
going concern, which assumption contemplates the realization of assets and
satisfaction of liabilities in the normal course of business.  The
Company suffered recurring losses from operations, and a recurring deficiency of
cash from operations, including a cash deficiency of approximately $892,000 from
operations, for the three months ended March 31, 2009.  While the
Company appears to have adequate liquidity at March 31, 2009, there can be no
assurances that such liquidity will remain sufficient.




15




These
factors raise substantial doubt about the Company's ability to continue as a
going concern.  The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amount of liabilities that might be necessary should the Company
be unable to continue in existence.  Continuation of the Company as a
going concern is dependent upon achieving profitable operations in the long-term
and raising additional capital to support existing operations for at least the
next twelve months.  Management's plans to achieve profitability
include developing new products, obtaining new customers and increasing sales to
existing customers.




Since
inception, the Company has financed its operations primarily through the sale of
its equity securities, debt securities and using available bank lines of credit.
As of March 31, 2009, the Company had cash of $1,201,903.





Cash used
for operating activities for the three months ended March 31, 2009 was $891,634,
which consisted of a net loss of $1,296,341; less depreciation and amortization
of $19,315, warrants and options issued to employees and consultants of $83,399,
warrants issued to investors of $485,919, and a decrease in accounts receivable
of $18,017, offset by increases in inventory of $114,053, prepaid expenses and
other current assets of $68,147, and decreases in provision for bad debt of
$11,342, accounts payable of $7,459 and deferred rent of $942.





Cash used
for operating activities for the three months ended March 31, 2008 was $807,405,
which consisted of a net loss of $888,156; less depreciation and amortization of
$14,847, warrants and options issued to employees and consultants of $207,000
and a decrease in deposits of $41,430, offset by increases in accounts
receivable of $19,780, inventory of $1,679, prepaid expenses and other current
assets of $72,481, and decreases in accounts payable and accrued expenses of
$86,981 and customer deposits of $1,605.





Net cash
used in investing activities for the three months ended March 31, 2009 was
$6,476, compared to $48,425 for the three months ended March 31, 2008. The total
amount for the first quarter of 2009 consisted of the purchase of property and
equipment.  The amount for the first quarter of 2008 consisted of the
purchase of property and equipment of $35,764, and capitalized costs related to
patent applications of $12,661.





There was
no cash provided by or used for financing activities for the three months ended
March 31, 2009.  Net cash provided by financing activities for the
three months ended March 31, 2008 was $280,000, which consisted solely of
proceeds from the issuance of equity securities.




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 will constitute a material use
of any cash resources.




16




Cash
Requirements and Need for Additional Funds




The
Company anticipates a substantial need for cash to fund its working capital
requirements.  In accordance with the Company’s prepared expansion
plan, it is the opinion of management that approximately $2.5 to $3 million will
be required to cover operating expenses, including, but not limited to, the
development of the Company’s next generation products, marketing, sales and
operations during the next twelve months.  Although we currently have
several months of working capital, we may nevertheless need to issue additional
debt or equity securities to raise required funds.  If the Company is
unable to obtain funding on reasonable terms or finance its needs through
current operations, the Company may be forced to restructure, file for
bankruptcy or cease operations.





Notable
changes to expenses are expected to include an increase in the Company’s sales
personnel and efforts, and developing more advanced versions of the Company’s
technology and products.





Critical
Accounting Policies and Estimates





Management’s
discussion and analysis of Power Efficiency Corporation’s financial condition
and results of operations are based upon the condensed financial statements
contained in this Quarterly Report on Form 10-Q, which have been prepared in
accordance with accounting principles generally accepted in the United
States.  The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expense, and disclosure of contingent assets
and liabilities.  On an on-going basis, management evaluates
estimates, including those related to the valuation of inventory and the
allowance for uncollectible accounts receivable.  We base our
estimates on historical experience and on various other assumptions that
management believes to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other
sources.  Actual results may differ from these estimates under
different assumptions or conditions.  We believe the following
critical accounting policies affect our more significant judgments and estimates
used in the preparation of our condensed financial statements.





