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: June 30, 2008
OR
¨
TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
transition period from ___________ to ___________
Commission
File No. 0-31805
POWER
EFFICIENCY CORPORATION
(Exact
Name of Small Business Issuer as Specified in its Charter)
Delaware
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
22-3337365
(I.R.S.
Employer Identification No.)
|
|
|
|
3960
Howard Hughes Pkwy, Ste 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 x
No ¨
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 ¨ Accelerated
filer ¨ Non-Accelerated
filer ¨ 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 ¨
No x
The
number of shares outstanding of the Issuer's Common Stock, $.001 par value,
as
of July 31, 2008 was 40,486,441.
Transitional
Small Business Disclosure Format (check one): Yes ¨ No
x
POWER
EFFICIENCY CORPORATION
FORM
10-Q INDEX
PART
I - FINANCIAL INFORMATION
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|
|
|
ITEM
1. Financial Statements
|
3 |
|
|
Condensed
Balance Sheet as of June 30, 2008 and December 31, 2007
|
3
|
|
|
Condensed
Statements of Operations for the three months ended
|
|
June
30, 2008 and 2007 and six months ended
|
|
June
30, 2008 and 2007
|
4
|
|
|
Condensed
Statements of Cash Flows for the six months
|
|
ended
June 30, 2008 and 2007
|
5
|
|
|
Notes
to Condensed Financial Statements
|
6
|
|
|
ITEM
2. Management's Discussion and Analysis Or Plan of Operation
|
7-10
|
|
|
ITEM
3. Quantitative and Qualitative Disclosures About Market
Risk
|
10
|
|
|
ITEM
4T. Controls and Procedures
|
11
|
|
|
Part
II — OTHER INFORMATION
|
|
|
|
ITEM
1. Legal Proceedings
|
12
|
|
|
ITEM
2. Changes in Securities and Use of Proceeds
|
12
|
|
|
ITEM
3. Defaults Upon Senior Securities
|
12
|
|
|
ITEM
4. Submission of Matters to a Vote of Security Holders
|
12
|
|
|
ITEM
5. Other Information
|
13
|
|
|
ITEM
6. Exhibits and Reports on Form 8-K
|
13
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|
|
Signatures
|
14
|
|
|
Certification
of Chief Executive Officer as Adopted
|
|
|
|
Certification
of Chief Financial Officer as Adopted
|
|
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
POWER
EFFICIENCY CORPORATION
CONDENSED
BALANCE SHEET
|
|
June 30,
2008
|
|
December 31,
2007
|
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash
|
|
$
|
3,602,868
|
|
$
|
5,086,378
|
|
Accounts
receivable, net
|
|
|
132,756
|
|
|
109,252
|
|
Inventory
|
|
|
218,703
|
|
|
131,762
|
|
Prepaid
expenses and other current assets
|
|
|
76,218
|
|
|
41,296
|
|
Total
Current Assets
|
|
|
4,030,545
|
|
|
5,368,688
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, Net
|
|
|
169,697
|
|
|
112,106
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
Patents,
net
|
|
|
63,905
|
|
|
39,746
|
|
Deposits
|
|
|
48,224
|
|
|
122,263
|
|
Goodwill
|
|
|
1,929,963
|
|
|
1,929,963
|
|
Total
Other Assets
|
|
|
2,042,092
|
|
|
2,091,972
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
6,242,334
|
|
$
|
7,572,766
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
542,663
|
|
$
|
586,458
|
|
Customer
deposits
|
|
|
-
|
|
|
1,605
|
|
Total
Current Liabilities
|
|
|
542,663
|
|
|
588,063
|
|
|
|
|
|
|
|
|
|
LONG
TERM LIABILITES
|
|
|
|
|
|
|
|
Deferred
Rent
|
|
|
12,375
|
|
|
12,063
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
555,038
|
|
|
600,126
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
Series
B Convertible Preferred Stock, $.001 par value,10,000,000 shares
authorized, 140,000 issued and outstanding in 2008, 134,400 issued
and
outstanding in 2007
|
|
|
140
|
|
|
134
|
|
Common
stock, $.001 par value, 140,000,000 shares authorized, 40,411,858
issued
and outstanding in 2008, 40,367,523 issued and outstanding in
2007
|
|
|
40,412
|
|
|
40,368
|
|
Additional
paid-in capital
|
|
|
34,391,838
|
|
|
33,741,902
|
|
Accumulated
deficit
|
|
|
(28,745,094
|
)
|
|
(26,809,764
|
)
|
Total
Stockholders' Equity
|
|
|
5,687,296
|
|
|
6,972,640
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
6,242,334
|
|
$
|
7,572,766
|
|
Accompanying
