Power Efficiency Corporation (OTCBB: PEFF), a developer and marketer of advanced energy savings technologies for electric motors, announced it closed on $3.2 million in equity and $2.0 million in debt financing. Investors include members of management and the board of directors, an energy-focused hedge fund, and a number of high net worth individuals.
The equity financing included sales of units comprised of two shares of common stock and one warrant. The purchase price for each unit was $0.60. Each warrant has an exercise price of $0.40 per share.
The debt financing consisted of $2.0 million of two year, secured promissory notes. The Company also issued 2.5 million warrants to the debt investors. Each warrant has an exercise price of $0.40 per share. Half the warrants vest upon issuance of the notes, while the other half vest evenly for the first 24 months after issuance.
With the financing, the Company retired two classes of existing notes originally issued in Spring 2006 and Winter 2004-2005, some of which was retired in exchange for the new notes.
Said Steven Strasser, Power Efficiency Corporation’s Chairman and CEO, “This financing enables us to finalize development and commence selling the next generation of our digital products. The new product for industrial motors is expected to be launched in the first quarter of 2007. This product combines all the standard characteristics of a solid state electric motor soft start with timely and valuable energy savings technology. Ultimately, this product will incorporate additional value-added features, such as motor load monitoring and predictive maintenance. With this new product, the Company is primarily targeting sales through established distribution channels, such as original equipment manufacturers, motor and drive distributors, and energy service companies. We believe the product and associated marketing strategy should lead to significantly increased sales with a healthy gross margin in 2007.”
“Some of the proceeds from the financing will also be used to complete the Company’s single phase product, which we are developing to reduce the electricity used by motors in appliances and light commercial equipment, such as refrigerators, residential air conditioning and shop tools.”
The financing was led by Steven Strasser, Herman Sarkowsky and funds managed by Marathon Resource Investments LLC. Mr. Strasser is Power Efficiency’s Chairman and CEO. Prior to joining the Company, Mr. Strasser was an accomplished venture capitalist, developer of power plants and related real estate, and attorney.
Marathon Resource Investments LLC is an investment management firm focused since 1997 on natural resources, including energy. Robert Mullin, the founder and general partner of Marathon, previously co-managed the Franklin Natural Resources Mutual Fund where he directed investments in energy and natural resources.
About Power Efficiency Corporation
Power Efficiency Corporation develops and markets advanced energy saving technologies for electric motors. The Company’s first product is an energy saving soft start. The product gradually brings an electric motor from rest to full speed. Once at full speed, the Company’s patented technology works like cruise control for a car; it delivers the motor just enough electricity to maintain a constant operating speed, whether the motor is heavily or lightly loaded. The technology saves energy on motors found in applications such as escalators, elevators, grinders, granulators, mixers, saw mills and more. Energy savings from these controllers are typically 20-40%. The controllers also reduce the operating heat of the motor, producing significant motor life extension and downtime reduction benefits. Power Efficiency’s products are CE Marked and CSA certified. The Company is also developing products to reduce the amount of electricity used by appliances and light commercial equipment, such as refrigerators, residential air conditioning and shop tools.
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