10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35212

PIONEER POWER SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	27-1347616
(State of incorporation)	(I.R.S. Employer Identification No.)

400 Kelby Street, 9th Floor

Fort Lee, New Jersey 07024

(Address of principal executive offices)

(212) 867-0700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data 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 ☒ 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 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 ☐
(Do not check if a smaller reporting company) Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐No ☒

The number of shares outstanding of the registrant’s Common Stock, $0.001 par value, as of August 11, 2015 was 7,405,962.

PIONEER POWER SOLUTIONS, INC.

Form 10-Q

For the Quarter Ended June 30, 2015

TABLE OF CONTENTS

	Page
Item 1. Financial Statements
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014	1
Consolidated Statements of Comprehensive (Loss) Incomefor the Three and Six Months Ended June 30, 2015 and 2014	2
Consolidated Balance Sheets at June 30, 2015 and December 31, 2014	3
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014	4
Notes to Unaudited Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 4. Controls and Procedures	27

Item 1A. Risk Factors	28
Item 6.  Exhibits	28

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PIONEER POWER SOLUTIONS, INC.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenues	$	26,460	$	21,064	$	55,348	$	41,957
Cost of goods sold		21,533		16,876		45,022		32,848
Gross profit		4,927		4,188		10,326		9,109
Operating expenses
Selling, general and administrative		5,535		3,509		11,188		7,478
Foreign exchange (gain) loss		79		108		(92)		63
Total operating expenses		5,614		3,617		11,096		7,541
Operating (loss) income		(687)		571		(770)		1,568
Interest expense		179		129		333		266
Other expense		186		-		263		2
Earnings (loss) before income taxes		(1,052)		442		(1,366)		1,300
Income tax (benefit) expense		(235)		140		(324)		408
Net (loss) earnings	$	(817)	$	302	$	(1,042)	$	892
Net (loss) earnings per common share:
Basic	$	(0.11)	$	0.04	$	(0.14)	$	0.12
Diluted	$	(0.11)	$	0.04	$	(0.14)	$	0.12
Weighted average common shares outstanding:
Basic		7,406		7,172		7,406		7,172
Diluted		7,406		7,237		7,406		7,244

The accompanying notes are an integral part of these consolidated financial statements

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PIONEER POWER SOLUTIONS, INC.

Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Net (loss) earnings	$	(817)	$	302	$	(1,042)	$	892
Other comprehensive income (loss)
Foreign currency translation adjustments		263		657		(1,246)		(19)
Amortization of net prior service costs and net actuarial losses, net of tax		(40)		10		51		73
Other comprehensive income (loss)		223		667		(1,195)		54
Comprehensive (loss) income	$	(594)	$	969	$	(2,237)	$	946

The accompanying notes are an integral part of these consolidated financial statements

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PIONEER POWER SOLUTIONS, INC.

Consolidated Balance Sheets

(In thousands)

	June 30,		December 31,
	2015		2014
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	-	$	3,832
Accounts receivable, net		14,722		13,101
Inventories, net		15,582		14,429
Income taxes receivable		470		474
Deferred income taxes		1,394		472
Prepaid expenses and other current assets		1,574		1,671
Total current assets		33,742		33,979
Property, plant and equipment, net		10,669		11,195
Noncurrent deferred income taxes		7,099		7,124
Other assets		1,024		1,143
Intangible assets, net		8,866		9,791
Goodwill		10,624		9,606
Total assets	$	72,024	$	72,838
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Bank overdrafts	$	979	$	-
Revolving credit facilities		9,153		6,860
Accounts payable and accrued liabilities		16,838		14,396
Current maturities of long-term debt and capital lease obligations		1,642		2,483
Income taxes payable		856		523
Total current liabilities		29,468		24,262
Long-term debt, net of current maturities		5,361		9,539
Pension deficit		225		351
Other long-term liability		500		-
Noncurrent deferred income taxes		7,755		7,852
Total liabilities		43,309		42,004
Shareholders’ Equity
Preferred stock, par value $0.001;5,000,000 shares authorized; none issued		-		-
Common stock, par value $0.001;30,000,000 shares authorized; 7,405,962 shares issued and outstanding		7		7
Additional paid-in capital		18,488		18,370
Accumulated other comprehensive loss		(4,520)		(3,325)
Retained earnings		14,740		15,782
Total shareholders’ equity		28,715		30,834
Total liabilities and shareholders’ equity	$	72,024	$	72,838

The accompanying notes are an integral part of these consolidated financial statements

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PIONEER POWER SOLUTIONS, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2015		2014
Operating activities
Net (loss) earnings	$	(1,042)	$	892
Depreciation		708		666
Amortization of intangible assets		869		159
Amortization of deferred financing costs		64		58
Deferred income tax		(1,030)		(573)
Accrued pension		22		(144)
Stock-based compensation		117		100
Foreign currency remeasurement (gain) loss		(87)		31
Changes in current operating assets and liabilities:
Accounts receivable		(2,383)		(1,764)
Inventories		(1,687)		(2,326)
Prepaid expenses and other assets		75		(98)
Income taxes		443		(184)
Accounts payable and accrued liabilities		2,678		2,923
Net cash used in operating activities		(1,253)		(260)
Investing activities
Additions to property, plant and equipment		(595)		(505)
Business acquisitions, net of cash acquired		(93)		-
Notes receivable		(88)		(34)
Net cash used in investing activities		(776)		(539)
Financing activities
Increase in bank overdrafts		979		729
Net increase in revolving credit facilities		2,348		661
Repayment of long-term debt		(4,467)		(1,090)
Payment of deferred financing costs		(40)		-
Repayment of financing obligation		(152)		(10)
Net cash (used in) provided by financing activities		(1,332)		290
Decrease in cash and cash equivalents		(3,361)		(509)
Effect of foreign exchange on cash and cash equivalents		(471)		142
Cash and cash equivalents
Beginning of year		3,832		425
End of period	$	-	$	58
Non-cash investing activities:
Forgiveness of indebtedness due to purchaser	$	609	$	-

The accompanying notes are an integral part of these consolidated financial statements

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PIONEER POWER SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements

1. BASIS OF PRESENTATION

Overview

Pioneer Power Solutions, Inc. and its wholly owned subsidiaries (referred to herein as the “Company,” “Pioneer,” “we,” “our” and “us”) manufacture, sell and service a broad range of specialty electrical transmission, distribution and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets. The Company is headquartered in Fort Lee, New Jersey and operates from thirteen additional locations in the U.S., Canada and Mexico for manufacturing, centralized distribution, engineering, sales and administration.

We have tworeportable segments as defined in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2015: Transmission and Distribution Solutions (“T&D Solutions”) and Critical Power Solutions.

Presentation

These unaudited consolidated financial statements include the accounts of the Pioneer Power Solutions, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation.

The accompanying unaudited consolidated financial statements of the Company have been prepared pursuant to the rules of the SEC. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), have been condensed or omitted pursuant to those rules and regulations. We believe that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included. The results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP for a year-end balance sheet.

These unaudited consolidated financial statements should be read in conjunction with the risk factors and the audited consolidated financial statements and notes thereto of the Company and its subsidiaries included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

All dollar amounts (except share and per share amounts) presented in the tables within the notes to our unaudited consolidated financial statements are stated in thousands of dollars, unless otherwise noted.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies were described in Note 2 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There have been no significant changes in the Company’s accounting policies during the second quarter of 2015.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on the Company’s financial statements.

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April 2014, the FASB issued Accounting Standards Update No. 2014-08 (“ASU 2014-08”) on reporting discontinued operations and disclosures of disposals of components of an entity. The new guidance restricts the presentation of discontinued operations to business circumstances when the disposal of business operations represents a strategic shift that has or will have a major effect on an entity's operations and financial

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results and enhances the related disclosure requirements. The Company adopted ASU 2014-08 on January 1, 2015, as required. There was no material impact on the Consolidated Financial Statements resulting from the adoption.

Revenue from Contracts with Customers.  In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.

In July 2015, the FASB made a decision to defer the effective date of the new standard for one year and permit early adoption as of the original effective date.  The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2018.

Simplifying the Measurement of Inventory.The FASB recently issued ASU 2015-111  as part of its simplification initiative. The amendments require inventory within the scope of the ASU to be measured using the lower of cost and net realizable value. The changes apply to all types of inventory, except those measured using LIFO or the retail inventory method. The new standard takes effect in 2017 for calendar year-end entities.  .  The Company is currently evaluating the impact on its consolidated financial statements.

3. ACQUISITIONS

Since January 1, 2014, the Company has acquired two businesses in the U.S. These acquisitions have allowed the Company to expand its products and service capabilities and offer its customers a greater breadth of solutions for their electrical power distribution and backup power needs. A summary of the acquisitions is as follows:

Business Acquired	Closing	Net Assets Acquired (in 000s)		Segment	Primary Form of Consideration
Titan Energy Worldwide, Inc.	12/02/14	$	1,958	Critical Power	Cash/stock
Harmonics Holdings Inc.	01/16/15		1,202	T&D Solutions	Seller note/debt forgiveness
		$	3,160

Each of the acquired businesses has been included in the Company’s results of operations since the date of closing its respective closing.

2014 Acquisition

On December 2, 2014, the Company acquired voting control of Titan Energy Worldwide, Inc. (“Titan”), a Minneapolis-headquartered provider of sales and service for commercial and industrial-scale onsite power systems, including generators and associated switching equipment. By December 31, 2014, the Company had acquired 100% ownership of Titan.  The Company funded the acquisition through a new term loan provided under its U.S. credit facilities and the issuance of shares of its common stock to former convertible preferred stock holders and note holders of Titan.

The following table summarizes the consideration paid for the Titan acquisition and presents the allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of December 2, 2014 (in thousands):

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	Titan Acquisition
Purchase Price
Cash consideration	$	953
Common stock consideration		1,005
	$	1,958
Purchase Price Allocation
Current assets, including cash and cash equivalents of $0.1 million	$	3,721
Property, plant and equipment		410
Identifiable intangible assets		5,147
Goodwill		2,719
Total assets acquired		11,997
Current liabilities		(6,881)
Notes payable		(3,158)
Net assets acquired	$	1,958

The Company determined the purchase price allocation based on estimates of the fair values of the tangible and intangible assets acquired and liabilities assumed. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can impact the Company’s results of operations. Management utilized recognized valuation techniques, including the income approach and cost approach for the net assets acquired, in addition to relying on asset appraisals.

The major classes of intangible assets arising from the acquisition of Titan, their respective amortization periods, and the amount of amortization expense recognized during the six months ended June 30, 2015 are as follows (in thousands):

	Weighted Average Amortization Years	Titan Acquisition
Acquired Intangible Assets
Customer relationships	4	$	4,320
Distributor territory license	4		474
Internally developed software	7		289
Trade names	1		64
		$	5,147

All of the goodwill and intangibles arising out of the Titan acquisition are amortizable for tax purposes.

The Company incurred $0.7 million of transaction, due diligence and integration costs during the year ended December 31, 2014 that were reflected in the Company’s results as a period expense. These costs included legal reorganization expenses, professional fees and integration costs and were included in the Company’s other expense in its statements of operations.

2015 Acquisition

On January 16, 2015, the Company acquired substantially all the assets of Harmonics Holdings Inc. (“Harmonics”), consisting primarily of intellectual property, accounts receivable and machinery and equipment. Harmonics is a Connecticut-based specialty provider of equipment that incorporates a patented technology for the elimination of harmonic currents in power distribution systems. The transaction was accounted for under the purchase method of accounting and the Company funded the cash consideration for the acquisition from available cash on hand.

The following table summarizes the consideration paid for the Harmonics acquisition and presents the preliminary allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of January 16, 2015 (in thousands):

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	Harmonics Acquisition
Purchase Price
Cash consideration	$	93
Forgiveness of trade payables and indebtedness due to purchaser		609
Deferred payments due to seller		500
	$	1,202
Purchase Price Allocation
Current assets	$	21
Property, plant and equipment		4
Goodwill		1,177
Total assets acquired		1,202
Current liabilities		-
Net assets acquired	$	1,202

The acquisition resulted in the recognition of goodwill in the Company’s consolidated financial statements because the purchase price exceeded the net tangible asset value and reflects the future earnings and cash flow potential of the acquired business. The Company made an initial allocation of the purchase price at the date of the acquisition, based upon its understanding of the fair value of the acquired tangible assets and assumed liabilities. After additional information is obtained about the intangible assets of the acquired business, the Company anticipates that its final allocation of the purchase price will result in a reduction to goodwill by an amount representing the estimated fair value of the intangible assets identified, which are likely to be intellectual property, customer relationships and non-compete agreements.

The Company incurred approximately $13,000 of transaction costs related to the acquisition during the six months ended June 30, 2015 that are reflected in the Company’s statement of operations as a period expense.

4. INVENTORIES

The components of inventories are summarized below (in thousands):

	June 30,		December 31,
	2015		2014
Raw materials	$	6,332	$	5,844
Work in process		4,491		3,496
Finished goods		5,228		5,567
Provision for excess and obsolete inventory		(469)		(478)
Total inventories	$	15,582	$	14,429

Included in raw materials and finished goods at June 30, 2015 and December 31, 2014 are goods in transit of approximately $0.1 million, respectively.

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5. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying values of goodwill for the six months ended June 30, 2015, were as follows (in thousands):

	T&D		Critical Power
	Solutions		Solutions		Total
	Segment		Segment		Goodwill
Balance as of December 31, 2014	$	6,029	$	3,577	$	9,606
Additions due to acquisition		1,177		-		1,177
Adjustments		-		(159)		(159)
Balance as of June 30, 2015	$	7,206	$	3,418	$	10,624

Changes in the carrying values of intangible assets for the six months ended June 30, 2015, were as follows (in thousands):

	T&D		Critical Power		Total
	Solutions		Solutions		Intangible
	Segment		Segment		Assets
Balance as of December 31, 2014	$	4,386	$	5,405	$	9,791
Amortization		(186)		(683)		(869)
Foreign currency translation		(56)		-		(56)
Balance as of June 30, 2015	$	4,144	$	4,722	$	8,866

The components of intangible assets as of June 30, 2015 are summarized below (in thousands):

	Weighted average amortization years	Gross carrying amount		Accumulated amortization		Impairment charges		Foreign currency translation		Net book value
Customer relationships	7	$	7,282	$	(1,801)	$	(214)	$	(153)	$	5,114
Non-compete agreements	6		465		(234)		-		(2)		229
Trademarks	(a)		2,113		(82)		-		(59)		1,972
Distributor territory license	4		474		(59)		-		-		415
Internally developed software	7		289		(21)		-		-		268
Technology-related industry accreditations	Indefinite		950		-		(17)		(65)		868
Total intangible assets		$	11,573	$	(2,197)	$	(231)	$	(279)	$	8,866

(a) Includes $1.8 million of trademarks with an indefinite useful life, and $0.3 million of trademarks that will be fully amortized during 2015 as a result of the Company’s decision to cease using them.

6. OTHER ASSETS

In December 2011 and January 2012, the Company made two loans, each in the amount of $300,000, to a developer of a renewable energy project in the U.S. The promissory notes accrue interest at a rate of 4.5% per annum with a final payment of all unpaid principal and interest becoming fully due and payable upon the earlier to occur of (i) the four year anniversary of the issuance date of the promissory notes, or (ii) an event of default. As defined in the promissory notes, an event of default includes, but is not limited to, the following: any bankruptcy, reorganization or similar proceeding involving the borrower, a sale or transfer of substantially all the assets of the borrower, a default by the borrower relating to any indebtedness due to third parties, the incurrence of additional indebtedness by the borrower without the Company’s written consent and failure of the borrower to perform its obligations

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pursuant to its other agreements with the Company, including its purchase order for pad mount transformers.  The full loan balance is outstanding at June 30, 2015.

Also included in Other Assets at June 30, 2015 are deferred financing costs of $0.3 million, a note receivable of $0.1 million as compared to deferred financing costs of $0.3 million and a note receivable of $0.2 million at December 31, 2014.

7. DEBT

Canadian Credit Facilities

In June 2013, the Company’s Canadian subsidiary, Pioneer Electrogroup Canada Inc., entered into an amended and restated letter loan agreement with Bank of Montreal (the “Canadian Facilities”) that replaced and superseded all of the Company’s prior financing arrangements with the bank.

The Canadian Facilities provide for up to $22.0 million Canadian dollars (“CAD”) (approximately $17.6 million expressed in U.S. dollars) in revolving and term debt. The Canadian facilities consist of a $10.0 million demand revolving credit facility (“Facility A”), a $2.0 million term credit facility (“Facility B”) and a $10.0 million term credit facility (“Facility C”).

Borrowings on Facility A are subject to margin criteria and are available in either U.S. or Canadian dollars. Pricing for U.S. Base Rate and Canadian Rate loans is the U.S. Base Rate or Canadian Rate plus 0.50% per annum. Borrowings of U.S. dollar LIBOR-based loans are priced at LIBOR plus 2.00%.  

Borrowings under Facility B bear interest at the bank’s prime rate plus 1.00% per annum with principal repayments becoming due on a five year amortization schedule.

Borrowings under Facility C are repayable according to a five year principal amortization schedule and bear interest for borrowings in U.S. dollars based on either LIBOR (plus 2.00% to 2.25%) or the U.S. Base Rate (plus 1.00% to 1.25%), depending on the Company’s leverage ratio. Facility C borrowings in Canadian dollars are priced at the Canadian Rate plus 1.00% to 1.25%, depending on the Company’s leverage ratio. On March 27, 2015, the Company elected to prepay in full the Canadian dollar portion of Facility C with $5.0 million Canadian dollars (approximately $4.0 million expressed in U.S. dollars) of cash available on-hand.

The Canadian Facilities are guaranteed by the Company and are secured by a first-ranking lien in the amount of $30 million CAD on all of the present and future movable and immovable property of the Company’s Canadian subsidiary. The Canadian Facilities require the Company’s Canadian operations to comply on a consolidated basis with various financial covenants, including maintaining a minimum fixed charge coverage ratio, a maximum funded debt to EBITDA ratio and a limitation on funded debt to capitalization.