notes are an integral part of the financial statements
POWER
EFFICIENCY CORPORATION
CONDENSED
STATEMENTS OF OPERATIONS
Unaudited
|
|
For the three months ended
June 30,
|
|
For the six months ended
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
164,644
|
|
$
|
230,195
|
|
$
|
298,339
|
|
$
|
266,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPONENTS
OF COST OF SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials,
labor and overhead
|
|
|
132,288
|
|
|
153,705
|
|
|
230,451
|
|
|
188,344
|
|
Inventory
obsolescence
|
|
|
24,577
|
|
|
-
|
|
|
24,577
|
|
|
-
|
|
Total
Cost of Sales
|
|
|
156,865
|
|
|
153,705
|
|
|
255,028
|
|
|
188,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
MARGIN
|
|
|
7,779
|
|
|
76,490
|
|
|
43,311
|
|
|
78,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
264,741
|
|
|
138,091
|
|
|
426,139
|
|
|
232,803
|
|
Selling,
general and administrative
|
|
|
798,964
|
|
|
620,526
|
|
|
1,588,536
|
|
|
1,295,981
|
|
Depreciation
and amortization
|
|
|
18,213
|
|
|
11,611
|
|
|
33,060
|
|
|
20,586
|
|
Total
Costs and Expenses
|
|
|
1,081,918
|
|
|
770,228
|
|
|
2,047,735
|
|
|
1,549,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(1,074,139
|
)
|
|
(693,738
|
)
|
|
(2,004,424
|
)
|
|
(1,470,904
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
26,964
|
|
|
12,800
|
|
|
69,094
|
|
|
25,120
|
|
Interest
expense
|
|
|
-
|
|
|
(156,694
|
)
|
|
-
|
|
|
(313,591
|
)
|
Total
Other Expenses, net
|
|
|
26,964
|
|
|
(143,894
|
)
|
|
69,094
|
|
|
(288,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(1,047,175
|
)
|
$
|
(837,632
|
)
|
$
|
(1,935,330
|
)
|
$
|
(1,759,375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND FULLY DILUTED LOSS PER COMMON SHARE
|
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
$
|
(0.05
|
)
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING, BASIC
|
|
|
40,411,858
|
|
|
38,516,676
|
|
|
40,402,433
|
|
|
37,645,746
|
|
Accompanying
notes are an integral part of the financial statements
POWER
EFFICIENCY CORPORATION
CONDENSED
STATEMENTS OF CASH FLOWS
Unaudited
|
|
For the six months ended June 30,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,935,330
|
)
|
$
|
(1,759,375
|
)
|
Adjustments
to reconcile net loss to net cash used for operating
activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
33,060
|
|
|
20,589
|
|
Amortization
of capitalized manufacturing costs
|
|
|
2,755
|
|
|
-
|
|
Amortization
of deferred financing costs
|
|
|
-
|
|
|
6,737
|
|
Debt
discount related to issuance of debt securities
|
|
|
-
|
|
|
158,087
|
|
Warrants
and options issued in connection with the issuance of debt securities,
and
to employees and consultants
|
|
|
389,342
|
|
|
360,503
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
(23,504
|
)
|
|
(134,783
|
)
|
Accounts
receivable, other
|
|
|
-
|
|
|
(20,000
|
)
|
Inventory
|
|
|
(86,941
|
)
|
|
35,097
|
|
Prepaid
expenses and other current assets
|
|
|
(37,677
|
)
|
|
19,222
|
|
Deposits
|
|
|
74,039
|
|
|
(4,736
|
)
|
Accounts
payable and accrued expenses
|
|
|
(43,795
|
)
|
|
37,793
|
|
Customer
deposits
|
|
|
(1,605
|
)
|
|
-
|
|
Deferred
rent
|
|
|
312
|
|
|
-
|
|
Net
Cash Used for Operating Activities
|
|
|
(1,629,344
|
)
|
|
(1,280,869
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Investment
in patents
|
|
|
(24,655
|
)
|
|
-
|
|
Purchase
of property and equipment
|
|
|
(90,156
|
)
|
|
(44,886
|
)
|
Net
Cash Used for Investing Activities
|
|
|
(114,811
|
)
|
|
(44,886
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds
from issuance of equity securities, net
|
|
|
260,645
|
|
|
1,024,796
|
|
Payments
on notes payable
|
|
|
-
|
|
|
(11,111
|
)
|
Net
Cash Provided by Financing Activities
|
|
|
260,645
|
|
|
1,013,685
|
|
|
|
|
|
|
|
|
|
Decrease
in cash
|
|
|
(1,483,510
|
)
|
|
(312,070
|
)
|
|
|
|
|
|
|
|
|
Cash
at beginning of period
|
|
|
5,086,378
|
|
|
1,693,584
|
|
|
|
|
|
|
|
|
|
Cash
at end of period
|
|
$
|
3,602,868
|
|
$
|
1,381,514
|
|
Accompanying
notes are an integral part of the financial statements
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 the condensed
