CEO To Participate for Additional $250,000

LAS VEGAS--(BUSINESS WIRE)---Power Efficiency Corporation (OTCBB: PEFF), a developer and manufacturer of advanced energy savings technologies for electric motors, today announced that it has increased the $1 million convertible debt financing to $1.5 million. The Company’s Chairman and CEO, Steven Strasser, provided half this total through a $750,000 commitment.

“I have made an additional financial commitment to the Company at this time because I have great confidence in our technology and the opportunities in front of us,” Strasser said. “With the energy situation today, I believe our energy saving technology can be extremely valuable. In the past several months we have conducted and reported numerous tests at major casino operations in Las Vegas and a facility in New York. These showed significant reductions in energy usage. With so many AC induction motors in operation throughout the world, and with such impressive recent test results, I believe we have a very special technology and opportunity. I have therefore personally invested further capital in the Company.”

Prior to the investment, Strasser was already the largest shareholder in the Company through an entity called Summit Energy Ventures LLC, which he controls.

The specific terms of the note were disclosed in an 8-K filed in April, when the original $1 million note was completed, and another on May 26 about the increased amount of the note. Under the original financing agreement, the investors had the option to increase the total financing to $1.5 million by the end of May. The general terms of this additional half million dollar commitment include:

• Interest rate of 10.75% per annum
• The Company can draw on the note, in increments of up to $200,000, and interest is calculated only on the outstanding principal drawn.
• Should the Company complete an equity financing before the maturity date of the Note, the Note may be converted into equity on the same terms and conditions as those provided to the equity investors.
• 755,210 warrants were issued to the Note holders with an exercise price of $0.32 per share. The Company will use its best efforts to register the shares underlying the warrants when it next files a registration statement or amendment to its existing registration statement.
• The Note is secured by a first security interest in the Company’s accounts receivable and inventory, and a second security interest in all other Company assets.
• A maturity date of January 19, 2007.