Inventories:




Inventories
are valued at the lower of cost (first-in, first-out) or market.  The
Company reviews inventory for impairments to net realizable value whenever
circumstances arise.  Such circumstances may include, but are not
limited to, the discontinuation of a product line or re-engineering certain
components making certain parts obsolete.  Management has determined a
reserve for inventory obsolescence is not necessary at March 31, 2009 or
2008.





Accounts
Receivable:




The
Company carries its accounts receivable at cost less an allowance for doubtful
accounts and returns.  On a periodic basis, the Company evaluates its
accounts receivable and establishes an allowance for doubtful accounts, based on
a history of past write-offs and collections and current credit
conditions.





17




Revenue
Recognition:




Revenue
from product sales is recognized at the time of shipment, when all services are
complete.  Returns and other sales adjustments (warranty accruals,
discounts and shipping credits) are provided for in the same period the related
sales are recorded.





Accounting
for Stock Based Compensation:




The
Company accounts for employee stock options as compensation expense, in
accordance with SFAS No. 123R, “Share Based
Payments.”  SFAS No. 123R requires companies to expense the
value of employee stock options and similar awards, and applies to all
outstanding and vested stock-based awards.





In
computing the impact, the fair value of each option is estimated on the date of
grant based on the Black-Scholes options-pricing model utilizing certain
assumptions for a risk free interest rate; volatility; and expected remaining
lives of the awards.  The assumptions used in calculating the fair
value of share-based payment awards represent management's best estimates, but
these estimates involve inherent uncertainties and the application of management
judgment.  As a result, if factors change and the Company uses
different assumptions, the Company’s stock-based compensation expense could be
materially different in the future. In addition, the Company is required to
estimate the expected forfeiture rate and only recognize expense for those
shares expected to vest.  In estimating the Company’s forfeiture rate,
the Company analyzed its historical forfeiture rate, the remaining lives of
unvested options, and the amount of vested options as a percentage of total
options outstanding.  If the Company’s actual forfeiture rate is
materially different from its estimate, or if the Company reevaluates the
forfeiture rate in the future, the stock-based compensation expense could be
significantly different from what we have recorded in the current
period.  The impact of applying SFAS No. 123R approximated $83,000 and
$207,000 in additional compensation expense during the periods ended March 31,
2009 and 2008, respectively.  Such amounts are included in research
and development expenses and selling, general and administrative expense on the
statement of operations.





Product
Warranties:




The
Company typically warrants its products for two years.  Estimated
product warranty expenses are accrued in cost of sales at the time the related
sale is recognized. Estimates of warranty expenses are based primarily on
historical warranty claim experience. Warranty expenses include accruals for
basic warranties for products sold.





Provision
for Income Taxes:




The
Company utilizes the asset and liability method of accounting for income taxes
pursuant to SFAS No. 109, Accounting for Income Taxes".  SFAS No. 109
requires the recognition of deferred tax assets and liabilities for both the
expected future tax impact of differences between the financial statement and
tax basis of assets and liabilities, and for the expected future tax benefit to
be derived from tax loss and tax credit carryforwards.  SFAS No. 109
additionally requires the establishment of a valuation allowance to reflect the
likelihood of realization of deferred tax assets.




18





In May
2007, the FASB issued FASB Staff Position FIN 48-1, “Definition of Settlement in FASB
Interpretation No. 48”.  FIN 48-1 provides guidance on how to
determine whether a tax position is effectively settled for the purpose of
recognizing previously unrecognized tax benefits.  FIN 48-1 is
effective retroactively to January 1, 2007.  Under FIN 48, the impact
of an uncertain tax position taken or expected to be taken on an income tax
return must be recognized in the financial statements at the amount that is more
likely than not to be sustained upon audit by the relevant taxing authority. An
uncertain income tax position will not be recognized in the financial statements
unless it is more likely than not of being sustained. The implementation of FIN
48 and FIN 48-1 did not have a material impact on the Company’s financial
position, results of operations or cash flows.





The
provision for taxes represents state franchise taxes, interest and
penalties.