financial statements fairly. Operating results for the three and six months
ended June 30, 2008 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, 2007 on Form 10-K, and Registration Statement on 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.
Certain
reclassifications have been made to the 2007 financial statements in order
for
them to conform to the 2008 financial statement presentation.
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, a recurring deficiency of cash from
operations, including a cash deficiency of approximately $1,629,000 from
operations for the six months ended June 30, 2008. While the Company appears
to
have adequate liquidity at June 30, 2008, 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.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
OVERVIEW
The
Company generates revenues from a single business segment: the design,
development, marketing and sale of Motor Efficiency Controllers (“MEC”), which
are proprietary solid state electrical motor controls 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 June 30, 2008, the Company had total
stockholders’ equity of $5,687,296 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.
RESULTS
OF OPERATIONS: FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND
2007.
REVENUES
Total
revenues for the three months ended June 30, 2008 were approximately $165,000,
compared to $230,000 for the three months ended June 30, 2007, a decrease of
$65,000 or 28%. This decrease is mainly attributable to sales to a local
transit authority, for the use on elevators and escalators, totaled
approximately $150,000 during the three months ended June 30, 2007. No such
singularly large sales occurred during the three months ended June 30, 2008.
This decrease was partially offset by an increase in sales to OEMs during the
three months ended June 30, 2008 totaling approximately $109,000, compared
to
$48,000 for the three month period ending June 30, 2007.
Total
revenues for the six months ended June 30, 2008 were approximately $298,000,
compared to $267,000 for the six months ended June 30, 2007, an increase of
$31,000 or 12%. This increase is mainly attributable to an increase in
sales in the elevator and escalator market segment. Specifically, sales in
the
first six months of 2008 included approximately $59,000 to major transit
facilities, approximately $10,000 to retail facilities and approximately $32,000
to convention centers.
COST
OF SALES
Total
cost of sales, which includes material, direct labor, overhead, and inventory
obsolescence for the three months ended June 30, 2008 were approximately
$157,000, compared to $154,000 for the three months ended June 30, 2007, an
increase of $3,000 or 2%. As a percentage of sales, total cost of sales
increased to approximately 95% of revenue for the three months ended June 30,
2008, compared to approximately 67% of revenue for the three months ended June
30, 2007. The increase in the costs as a percentage of sales was primarily
due
the Company’s replacement of 40 Platform E MECs with more feature rich and
expensive Platform 1 MECs for no additional charge to the customer. This
transaction added approximately $22,000 to the Company’s cost of sales for the
three months ended June 30, 2008. All of the Platform E MECs returned to the
Company were not installed, and in good working condition. However, with the
release of the Company’s new digital line of MECs, we determined that the
Platform E units that were returned were obsolete, and therefore did not record
the units back into inventory. During the three months ended June 30, 2008,
the
Company also wrote off the remaining Platform E components held in its
inventory. In total, the Company recorded an inventory obsolescence charge
of
approximately $25,000 for the three months ended June 30, 2008. Excluding the
inventory obsolescence charge of $25,000 and the $22,000 charge from replacing
Platform E units with Platform 1 units, the Company’s cost of sales was
approximately $110,000, or 67% of revenue for the three months ended June 30,
2008.