As of June 30, 2015 the Company had approximately $1.5 million in U.S. dollar equivalents outstanding under the Canadian Facilities and was in compliance with its financial covenant requirements. The Company’s borrowings consisted of $0 outstanding under Facility A, $0.6 million outstanding under Facility B and $0.9 million outstanding under Facility C.

In July 2015, the Canadian Facilities were amended to provide for a $2.0 million loan under Facility A, which was used by the Company’s U.S. operations in connection with an acquisition (see Note 12 – Subsequent Events). The loan must be repaid by September 30, 2015. The Company intends to repay the loan using sources of cash including, but not limited to, its cash flow from operations and/or external financing sources, if required.

United States Credit Facilities

On June 28, 2013, the Company and its wholly-owned U.S. subsidiaries entered into a credit agreement with Bank of Montreal, Chicago Branch (the “U.S. Facility”) consisting of a $10.0 million demand revolving credit facility.

On December 2, 2014, the U.S. Facilities were amended in order to provide a $5.0 million term loan facility that was used for the acquisition of Titan. The term loan facility has principal repayments becoming due on a five year amortization schedule.

The U.S. Facility, as amended in August 2015, requires the Company to comply with a two-step test of financial covenants. First, the Company must comply with a maximum funded debt to adjusted EBITDA ratio of (a) 5.00x for the quarter ending June 30,

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2015, (b) 7.00x for the quarter ending September 30, 2015, (c) 4.00x for the quarter ending December 31, 2015, (d) 3.25x for the quarter ending March 31, 2016 and (e) 2.75x for the quarter ending June 30, 2016 and all testing periods thereafter. Secondly, if the funded debt to adjusted EBITDA tests above are met, and the Company’s fixed charge coverage ratio is at or above (a) 1.00x for the quarter ending June 30, 2015, (b) 0.50x for the quarter ending September 30, 2015, (c) 1.00x for the quarter ending December 31, 2015, and (d) 1.25x for the quarter ending March 31, 2016 and all testing periods thereafter, then no further compliance tests are required.

Alternatively, the Company may comply with the financial covenant requirements of the U.S. Facilities if its U.S. operations comply with various financial covenants, including (a) maintaining a minimum fixed charge coverage ratio of 1.35, (b) limiting funded debt to less than 50% of capitalization, and (c) maintaining a maximum funded debt to adjusted EBITDA ratio of (i) 3.75 for fiscal quarters ending June 30, 2015 and September 30, 2015, and (ii) 3.00 for the fiscal quarters ending on or after December 31, 2015. The U.S. Facilities also restrict the ability of the Company and its U.S. subsidiaries to incur indebtedness, create or incur liens, make investments, make distributions or dividends and enter into merger agreements or agreements for the sale of any or all assets.

Borrowings under the demand revolving credit facility bear interest, at the Company’s option, at the bank’s prime rate plus 1.00% per annum on U.S. prime rate loans, or an adjusted LIBOR rate plus 2.25% per annum on Eurodollar loans. Borrowings under the term loan facility bear interest, at the Company’s option, at the bank’s prime rate plus 1.25% per annum on U.S. prime rate loans, or an adjusted LIBOR rate plus 2.50% per annum on Eurodollar loans.

In connection with the U.S. Facilities, the Company and its U.S. subsidiaries and the bank entered into a security agreement, pursuant to which the Company granted a security interest in substantially all of its assets in the U.S., including 65% of the shares of Pioneer Electrogroup Canada Inc., to secure the Company’s obligations under the U.S. Facilities.

As of June 30, 2015, the Company had $14.1 million of borrowings outstanding under the U.S. Facilities and the Company was in compliance with its financial covenant requirements. The Company’s borrowings consisted of $9.2 million outstanding under its revolving credit facility and $4.9 million outstanding under its term loan facility.

Nexus Promissory Note

On July 25, 2012, the Company’s Mexican subsidiary, Nexus Magneticos de Mexico, S. de R.L. de C.V. (“Nexus”), entered into a $1.65 million term loan agreement with GE CF Mexico, S.A. de C.V. (“GE Capital Mexico”). The term loan is payable in 60 consecutive monthly installments and bears interest, payable monthly, at a rate of 6.93% per annum. The obligations of Nexus under the term loan are secured by certain machinery and equipment located in Mexico and by a corporate guaranty by the Company. As of June 30, 2015, there was approximately $0.5 million outstanding.

Titan Notes Payable

In connection with the acquisition of Titan, the Company assumed obligations to repay the remaining holders of unsecured notes. As of June 30, 2015, an aggregate principal amount of $70,000 remained outstanding.

Long-term debt consists of the following (in thousands):

	June 30,		December 31,
	2015		2014
Term credit facilities	$	6,470	$	11,165
Nexus promissory note		455		587
Other notes payable		70		260
Capital lease obligations		8		10
Total debt		7,003		12,022
Less current portion		(1,642)		(2,483)
Total long-term debt	$	5,361	$	9,539

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8. PENSION PLAN

The Company’s Canadian subsidiary sponsors a defined benefit pension plan at one of its locations in which a majority of its employees there are members. The subsidiary funds 100% of all contributions to the plan. The benefits, or the rate per year of credit service, are established by the Company and updated at its discretion.

The components of the expense the Company incurred under the pension plan are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Current service cost, net of employee contributions	$	14	$	9	$	29	$	20
Interest cost on accrued benefit obligation		27		32		55		64
Expected return on plan assets		(44)		(44)		(85)		(86)
Amortization of transitional obligation		3		3		5		6
Amortization of past service costs		2		2		4		4
Amortization of net actuarial gain		9		8		19		17
Total cost of benefit	$	11	$	10	$	27	$	25

The Company’s policy is to fund the pension plan at or above the minimum level required by law. The Company made $59,000 and $68,000 of contributions to its defined benefit pension plan during the six months ended June 30, 2015 and 2014, respectively. Changes in the discount rate and actual investment returns that are lower than the long-term expected return on plan assets could result in the Company making additional contributions.

9. SHAREHOLDERS’ EQUITY

Common Stock

The Company had 7,405,962 shares of common stock, $0.001 par value per share, outstanding of as of June 30, 2015 and December 31, 2014, respectively. In December 2014, in connection with the acquisition of Titan, the Company issued 233,707 shares of its common stock to Titan’s former convertible preferred stockholders and note holders in exchange for their interests in Titan.

Warrants

As of June 30, 2015, the Company had warrants outstanding to purchase 50,600 shares of common stock at an exercise price of $7.00 per share. These warrants are scheduled to expire on September 18, 2018 unless exercised earlier. No warrants were exercised during the six months ended June 30, 2015.

Stock-Based Compensation

A summary of stock option activity under the 2011 Long-Term Incentive Plan as of June 30, 2015, and changes during the six months ended June 30, 2015, are presented below:

	Stock Options	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding as of December 31, 2014	366,400	$	9.81	6.9	$	268,400
Granted	13,000		8.98	10.0		-
Exercised	-		-	-		-
Forfeited	(30,000)		-	-		-
Outstanding as of June 30, 2015	349,400	$	9.34	7.1	$	268,400
Exercisable as of June 30, 2015	278,401	$	9.48	6.4	$	229,774

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As of June  30, 2015, there were 320,600 shares available for future grants under the Company’s 2011 Long-Term Incentive Plan.

Expense for stock-based compensation recorded for the three and six months ended June 30, 2015 wasapproximately $57,000 and $117,000, respectively, as compared to $63,000 and $100,000 during the three and six months ended June 30, 2014, respectively. At June 30, 2015, the Company had total stock-based compensation expense remaining to be recognized in the statement of operations of approximately $319,000.

Foreign Currency Translation

Foreign assets and liabilities are translated using the exchange rate in effect at the balance sheet date, and results of operations are translated using an average rate for the period. Translation adjustments are accumulated and reported as a component of accumulated other comprehensive income (loss). The Company had foreign currency translation adjustments resulting in an unrealized loss of $1.2 million for the six months ended June 30, 2015, as compared to an unrealized gain of $0.1 million for the six months ended June 30, 2014.

10. BASIC AND DILUTED EARNINGS PER SHARE

Basic and diluted earnings per common share are calculated based on the weighted average number of shares outstanding during the period. The Company’s employee and director stock option awards, as well as incremental shares issuable upon exercise of warrants, are not considered in the calculations if the effect would be anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Numerator:
Net (loss) earnings	$	(817)	$	302	$	(1,042)	$	892
Denominator:
Weighted average basic shares outstanding		7,406		7,172		7,406		7,172
Effect of dilutive securities - equity based compensation plans		-		54		-		60
Net dilutive effect of warrants outstanding		-		11		-		12
Denominator for diluted earnings per common share		7,406		7,237		7,406		7,244
Net (loss) earnings per common share:
Basic	$	(0.11)	$	0.04	$	(0.14)	$	0.12
Diluted	$	(0.11)	$	0.04	$	(0.14)	$	0.12
Anti-dilutive securities (excluded from per share calculation):
Equity based compensation plans		349		223		349		223
Warrants		51		240		51		240

11. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company follows ASC 280 ­ Segment Reporting in determining its reportable segments. In December 2014, the Company considered the way its management team, most notably its chief operating decision maker, makes operating decisions and assesses performance and considered which components of the Company’s enterprise have discrete financial information available.  As the Company makes decisions using a products and services group focus, its analysis resulted in two reportable segments: T&D Solutions and Critical Power Solutions. The Critical Power Solutions reportable segment is an aggregation of the Company’s Pioneer Critical Power Inc. and Titan Energy Systems Inc. subsidiaries, and also includes sales and expenses directly and indirectly attributable to the Company’s strategic sales group. The T&D Solutions reportable segment is an aggregation of all other Company subsidiaries, together with sales and expenses attributable to the strategic sales group for its T&D Solutions marketing activities.

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The T&D Solutions segment is involved in the design, manufacture and distribution of electrical transformers and switchgear used primarily by utilities, large industrial and commercial operations to manage their electrical power distribution needs. The Critical Power Solutions segment provides power generation equipment, switchgear, related electrical distribution infrastructure and aftermarket field-services primarily to help customers ensure smooth, uninterrupted power to operations during times of emergency.

The following tables present information about segment income and loss (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenues
T&D Solutions	$	20,914	$	20,857	$	44,577	$	40,607
Critical Power Solutions		5,546		207		10,771		1,350
Consolidated	$	26,460	$	21,064	$	55,348	$	41,957
Depreciation and Amortization
T&D Solutions	$	397	$	392	$	790	$	769
Critical Power Solutions		379		18		755		35
General Corporate		17		11		33		21
Consolidated	$	793	$	421	$	1,578	$	825
Operating Income (Loss)
T&D Solutions	$	483	$	1,401	$	2,189	$	2,957
Critical Power Solutions		(586)		(263)		(1,378)		(227)
General Corporate		(584)		(567)		(1,581)		(1,162)
Consolidated	$	(687)	$	571	$	(770)	$	1,568

Revenues are attributable to countries based on the location of the Company's customers (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
United States	$	16,001	$	9,088	$	34,399	$	19,407
Canada		10,110		11,968		20,585		22,542
Others		349		8		364		8
Total	$	26,460	$	21,064	$	55,348	$	41,957

12. SUBSEQUENT EVENTS

On August 1, 2015, Pioneer Custom Electrical Products Inc. completed the purchase of substantially all the assets comprising the business of Pacific Power Integration Systems, Inc. (“Pacific”).Located in Santa Fe Springs, California, Pacific is a manufacturer of low and medium voltage switchgear, primarily serving customers in the oil refining, mass transit and utility sectors. The purchase price of$2.0 million in cash was financed with revolving debt drawn from the Company’s Canadian Facilities, and must be repaid by September 30, 2015 (see Note 7 – Debt).

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated interim financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission on April 2, 2015 and is available on the SEC’s website at www.sec.gov.

Unless the context requires otherwise, references in this Form 10-Q to the “Company,” “Pioneer,” “we,” “our” and “us” refer to Pioneer Power Solutions, Inc. and its subsidiaries.

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation.  Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.  Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved.  Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

· General economic conditions and their effect on demand for electrical equipment, particularly in the commercial construction market, but also in the power generation, industrial production, data center, oil and gas, marine and infrastructure industries.

· The effects of fluctuations in sales on our business, revenues, expenses, net income, earnings per share, margins and profitability.

· Many of our competitors are better established and have significantly greater resources, and may subsidize their competitive offerings with other products and services, which may make it difficult for us to attract and retain customers.

· We depend on Hydro-Quebec Utility Company and Siemens Industry, Inc. for a large portion of our business, and any change in the level of orders from Hydro-Quebec Utility Company or Siemens Industry, Inc., could have a significant impact on our results of operations.

· The potential loss or departure of key personnel, including Nathan J. Mazurek, our chairman, president and chief executive officer.

· Our ability to expand our business through strategic acquisitions.

· Our ability to integrate acquisitions and related businesses.

· Our ability to generate internal growth, maintain market acceptance of our existing products and gain acceptance for our new products.

· Unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect our profitability.

· Restrictive loan covenants and/or our ability to repay or refinance debt under our credit facilities could limit our future financing options and liquidity position and may limit our ability to grow our business.

· Our ability to realize revenue reported in our backlog.

· Operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor or overhead cost increases, interest rate risk and commodity risk.

· Strikes or labor disputes with our employees may adversely affect our ability to conduct our business.

· A  significant portion of our revenue and expenditures are derived or spent in Canadian dollars. However, we report our financial condition and results of operations in U.S. dollars. As a result, fluctuations between the U.S. dollar and the Canadian dollar will impact the amount of our revenues and earnings.

· The impact of geopolitical activity on the economy, changes in government regulations such as income taxes, climate control initiatives, the timing or strength of an economic recovery in our markets and our ability to access capital markets.

· Our chairman controls a majority of our voting power, and may have, or may develop in the future, interests that may diverge from yours.

· Material weaknesses in internal controls.

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· Future sales of large blocks of our common stock may adversely impact our stock price.

· The liquidity and trading volume of our common stock.

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. Moreover, new risks regularly emerge and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should carefully review the risk factors and other cautionary statements in our other reports filed with the SEC for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock.

Business Overview

We manufacture, sell and service a broad range of specialty electrical transmission, distribution and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets.  Our principal products and services include custom-engineered electrical transformers, switchgear and engine-generator sets and controls, complemented by a national field-service network to maintain and repair power generation assets. We are headquartered in Fort Lee, New Jersey and operate from 14 additional locations in the U.S., Canada and Mexico for manufacturing, service, centralized distribution, engineering, sales and administration.

Description of Business Segments

In 2014, we realigned our operations into two reportable segments: Transmission & Distribution Solutions (“T&D Solutions”) and Critical Power Solutions (“Critical Power”).

· Our T&D Solutions business provides equipment solutions that help customers effectively and efficiently manage their electrical power distribution systems to desired specifications.  The reporting segment is comprised of two primary product categories: electrical transformers and switchgear. These solutions are marketed principally through our Pioneer Transformers Ltd., Jefferson Electric, Inc. and Pioneer CEP brand names.

· Our Critical Power Solutions business provides customers with sophisticated power generation equipment, switchgear, related electrical distribution infrastructure and an advanced data collection and monitoring platform, the combination of which is used to ensure smooth, uninterrupted power to operations during times of emergency. The reporting segment is comprised of two primary product categories and one main service category: engine-generator sets, switchgear and controls, and preventative maintenance and monitoring services. These solutions are marketed by our operations headquartered in Minneapolis, currently doing business under the Pioneer Critical Power Inc. and Titan Energy Systems Inc. (“Titan”) brand names.

Foreign Currency Exchange Rates

Although we report our results in accordance with U.S. GAAP and in U.S. dollars, two of our business units are Canadian operations whose functional currency is the Canadian dollar.  As such, the financial position, results of operations, cash flows and equity of these operations are initially consolidated in Canadian dollars. Their assets and liabilities are then translated from Canadian dollars to U.S. dollars by applying the foreign currency exchange rate in effect at the balance sheet date, while the results of their operations and cash flows are translated to U.S. dollars by applying weighted average foreign currency exchange rates in effect during the reporting period. The resulting translation adjustments are included in other comprehensive income or loss.

The following table provides actual end of period exchange rates used to translate the financial position of our Canadian operations at the end of each period reported. The average exchange rates presented below, as provided by the Bank of Canada, are indicative of the weighted average rates we used to translate the revenues and expenses of our Canadian operations into U.S. dollars (rates expressed as the number of U.S. dollars to one Canadian dollar for each period reported):

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	2015						2014
	Balance Sheet		Statements of Operations and Comprehensive Income				Balance Sheet		Statements of Operations and Comprehensive Income
Quarter Ended	End of Period		Period Average		Cumulative Average		End of Period		Period Average		Cumulative Average
March 31	$	0.7895	$	0.8057	$	0.8057	$	0.9046	$	0.9062	$	0.9062
June 30	$	0.8006	$	0.8134	$	0.8095	$	0.9372	$	0.9170	$	0.9116

Critical Accounting Policies

There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014.

RESULTS OF OPERATIONS

Overview of First Half Results

Selected financial and operating data for our reportable business segments for the most recent reporting period is summarized below. This information, as well as the selected financial data provided in Note 11–Business Segment and Geographic Information and in our Consolidated Financial Statements and related notes included in this Quarterly Report on Form 10-Q, should be referred to when reading our discussion and analysis of results of operations below.