Goodwill:




SFAS No.
142, “Goodwill and Other Intangible Assets” requires that goodwill shall no
longer be amortized.  Goodwill is tested for impairment on an annual
basis and between annual tests on a quarterly basis, utilizing a two-step test,
as described in SFAS No. 142.





New
Accounting Pronouncements:




In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities”, which provides companies with an option to report selected
financial assets and liabilities at fair value. The objective of SFAS
No. 159 is to reduce both complexity in accounting for financial
instruments and the volatility in earnings caused by measuring related assets
and liabilities differently. SFAS No. 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. SFAS No. 159 is effective for the Company as of
January 1, 2008.  The adoption of SFAS No. 159 did not have a
material effect on our operating results or financial position.





In
December 2007, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 141R,
Business Combinations(“SFAS
No. 141R”), which replaces SFAS No. 141.SFAS No. 141R, among
other things, establishes principles and requirements for how an acquirer entity
recognizes and measures in its financial statements the identifiable assets
acquired (including intangibles), the liabilities assumed and any noncontrolling
interest in the acquired entity. Additionally, SFAS No. 141R requires that all
transaction costs will be expensed as incurred and is effective for financial
statements issued for fiscal years beginning after December 15, 2008. The
adoption of SFAS No. 141R had no material impact on the Company’s
consolidated financial statements.





In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160, Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB No. 51(“SFAS 160”). This Statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. In addition to the
amendments to ARB 51, this Statement amends SFAS 128, Earnings per Share;so that
earnings-per-share data will continue to be calculated the same way those data
were calculated before this Statement was issued. This Statement is effective
for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. The Company will apply the provisions of SFAS 160
to any noncontrolling interests acquired after the effective date.




19





In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities — an amendment of FASB Statement No. 133(“SFAS
No. 161”). SFAS No. 161 requires enhanced disclosures related
to derivative and hedging activities and thereby seeks to improve the
transparency of financial reporting. Under SFAS No. 161, entities are
required to provide enhanced disclosure related to (i) how and why an
entity uses derivative instruments (ii) how derivative instruments and related
hedge items are accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities(“SFAS No. 133”), and its
related interpretations; and (iii) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. SFAS No. 161 must be applied prospectively to all derivative
instruments and non-derivative instruments that are designated and qualify as
hedging instruments and related hedged items accounted for under SFAS
No. 133 for all financial statements issued for fiscal years and interim
periods beginning after November 15, 2008 with early application
encouraged. The adoption of SFAS No. 161 had no material impact on the
Company’s consolidated financial statements.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





The
information in this Item is not being disclosed by Smaller Reporting Companies
pursuant to Regulation S-K.




ITEM
4T. CONTROLS AND PROCEDURES




(a) Evaluation of Disclosure Controls
and Procedures.  Under the supervision and with the
participation of its Chief Executive Officer and Chief Financial Officer,
management has evaluated the effectiveness of the Company’s disclosure controls
and procedures as of the end of the period covered by this report pursuant to
Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).  Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that, as of the end of the
period covered by this report, the Company’s disclosure controls and procedures
are effective in ensuring that information required to be disclosed in the
Company’s Exchange Act reports is (1) recorded, processed, summarized and
reported in a timely manner, and (2) accumulated and communicated to the
Company’s management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.




(b) Changes in Internal
Controls. There were no material changes in the Company’s internal
control over financial reporting as of the end of the period covered by this
report as such term is defined in Rule 13a-15(f) of the Exchange
Act.




20




PART
II — OTHER INFORMATION




ITEM
1. LEGAL PROCEEDINGS




None.




ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




On March
11, 2009, the Company entered into a consulting agreement with one of the
Company’s directors.  As consideration for services provided by the
director and pursuant to the consulting agreement, the director will receive
360,000 warrants to purchase the Company’s common stock, at an exercise price of
$0.11 per share.  The warrants vest equally over the term of the
agreement.  The warrants were issued pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
amended.




ITEM
3. DEFAULTS UPON SENIOR SECURITIES




None.




ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




None.