Total
manufacturing cost of sales, which includes material and direct labor and
overhead for the six months ended June 30, 2008 were approximately $255,000
compared to approximately $188,000 for the six months ended June 30, 2007,
an
increase of $67,000 or 36%. As a percentage of sales, total cost of sales
increased to approximately 86% for the six months ended June 30, 2008, compared
to approximately 71% for the six months ended June 30, 2007. The increase in
the
costs as a percentage of sales was primarily due to the Company’s replacement of
40 Platform E MECs with Platform 1 MECs, as well as the inventory obsolescence
charges, as described above.
GROSS
MARGIN
Gross margin
for the three months ended June 30, 2008 was approximately $8,000 compared
to
approximately $76,000 for the three months ended June 30, 2007, a decrease
of
$68,000 or 89%. This decrease was primarily due to the Company’s replacement of
40 Platform E MECs with Platform 1 MECs, and the inventory obsolescence charges,
as described above.
Gross margin
for the six months ended June 30, 2008 was approximately $43,000 compared to
approximately $78,000 for the six months ended June 30, 2007, a decrease of
$35,000 or 45%. This decrease was primarily due to the Company’s replacement of
40 Platform E MECs with Platform 1 MECs, and the inventory obsolescence charge,
as described above. This decrease was partially offset by a higher volume of
sales during the first six months of 2008 and lower per unit production costs
due to the Company bringing the majority of its manufacturing
in-house.
OPERATING
EXPENSES
Research
and Development Expenses
Research
and development expenses were approximately $265,000 for the three months ended
June 30, 2008, as compared to approximately $138,000 for the three months ended
June 30, 2007, an increase of $127,000 or 92%. 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.
Specifically, the increased costs include additional personnel in the Company’s
research and development department, which resulted in higher salaries and
related payroll costs, as well as the costs associated with the Company’s
research and development center, and new product certification
expenses.
Research
and development expenses were approximately $426,000 for the six months ended
June 30, 2008, as compared to approximately $233,000 for the six months ended
June 30, 2007, an increase of $193,000 or 83%. 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.
Specifically, the increased costs include additional personnel in the Company’s
research and development department, which resulted in higher salaries and
related payroll costs, as well as the opening of a research and development
center, and new product certification expenses.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses were approximately $799,000 for the three
months ended June 30, 2008, as compared to $621,000 for the three months ended
June 30, 2007, an increase of $178,000 or 29%. The
increase in selling, general and administrative expenses compared to the prior
year was primarily due to an increase in payroll, and payroll related costs,
as
well as increases in sales travel expenses, marketing, tradeshows and
advertising expenses, and sales related legal and consulting expenses. The
increases in payroll expenses were due to the growth of the Company’s sales
personnel.
Selling,
general and administrative expenses were approximately $1,588,000 for the six
months ended June 30, 2008, as compared to $1,296,000 for the six months ended
June 30, 2006, an increase of $292,000 or 23%. The increase in selling, general
and administrative expenses compared to the prior year was primarily due to
an
increase in payroll, and payroll related costs, as well as increases in sales
travel expenses, marketing, tradeshows and advertising expenses, and sales
related legal and consulting expenses. The increases in payroll expenses were
due to the growth of the Company’s sales personnel.
Financial
Condition, Liquidity, and Capital Resources: For the Six Months Ended June
30,
2007 and 2006
Since
inception, the Company has financed its operations primarily through the sale
of
its equity and debt securities and using available bank lines of credit. As
of
June 30, 2008, the Company had cash of $3,602,868.
Cash
used
for operating activities for the six months ended June 30, 2008 was $1,629,344,
which consisted of: a net loss of $1,935,330; less depreciation and amortization
of $33,060, and warrants and options issued in connection with the issuance
of
debt securities, and to employees and consultants of $389,342; offset by
increases in accounts receivable of $23,504, inventory of $86,941, prepaid
expenses of $34,922, and deferred rent of $312, and decreases in deposits of
$74,039, accounts payable of $43,795, and customer deposits of
1,605.