Our summary operating results during the three and six months ended June 30, 2015 and 2014 are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Revenues
T&D Solutions	$	20,914	$	20,857	$	44,577	$	40,607
Critical Power Solutions		5,546		207		10,771		1,350
Consolidated		26,460		21,064		55,348		41,957
Cost of sales
T&D Solutions		17,013		16,683		35,863		31,880
Critical Power Solutions		4,520		193		9,159		968
Consolidated		21,533		16,876		45,022		32,848
Gross profit		4,927		4,188		10,326		9,109
Selling, general and administrative expenses		5,014		3,382		10,153		7,225
Depreciation and amortization expense		521		127		1,035		253
Foreign exchange (gain) loss		79		108		(92)		63
Total operating expenses		5,614		3,617		11,096		7,541
Operating (loss) income		(687)		571		(770)		1,568
Interest expense		179		129		333		266
Other expense		186		-		263		2
Earnings (loss) before income taxes		(1,052)		442		(1,366)		1,300
Income tax (benefit) expense		(235)		140		(324)		408
Net (loss) earnings	$	(817)	$	302	$	(1,042)	$	892

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Backlog

Our backlog is based on firm orders from our customers expected to be delivered in the future, most of which is expected to occur during the next twelve months.  Backlog may vary significantly from reporting period to reporting period due to the timing of customer commitments. The time between receipt of an order and actual delivery, or completion, of our products and services varies from one or more days, in the case of inventoried standard products, to three to nine months, in the case of certain custom engineered equipment solutions, and up to one year or more under our service contracts.

The following table represents the progression of our backlog, by reporting segment,as of the end of the last five quarters (in thousands):

	June 30,		March 31,		December 31,		September 30,		June 30,
	2015		2015		2014		2014		2014
T&D Solutions	$	21,712	$	21,949	$	25,854	$	26,854	$	29,321
Critical Power Solutions		11,070		9,731		10,150		622		3,100
Total order backlog	$	32,782	$	31,680	$	36,004	$	27,476	$	32,421

Three and Six Months Ended June 30, 2015 Compared to Three and Six Months Ended June 30, 2014

Revenue

The following table represents our revenues by reporting segment and major product category for the periods indicated (in thousands, except percentages):

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2015		2014		Variance		%	2015		2014		Variance		%
T&D Solutions
Transformers	$	19,248	$	19,670	$	(422)	(2.1)	$	41,163	$	38,830	$	2,333	6.0
Switchgear		1,666		1,187		479	40.4		3,414		1,777		1,637	92.1
		20,914		20,857		57	0.3		44,577		40,607		3,970	9.8
Critical Power Solutions
Equipment		3,487		147		3,340	pos.		6,632		1,308		5,324	407.0
Service		2,059		60		1,999	pos.		4,139		42		4,097	pos.
		5,546		207		5,339	pos.		10,771		1,350		9,421	697.9
Total revenue	$	26,460	$	21,064	$	5,396	25.6	$	55,348	$	41,957	$	13,391	31.9

For the three months ended June 30, 2015, our consolidated revenue increased by $5.4 million, or 25.6%, to $26.5 million, up from $21.1 million during the three months ended June 30, 2014.For the six months ended June 30, 2015, our consolidated revenue increased by $13.4 million, or 31.9%, to $55.3 million, up from $42.0 million during the six months ended June 30, 2014.

T&D Solutions.  During the three months ended June 30, 2015, our T&D Solutions revenue increased $0.1 million (up 0.3%) as compared to the same quarter of 2014. Revenue from our transformer product lines decreased by $0.4 million (down 2.1%), and was offset by $0.5 million of growth (up 40.4%) in sales of our switchgear equipment solutions. The overall decrease in our transformer sales was driven by our Canadian operations where sales declined $2.7 million (down 22%) mostly as a result of foreign currency translation which negatively impacted revenue by approximately 12%. The remaining 10% year-over-year decrease in our Canadian transformer revenue is attributable to recessionary economic conditions and a general lack of commercial and industrial capital spending, particularly in Canada’s natural resource sector. Partially offsetting this sales performance, our U.S. transformer sales grew $2.3 million (up 31%), primarily as a result of a major new data center-oriented customer in our OEM sales channel, and new customer gains by our corporate selling group.

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For the six months ended June 30, 2015, our T&D Solutions revenue increased $4.0 million (up 9.8%) as compared to the first six months of 2014. This increase was comprised of $2.3 million in revenue growth (up 6.0%) from our transformer product categories, together with a $1.6 million increase (up 92.1%) in sales of our T&D switchgear-related revenue. The overall increase in our transformer sales was driven by strong volume in the U.S. (up 40%), led mostly by demand for custom magnetics in our OEM sales channel, together with increased brand label sales and commercial construction activity. This growth was partially offset by continued weakness in Canadian market conditions and the effect of foreign currency translation which precipitated a 14% decrease in Canadian sales, as compared to the same period in 2014. The large increase in our sales of T&D switchgear reflects an increasing market share in the California market and surrounding regions for our Pioneer CEP business unit that was established in August 2013.

Critical Power Solutions.  During the three months ended June 30, 2015, the $5.3 million increase in our Critical Power segment revenue was driven by the acquisition of Titan on December 2, 2014, which accounted for $5.4 million of revenue during the three months ended June 30, 2015, as compared to none during the prior year quarter. Titan’srevenue during the quarter included $3.4 million of power generation equipment sales (principally from Generac’s Industrial Power product line), together with $2.0 million of service program revenue attributable to its regional and national account customers. The remaining $0.1 million of segment revenue was attributable to the manufacture, sale and service of switchgear for critical power systems, down from $0.2 million of revenue during the three months ended June 30, 2014.

For the six months ended June 30, 2015, our Critical Power Solutions revenue increased to $10.8 million, up $9.4 million (or approximately 700%), due to the acquisition of Titan. Segment revenue consisted of $6.6 million in power generation equipment and $4.1 million in service revenue, a different mix as compared to $1.4 million of revenue during the six months ended June 30, 2014, consisting almost entirely of two significant paralleling switchgear projects.

Gross Profit and Gross Margin

The following table represents our gross profit by reporting segment for the periods indicated (in thousands, except percentages):

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2015		2014		Variance		%	2015		2014		Variance		%
T&D Solutions
Gross profit	$	3,901	$	4,174	$	(273)	(6.5)	$	8,714	$	8,727	$	(13)	(0.1)
Gross margin %		18.7		20.0		(1.3)			19.5		21.5		(2.0)
Critical Power Solutions
Gross profit		1,026		14		1,012	pos.		1,612		382		1,230	322.0
Gross margin %		18.5		6.8		11.7			15.0		28.3		(13.3)
Consolidated gross profit	$	4,927	$	4,188	$	739	17.6	$	10,326	$	9,109	$	1,217	13.4
Consolidated gross margin %		18.6		19.9		(1.3)			18.7		21.7		(3.0)

For the three months ended June 30, 2015, our gross margin percentage was 18.6% of revenues, compared to 19.9% during the three months ended June 30, 2014. For the six months ended June 30, 2015, our gross margin percentage was 18.7% of revenues, compared to 21.7% during the six months ended June 30, 2014. The decreases in our consolidated gross margin percentages is explained mostly by an unfavorable sales mix shift within our larger T&D Solutions segment, as well as in in our Critical Power Solutions segment, which included lower sales of paralleling switchgear in 2015, as compared to the same periods of 2014.

T&D Solutions.  During the three months ended June 30, 2015, the 1.3% decrease in our T&D Solutions gross margin percentage resulted primarily from challenging conditions in Canada where material costs have risen due to appreciation of the U.S. dollar, combined with weak commercial and industrial construction activity which has lowered demand overall, and in particular for our higher-margin, custom-engineered product categories. Increased sales from our U.S. T&D operations partially offset the decline in gross profit from Canada, but most of this sales growth occurred in channels where our gross margin percentage is lower than our overall segment average.

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For the six months ended June 30, 2015, the 2.0% decrease in our T&D Solutions gross margin percentage was due mostly to challenging demand and sales mix factors in Canada described above, particularly in our dry-type transformer categories. Higher throughput and sales by our U.S. T&D operations balanced out the decline in gross profit dollars from Canada, but at a lower average gross margin.

Critical Power Solutions.  During the three months ended June 30, 2015, the 11.7%  increase in our Critical Power segment gross margin percentage reflects a significant, acquisition-driven mix change towards the sale of engine generators and provision of aftermarket service, as compared to the same period of 2014 when our sales consisted solely of paralleling switchgear, and in an amount too small to be useful for comparison purposes. The gross margin increase also underscores improved performance by our Titan division which expanded its gross margin percentage by 5.7%, as compared to the first quarter of 2015, attributable mostly to its recurring field service business.

For the six months ended June 30, 2015, the 13.3% decrease in our Critical Power segment gross margin percentage was due mostly to the timing of the Titan acquisition, together with a lack of major projects completed in 2015 by our original Critical Power business focused on paralleling switchgear. This business represented 100% of segment sales at a 28.3% gross margin during the first six months of 2014, but represented only 2% of segment sales and at a negative gross margin during the six month period ended June 30, 2015. As a result, our blended 15.0% segment gross margin percentage during the six months ended June 30, 2015 mostly reflects our Titan division and the impact being caused by our paralleling switchgear business as it attempts to rebuild its order backlog in size and consistency from quarter to quarter.

Operating Expenses

The following table represents our operating expenses by reportable segment for the periods indicated (in thousands, except percentages):

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2015		2014		Variance		%	2015		2014		Variance		%
T&D Solutions
Selling, general and administrative expense	$	3,203	$	2,567	$	636	24.8	$	6,359	$	5,508	$	851	15.5
Depreciation and amortization expense		125		98		27	27.6		247		197		50	25.4
Foreign exchange (gain) loss		90		108		(18)	(16.7)		(81)		65		(146)	(224.6)
Segment operating expense	$	3,418	$	2,773	$	645	23.3	$	6,525	$	5,770	$	755	13.1
Critical Power Solutions
Selling, general and administrative expense	$	1,233	$	259	$	974	376.1	$	2,235	$	574	$	1,661	289.4
Depreciation and amortization expense		379		18		361	pos.		755		35		720	pos.
Segment operating expense	$	1,612	$	277	$	1,335	481.9	$	2,990	$	609	$	2,381	391.0
General corporate expense
Selling, general and administrative expense	$	578	$	556	$	22	4.0	$	1,559	$	1,143	$	416	36.4
Depreciation expense		17		11		6	54.5		33		21		12	57.1
Foreign exchange (gain)		(11)		-		(11)	-		(11)		(2)		(9)	450.0
Segment operating expense	$	584	$	567	$	17	3.0	$	1,581	$	1,162	$	419	36.1
Consolidated
Selling, general and administrative expense	$	5,014	$	3,382	$	1,632	48.3	$	10,153	$	7,225	$	2,928	40.5
Depreciation and amortization expense		521		127		394	310.2		1,035		253		782	309.1
Foreign exchange		79		108		(29)	(26.9)		(92)		63		(155)	(246.0)
Consolidated operating expense	$	5,614	$	3,617	$	1,997	55.2	$	11,096	$	7,541	$	3,555	47.1

Selling, General and Administrative Expense.  For the three months ended June 30, 2015, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $1.6 million, or 48.3%, to $5.0 million.

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During the six months ended June 30, 2015, consolidated selling, general and administrative expense, before depreciation and amortization, increased by approximately $2.9 million, or 40.5%, to $10.2 million. As a percentage of consolidated revenue, selling, general and administrative expense before depreciation and amortization increased to 18.9%  and 18.3% during the three and six month periods ended June 30, 2015, respectively, as compared to 16.1%  and 17.2% of revenue during the same periods of 2014.

The increase in our selling, general and administrative expense is attributable mostly to our Critical Power segment, which accounted for approximately 60% of the overall increase during both the three and six month periods ended June 30, 2015, as compared to 2014, resulting from the acquisition and inclusion of Titan in our 2015 results.T&D segmentselling, general and administrative expense increased by $0.6  million (up 24.8%) and $0.9 million (up 15.5%) during the three and six month periods ended June 30, 2015,  respectively, as compared to the same periods of 2014.  The increase in T&D expense mainly reflects $0.3 million of higher salary and benefits expense during both periods due to the expansion of our corporate selling group and switchgear manufacturing operations, as well as higher professional fees, bad debt and freight expense. General corporate selling, general and administrative expense increased $22,000 and $0.4 million during the three and six month periods ended June 30, 2015, respectively, as compared to the same periods of 2014, primarily due to higher headcount, salary and benefits costs and information technology expenses.

Depreciation and Amortization Expenses.  Depreciation and amortization expense consists primarily of amortization of definite-lived intangible assets,followed by depreciation of fixed assets (principally IT systems) and excludes amounts included in cost of revenue. Depreciation and amortization expense increased by $0.4 million and $0.8 million during the three and six month periods ended June 30, 2015, respectively, as compared to the same periods of 2014, primarily as a result of amortization of intangible assets associated with the Titan acquisition.

Foreign Exchange (Gain) Loss. During the three and six months ended June 30, 2015, approximately 38% and 37%, respectively, of our consolidated operating revenues were denominated in Canadian dollars (as compared to 57% and 54% in the corresponding 2014 periods) and most of our expenses were denominated and disbursed in U.S. dollars. We have not historically engaged in currency hedging activities. Fluctuations in foreign currency exchange rates between the time we initiate and then settle transactions with our customers and suppliers can have an impact on our operating results. For the three month period ended June 30, 2015, we recorded a loss of $79,000 due to currency fluctuations, compared to a loss of $108,000 during the three months ended June 30, 2014. For the six month period ended June 30, 2015, we recognized a foreign currency gain of $92,000, as compared to a loss of $63,000 during the same period of 2014.

Operating Income (Loss)

The following table represents our operating income or loss by reportable segment for the periods indicated (in thousands):

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2015		2014		Variance		%	2015		2014		Variance		%
T&D Solutions	$	483	$	1,401	$	(918)	(65.5)	$	2,189	$	2,957	$	(768)	(26.0)
Critical Power Solutions		(586)		(263)		(323)	122.8		(1,378)		(227)		(1,151)	507.0
General corporate expense		(584)		(567)		(17)	3.0		(1,581)		(1,162)		(419)	36.1
Total operating income (loss)	$	(687)	$	571	$	(1,258)	(220.3)	$	(770)	$	1,568	$	(2,338)	(149.1)

T&D Solutions.  T&D segment operating income for the three and six months ended June 30, 2015 declined $0.9 million and $0.8 million, respectively. This decline accelerated in the second quarter of 2015, driven by lower sales and gross profit from our Canadian businesses, particularly in our short-cycle, distribution transformer product lines where the economic downturn and adverse effect of a stronger U.S. dollar has been felt hardest. Operating income from our U.S. business units grew by $0.2 million during the six months ended June 30, 2015, mostly as a result of significantly increased sales, together with operating losses that have been stabilized at our T&D switchgear operation.

Critical Power Solutions.  During the three and six months ended June 30, 2015, our Critical Power segment generated an operating loss of $0.6 million and $1.4 million, respectively, as compared to operating losses of $0.3 million and $0.2 million during the same periods of 2014. The largest component of the change in Critical Power’s operating loss includes approximately $0.4 million in non-cash amortization expense per quarter related to intangible assets arising from the Titan acquisition. During the second quarter

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of 2015, Critical Power’s operating loss narrowed by $0.2 million, or approximately 26%, as compared to the immediately preceding quarter.

General Corporate Expense. Our general corporate expense consists primarily of executive management, corporate accounting and human resources personnel, office expenses, financing and corporate development activities, payroll and benefits administration, treasury, tax compliance, legal, stock-based compensation and public reporting costs, and costs not specifically allocated to reportable business segments such as our corporate strategic sales group. During the three and six month periods ended June 30, 2015, our general corporate expense increased $17,000 and $0.4 million, respectively, or 34.6%, primarily due to higher staffing and information technology expenses.

Non-Operating Expense

Interest Expense. For the three and six months ended June 30, 2015, interest expense was approximately $0.2 million and $0.3 million, respectively, as compared to $0.1 million and $0.3 million during the same periods of 2014. The increase in our interest expense was due to higher average borrowings outstanding under our credit facilities during the 2015 period, as compared to 2014.

Other Expense. For the three and six months ended June 30, 2015, other non-operating expense was $0.2 million and $0.3 million, respectively, as compared to $0 during the same periods of 2014. The 2015 other expense resulted primarily from acquisition-related transaction and integration expenses.

Income Tax (Benefit) Expense.  Our effective income tax rate was22.3%  and 23.7% for the three and six months ended June 30, 2015, respectively, as compared to 31.7%  and 31.4% during the same periods of 2014 period, as set forth below (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015		2014		Variance		2015		2014		Variance
Earnings (loss) before income taxes	$	(1,052)	$	442	$	(1,494)	$	(1,366)	$	1,300	$	(2,666)
Income tax (benefit) expense		(235)		140		(375)		(324)		408		(732)
Effective income tax rate %		22.3		31.7		(9.4)		23.7		31.4		(7.7)

Historically, most of our taxable income hasbeen derived in Canada where we are subject to lower corporate tax rates relative to our U.S. operations. During the 2015 periods, the decrease in our effective tax rate is primarily as a result of increased losses before income taxes from our U.S. operations (driven in large part by an increase in amortization of acquisition intangibles), and lower taxable income generated in Canada, the combination of which had the effect of reducing our weighted average blended effective tax rate.

Net Earnings (Loss)

We generated a net loss of $0.8 million and $1.0 million during the three and six months ended June 30, 2015, as compared to net earnings of $0.3 million and $0.9 million for the three and six months ended June 30, 2014. Our net loss per basic and diluted share for the three and six month periods ended June 30, 2015 was $0.11 and $0.14, respectively, as compared to net earnings per basic and diluted share of $0.04 and $0.12 for the three and six month periods ended June 30, 2014. The overall decrease in our net earnings was driven mostly bya lower overall profit contribution from our Canada-based transformer businesses, together with operating losses from our Critical Power Solutions segment caused by a lack of throughput at our paralleling switchgear manufacturing operation and increased expense for the amortization of acquisition-related intangibles.