ITEM
5. OTHER INFORMATION





On March
11, 2009, the Company elected a new director to its Board of
Directors.  For his services on the Board of Directors, the new
director received 100,000 options to purchase the Company’s common stock at an
exercise price of $0.11 per share, which is the standard amount of options
granted to non-employee directors who are not members of the Company’s Audit
Committee.





On April
23, 2009, the Company dismissed Sobel & Co., LLC (“Sobel”) as its
independent registered public accounting firm.  The Company’s audit
committee approved the termination of Sobel.  During the Company’s two
most recent fiscal years and the subsequent interim period through April 23,
2009, there were no disagreements with Sobel on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which disagreement, if not resolved to Sobel’s satisfaction, would
have caused Sobel to make reference to the subject matter of the disagreement in
connection with its report. There were no “reportable events” as defined in Item
304(a)(1)(v) of Regulation S-K during the Company’s two most recent fiscal years
and the subsequent interim period through April 23, 2009.





On April
27, 2009, the Company’s audit committee approved the engagement of BDO Seidman,
LLP (“BDO Seidman”) as its new independent registered public accounting firm.
The Company has not consulted with BDO Seidman during its two most recent fiscal
years or during the subsequent interim period through April 27, 2009 regarding
the application of accounting principles to a specific completed or proposed
transaction, or the type of audit opinion that might be rendered on the
Company’s financial statements, or as to any disagreement or reportable event as
described in Item 304(a)(1)(iv) and Item 304(a)(1)(v) of Regulation
S-K.




21





On May
15, 2009, the Company elected a new director, Kenneth H. Dickey, to its Board of
Directors.  For his services on the Board of Directors, the new
director received 75,000 options to purchase the Company’s common stock at an
exercise price of $0.23 per share, which is the standard amount of options
granted to non-employee directors who are not members of the Company’s Audit
Committee, pro-rated for the quarters of the year he will serve.





Mr.
Dickey is the co-founder of The Institute of Strategic Mapping, and has spent
his extensive career learning how superior results can be achieved from very
average businesses and how to translate this winning process into an
understandable, reusable format.  Mr. Dickey has been retired since
February 2002.  From October 1999 to February 2002, Mr. Dickey was
Vice President Sales-Marketing for Safetronics, where he developed sales and
marketing strategies, completed Safetronic’s acquisition of Fincor Electric, a
manufacturer of variable frequency drives, and ran that business
unit.  Prior to this, Mr. Dickey was the President/CEO of Cleveland
Motion Control, Dynact Inc., and Motion Science, Inc., from February 1997 to
October 1999.  Prior to this, Mr. Dickey served as Senior Vice-President
Sales for Reliance Electric/Rockwell Automation from 1994 thru 1996. His
responsibilities included Sales/Marketing with 76 sales offices (located in the
Americas), which generated more than $900 million in revenue. He also spent 9
years as the Operating General Manager of the Industrial Motor Division at
Reliance Electric from 1986 to 1994.  Mr. Dickey earned his Bachelor of
Science degree in Finance from the University of Akron and an Executive MBA from
Case-Western Reserve University.





ITEM
6. EXHIBITS





31.1
            
            Certification
      by the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
            
            Certification
      by the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            
            Certification
      by the Chief Executive Officer pursuant to Section 1350 of Chapter 63 of
      Title 18 of the United States Code (18 U.S.C. 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.32.2
            
            Certification
      by the Chief Financial Officer pursuant to Section 1350 of Chapter 63 of
      Title 18 of the United States Code (18 U.S.C. 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.99.1
            
            Press
      Release, dated May 15, 2009, announcing first quarter 2009
      results.




22




SIGNATURES




In
accordance with the requirements of the Securities Exchange Act of 1934, the
Company caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.




POWER
      EFFICIENCY CORPORATION
                (Company)Date:  May
      15, 2009
              By:
              /s/ 
      Steven StrasserChief
      Executive Officer






Date:  May
      15, 2009
              By:
              /s/ 
      John LacklandChief
      Financial Officer (Principal
                Financial and
      Accounting Officer)




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