Cash
used
for operating activities for the six months ended June 30, 2007 was $1,280,869,
which consisted of: a net loss of $1,759,375; less depreciation and amortization
of $20,589, amortization of deferred financing costs of $6,737, amortization
of
debt discount related to the issuance of debt securities of $158,087, and
warrants and options issued in connection with the issuance of debt securities
and to employees and consultants of $360,503; offset by increases in accounts
receivable of $134,783, other accounts receivable of $20,000 and deposits of
$4,736, and decreases in inventory of $35,097, prepaid expenses and other assets
of $19,222, and accounts payable and accrued expenses of $37,793.
Net
cash
used for investing activities for the six months ended June 30, 2008 was
$114,811. The amount consisted of the purchase of property and equipment of
$90,156, and investments in patents of $24,655.
Net
cash
used for investing activities for the six months ended June 30, 2007 was
$44,886. The entire amount consisted of the purchase of property and
equipment.
Net
cash
provided by financing activities for the six months ended June 30, 2008 was
$260,645. The entire amount consisted of the net proceeds from the issuance
of
equity securities.
Net
cash
provided by financing activities for the six months ended June 30, 2007 was
$1,013,685, which consisted of the proceeds from the issuance of equity
securities of $1,024,796, offset by repayments of notes payable of $11,111.
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.
Although
we currently have over 12 months of working capital, management may need to
sell
additional equity or debt securities in order to continue to finance the
Company’s operations. The Company believes it can raise additional funds through
private placements of equity or debt. However, there are no assurances that
sufficient capital can be raised.
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 $3.0 - $3.6 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.
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 (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.
Since
the date of the evaluation of the Company’s internal controls, the Company
implemented new Enterprise Resource Planning and Customer Relationship
Management software. This new software did not significantly affect these
controls subsequent to the date of their evaluation, nor were there any
significant deficiencies or material weaknesses in the Company’s internal
controls. Accordingly, no corrective actions were required or undertaken.
PART
II — OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
None.
ITEM
2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The
Company held its 2008 Annual Meeting of Stockholders on July 11, 2007 in Las
Vegas, Nevada.
At
the
2008 Annual Meeting of Stockholders, the stockholders elected the following
individuals as directors, to serve until the 2009 Annual Meeting of
Stockholders, and until their successors are elected and qualified:
Name
|
|
Votes
For
|
|
Votes
Withheld
|
|
Steven
Strasser
|
|
|
38,075,661
|
|
|
103,309
|
|
John
(BJ) Lackland
|
|
|
38,110,661
|
|
|
68,309
|
|
Raymond
J. Skiptunis
|
|
|
38,110,661
|
|
|
68,309
|
|
George
Boyadjieff
|
|
|
38,085,661
|
|
|
93,309
|
|
Douglas
M. Dunn
|
|
|
37,995,497
|
|
|
183,473
|
|
Richard
Morgan
|
|
|
37,908,061
|
|
|
270,909
|
|
Gary
Rado
|
|
|
38,110,661
|
|
|
68,309
|
|
Also,
at
the 2008 Annual Meeting of Stockholders, the stockholders approved the
ratification of the appointment of Sobel & Co., LLC as the Company’s
independent registered public accounting firm for the year ended December 31,
2008. There were 38,126,608 votes cast for the ratification, 43,290 votes cast
against the ratification and 9,072 abstentions.
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K
(a)
Exhibits
Number
|
|
Description
of Document
|
|
|
|
31.1
|
|
Certification
by the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
|
31.2
|
|
Certification
by the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, filed herewith.
|
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, filed
herewith.
|
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, filed
herewith.
|
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
|
|
|
Date: August
14, 2008
|
By:
|
/s/
Steven Strasser
|
|
|
Chief
Executive Officer
|
|
|
|
Date: August
14, 2008
|
By:
|
/s/
John Lackland
|
|
|
Chief
Financial Officer (Principal
Financial and
Accounting Officer)
|