Restructuring and Optimization Actions

During the second quarter of 2015, we began evaluating and implementing improvement strategies intended to reorganize, simplify and cut costs from operations, with the objective of returning the Company to more profitable growth. The restructuring and integration plan is being executed in stages, and is expected to be complete by mid-2016. We anticipate that theplan, when finalized, will result in restructuring charges, and that incremental capital expenditures will be required, none of which can be quantified with certainty at this time. At completion, we expect these actions to yield annual fixed cost savings of at least $2.5 million, in addition to

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other operating cost-efficiencies achieved through business closer integration. The plan is expected to primarily affect the following of our reporting units:

Titan Northeast. We recently began winding down the Northeast operations of our Titan subsidiary (“Titan Northeast”), which forms a small part of our Critical Power Solutions reporting segment. Titan Northeast is a distinct, project management-oriented division within Titan that is engaged in the procurement, sale and service of backup power systems supplied by major manufacturers. For the six months ended June 30, 2015, Titan Northeast had sales of $1.9 million and generated a  small pretax loss.The decision to cease Titan Northeast operations was indicative of our strategy to focus on higher margin, higher investment return activities that create the most shareholder value.

Pioneer CEP. Established in August 2013, Pioneer CEP functions as our switchgear manufacturing business unit within the T&D Solutions reporting segment. Since its formation, Pioneer CEP has experienced significant growth in product range and revenue, yet pretax operating losses have persisted longer than originally anticipated ($0.7 million during the six month period ended June 30, 2015). In July 2015, we instituted a reduction in force designed to provide $0.5 million in annual cost savings. As discussed further in Note 12 – Subsequent Events, on August 1, 2015, Pioneer CEP acquired substantially all the assets of Pacific Power Integration Systems, Inc., also located in Santa Fe Springs, California. Pacific is a manufacturer of low and medium voltage switchgear in classifications and for customers not currently addressed by Pioneer CEP. In connection with the business integration, Pacific’s facility will be closed before the end of December 2015, and its operations consolidated into Pioneer CEP’s location. As a result, our switchgear production flow will be overhauled in stages, certain low value-added activities will be outsourced, and we anticipate achieving greater overall production flexibility and efficiency. We believe that the plant consolidation, together with these and other initiatives, will enable Pioneer CEP to achieve profitability by the second quarter of 2016.

Pioneer Critical Power.  Established in March 2013, Pioneer Critical PowerInc. specializes in providing paralleling switchgear, automatic transfer switches and custom controls for engine-generators in highly complex backup power schemes at mission critical facilities. The second business unit within our Critical Power Solutions reporting segment, Titan Energy Systems Inc., also located in Minneapolis, sells commercial and industrial scale engine-generators and provides annual preventative maintenance and monitoring services under contract. In order to more closely align their strategies and drive operational growth, these companies will be consolidated into a single Minneapolis location by the end of 2015. In connection with the consolidation, all switchgear-related procurement and assembly activities will be transferred to our Pioneer CEP facility, given its newly acquired technical capabilities through the Pacific acquisition.

Bemag Transformer. We have outlined a strategy to reposition and significantly restructure  the business of our Bemag Transformer business unit, which forms part of our T&D Solutions reporting segment. Due to deteriorating economic conditions in Canada, leading to increased competition and a devaluation of the Canadian dollar to near 10-year lows, Bemag Transformer faces systemic challenges that resulted in a pretax loss of $1.3 million during the six month period ended June 30, 2015. The business will be rationalized and ultimately function as part of Jefferson Electric, Inc., which provides the same product offerings to U.S.-based customers.  We anticipate that the plan will initially and adversely impact the rate of our revenue growth, but that completion of the plan by mid-2016 will curtail the losses from the business, while enhancing already strong financial performance by Jefferson Electric Inc. through integration efficiencies.

LIQUIDITY AND CAPITAL RESOURCES

General. At June 30, 2015, we had total debt of $16.2 million and no cash and cash equivalents on hand. We have historically met our cash needs through a combination of cash flows from operating activities and bank borrowings under our revolving credit facilities. Our cash requirements are generally for operating activities, debt repayment, capital improvements and acquisitions. We believe that working capital, borrowing capacity available under our credit facilities and funds generated from operations should be sufficient to finance our cash requirements for anticipated operating activities, capital improvements and scheduled principal repayments of long-term debt through at least the next twelve months. In connection with the acquisition of Pacific (see Note 12 – Subsequent Events), our bank has required us to repay $2.0 million of our Canada-based short-term debt by September 30, 2015.We intend to repay the loan using sources of cash including, but not limited to, our cash flow from operations and/or external financing sources, if required.

Cash Used in Operating Activities. Cash used in our operating activities was approximately $1.3 million during the six months ended June 30, 2015, compared to cash used in our operating activities of $0.3 million during the six months ended June 30, 2014. The principal elements of cash provided by operating activities during the six months ended June  30, 2015 were approximately $1.8 million of non-cash expenses consisting of depreciation, amortization of intangibles and deferred financing costs and stock-based

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compensation. These sources of cash during the period were offset by a net loss of $1.0 million, $0.9 million of cash used for working capital purposes and $1.0 million related to deferred taxes, pension costs and unrealized gains related to currency translation included in our net earnings.

Cash Used in Investing Activities. Cash used in investing activities during the six months ended June 30, 2015 was approximately $0.8 million, as compared to $0.5 million during the six months ended June 30, 2014. During the six months ended June 30, 2015, additions to our property, plant and equipment were $0.6 million, or up $0.1 million as compared to the six months ended June 30, 2014. Our uses of cash in investing activities during the six months ended June 30, 2015 also included $0.1 million for an acquisition and $0.1 million in notes receivable.

Cash Provided by (Used in) Financing Activities. Cash used in our financing activities was approximately $1.3 million during the six months ended June 30, 2015, as compared to cash provided of $0.3 million during the six months ended June 30, 2014. During the six months ended June 30, 2015, our net cash used in financing activities included approximately $3.3 million of increased bank overdrafts and borrowings under our revolving credit facilities, offset by principal payments of $4.6 million on our long-term debt and Titan’s remaining short-term financing obligations. During the six months ended June 30, 2014,  our cash provided by financing activities included approximately $1.4 million of increased bank overdrafts and borrowings outstanding under our revolving credit facilities, offset by principal payments of $1.1 million on our long-term debt.

Working Capital. As of June 30, 2015, we had net working capital of $4.3 million, compared to net working capital of $9.7 million, including $0 and $3.8 million of cash and equivalents at June 30, 2015 and December 31, 2014, respectively. Our current assets were approximately 1.1 times our current liabilities at June 30, 2015, as compared to 1.4 times as at December 31, 2014. At June 30, 2015 we had $3.8 million of available and unused borrowing capacity from our revolving credit facilities, as compared to $5.4 million at December 31, 2014, without taking into account cash and cash equivalents on hand. However, the availability of this capacity under our revolving credit facilities is subject to restrictions on the use of proceeds and is dependent upon our ability to satisfy certain financial and operating covenants, including financial ratios.

Credit Facilities and Long-Term Debt

Canadian Credit Facilities

Our Canadian subsidiary has maintained credit facilities with Bank of Montreal since October 2009. In June 2013, our Canadian subsidiaryentered into an amended and restated letter loan agreement(the “Canadian Facilities”) that replaced and superseded all our prior financing arrangements with the bank.

Our Canadian Facilities provide for up to $22.0 million Canadian dollars (“CAD”) ($17.6million expressed in U.S. dollars) in revolving and term debt. The Canadian Facilities consist of a $10.0 million demand revolving credit facility (“Facility A”), a $2.0 million term credit facility (“Facility B”) and a $10.0 million term credit facility (“Facility C”).

Facility A is subject to margin criteria and borrowings bear interest at Bank of Montreal’s prime rate plus 0.50% per annum on amounts borrowed in Canadian dollars, or its U.S. base rate plus 0.50% per annum or LIBOR plus 2.00% per annum on amounts borrowed in U.S. dollars.Borrowings under Facility B bear interest at Bank of Montreal’s prime rate plus 1.00% per annum with principal repayments becoming due on a five year amortization schedule.Borrowings under Facility C are repayable according to a five year principal amortization schedule and bear interest for borrowings in U.S. dollars based on either LIBOR (plus 2.00% to 2.25%) or the U.S. Base Rate (plus 1.00% to 1.25%), depending on our leverage ratio. Facility C borrowings in Canadian dollars are priced at the Canadian Rate plus 1.00% to 1.25%, depending on our leverage ratio. On March 27, 2015, we elected to prepay in full the Canadian dollar portion of Facility C with $5.0 million Canadian dollars (approximately $4.0 million expressed in U.S. dollars) of cash available on-hand.

All obligations under the Canadian Facilities are guaranteed by us and are secured by a first-ranking lien in the amount of $30 million CAD on all of the present and future movable and immovable property of our Canadian subsidiary.

As of June 30, 2015, we had approximately $1.5 million in U.S. dollar equivalents outstanding under our Canadian Facilities and we were in compliance with our financial covenant requirements. Our borrowings consisted of $0 outstanding under Facility A, $0.6 million outstanding under Facility B and $0.9million outstanding under Facility C.

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In July 2015, in connection with financing the acquisition of Pacific (see Note 12 – Subsequent Events),our Canadian subsidiaryborrowed $2.0 million under Facility A in order to make a loan to us, which must be repaid to Bank of Montreal by September 30, 2015.

United States Credit Facilities

In June 2013, we entered into a credit agreement with Bank of Montreal, Chicago Branch (the “U.S. Facility”), consisting of a $10.0 million demand revolving credit facility that replaced a smaller facility we maintained with another bank.

On December 2, 2014, the U.S. Facilitywas amended in order to provide a $5.0 million term loan that we used for the acquisition of Titan. The term loan has principal repayments becoming due on a five year amortization schedule.

Borrowings under the U.S. Facility bear interest, at our option, at the bank’s prime rate plus 1.00% per annum on U.S. prime rate loans, or an adjusted LIBOR rate plus 2.25% per annum on Eurodollar loans.

Our obligations under the U.S. Facility are guaranteed by all our wholly-owned U.S. subsidiaries. In addition, we and our wholly-owned U.S. subsidiaries granted a security interest in substantially all of our assets, including 65% of the shares of Pioneer Electrogroup Canada Inc. held by us, to secure our obligations under the U.S. Facility.

As of June 30, 2015, we had $14.1 million outstanding under the U.S. Facility and we were in compliance with its financial covenant requirements, as amended in August 2015.Our borrowings consisted of $9.2 million outstanding under the revolving credit facility and $4.9 million outstanding under the term loan facility.

Nexus Promissory Note

In July 2012, our Mexican subsidiary entered into a $1.7million term loan agreement with GE Capital Mexico. The term loan is guaranteed by us and is payable in 60 consecutive monthlyinstallments and bears interest, payable monthly, at a rate of 6.93% per annum. As of June 30, 2015,  there was approximately $0.5 million outstanding under this loan.

Titan Notes Payable

In connection with the acquisition of Titan, we assumed obligations to repay the remaining holders of unsecured notes. As of June 30, 2015, an aggregate principal amount of $70,000 remained outstanding.

Capital Lease Obligations

As of June 30, 2015, we had an immaterial amount of capital lease obligations outstanding that were assumed in connection with the acquisition of Titan.

Capital Expenditures

Our additions to property, plant and equipment were $0.6 million during the six months ended June 30, 2015, as compared to $0.5million during the six months ended June 30, 2014. Our 2015 capital expenditures included approximately $0.2 million for the implementation of a new ERP system, which project is ongoing, as compared to $0.1million during the six months ended June 30, 2014. Other than the ERP system deployment, and consolidation plans forming part of our restructuring activities described above, we have no major future capital projects planned, or significant replacement spending anticipated during 2015.

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ITEM 4. CONTROLS AND PROCEDURES

Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.The matters that management identified in our Annual Report on Form 10-K for the year ended December 31, 2014, continued to exist and were still considered material weaknesses in our internal control over financial reporting at June 30, 2015.

We conducted an evaluation, under the supervision and participation of management including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. In light of the material weaknesses found in our internal controls over financial reporting previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014that continue to exist, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were not effective.

Previously Disclosed Material Weaknesses

Management previously reported material weaknesses in the Company's internal control over financial reporting in the Annual Report on Form 10-K for the year ended December 31, 2014. The material weaknesses related to entity-level controls including maintaining a sufficient complement of adequately trained personnel, adherence to procedures regarding standard costing and the valuation of inventory at our Bemag Transformer reporting unit, and the financial close and reporting process at our Pioneer Critical Power reporting unit.  

While we have taken certain actions to address the material weaknesses identified, additional measures may be necessary as we work to improve the overall effectiveness of our internal controls over financial reporting.Through the actions described in the remediation plan reportedin our Annual Report on Form 10-K for the year ended December 31, 2014, we believe that we are addressing the deficiencies that affected our internal control over financial reporting for the year then ended. Until the remediation plan is fully implemented and operating for a sufficient period of time, we will not be able to conclude that the material weaknesses have been remediated. We will continue to monitor and assess our remediation activities to address the material weaknesses discussed above through remediation as soon as practicable.

Changes in Internal Control over Financial Reporting

Other than changes that have been enacted pursuant to our remediation plan, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2015 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS

There have been no material changes in the Company’s risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2014, other than the following:

Our business operations are dependent upon our ability to engage in successful collective bargaining with our unionized workforce.

Our hourly employees located at our plant in Granby, Quebec, Canada are covered by a collective bargaining agreement with the United Steel Workers of America Local 9414 that expired in May 2015.  We are in the process of negotiating a new collective bargaining agreement with our unionized workforce at this facility which may take several months to complete.  There can be no assurance we will be successful in this effort.If we are unable to renew our collective bargaining agreement, or if additional segments of our workforce become unionized, we may be subject to work interruptions or stoppages. Strikes or labor disputes with our employees may adversely affect our ability to conduct our business.

ITEM 6. EXHIBITS

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PIONEER POWER SOLUTIONS, INC.
Date: August 12, 2015	/s/ Nathan J. Mazurek
	Nathan J. Mazurek
	President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer duly authorized to sign on behalf of Registrant)
Date: August 12, 2015	/s/ Andrew Minkow
	Andrew Minkow Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer duly authorized to sign on behalf of Registrant)

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EXHIBIT INDEX

Exhibit No.	Description
10.1*	Waiver and Eighth Amendment to Credit Agreement, dated as of August 12, 2015, by and among Pioneer Power Solutions, Inc. and Bank of Montreal, Chicago Branch.
10.2*	Amendment to Amended and Restated Loan Agreement, dated as of July 30, 2015, by and among Pioneer Electrogroup Canada Inc., as borrower,Pioneer Power Solutions, Inc., as guarantor, and Bank of Montreal, as lender.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL (eXtensible Business Reporting Language), (i) Consolidated Statements of Earnings, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows and (v) Notes to the Consolidated Financial Statements.

_______________

* Filed herewith.

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EX-10.1

EXHIBIT 10.1

WAIVER AND EIGHTH AMENDMENT TO CREDIT AGREEMENT

This Waiver and Eighth Amendment to Credit Agreement (herein, the “Amendment”) is entered into as of August 12, 2015, but effective as of June 30, 2015,  by and among PIONEER POWER SOLUTIONS, INC., a Delawarecorporation (the “Borrower”), the direct and indirect Domestic Subsidiaries of the Borrower, as Guarantors, and BANK OF MONTREAL,  aCanadian chartered bank acting through its Chicago branch(the “Bank”).

PRELIMINARY STATEMENTS

A.The Borrower, the Guarantors and the Bank entered into a certain Credit Agreement, dated as of June 28, 2013 (the Credit Agreement, as the same has been amended prior to the date hereof, being referred to herein as the “Credit Agreement”).  All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement.

B.The Borrower has requested that the Bank waive certain financial reporting defaults and amend certain financial covenants, and the Bank is willing to do so under the terms and conditions set forth in this Amendment.

NOW, THEREFORE,  for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 

SECTION 1.WAIVER.

The Borrower hasfailed to timely deliver the financial statements required by Section 8.5(c) (the “U.S. Financial Statements Default”), 8.5(d) (the “Consolidated Financial Statements Default”) and 8.5(e) (the “Canadian Financial Statements Default”), in each case for the fiscal year ended December31, 2014  (collectively, the “Existing Defaults”).  The Borrower has requested that the Bank permanently waive the U.S. Financial Statements Default and the Canadian Financial Statements Default and waive the Consolidated Financial Statements Defaultthrough September 30, 2015.  Subject to the satisfaction of the conditions precedent set forth in Section3 below, the Bank hereby permanently waives the U.S. Financial Statements Default and the Canadian Financial Statements Default and waives the Consolidated Financial Statements Defaultthrough September 30, 2015, and only through September 30, 2015.  For further clarity, failure to deliver the audited financial statements required by Section 8.5(d) for the fiscal year ended December31, 2014 by September 30, 2015 shall constitute an Event of Default under the Credit Agreement.  This waiver is limited to the matters and time periods expressly stated herein.  Except as specifically waived hereby, all of the terms and conditions of the Credit Agreement shall stand and remain in full force and effect.

In addition, the Bank hereby invokes its option to receive an unqualified audit report from BDO USA, LLP or its Canadian affiliates with respect to the financial statements of PECI for the fiscal year ending on or about December 31, 2015.

SECTION 2.AMENDMENTS.

Subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Credit Agreement shall be and hereby is amended as follows:

2.1.The definition of “EBITDA” appearing in Section 1.1 of the Credit Agreement (Definitions) shall be amended and restated in its entirety to read as follows:

“EBITDA” means, with reference to any period, Net Income for such period plus all amounts deducted in arriving at such Net Income amount in respect of (a) Interest Expense for such period, (b) federal, state, and local income taxes for such period, (c) depreciation of fixed assets and amortization (including, but not limited to, the amortization of any employee stock option (or similar) compensation plan) of (and other charges with respect to) intangible assets for such period, and (d) extraordinary fees or expenses not to exceed (i)$1,500,000 beginning January1, 2015 and ending December 31, 2015 and for the period beginning January1, 2016 and ending December 31, 2016,  and (ii) $1,000,000 during any twelve month period thereafter, in each case including any fees and expenses paid by the Loan Parties during such period in connection with this Agreement and the consummation of any Permitted Acquisition.  It is understood and agreed that the EBITDA for the trailing twelve month period of Pacific Power Systems Integration, Inc. prior to the acquisition by the Borrower shall be excluded from the calculation of EBITDA.

