November 13 , 2008

Power Efficiency Corporation Reports Third Quarter 2008 Financial Results

First Sales of Digital Units in New Industrial Markets Show Strong Gross Margins

November 13, 2008 – Las Vegas, NV – Power Efficiency Corporation (OTCBB:PEFF.OB), a clean tech company focused on efficiency technologies for electric motors, today announced its third quarter 2008 financial results and updated shareholders about the company’s progress.

The Company’s technology platform, called E-Save Technology™, reduces the amount of electricity used by electric motors that are at times lightly loaded and operate at a constant speed. Power Efficiency estimates E-Save Technology has the potential to save $1.7 billion in electricity a year in industrial applications in the U.S. alone. The Company has developed two products based on this technology. One is a Three Phase Motor Efficiency Controller (MEC), which improves the efficiency of motors in escalators, elevators, granulators, saws, stamping presses, conveyors, crushers and many other applications. The second is a Single Phase MEC, which is targeted at small motors in clothes washers and dryers, refrigerators, and other appliances and light commercial equipment. The Company has recently released “digital” versions of these products that have significantly enhanced features and capabilities, making them capable of being adopted by large volume channels such as OEMs. 

Sales for the quarter ended September 30, 2008 were $108,607. Net loss for the quarter, including $172,992 in non-cash expenses relating to stock based compensation, was $992,485, or $0.02 per share. The Company recorded a gross margin of $39,136, or 36%.  The gross margin on analog units was approximately 20% while the gross margin on digital units was approximately 52%.

Sales for the nine months ended September 30, 2008 were $406,946. Net loss for the first nine months of 2008, including $562,335 in non-cash expenses relating to stock based compensation, was $2,927,815, or $0.07 per share. The Company recorded a gross margin of $82,447, or 20%, including a charge of approximately $47,000 for two one time items. Excluding these two one time items, the gross margin would have been approximately $129,000, or 32%.

Steven Strasser, Chairman and CEO stated, “The third quarter saw increased progress toward acceptance of our digital three phase motor efficiency controller by higher volume distribution channels, such as targeted distributors and original equipment manufacturers (OEMs).  We have progressed through extensive testing with several OEMs and large potential channel partners and signed a stocking distributorship agreement with CED Elevator, a highly regarded distributor of electronics for the elevator and escalator industry.”

“The third quarter was the first quarter in which sales of our new digital three phase motor efficiency controller roughly equaled sales of our analog product.  I am particularly pleased that we achieved a gross margin over 50% on the digital units we sold. In future quarters, I expect digital unit sales to outpace analog unit sales by a considerable amount and we expect to maintain a strong gross margin on the digital units."

“Sales of our analog product are still ongoing because one of the major escalator manufacturers and service providers, which is one of our largest customers, is still undergoing testing and approvals of our digital product.  This customer ceased active efforts to sell the analog product in anticipation of soon approving and releasing the digital product.  Although this depressed revenues for the third quarter, longer term this customer’s adoption of the digital product for new escalators and large scale retrofit projects is far more important.  This customer can utilize the digital product much more extensively and economically than the analog product because of the digital product’s additional features, reduced size and cost structure.”

Strasser continued, “There are numerous applications and industries in which E-Save Technology can save energy. However, as we have stated in the past, we have selected three initial target markets for our three phase MEC – escalators & elevators, plastics, and rock-related industries (mining, aggregate, cement, and concrete). Our strategy in each of these markets is to start with direct sales to end users because they benefit directly from reduced energy expenses. Once we have established the effectiveness of E-Save Technology™ and developed awareness of it in a target market, our goal is to work up the value chain and secure arrangements with OEMs and other large volume channels to that market. This strategy allows us to leverage our intellectual property through existing distribution channels to rapidly grow sales.”

“Our single phase Motor Efficiency Controller is targeted at the millions of home appliances and light commercial equipment made each year. Our strategy is to work with OEMs to include the technology in new equipment.  We recently released information about new developments and successful tests showing 9-27% savings on a clothes washer.  We believe this technology may be the most effective and economical way to improve the efficiency of the tens of millions of new washers, dryers and refrigerators sold each year. We recently announced an important partnership with IXYS Corporation to supply components and sell this technology to their customers, which include major appliance manufacturers and other OEMs. We believe this partnership can significantly accelerate our sales efforts for the single phase motor efficiency controller.”

Specific developments in the third quarter include:

• Completed a project on escalators with KONE Inc., one of the largest escalator manufacturers and service providers in the world, at the Las Vegas Convention Center, one of the country’s largest convention centers. 
• Signed stocking distribution agreement with CED Elevator, one of the largest and most respected electrical distributors to the elevator and escalator industry. The agreement was signed in the third quarter but revenues from the initial stocking order will fall into the forth quarter of 2008.
• Successful refinement and testing of E-Save Technology for single phase motors (i.e. appliance motors) on several clothes washers and dryers, with measured savings on a washing machine of 9-27%.
• Completed important initial sales of digital units for plastic granulators, ranging from 20-50 horsepower, and a 300 horsepower rock crusher.

Looking forward, Strasser added, “Our main goals for 2008 remain releasing a full line of certified motor efficiency controllers, proving out numerous industrial applications, commencing testing of the single phase MEC with E-Save Technology by several appliance manufacturers, and gaining commitments from OEMs and other large channel partners for our three phase MECs. Although we are mindful of the revenues from our present direct sales efforts, for an emerging technology company like Power Efficiency, securing the acceptance and commitments of OEMs and other large resellers is the most important goal to grow long term shareholder value.”

“Unlike solar, wind, biofuels and many other energy technologies, our products do not require a government subsidy to be attractive investments; our customers frequently realize returns on investment from energy savings exceeding 20-30%. That said, the political climate for energy efficiency is continuing to improve and that can only help our business. For example, President-Elect Obama has stated numerous times that he intends to promote and fund the development of an alternative energy economy. I am more optimistic than ever that energy efficiency will be an early focus of these efforts as more and more analysts, utilities and politicians are realizing that efficiency is the fastest and cheapest way to advance a clean energy economy."   
 
About Power Efficiency Corporation

Power Efficiency Corporation is a green energy company focused on efficiency technologies for electric motors. Power Efficiency is incorporated in Delaware and is headquartered in Las Vegas, Nevada. The company has developed a patented and patent-pending technology platform, called E-Save Technology™, which has been demonstrated in independent testing to improve the efficiency of electric motors by up to 35% in appropriate applications. Electric motors consume over 25% of the electricity in the U.S. and many operate inefficiently. E-Save Technology™ can be licensed to motor, controls and equipment manufacturers. Power Efficiency’s first product based on E-Save Technology™ is a Motor Efficiency Controller for applications such as escalators, crushers, granulators, mixers, saws and MG elevators. Power Efficiency is also developing a new product based on E-Save Technology™ for the tens of millions of small motors found in applications such as residential air conditioning, pool pumps, and clothes dryers. The company is working with manufacturers to incorporate this technology directly into new motors and appliances.

For more information go to www.powerefficiency.com.

As a cautionary note to investors, certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of the Company’s products in the market; the Company’s success in technology and product development; the Company’s ability to execute its business model and strategic plans; and all the risks and related information described from time to time in the Company’s SEC filings, including the financial statements and related information contained in the Company’s SEC filing. Power Efficiency assumes no obligation to update the information in this release.