2.2.Clauses (d) and (e) of Section 8.23 of the Credit Agreement (Financial Covenants) shall be amended and restated in its entirety to read as follows:

(d)Reserved.

(e)Special Provision Regarding Financial Covenants. Notwithstanding the foregoing, if both (x)pursuant to Section 8.26(a), the calculated Total Leverage Ratio is less than or equal to (i)3.15 to 1.00 for the period ending on December31, 2014, (ii)3.65 to 1.00 for the period ending on March31, 2015, (iii)5.00 to 1.00 for the period ending on June30, 2015, (iv)7.00 to 1.00 for the period ending on September30, 2015,(v)4.00 to 1.00 for the period ending on December31, 2015, (vi)3.25 to 1.00 for the period ending on March31, 2016, and (vii)2.75 to 1.00 for the period ending on June30, 2016 and all periods thereafter, and

-3-

(y)pursuant to Section 8.26(b), the calculated Fixed Charge Coverage Ratio is greater than or equal to (i)1.00 to 1.00 for the period ending on June30, 2015, (ii)0.50 to 1.00 for the period ending on September30, 2015, (iii)1.00 to 1.00 for the period ending on December31, 2015,  and (iv)1.25 to 1.00 for the period ending on March31, 2016 and all periods thereafter, then the Loan Parties and their Non-Canadian Subsidiaries shall not be required to comply with the financial covenants set forth in Section 8.23(a), (b) and (c) or deliver such financial covenant calculations pursuant to Section 8.5(l).

2.3.Schedule I to Exhibit E to the Credit Agreement (Compliance Certificate) shall be replaced with Schedule I attached hereto.

SECTION 3.CONDITIONS PRECEDENT.

The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent:

3.1.The Borrower, the Guarantors and the Bank shall have executed and delivered this Amendment.

3.2.The Bank shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Amendment to the extent the Bank or its counsel may reasonably request.

3.3.Legal matters incident to the execution and delivery of this Amendment shall be satisfactory to the Bank and its counsel.

3.4.The Bank shall have received a non-refundable amendment fee of $7,500.

SECTION 4.REPRESENTATIONS.

In order to induce the Bank to execute and deliver this Amendment, the Borrower hereby represents to the Bank that as of the date hereof (a)  the representations and warranties set forth in Section 6 of the Credit Agreement are and shall be and remain true and correct (except that the representations contained in Section 6.5 shall be deemed to refer to the most recent financial statements of the Borrower delivered to the Bank) and (b) the Borrower is in compliance with the terms and conditions of the Credit Agreement and no Default or Event of Default has occurred and is continuing under the Credit Agreement or shall result after giving effect to this Amendment.

-4-

SECTION 5.MISCELLANEOUS.

5.1.The Borrower and the Guarantors heretofore executed and delivered to the Bank the Security Agreement and certain other Collateral Documents. The Borrower and the Guarantors hereby acknowledge and agree that the Liens created and provided for by the Collateral Documents continue to secure, among other things, the Secured Obligations arising under the Credit Agreement as amended hereby; and the Collateral Documents and the rights and remedies of the Bank thereunder, the obligations of the Borrower and Guarantors thereunder, and the Liens created and provided for thereunder remain in full force and effect and shall not be affected, impaired or discharged hereby.  Nothing herein contained shall in any manner affect or impair the priority of the liens and security interests created and provided for by the Collateral Documents as to the indebtedness which would be secured thereby prior to giving effect to this Amendment.

5.2.Except as specifically amended herein, the Credit Agreement shall continue in full force and effect in accordance with its original terms.  Reference to this specific Amendment need not be made in the Credit Agreement, the Notes, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.

5.3.The Borrower agrees to pay on demand all costs and expenses of or incurred by the Bank in connection with the negotiation, preparation, execution and delivery of this Amendment, including the reasonable fees and expenses of counsel for the Bank.

5.4.This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement.  Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original.  Delivery of a counterpart hereof by facsimile transmission or by e‑mail transmission of an Adobe portable document format file (also known as a “PDF” file) shall be effective as delivery of a manually executed counterpart hereof.  This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of Illinois.

[SIGNATURE PAGE TO FOLLOW]

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This Waiver and Eighth Amendment to Credit Agreement is entered into as of the date and year first above written.

“BORROWER”

PIONEER POWER SOLUTIONS, INC.
By	/s/ Andrew Minkow
Name	Andrew Minkow
Title	CFO

“GUARANTORS”

JEFFERSON ELECTRIC, INC.
By	/s/ Andrew Minkow
Name	Andrew Minkow
Title	CFO

PIONEER CRITICAL POWER INC.
By	/s/ Andrew Minkow
Name	Andrew Minkow
Title	CFO

PIONEER CUSTOM ELECTRICAL PRODUCTS CORP.
By	/s/ Andrew Minkow
Name	Andrew Minkow
Title	CFO

TITAN ENERGY SYSTEMS INC.
By	/s/ Andrew Minkow
Name	Andrew Minkow
Title	CFO

[SIGNATURE PAGE TO WAIVER AND EIGHTH AMENDMENT TO CREDIT AGREEMENT]

Accepted and agreed to.

BANK OF MONTREAL, acting through its Chicago Branch

By	/s/ Joseph W. Linder
Name	Joseph W. Linder
Title	Vice President

[SIGNATURE PAGE TO WAIVER AND EIGHTH AMENDMENT TO CREDIT AGREEMENT]

SCHEDULE I

TO COMPLIANCE CERTIFICATE

PIONEER POWER SOLUTIONS, INC.

COMPLIANCE CALCULATIONS

FOR CREDIT AGREEMENT DATED AS OF JUNE 28, 2013, AS AMENDED

CALCULATIONS AS OF _____________, _______

CONSOLIDATED FINANCIAL CALCULATIONS (SECTION 8.26)

A.Total Leverage Ratio for the Loan Parties and their Subsidiaries (Section 8.26(a))
1.Funded Debt (per definition but modified)	$_________________
2.Net Income for past 4 quarters	$_________________
3.Interest Expense for past 4 quarters	$_________________
4.Federal, state and local income taxes for past 4 quarters	$_________________
5.Depreciation and amortization for past 4 quarters	$_________________
6.Extraordinary fees or expenses for past 4 quarters	$_________________
7.Sum of Lines A2-A6 (EBITDA)	$_________________
8.Adjustments per definition of Adjusted EBITDA	$_________________
9.Sum of Line A7 and A8 (Adjusted EBITDA)	$_________________
10.Ratio of Line A1 to Line A9	____:1.00
11.Threshold limit pursuant to Section 8.23(e)(x)	3.15:1.00 for 12/31/14; 3.65:1.00 for 3/31/15; 5.00:1.00 for 6/30/15; 7.00: 1.00 for 9/30/15; 4.00:1.00 for 12/31/15; 3.25:1:00 for 3/31/16; and 2.75:1.00 for 6/30/16 and all periods thereafter
12.Is Line A10 less than or equal toA11 (circle yes or no)	yes/no

B.Fixed Charge Coverage Ratio for the Loan Parties and their Subsidiaries (Section 8.26(b))
1.Adjusted EBITDA (Line A9)	$_________________
2Unfinanced Capital Expenditures for past 4 quarters	$_________________
3.Cash taxes for past 4 quarters	$_________________
4.Restricted Payments paid in cash for past 4 quarters	$_________________
5.Line B1 minus the sum of Lines B2-B4	$_________________
6.Scheduled principal payments for past 4 quarters	$_________________
7.Interest Expense for past 4 quarters	$_________________
8.Sum of Lines B6 and B7 (Fixed Charges)	$_________________
9.Ratio of Line B5 to Line B8	____:1.00
10.Threshold limit pursuant to Section 8.23(e)(y)	1.00:1.00 for 6/30/15;  0.50:1.00 for 9/30/15; 1.00:1.00 for 12/31/15; and 1:25:1.00 for 3/31/16 all periods thereafter
11.Is Line B9 greater than or equal to B10 (circle yes or no)	yes/no
C.Calculation of Financial Covenants Pursuant to Section 8.23(a), (b) and (c)
1.If either of Line A12 or B11 is “no”, then the financial covenants set forth below must be calculated

FINANCIAL COVENANTS (SECTION 8.23)

A.Total Leverage Ratio for the Loan Parties and their Non-Canadian Subsidiaries (Section 8.23(a))
1.Funded Debt (per definition)	$_________________
2.Net Income for past 4 quarters	$_________________
3.Interest Expense for past 4 quarters	$_________________
4.Federal, state and local income taxes for past 4 quarters	$_________________
5.Depreciation and amortization for past 4 quarters	$_________________
6.Extraordinary fees or expenses for past 4 quarters	$_________________
7.Sum of Lines A2-A6 (EBITDA)	$_________________

-2-

8.Adjustments per definition of Adjusted EBITDA	$_________________
9.Sum of Lines A7 and A8 (Adjusted EBITDA)	$_________________
10.Ratio of Line A1 to Line A9	____:1.0
11.Line A10 Ratio shall not exceed	____:1.0
12.The Borrower is in compliance?  (circle yes or no)	yes/no
B.Funded Debt to Capitalization Ratio for the Loan Parties and their Non-Canadian Subsidiaries (Section 8.23(b))
1.Funded Debt (Line A1)	$_________________
2.Net Worth	$_________________
3.Sum of Lines B1 and B2 (Total Capitalization)	$_________________
4.Ratio of Line B1 to Line B3	____:1.0
5.Line B4 Ratio shall not exceed	0.50:1.0
6.The Borrower is in compliance?  (circle yes or no)	yes/no
C.Fixed Charge Coverage Ratio for the Loan Parties and their Non-Canadian Subsidiaries (Section 8.23(c))
1.Adjusted EBITDA for past 4 quarters (Line A9)	$_________________
2.Unfinanced Capital Expenditures for past 4 quarters	$_________________
3.Cash taxes for past 4 quarters	$_________________
4.Restricted Payments paid in cash for past 4 quarters	$_________________
5.Line C1 minus the sum of Lines C2-C4	$_________________
6.Scheduled principal payments for past 4 quarters	$_________________
7.Interest Expense for past 4 quarters	$_________________
8.Sum of Lines C6 and C7 (Fixed Charges)	$_________________
9.Ratio of Line C5 to Line C8	____:1.0
10.Line C9 Ratio shall not be less than	1.35:1.0
11.The Borrower is in compliance?  (circle yes or no)	yes/no

-3-

EX-10.2

EXHIBIT 10.2

July 30, 2015

PIONEER ELECTROGROUP CANADA INC.
c/o Pioneer Power Solutions Inc.

400 Kelby Street, 9th Floor

Fort Lee, NJ 07024

Attention:Andrew Minkow, CFO

Dear Sir:

Reference is hereby made to the Amended and Restated Letter Loan Agreement dated June 28, 2013 and entered into by, inter alios, Pioneer Electrogroup Canada Inc. (a corporation resulting from the amalgamation of Pioneer Electrogroup Canada Inc., Pioneer Transformers Ltd. and Bemag Transformer Inc.), as borrower (the “Borrower”), and Bank of Montreal, as lender (the “Bank”), as amended by an Amending Agreement No. 1 dated as of March 10, 2014 (as same may be further amended, restated, replaced or otherwise modified from time to time, collectively the “Loan Agreement”). All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Loan Agreement.

We hereby confirm that the Bank hasapproved your request to modify the purpose of Facility A under the Loan Agreement in order for the Borrower to make an inter-company loan to Pioneer Power Solutions Inc. (“Solutions”)in an amount not to exceed USD$2,300,000, such inter-company loan to be used to finance the acquisition by Solutions of Pacific Power Systems Integration Inc.

Solutions hereby undertakes to repay the aforementioned inter-company loan to the Borrowerby no later than September 30, 2015. Failure to do so shall constitute an Event of Default under the Loan Agreement.

Each of the terms and conditions of the Loan Agreement, as amended by this letter, shall remain in full force and effect, and are hereby affirmed by the undersigned.  It is expressly understood and agreed between the parties hereto that this letter does not constitute a novation of the terms and conditions provided for in the Loan Agreement and the documents relating thereto, the Bank hereby reserving all of its rights and recourses under the Loan Agreement.

Kindly acknowledge receipt and acceptance of this letter by dating and returning to the Bank the enclosed copy of this letter executed by the parties indicated below.

Yours truly,

	BANK OF MONTREAL
Per :	/s/ Peter Clair
	Name : Peter Clair Title : Managing Director
Per :	/s/ Jean-Michel Laplante
	Name :Jean-Michel Laplante Title :  Director

Each of the undersigned hereby acknowledges and agrees to the terms and conditions of this Letter this 4th day of August, 2015.

PIONEER ELECTROGROUP CANADA INC.		PIONEER POWER SOLUTIONS INC.
Per :	/s/ Nathan Mazurek	Per :	/s/ Nathan Mazurek
	Name :  Nathan Mazurek Title :  President		Name :  Nathan Mazurek Title :  President
Per :	/s/ Andrew Minkow	Per :	/s/ Andrew Minkow
	Name :  Andrew Minkow Title :  Chief Financial Officer		Name :  Andrew Minkow Title :  Chief Financial Officer

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Nathan J. Mazurek, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Pioneer Power Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and;
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 12, 2015	/s/ Nathan J. Mazurek
	Nathan J. Mazurek
	President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer duly authorized to sign on behalf of Registrant)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Andrew Minkow, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Pioneer Power Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August  12, 2015	/s/ Andrew Minkow
	Andrew Minkow
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the Quarterly Report on Form 10-Q (the “Form 10-Q”) for the quarter ended June 30, 2015 of Pioneer Power Solutions, Inc. (the “Company”). I, Nathan J. Mazurek, the Chief Executive Officer and Principal Executive Officer of the Company, certify that, based on my knowledge:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in this report.

Date: August 12, 2015	By:	/s/ Nathan J. Mazurek
	Name:	Nathan J. Mazurek
	Title:	Chief Executive Officer (Principal Executive Officer)

The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This certification is furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and accompanies the Quarterly Report on Form 10-Q (the “Form 10-Q”) for the quarter ended June 30, 2015 of Pioneer Power Solutions, Inc. (the “Company”). I, Andrew Minkow, the Chief Financial Officer and Principal Financial Officer of the Company, certify that, based on my knowledge:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in this report.

Date: August 12, 2015	By:	/s/ Andrew Minkow
	Name:	Andrew Minkow
	Title:	Chief Financial Officer (Principal Financial Officer)

The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

Debt (Narrative) (United States Credit Facilities) (Details) - Subsequent Event Type [Domain] $ in Thousands		3 Months Ended				6 Months Ended
	Jun. 23, 2013	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016	Dec. 31, 2014 USD ($)	Dec. 02, 2014 USD ($)	Jun. 28, 2013 USD ($)
Line of Credit Facility [Line Items]
Credit facilities amount outstanding					$ 9,153	$ 9,153		$ 6,860
Term Credit Facility (U.S. Facilities) [Member]
Line of Credit Facility [Line Items]
Credit facility, borrowing capacity									$ 5,000
Minimum fixed charge coverage ratio						1.35
Percentage of debt to capitalization					50	50
Percentage of subsidiary shares used to secure borrowings in facility	65.00%
Credit facilities amount outstanding					$ 4,900	$ 4,900
United States Credit Facilities [Member]
Line of Credit Facility [Line Items]
Credit facilities amount outstanding					$ 14,100	$ 14,100
United States Credit Facilities [Member] | Scenario, Plan [Member]
Line of Credit Facility [Line Items]
Minimum fixed charge coverage ratio			1.00		1.00
United States Credit Facilities [Member] | Bank of Montreal [Member]
Line of Credit Facility [Line Items]
Credit facility, borrowing capacity										$ 10,000
United States Credit Facilities [Member] | Prime Rate [Member]
Line of Credit Facility [Line Items]
Interest rate spread						1.00%
United States Credit Facilities [Member] | LIBOR Eurodollar Loan [Member]
Line of Credit Facility [Line Items]
Interest rate spread						2.25%
Term Loan Facility [Member] | Term Credit Facility (U.S. Facilities) [Member] | Prime Rate [Member]
Line of Credit Facility [Line Items]
Interest rate spread						1.25%
Term Loan Facility [Member] | Term Credit Facility (U.S. Facilities) [Member] | LIBOR Eurodollar Loan [Member]
Line of Credit Facility [Line Items]
Interest rate spread						2.50%
Minimum [Member] | United States Credit Facilities [Member] | Scenario, Plan [Member]
Line of Credit Facility [Line Items]
Minimum fixed charge coverage ratio		1.25		0.50
Maximum [Member] | United States Credit Facilities [Member]
Line of Credit Facility [Line Items]
EBITDA benchmark ratio					5.00	5.00
Maximum [Member] | United States Credit Facilities [Member] | Scenario, Plan [Member]
Line of Credit Facility [Line Items]
EBITDA benchmark ratio		3.25	4.00	7.00			2.75
Fiscal Quarters Ending on of After December 31, 2015 [Member] | Term Credit Facility (U.S. Facilities) [Member]
Line of Credit Facility [Line Items]
EBITDA benchmark ratio					3.00	3.00
Quarter Ends March 31, 2015 and September 30, 2015 [Member] | Term Credit Facility (U.S. Facilities) [Member]
Line of Credit Facility [Line Items]
EBITDA benchmark ratio					3.75	3.75

XML

Business Segment and Geographic Information (Narrative) (Details)	6 Months Ended
	Jun. 30, 2015 segment
Business Segment and Geographic Information [Abstract]
Number of reportable segments	2

XML

Inventories (Schedule of Inventories) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Inventories [Abstract]
Raw materials	$ 6,332	$ 5,844
Work in process	4,491	3,496
Finished goods	5,228	5,567
Provision for excess and obsolete inventory	(469)	(478)
Total inventories	$ 15,582	$ 14,429

XML

Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2015

2011 Long-Term Incentive Plan [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Stock Option Activity

A summary of stock option activity under the 2011 Long-Term Incentive Plan as of June 30, 2015, and changes during the six months ended June 30, 2015, are presented below:

	Stock Options	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding as of December 31, 2014	366,400	$	9.81	6.9	$	268,400
Granted	13,000		8.98	10.0		-
Exercised	-		-	-		-
Forfeited	(30,000)		-	-		-
Outstanding as of June 30, 2015	349,400	$	9.34	7.1	$	268,400
Exercisable as of June 30, 2015	278,401	$	9.48	6.4	$	229,774

XML

Business Segment and Geographic Information (Schedule of Geographical Information) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment Reporting Information [Line Items]
Revenues	$ 26,460	$ 21,064	$ 55,348	$ 41,957
United States [Member]
Segment Reporting Information [Line Items]
Revenues	16,001	9,088	34,399	19,407
Canada [Member]
Segment Reporting Information [Line Items]
Revenues	10,110	11,968	20,585	22,542
Others [Member]
Segment Reporting Information [Line Items]
Revenues	$ 349	$ 8	$ 364	$ 8

XML

Debt (Schedule of Long-Term Debt) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Total debt	$ 7,003	$ 12,022
Less current portion	(1,642)	(2,483)
Total long-term debt	5,361	9,539
Term Credit Facilities [Member]
Debt Instrument [Line Items]
Total debt	6,470	11,165
Other Notes Payable [Member]
Debt Instrument [Line Items]
Total debt	70	260
Capital Lease Obligations [Member]
Debt Instrument [Line Items]
Total debt	8	10
Nexus Promissory Note [Member]
Debt Instrument [Line Items]
Total debt	$ 455	$ 587

XML

Other Assets (Narrative) (Details)					6 Months Ended
	Jan. 31, 2012 USD ($) item	Jan. 31, 2012 USD ($)	Dec. 31, 2011 USD ($) item	Dec. 31, 2011 USD ($)	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Deferred financing costs					$ 300,000	$ 300,000
Note receivable					$ 100,000	$ 200,000
Promissory Notes [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Principal amount	$ 300,000	$ 300,000	$ 300,000	$ 300,000
Number of promissory notes | item	1		1
Accrued interest rate (in percent)		4.50%		4.50%
Notes receivables, maturity date, description					the four year anniversary of the issuance date of the promissory notes, or (ii) an event of default
Notes receivables, maturity date	Jan. 31, 2016		Dec. 31, 2015

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Basic and Diluted Earnings Per Share (Schedule of Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net (loss) earnings	$ (817)	$ 302	$ (1,042)	$ 892
Denominator:
Weighted average basic shares outstanding	7,406	7,172	7,406	7,172
Effect of dilutive securities - equity based compensation plans		54		60
Net dilutive effect of warrants outstanding		11		12
Denominator for diluted earnings per common share	7,406	7,237	7,406	7,244
Net (loss) earnings per common share:
Basic	$ (0.11)	$ 0.04	$ (0.14)	$ 0.12
Diluted	$ (0.11)	$ 0.04	$ (0.14)	$ 0.12
Equity Based Compensation Plans[Member]
Anti-dilutive securities (excluded from per share calculation):
Excluded securities from computation of basic and diluted EPS	349	223	349	223
Warrants [Member]
Anti-dilutive securities (excluded from per share calculation):
Excluded securities from computation of basic and diluted EPS	51	240	51	240

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Acquisitions

6 Months Ended

Jun. 30, 2015

Acquisitions [Abstract]

Acquisitions

3. ACQUISITIONS

Since January 1, 2014, the Company has acquired two businesses in the U.S. These acquisitions have allowed the Company to expand its products and service capabilities and offer its customers a greater breadth of solutions for their electrical power distribution and backup power needs. A summary of the acquisitions is as follows:

Business Acquired	Closing	Net Assets Acquired (in 000s)		Segment	Primary Form of Consideration
Titan Energy Worldwide, Inc.	12/02/14	$	1,958	Critical Power	Cash/stock
Harmonics Holdings Inc.	01/16/15		1,202	T&D Solutions	Seller note/debt forgiveness
		$	3,160

Each of the acquired businesses has been included in the Company’s results of operations since the date of closing its respective closing.

2014 Acquisition

On December 2, 2014, the Company acquired voting control of Titan Energy Worldwide, Inc. (“Titan”), a Minneapolis-headquartered provider of sales and service for commercial and industrial-scale onsite power systems, including generators and associated switching equipment. By December 31, 2014, the Company had acquired 100% ownership of Titan.  The Company funded the acquisition through a new term loan provided under its U.S. credit facilities and the issuance of shares of its common stock to former convertible preferred stock holders and note holders of Titan.

The following table summarizes the consideration paid for the Titan acquisition and presents the allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of December 2, 2014 (in thousands):

	Titan Acquisition
Purchase Price
Cash consideration	$	953
Common stock consideration		1,005
	$	1,958
Purchase Price Allocation
Current assets, including cash and cash equivalents of $0.1 million	$	3,721
Property, plant and equipment		410
Identifiable intangible assets		5,147
Goodwill		2,719
Total assets acquired		11,997
Current liabilities		(6,881)
Notes payable		(3,158)
Net assets acquired	$	1,958

The Company determined the purchase price allocation based on estimates of the fair values of the tangible and intangible assets acquired and liabilities assumed. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can impact the Company’s results of operations. Management utilized recognized valuation techniques, including the income approach and cost approach for the net assets acquired, in addition to relying on asset appraisals.

The major classes of intangible assets arising from the acquisition of Titan, their respective amortization periods, and the amount of amortization expense recognized during the six months ended June 30, 2015 are as follows (in thousands):

	Weighted Average Amortization Years	Titan Acquisition
Acquired Intangible Assets
Customer relationships	4	$	4,320
Distributor territory license	4		474
Internally developed software	7		289
Trade names	1		64
		$	5,147

All of the goodwill and intangibles arising out of the Titan acquisition are amortizable for tax purposes.

The Company incurred $0.7 million of transaction, due diligence and integration costs during the year ended December 31, 2014 that were reflected in the Company’s results as a period expense. These costs included legal reorganization expenses, professional fees and integration costs and were included in the Company’s other expense in its statements of operations.

2015 Acquisition

On January 16, 2015, the Company acquired substantially all the assets of Harmonics Holdings Inc. (“Harmonics”), consisting primarily of intellectual property, accounts receivable and machinery and equipment. Harmonics is a Connecticut-based specialty provider of equipment that incorporates a patented technology for the elimination of harmonic currents in power distribution systems. The transaction was accounted for under the purchase method of accounting and the Company funded the cash consideration for the acquisition from available cash on hand.

The following table summarizes the consideration paid for the Harmonics acquisition and presents the preliminary allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of January 16, 2015 (in thousands):

	Harmonics Acquisition
Purchase Price
Cash consideration	$	93
Forgiveness of trade payables and indebtedness due to purchaser		609
Deferred payments due to seller		500
	$	1,202
Purchase Price Allocation
Current assets	$	21
Property, plant and equipment		4
Goodwill		1,177
Total assets acquired		1,202
Current liabilities		-
Net assets acquired	$	1,202

The acquisition resulted in the recognition of goodwill in the Company’s consolidated financial statements because the purchase price exceeded the net tangible asset value and reflects the future earnings and cash flow potential of the acquired business. The Company made an initial allocation of the purchase price at the date of the acquisition, based upon its understanding of the fair value of the acquired tangible assets and assumed liabilities. After additional information is obtained about the intangible assets of the acquired business, the Company anticipates that its final allocation of the purchase price will result in a reduction to goodwill by an amount representing the estimated fair value of the intangible assets identified, which are likely to be intellectual property, customer relationships and non-compete agreements.

The Company incurred approximately $13,000 of transaction costs related to the acquisition during the six months ended June 30, 2015 that are reflected in the Company’s statement of operations as a period expense.

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Pension Plan (Narrative) (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Pension Plan [Abstract]
Funded percentage (in percent)	100.00%	100.00%
Contributions to defined benefit pension plan	$ 59,000	$ 68,000

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Acquisitions (Narrative) (Details)	6 Months Ended
	Jun. 30, 2015 USD ($) entity	Dec. 31, 2014 USD ($)
Business Acquisition [Line Items]
Number of businesses acquired | entity	2
Titan Energy Worldwide Inc. [Member]
Business Acquisition [Line Items]
Business acquisition, effective date of acquisition	Dec. 02, 2014
Equity method investment, ownership percentage		100.00%
Transaction costs incurred		$ 700,000
Harmonics Holdings Inc. [Member]
Business Acquisition [Line Items]
Business acquisition, effective date of acquisition	Jan. 16, 2015
Transaction costs incurred	$ 13,000

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Basis of Presentation (Narrative) (Details)	6 Months Ended
	Jun. 30, 2015 segment
Basis of Presentation [Abstract]
Number of reportable segments	2

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Pension Plan (Schedule of Pension Plan Expenses) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Pension Plan [Abstract]
Current service cost, net of employee contributions	$ 14	$ 9	$ 29	$ 20
Interest cost on accrued benefit obligation	27	32	55	64
Expected return on plan assets	(44)	(44)	(85)	(86)
Amortization of transitional obligation	3	3	5	6
Amortization of past service costs	2	2	4	4
Amortization of net actuarial gain	9	8	19	17
Total cost of benefit	$ 11	$ 10	$ 27	$ 25

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Acquisitions (Summary of Acquisitions) (Details) - USD ($) $ in Thousands			6 Months Ended
	Jan. 16, 2015	Dec. 02, 2014	Jun. 30, 2015	Dec. 31, 2014
Purchase Price Allocation
Goodwill			$ 10,624	$ 9,606
Net assets acquired			$ 3,160
Titan Energy Worldwide Inc. [Member]
Business Acquisition [Line Items]
Business Acquisition, Name of Acquired Entity			Titan Energy Worldwide, Inc.
Business acquisition, effective date of acquisition			Dec. 02, 2014
Business combination location within acquiree's segment			Critical Power
Business combination primary form of consideration			Cash/stock
Purchase Price
Cash consideration		$ 953
Common stock consideration		1,005
Purchase Price Allocation
Current assets		3,721
Property, plant and equipment		410
Identifiable intangible assets		5,147
Goodwill		2,719
Total assets acquired		11,997
Current liabilities		(6,881)
Notes payable		(3,158)
Net assets acquired		1,958	$ 1,958
Cash and cash equivalents		$ 100
Harmonics Holdings Inc. [Member]
Business Acquisition [Line Items]
Business Acquisition, Name of Acquired Entity			Harmonics Holdings Inc.
Business acquisition, effective date of acquisition			Jan. 16, 2015
Business combination location within acquiree's segment			T&D Solutions
Business combination primary form of consideration			Seller note/debt forgiveness
Purchase Price
Cash consideration	$ 93
Purchase Price Allocation
Current assets	21
Property, plant and equipment	4
Goodwill	1,177
Total assets acquired	1,202
Net assets acquired	1,202		$ 1,202
Harmonics Holdings Inc. [Member] | Forgiveness Trade Payables and Indebtedness to Purchaser [Member]
Purchase Price
Business combination, separately recognized transactions, assets recognized	609
Harmonics Holdings Inc. [Member] | Deferred Purchase Price Due To Seller [Member]
Purchase Price
Business combination, separately recognized transactions, assets recognized	$ 500

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Acquisitions (Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization of intangibles	$ 869	$ 159
Titan Energy Worldwide Inc. [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets acquired	$ 5,147
Titan Energy Worldwide Inc. [Member] | Customer Relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period of identifiable intangible assets	4 years
Amortization of intangibles	$ 4,320
Titan Energy Worldwide Inc. [Member] | Distributor Territory License [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period of identifiable intangible assets	4 years
Amortization of intangibles	$ 474
Titan Energy Worldwide Inc. [Member] | Internally Developed Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period of identifiable intangible assets	7 years
Amortization of intangibles	$ 289
Titan Energy Worldwide Inc. [Member] | Trade Names [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization period of identifiable intangible assets	1 year
Amortization of intangibles	$ 64

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies were described in Note 2 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There have been no significant changes in the Company’s accounting policies during the second quarter of 2015.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on the Company’s financial statements.

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April 2014, the FASB issued Accounting Standards Update No. 2014-08 (“ASU 2014-08”) on reporting discontinued operations and disclosures of disposals of components of an entity. The new guidance restricts the presentation of discontinued operations to business circumstances when the disposal of business operations represents a strategic shift that has or will have a major effect on an entity's operations and financial results and enhances the related disclosure requirements. The Company adopted ASU 2014-08 on January 1, 2015, as required. There was no material impact on the Consolidated Financial Statements resulting from the adoption.

Revenue from Contracts with Customers.  In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.

In July 2015, the FASB made a decision to defer the effective date of the new standard for one year and permit early adoption as of the original effective date.  The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2018.

Simplifying the Measurement of Inventory.The FASB recently issued ASU 2015-111  as part of its simplification initiative. The amendments require inventory within the scope of the ASU to be measured using the lower of cost and net realizable value. The changes apply to all types of inventory, except those measured using LIFO or the retail inventory method. The new standard takes effect in 2017 for calendar year-end entities.  .  The Company is currently evaluating the impact on its consolidated financial statements.

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Inventories (Narrative) (Details) $ in Millions	Jun. 30, 2015 USD ($)
Inventories [Abstract]
Goods in transit	$ 0.1

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Debt (Narrative) (Nexus Promissory Note) (Details) - GE Cf Mexico (Term Loan Agreement) [Member] - USD ($)	6 Months Ended
	Jun. 30, 2015	Jul. 25, 2012
Note issued		$ 1,650,000
Term loan frequency of periodic payment	60 consecutive monthly installments
Rate of interest of debt instrument		6.93%
Term Loan Facility [Member]
Long-term Debt	$ 500,000

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Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Revenues	$ 26,460	$ 21,064	$ 55,348	$ 41,957
Cost of goods sold	21,533	16,876	45,022	32,848
Gross profit	4,927	4,188	10,326	9,109
Operating expenses
Selling, general and administrative	5,535	3,509	11,188	7,478
Foreign exchange (gain) loss	79	108	(92)	63
Total operating expenses	5,614	3,617	11,096	7,541
Operating (loss) income	(687)	571	(770)	1,568
Interest expense	179	129	333	266
Other expense	186		263	2
Earnings (loss) before income taxes	(1,052)	442	(1,366)	1,300
Income tax (benefit) expense	(235)	140	(324)	408
Net (loss) earnings	$ (817)	$ 302	$ (1,042)	$ 892
Net (loss) earnings per common share:
Basic	$ (0.11)	$ 0.04	$ (0.14)	$ 0.12
Diluted	$ (0.11)	$ 0.04	$ (0.14)	$ 0.12
Weighted average common shares outstanding:
Basic	7,406	7,172	7,406	7,172
Diluted	7,406	7,237	7,406	7,244

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Shareholders' Equity (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001		$ 0.001
Common stock, outstanding shares	7,405,962	7,405,962		7,405,962
Outstanding purchase of warrants (in shares)		50,600		50,600
Strike price of warrants outstanding		$ 7.00		$ 7.00
Warrant expiration date range end				Sep. 18, 2018
Warrants exercised				0
Stock-based compensation expense		$ 57,000	$ 63,000	$ 117,000	$ 100,000
Stock-based compensation expense unrecognized in the statement of operations		$ 319,000		319,000
Foreign currency translation				$ (1,200,000)	$ 100,000
2011 Long-Term Incentive Plan [Member]
Shares available for future grants		320,600		320,600
Titan Energy Worldwide Inc. [Member]
Business acquisition, equity interest issued or issuable, number of shares	233,707

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating activities
Net (loss) earnings	$ (1,042)	$ 892
Depreciation	708	666
Amortization of intangible assets	869	159
Amortization of deferred financing costs	64	58
Deferred income tax	(1,030)	(573)
Accrued pension	22	(144)
Stock-based compensation	117	100
Foreign currency remeasurement (gain) loss	(87)	31
Changes in current operating assets and liabilities:
Accounts receivable	(2,383)	(1,764)
Inventories	(1,687)	(2,326)
Prepaid expenses and other assets	75	(98)
Income taxes	443	(184)
Accounts payable and accrued liabilities	2,678	2,923
Net cash used in operating activities	(1,253)	(260)
Investing activities
Additions to property, plant and equipment	(595)	(505)
Business acquisitions, net of cash acquired	(93)
Notes receivable	(88)	(34)
Net cash used in investing activities	(776)	(539)
Financing activities
Increase in bank overdrafts	979	729
Net increase in revolving credit facilities	2,348	661
Repayment of long-term debt	(4,467)	(1,090)
Payment of deferred financing costs	(40)
Repayment of financing obligation	(152)	(10)
Net cash (used in) provided by financing activities	(1,332)	290
Decrease in cash and cash equivalents	(3,361)	(509)
Effect of foreign exchange on cash and cash equivalents	(471)	142
Cash and cash equivalents
Beginning of year	3,832	425
End of period		$ 58
Non-cash investing activities:
Forgiveness of indebtedness due to purchaser	$ 609

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Goodwill and Other Intangible Assets (Schedule of Carrying Value of Intangible Assets) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Finite-Lived Intangible Assets [Line Items]
Balance as of December 31, 2014	$ 9,791
Amortization	(869)	$ (159)
Foreign currency translation	(56)
Balance as of June 30, 2015	8,866
T & D Solutions Segment [Member]
Finite-Lived Intangible Assets [Line Items]
Balance as of December 31, 2014	4,386
Amortization	(186)
Foreign currency translation	(56)
Balance as of June 30, 2015	4,144
Critical Power Solutions Segment [Member]
Finite-Lived Intangible Assets [Line Items]
Balance as of December 31, 2014	5,405
Amortization	(683)
Balance as of June 30, 2015	$ 4,722

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2015

Goodwill and Other Intangible Assets [Abstract]

Schedule of Intangible Assets and Goodwill

Changes in the carrying values of goodwill for the six months ended June 30, 2015, were as follows (in thousands):

	T&D		Critical Power
	Solutions		Solutions		Total
	Segment		Segment		Goodwill
Balance as of December 31, 2014	$	6,029	$	3,577	$	9,606
Additions due to acquisition		1,177		-		1,177
Adjustments		-		(159)		(159)
Balance as of June 30, 2015	$	7,206	$	3,418	$	10,624

Changes in the carrying values of intangible assets for the six months ended June 30, 2015, were as follows (in thousands):

	T&D		Critical Power		Total
	Solutions		Solutions		Intangible
	Segment		Segment		Assets
Balance as of December 31, 2014	$	4,386	$	5,405	$	9,791
Amortization		(186)		(683)		(869)
Foreign currency translation		(56)		-		(56)
Balance as of June 30, 2015	$	4,144	$	4,722	$	8,866

The components of intangible assets as of June 30, 2015 are summarized below (in thousands):

	Weighted average amortization years	Gross carrying amount		Accumulated amortization		Impairment charges		Foreign currency translation		Net book value
Customer relationships	7	$	7,282	$	(1,801)	$	(214)	$	(153)	$	5,114
Non-compete agreements	6		465		(234)		-		(2)		229
Trademarks	(a)		2,113		(82)		-		(59)		1,972
Distributor territory license	4		474		(59)		-		-		415
Internally developed software	7		289		(21)		-		-		268
Technology-related industry accreditations	Indefinite		950		-		(17)		(65)		868
Total intangible assets		$	11,573	$	(2,197)	$	(231)	$	(279)	$	8,866

(a) Includes $1.8 million of trademarks with an indefinite useful life, and $0.3 million of trademarks that will be fully amortized during 2015 as a result of the Company’s decision to cease using them.

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Goodwill and Other Intangible Assets (Schedule of Intangible Assets) (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount		$ 11,573
Accumulated amortization		(2,197)
Impairment charges		(231)
Foreign currency translation		(279)
Net book value		$ 8,866	$ 9,791
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization years		7 years
Gross carrying amount		$ 7,282
Accumulated amortization		(1,801)
Impairment charges		(214)
Foreign currency translation		(153)
Net book value		$ 5,114
Non-Compete Agreement [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization years		6 years
Gross carrying amount		$ 465
Accumulated amortization		(234)
Foreign currency translation		(2)
Net book value		$ 229
Trademarks
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization years, description	[1]
Gross carrying amount		$ 2,113
Accumulated amortization		(82)
Foreign currency translation		(59)
Net book value		1,972
Indefinite-lived intangible assets acquired		1,800
Next six months		$ 300
Distributor Territory License [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization years		4 years
Gross carrying amount		$ 474
Accumulated amortization		(59)
Net book value		$ 415
Internally Developed Software [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization years		7 years
Gross carrying amount		$ 289
Accumulated amortization		(21)
Net book value		$ 268
Technology-Related Industry Accreditations [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average amortization years, description		Indefinite
Gross carrying amount		$ 950
Impairment charges		(17)
Foreign currency translation		(65)
Net book value		$ 868

[1] Includes $1.8 million of trademarks with an indefinite useful life, and $0.3 million of trademarks that will be fully amortized during 2015 as a result of the Company's decision to cease using them.

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Pension Plan (Tables)

6 Months Ended

Jun. 30, 2015

Pension Plan [Abstract]

Schedule of Pension Plan Expenses

The components of the expense the Company incurred under the pension plan are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Current service cost, net of employee contributions	$	14	$	9	$	29	$	20
Interest cost on accrued benefit obligation		27		32		55		64
Expected return on plan assets		(44)		(44)		(85)		(86)
Amortization of transitional obligation		3		3		5		6
Amortization of past service costs		2		2		4		4
Amortization of net actuarial gain		9		8		19		17
Total cost of benefit	$	11	$	10	$	27	$	25

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Basis of Presentation

6 Months Ended

Jun. 30, 2015

Basis of Presentation [Abstract]

Basis of Presentation

1. BASIS OF PRESENTATION

Overview

Pioneer Power Solutions, Inc. and its wholly owned subsidiaries (referred to herein as the “Company,” “Pioneer,” “we,” “our” and “us”) manufacture, sell and service a broad range of specialty electrical transmission, distribution and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets. The Company is headquartered in Fort Lee, New Jersey and operates from thirteen additional locations in the U.S., Canada and Mexico for manufacturing, centralized distribution, engineering, sales and administration.

We have two reportable segments as defined in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2015: Transmission and Distribution Solutions (“T&D Solutions”) and Critical Power Solutions.

Presentation

These unaudited consolidated financial statements include the accounts of the Pioneer Power Solutions, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation.

The accompanying unaudited consolidated financial statements of the Company have been prepared pursuant to the rules of the SEC. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), have been condensed or omitted pursuant to those rules and regulations. We believe that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim consolidated financial statements have been included. The results of operations for the interim period are not necessarily indicative of the results for the entire fiscal year. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP for a year-end balance sheet.

These unaudited consolidated financial statements should be read in conjunction with the risk factors and the audited consolidated financial statements and notes thereto of the Company and its subsidiaries included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

All dollar amounts (except share and per share amounts) presented in the tables within the notes to our unaudited consolidated financial statements are stated in thousands of dollars, unless otherwise noted.

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Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement [Abstract]
Net (loss) earnings	$ (817)	$ 302	$ (1,042)	$ 892
Other comprehensive income (loss)
Foreign currency translation adjustments	263	657	(1,246)	(19)
Amortization of net prior service costs and net actuarial losses, net of tax	(40)	10	51	73
Other comprehensive income (loss)	223	667	(1,195)	54
Comprehensive (loss) income	$ (594)	$ 969	$ (2,237)	$ 946

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Business Segment and Geographic Information

6 Months Ended

Jun. 30, 2015

Business Segment and Geographic Information [Abstract]

Business Segment and Geographic Information

11. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company follows ASC 280 ­ Segment Reporting in determining its reportable segments. In December 2014, the Company considered the way its management team, most notably its chief operating decision maker, makes operating decisions and assesses performance and considered which components of the Company’s enterprise have discrete financial information available.  As the Company makes decisions using a products and services group focus, its analysis resulted in two reportable segments: T&D Solutions and Critical Power Solutions. The Critical Power Solutions reportable segment is an aggregation of the Company’s Pioneer Critical Power Inc. and Titan Energy Systems Inc. subsidiaries, and also includes sales and expenses directly and indirectly attributable to the Company’s strategic sales group. The T&D Solutions reportable segment is an aggregation of all other Company subsidiaries, together with sales and expenses attributable to the strategic sales group for its T&D Solutions marketing activities.

The T&D Solutions segment is involved in the design, manufacture and distribution of electrical transformers and switchgear used primarily by utilities, large industrial and commercial operations to manage their electrical power distribution needs. The Critical Power Solutions segment provides power generation equipment, switchgear, related electrical distribution infrastructure and aftermarket field-services primarily to help customers ensure smooth, uninterrupted power to operations during times of emergency.

The following tables present information about segment income and loss (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenues
T&D Solutions	$	20,914	$	20,857	$	44,577	$	40,607
Critical Power Solutions		5,546		207		10,771		1,350
Consolidated	$	26,460	$	21,064	$	55,348	$	41,957
Depreciation and Amortization
T&D Solutions	$	397	$	392	$	790	$	769
Critical Power Solutions		379		18		755		35
General Corporate		17		11		33		21
Consolidated	$	793	$	421	$	1,578	$	825
Operating Income (Loss)
T&D Solutions	$	483	$	1,401	$	2,189	$	2,957
Critical Power Solutions		(586)		(263)		(1,378)		(227)
General Corporate		(584)		(567)		(1,581)		(1,162)
Consolidated	$	(687)	$	571	$	(770)	$	1,568

Revenues are attributable to countries based on the location of the Company's customers (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
United States	$	16,001	$	9,088	$	34,399	$	19,407
Canada		10,110		11,968		20,585		22,542
Others		349		8		364		8
Total	$	26,460	$	21,064	$	55,348	$	41,957

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 11, 2015
Document And Entity Information [Abstract]
Entity Registrant Name	PIONEER POWER SOLUTIONS, INC.
Entity Central Index Key	0001449792
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-Known Seasoned Issuer	No
Entity Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2015
Entity Common Stock, Shares Outstanding		7,405,962

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Subsequent Event

6 Months Ended

Jun. 30, 2015

Subsequent Event [Abstract]

Subsequent Event

12. SUBSEQUENT EVENTS

On August 1, 2015, Pioneer Custom Electrical Products Inc. completed the purchase of substantially all the assets comprising the business of Pacific Power Integration Systems, Inc. (“Pacific”). Located in Santa Fe Springs, California, Pacific is a manufacturer of low and medium voltage switchgear, primarily serving customers in the oil refining, mass transit and utility sectors. The purchase price of $2.0 million in cash was financed with revolving debt drawn from the Company’s Canadian Facilities, and must be repaid by September 30, 2015 (see Note 7 – Debt).

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Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current Assets
Cash and cash equivalents		$ 3,832
Accounts receivable, net	$ 14,722	13,101
Inventories, net	15,582	14,429
Income taxes receivable	470	474
Deferred income taxes	1,394	472
Prepaid expenses and other current assets	1,574	1,671
Total current assets	33,742	33,979
Property, plant and equipment, net	10,669	11,195
Noncurrent deferred income taxes	7,099	7,124
Other assets	1,024	1,143
Intangible assets, net	8,866	9,791
Goodwill	10,624	9,606
Total assets	72,024	72,838
Current Liabilities
Bank overdrafts	979
Revolving credit facilities	9,153	6,860
Accounts payable and accrued liabilities	16,838	14,396
Current maturities of long-term debt and capital lease obligations	1,642	2,483
Income taxes payable	856	523
Total current liabilities	29,468	24,262
Long-term debt, net of current maturities	5,361	9,539
Pension deficit	225	351
Other long term liability	500
Noncurrent deferred income taxes	7,755	7,852
Total liabilities	$ 43,309	$ 42,004
Shareholders' Equity
Preferred stock, par value $0.001; 5,000,000 shares authorized; none issued
Common stock, par value $0.001; 30,000,000 shares authorized; 7,405,962 shares issued and outstanding	$ 7	$ 7
Additional paid-in capital	18,488	18,370
Accumulated other comprehensive loss	(4,520)	(3,325)
Retained earnings	14,740	15,782
Total shareholders' equity	28,715	30,834
Total liabilities and shareholders' equity	$ 72,024	$ 72,838

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Other Assets

6 Months Ended

Jun. 30, 2015

Other Assets [Abstract]

Other Assets

6. OTHER ASSETS

In December 2011 and January 2012, the Company made two loans, each in the amount of $300,000, to a developer of a renewable energy project in the U.S. The promissory notes accrue interest at a rate of 4.5% per annum with a final payment of all unpaid principal and interest becoming fully due and payable upon the earlier to occur of (i) the fouryear anniversary of the issuance date of the promissory notes, or (ii) an event of default. As defined in the promissory notes, an event of default includes, but is not limited to, the following: any bankruptcy, reorganization or similar proceeding involving the borrower, a sale or transfer of substantially all the assets of the borrower, a default by the borrower relating to any indebtedness due to third parties, the incurrence of additional indebtedness by the borrower without the Company’s written consent and failure of the borrower to perform its obligations pursuant to its other agreements with the Company, including its purchase order for pad mount transformers.  The full loan balance is outstanding at June 30, 2015.

Also included in Other Assets at June 30, 2015 are deferred financing costs of $0.3 million, a note receivable of $0.1 million as compared to deferred financing costs of $0.3 million and a note receivable of $0.2 million at December 31, 2014.

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2015

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying values of goodwill for the six months ended June 30, 2015, were as follows (in thousands):

	T&D		Critical Power
	Solutions		Solutions		Total
	Segment		Segment		Goodwill
Balance as of December 31, 2014	$	6,029	$	3,577	$	9,606
Additions due to acquisition		1,177		-		1,177
Adjustments		-		(159)		(159)
Balance as of June 30, 2015	$	7,206	$	3,418	$	10,624

Changes in the carrying values of intangible assets for the six months ended June 30, 2015, were as follows (in thousands):

	T&D		Critical Power		Total
	Solutions		Solutions		Intangible
	Segment		Segment		Assets
Balance as of December 31, 2014	$	4,386	$	5,405	$	9,791
Amortization		(186)		(683)		(869)
Foreign currency translation		(56)		-		(56)
Balance as of June 30, 2015	$	4,144	$	4,722	$	8,866

The components of intangible assets as of June 30, 2015 are summarized below (in thousands):

	Weighted average amortization years	Gross carrying amount		Accumulated amortization		Impairment charges		Foreign currency translation		Net book value
Customer relationships	7	$	7,282	$	(1,801)	$	(214)	$	(153)	$	5,114
Non-compete agreements	6		465		(234)		-		(2)		229
Trademarks	(a)		2,113		(82)		-		(59)		1,972
Distributor territory license	4		474		(59)		-		-		415
Internally developed software	7		289		(21)		-		-		268
Technology-related industry accreditations	Indefinite		950		-		(17)		(65)		868
Total intangible assets		$	11,573	$	(2,197)	$	(231)	$	(279)	$	8,866

(a) Includes $1.8 million of trademarks with an indefinite useful life, and $0.3 million of trademarks that will be fully amortized during 2015 as a result of the Company’s decision to cease using them.

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Debt (Tables)

6 Months Ended

Jun. 30, 2015

Debt [Abstract]

Schedule of Long-Term Debt

Long-term debt consists of the following (in thousands):

	June 30,		December 31,
	2015		2014
Term credit facilities	$	6,470	$	11,165
Nexus promissory note		455		587
Other notes payable		70		260
Capital lease obligations		8		10
Total debt		7,003		12,022
Less current portion		(1,642)		(2,483)
Total long-term debt	$	5,361	$	9,539

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Summary of Significant Accounting Policies (Policy)

6 Months Ended

Jun. 30, 2015

Summary of Significant Accounting Policies [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

There have been no recent accounting pronouncements not yet adopted by the Company which would have a material impact on the Company’s financial statements.

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. In April 2014, the FASB issued Accounting Standards Update No. 2014-08 (“ASU 2014-08”) on reporting discontinued operations and disclosures of disposals of components of an entity. The new guidance restricts the presentation of discontinued operations to business circumstances when the disposal of business operations represents a strategic shift that has or will have a major effect on an entity's operations and financial results and enhances the related disclosure requirements. The Company adopted ASU 2014-08 on January 1, 2015, as required. There was no material impact on the Consolidated Financial Statements resulting from the adoption.

Revenue from Contracts with Customers.  In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.

In July 2015, the FASB made a decision to defer the effective date of the new standard for one year and permit early adoption as of the original effective date.  The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2018.

Simplifying the Measurement of Inventory.The FASB recently issued ASU 2015-111  as part of its simplification initiative. The amendments require inventory within the scope of the ASU to be measured using the lower of cost and net realizable value. The changes apply to all types of inventory, except those measured using LIFO or the retail inventory method. The new standard takes effect in 2017 for calendar year-end entities.  .  The Company is currently evaluating the impact on its consolidated financial statements.

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Shareholders' Equity

6 Months Ended

Jun. 30, 2015

Shareholders' Equity [Abstract]

Shareholders' Equity

9. SHAREHOLDERS’ EQUITY

Common Stock

The Company had 7,405,962 shares of common stock, $0.001 par value per share, outstanding of as of June 30, 2015 and December 31, 2014, respectively. In December 2014, in connection with the acquisition of Titan, the Company issued 233,707 shares of its common stock to Titan’s former convertible preferred stockholders and note holders in exchange for their interests in Titan.

Warrants

As of June 30, 2015, the Company had warrants outstanding to purchase 50,600 shares of common stock at an exercise price of $7.00 per share. These warrants are scheduled to expire on September 18, 2018 unless exercised earlier. No warrants were exercised during the six months ended June 30, 2015.

Stock-Based Compensation

A summary of stock option activity under the 2011 Long-Term Incentive Plan as of June 30, 2015, and changes during the six months ended June 30, 2015, are presented below:

	Stock Options	Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding as of December 31, 2014	366,400	$	9.81	6.9	$	268,400
Granted	13,000		8.98	10.0		-
Exercised	-		-	-		-
Forfeited	(30,000)		-	-		-
Outstanding as of June 30, 2015	349,400	$	9.34	7.1	$	268,400
Exercisable as of June 30, 2015	278,401	$	9.48	6.4	$	229,774

As of June 30, 2015, there were 320,600 shares available for future grants under the Company’s 2011 Long-Term Incentive Plan.

Expense for stock-based compensation recorded for the three and six months ended June 30, 2015 was approximately $57,000 and $117,000, respectively, as compared to $63,000 and $100,000 during the three and six months ended June 30, 2014, respectively. At June 30, 2015, the Company had total stock-based compensation expense remaining to be recognized in the statement of operations of approximately $319,000.

Foreign Currency Translation

Foreign assets and liabilities are translated using the exchange rate in effect at the balance sheet date, and results of operations are translated using an average rate for the period. Translation adjustments are accumulated and reported as a component of accumulated other comprehensive income (loss). The Company had foreign currency translation adjustments resulting in an unrealized loss of $1.2 million for the six months ended June 30, 2015, as compared to an unrealized gain of $0.1 million for the six months ended June 30, 2014.

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Debt

6 Months Ended

Jun. 30, 2015

Debt [Abstract]

Debt

7. DEBT

Canadian Credit Facilities

In June 2013, the Company’s Canadian subsidiary, Pioneer Electrogroup Canada Inc., entered into an amended and restated letter loan agreement with Bank of Montreal (the “Canadian Facilities”) that replaced and superseded all of the Company’s prior financing arrangements with the bank.

The Canadian Facilities provide for up to $22.0 million Canadian dollars (“CAD”) (approximately $17.6 million expressed in U.S. dollars) in revolving and term debt. The Canadian facilities consist of a $10.0 million demand revolving credit facility (“Facility A”), a $2.0 million term credit facility (“Facility B”) and a $10.0 million term credit facility (“Facility C”).

Borrowings on Facility A are subject to margin criteria and are available in either U.S. or Canadian dollars. Pricing for U.S. Base Rate and Canadian Rate loans is the U.S. Base Rate or Canadian Rate plus 0.50% per annum. Borrowings of U.S. dollar LIBOR-based loans are priced at LIBOR plus 2.00%.  

Borrowings under Facility B bear interest at the bank’s prime rate plus 1.00% per annum with principal repayments becoming due on a five year amortization schedule.

Borrowings under Facility C are repayable according to a five year principal amortization schedule and bear interest for borrowings in U.S. dollars based on either LIBOR (plus 2.00% to 2.25%) or the U.S. Base Rate (plus 1.00% to 1.25%), depending on the Company’s leverage ratio. Facility C borrowings in Canadian dollars are priced at the Canadian Rate plus 1.00% to 1.25%, depending on the Company’s leverage ratio. On March 27, 2015, the Company elected to prepay in full the Canadian dollar portion of Facility C with $5.0 million Canadian dollars (approximately $4.0 million expressed in U.S. dollars) of cash available on-hand.

The Canadian Facilities are guaranteed by the Company and are secured by a first-ranking lien in the amount of $30 million CAD on all of the present and future movable and immovable property of the Company’s Canadian subsidiary. The Canadian Facilities require the Company’s Canadian operations to comply on a consolidated basis with various financial covenants, including maintaining a minimum fixed charge coverage ratio, a maximum funded debt to EBITDA ratio and a limitation on funded debt to capitalization.

As of June 30, 2015 the Company had approximately $1.5 million in U.S. dollar equivalents outstanding under the Canadian Facilities and was in compliance with its financial covenant requirements. The Company’s borrowings consisted of $0 outstanding under Facility A, $0.6 million outstanding under Facility B and $0.9 million outstanding under Facility C.

In July 2015, the Canadian Facilities were amended to provide for a $2.0 million loan under Facility A, which was used by the Company’s U.S. operations in connection with an acquisition (see Note 12 – Subsequent Events). The loan must be repaid by September 30, 2015. The Company intends to repay the loan using sources of cash including, but not limited to, its cash flow from operations and/or external financing sources, if required.

United States Credit Facilities

On June 28, 2013, the Company and its wholly-owned U.S. subsidiaries entered into a credit agreement with Bank of Montreal, Chicago Branch (the “U.S. Facility”) consisting of a $10.0 million demand revolving credit facility.

On December 2, 2014, the U.S. Facilities were amended in order to provide a $5.0 million term loan facility that was used for the acquisition of Titan. The term loan facility has principal repayments becoming due on a five year amortization schedule.

The U.S. Facility, as amended in August 2015, requires the Company to comply with a two-step test of financial covenants. First, the Company must comply with a maximum funded debt to adjusted EBITDA ratio of (a) 5.00x for the quarter ending June 30, 2015, (b) 7.00x for the quarter ending September 30, 2015, (c) 4.00x for the quarter ending December 31, 2015, (d) 3.25x for the quarter ending March 31, 2016 and (e) 2.75x for the quarter ending June 30, 2016 and all testing periods thereafter. Secondly, if the funded debt to adjusted EBITDA tests above are met, and the Company’s fixed charge coverage ratio is at or above (a) 1.00x for the quarter ending June 30, 2015, (b) 0.50x for the quarter ending September 30, 2015, (c) 1.00x for the quarter ending December 31, 2015, and (d) 1.25x for the quarter ending March 31, 2016 and all testing periods thereafter, then no further compliance tests are required.

Alternatively, the Company may comply with the financial covenant requirements of the U.S. Facilities if its U.S. operations comply with various financial covenants, including (a) maintaining a minimum fixed charge coverage ratio of 1.35, (b) limiting funded debt to less than 50% of capitalization, and (c) maintaining a maximum funded debt to adjusted EBITDA ratio of (i) 3.75 for fiscal quarters ending June 30, 2015 and September 30, 2015, and (ii) 3.00 for the fiscal quarters ending on or after December 31, 2015. The U.S. Facilities also restrict the ability of the Company and its U.S. subsidiaries to incur indebtedness, create or incur liens, make investments, make distributions or dividends and enter into merger agreements or agreements for the sale of any or all assets.

Borrowings under the demand revolving credit facility bear interest, at the Company’s option, at the bank’s prime rate plus 1.00% per annum on U.S. prime rate loans, or an adjusted LIBOR rate plus 2.25% per annum on Eurodollar loans. Borrowings under the term loan facility bear interest, at the Company’s option, at the bank’s prime rate plus 1.25% per annum on U.S. prime rate loans, or an adjusted LIBOR rate plus 2.50% per annum on Eurodollar loans.

In connection with the U.S. Facilities, the Company and its U.S. subsidiaries and the bank entered into a security agreement, pursuant to which the Company granted a security interest in substantially all of its assets in the U.S., including 65% of the shares of Pioneer Electrogroup Canada Inc., to secure the Company’s obligations under the U.S. Facilities.

As of June 30, 2015, the Company had $14.1 million of borrowings outstanding under the U.S. Facilities and the Company was in compliance with its financial covenant requirements. The Company’s borrowings consisted of $9.2 million outstanding under its revolving credit facility and $4.9 million outstanding under its term loan facility.

Nexus Promissory Note

On July 25, 2012, the Company’s Mexican subsidiary, Nexus Magneticos de Mexico, S. de R.L. de C.V. (“Nexus”), entered into a $1.65 million term loan agreement with GE CF Mexico, S.A. de C.V. (“GE Capital Mexico”). The term loan is payable in 60 consecutive monthly installments and bears interest, payable monthly, at a rate of 6.93% per annum. The obligations of Nexus under the term loan are secured by certain machinery and equipment located in Mexico and by a corporate guaranty by the Company. As of June 30, 2015, there was approximately $0.5 million outstanding.

Titan Notes Payable

In connection with the acquisition of Titan, the Company assumed obligations to repay the remaining holders of unsecured notes. As of June 30, 2015, an aggregate principal amount of $70,000 remained outstanding.

Long-term debt consists of the following (in thousands):

	June 30,		December 31,
	2015		2014
Term credit facilities	$	6,470	$	11,165
Nexus promissory note		455		587
Other notes payable		70		260
Capital lease obligations		8		10
Total debt		7,003		12,022
Less current portion		(1,642)		(2,483)
Total long-term debt	$	5,361	$	9,539

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Pension Plan

6 Months Ended

Jun. 30, 2015

Pension Plan [Abstract]

Pension Plan

8. PENSION PLAN

The Company’s Canadian subsidiary sponsors a defined benefit pension plan at one of its locations in which a majority of its employees there are members. The subsidiary funds 100% of all contributions to the plan. The benefits, or the rate per year of credit service, are established by the Company and updated at its discretion.

The components of the expense the Company incurred under the pension plan are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Current service cost, net of employee contributions	$	14	$	9	$	29	$	20
Interest cost on accrued benefit obligation		27		32		55		64
Expected return on plan assets		(44)		(44)		(85)		(86)
Amortization of transitional obligation		3		3		5		6
Amortization of past service costs		2		2		4		4
Amortization of net actuarial gain		9		8		19		17
Total cost of benefit	$	11	$	10	$	27	$	25

The Company’s policy is to fund the pension plan at or above the minimum level required by law. The Company made $59,000 and $68,000 of contributions to its defined benefit pension plan during the six months ended June 30, 2015 and 2014, respectively. Changes in the discount rate and actual investment returns that are lower than the long-term expected return on plan assets could result in the Company making additional contributions.

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Basic and Diluted Earnings Per Share

6 Months Ended

Jun. 30, 2015

Basic and Diluted Earnings Per Share [Abstract]

Basic and Diluted Earnings Per Share

10. BASIC AND DILUTED EARNINGS PER SHARE

Basic and diluted earnings per common share are calculated based on the weighted average number of shares outstanding during the period. The Company’s employee and director stock option awards, as well as incremental shares issuable upon exercise of warrants, are not considered in the calculations if the effect would be anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Numerator:
Net (loss) earnings	$	(817)	$	302	$	(1,042)	$	892
Denominator:
Weighted average basic shares outstanding		7,406		7,172		7,406		7,172
Effect of dilutive securities - equity based compensation plans		-		54		-		60
Net dilutive effect of warrants outstanding		-		11		-		12
Denominator for diluted earnings per common share		7,406		7,237		7,406		7,244
Net (loss) earnings per common share:
Basic	$	(0.11)	$	0.04	$	(0.14)	$	0.12
Diluted	$	(0.11)	$	0.04	$	(0.14)	$	0.12
Anti-dilutive securities (excluded from per share calculation):
Equity based compensation plans		349		223		349		223
Warrants		51		240		51		240

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Goodwill and Other Intangible Assets (Schedule of Goodwill) (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2015 USD ($)
Goodwill [Roll Forward]
Balance as of December 31, 2014	$ 9,606
Additions due to acquisitions	1,177
Adjustments	(159)
Balance as of June 30, 2015	10,624
T & D Solutions Segment [Member]
Goodwill [Roll Forward]
Balance as of December 31, 2014	6,029
Additions due to acquisitions	1,177
Balance as of June 30, 2015	7,206
Critical Power Solutions Segment [Member]
Goodwill [Roll Forward]
Balance as of December 31, 2014	3,577
Adjustments	(159)
Balance as of June 30, 2015	$ 3,418

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Subsequent Event (Narrative) (Details) - Term Credit Facilities [Member] - Pioneer Electrogroup Canada Incorporated [Member] - USD ($) $ in Millions		6 Months Ended
	Aug. 01, 2015	Jun. 30, 2015
Subsequent Event [Line Items]
Debt instrument, maturity date		Sep. 30, 2015
Subsequent Event [Member]
Subsequent Event [Line Items]
Revolving debt drawn	$ 2.0

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Inventories (Tables)

6 Months Ended

Jun. 30, 2015

Inventories [Abstract]

Schedule of Inventories

The components of inventories are summarized below (in thousands):

	June 30,		December 31,
	2015		2014
Raw materials	$	6,332	$	5,844
Work in process		4,491		3,496
Finished goods		5,228		5,567
Provision for excess and obsolete inventory		(469)		(478)
Total inventories	$	15,582	$	14,429

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Basic and Diluted Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2015

Basic and Diluted Earnings Per Share [Abstract]

Schedule of Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Numerator:
Net (loss) earnings	$	(817)	$	302	$	(1,042)	$	892
Denominator:
Weighted average basic shares outstanding		7,406		7,172		7,406		7,172
Effect of dilutive securities - equity based compensation plans		-		54		-		60
Net dilutive effect of warrants outstanding		-		11		-		12
Denominator for diluted earnings per common share		7,406		7,237		7,406		7,244
Net (loss) earnings per common share:
Basic	$	(0.11)	$	0.04	$	(0.14)	$	0.12
Diluted	$	(0.11)	$	0.04	$	(0.14)	$	0.12
Anti-dilutive securities (excluded from per share calculation):
Equity based compensation plans		349		223		349		223
Warrants		51		240		51		240

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Business Segment and Geographic Information (Reconciliation of Revenue from Segments to Consolidated) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment Reporting Information [Line Items]
Revenues	$ 26,460	$ 21,064	$ 55,348	$ 41,957
Operating Income (Loss)	(687)	571	(770)	1,568
Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenues	26,460	21,064	55,348	41,957
Depreciation and Amortization	793	421	1,578	825
Operating Income (Loss)	(687)	571	(770)	1,568
Operating Segments [Member] | T & D Solutions Segment [Member]
Segment Reporting Information [Line Items]
Revenues	20,914	20,857	44,577	40,607
Depreciation and Amortization	397	392	790	769
Operating Income (Loss)	483	1,401	2,189	2,957
Operating Segments [Member] | Critical Power Solutions Segment [Member]
Segment Reporting Information [Line Items]
Revenues	5,546	207	10,771	1,350
Depreciation and Amortization	379	18	755	35
Operating Income (Loss)	(586)	(263)	(1,378)	(227)
Operating Segments [Member] | Corporate Segment [Member]
Segment Reporting Information [Line Items]
Depreciation and Amortization	17	11	33	21
Operating Income (Loss)	$ (584)	$ (567)	$ (1,581)	$ (1,162)

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Debt (Narrative) (Titans Notes Payable) (Details)	Jun. 30, 2015 USD ($)
Titan Energy Worldwide Inc. [Member]
Unsecured debt, current	$ 70,000

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Statement Of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, issued	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized	30,000,000	30,000,000
Common stock, issued	7,405,962	7,405,962
Common stock, outstanding shares	7,405,962	7,405,962

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Inventories

6 Months Ended

Jun. 30, 2015

Inventories [Abstract]

Inventories

4. INVENTORIES

The components of inventories are summarized below (in thousands):

	June 30,		December 31,
	2015		2014
Raw materials	$	6,332	$	5,844
Work in process		4,491		3,496
Finished goods		5,228		5,567
Provision for excess and obsolete inventory		(469)		(478)
Total inventories	$	15,582	$	14,429

Included in raw materials and finished goods at June 30, 2015 and December 31, 2014 are goods in transit of approximately $0.1million, respectively.

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Business Segment and Geographic Information (Tables)

6 Months Ended

Jun. 30, 2015

Business Segment and Geographic Information [Abstract]

Reconciliation of Revenue from Segments to Consolidated

The following tables present information about segment income and loss (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Revenues
T&D Solutions	$	20,914	$	20,857	$	44,577	$	40,607
Critical Power Solutions		5,546		207		10,771		1,350
Consolidated	$	26,460	$	21,064	$	55,348	$	41,957
Depreciation and Amortization
T&D Solutions	$	397	$	392	$	790	$	769
Critical Power Solutions		379		18		755		35
General Corporate		17		11		33		21
Consolidated	$	793	$	421	$	1,578	$	825
Operating Income (Loss)
T&D Solutions	$	483	$	1,401	$	2,189	$	2,957
Critical Power Solutions		(586)		(263)		(1,378)		(227)
General Corporate		(584)		(567)		(1,581)		(1,162)
Consolidated	$	(687)	$	571	$	(770)	$	1,568

Schedule of Geographical Information

Revenues are attributable to countries based on the location of the Company's customers (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
United States	$	16,001	$	9,088	$	34,399	$	19,407
Canada		10,110		11,968		20,585		22,542
Others		349		8		364		8
Total	$	26,460	$	21,064	$	55,348	$	41,957

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Debt (Narrative) (Canadian Credit Facilities) (Details) $ in Thousands, CAD in Millions	6 Months Ended
	Jun. 30, 2015 CAD	Jun. 30, 2015 USD ($)	Jul. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Jun. 30, 2013 CAD	Jun. 30, 2013 USD ($)
Line of Credit Facility [Line Items]
Credit facilities amount outstanding		$ 9,153		$ 6,860
Canadian Credit Facilities (Facility C)
Line of Credit Facility [Line Items]
Credit facility, borrowing capacity | CAD					CAD 10.0
Repayments of lines of credit	CAD 5.0	4,000
Credit facilities amount outstanding		900
Canadian Credit Facilities (Facility B)
Line of Credit Facility [Line Items]
Credit facility, borrowing capacity | CAD					2.0
Credit facilities amount outstanding		600
Canadian Credit Facilities (Facility A)
Line of Credit Facility [Line Items]
Credit facility, borrowing capacity | CAD					10.0
Credit facilities amount outstanding		0
Term Credit Facilities [Member]
Line of Credit Facility [Line Items]
Credit facility, borrowing capacity					22.0	$ 17,600
Canadian facilities secured by a first-ranking lien | CAD					CAD 30.0
Credit facilities amount outstanding		$ 1,500
Pioneer Electrogroup Canada Incorporated [Member] | Term Credit Facilities [Member]
Line of Credit Facility [Line Items]
Debt instrument, maturity date	Sep. 30, 2015	Sep. 30, 2015
Base Rate Plus Funds Borrowed in USD [Member] | Minimum [Member] | Canadian Credit Facilities (Facility C)
Line of Credit Facility [Line Items]
Interest rate spread	1.00%	1.00%
Base Rate Plus Funds Borrowed in USD [Member] | Maximum [Member] | Canadian Credit Facilities (Facility C)
Line of Credit Facility [Line Items]
Interest rate spread	1.25%	1.25%
Base Rate Plus Funds Borrowed in CAD [Member] | Canadian Credit Facilities (Facility B)
Line of Credit Facility [Line Items]
Interest rate spread	1.00%	1.00%
Base Rate Plus Funds Borrowed in CAD [Member] | Minimum [Member] | Canadian Credit Facilities (Facility C)
Line of Credit Facility [Line Items]
Interest rate spread	1.00%	1.00%
Base Rate Plus Funds Borrowed in CAD [Member] | Maximum [Member] | Canadian Credit Facilities (Facility C)
Line of Credit Facility [Line Items]
Interest rate spread	1.25%	1.25%
Base Rate Plus Funds Borrowed in USD or CAD [Member] | Canadian Credit Facilities (Facility A)
Line of Credit Facility [Line Items]
Interest rate spread	0.50%	0.50%
LIBOR Plus Funds Borrowed In USD [Member] | Canadian Credit Facilities (Facility A)
Line of Credit Facility [Line Items]
Interest rate spread	2.00%	2.00%
LIBOR Plus Funds Borrowed In USD [Member] | Minimum [Member] | Canadian Credit Facilities (Facility C)
Line of Credit Facility [Line Items]
Interest rate spread	2.00%	2.00%
LIBOR Plus Funds Borrowed In USD [Member] | Maximum [Member] | Canadian Credit Facilities (Facility C)
Line of Credit Facility [Line Items]
Interest rate spread	2.25%	2.25%
Subsequent Event [Member] | Pioneer Electrogroup Canada Incorporated [Member] | Term Credit Facilities [Member]
Line of Credit Facility [Line Items]
Credit facilities amount outstanding			$ 2,000

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2015

Business Acquisition [Line Items]

Schedule of Business Acquisitions, by Acquisition

A summary of the acquisitions is as follows:

Titan Energy Worldwide Inc. [Member]

Business Acquisition [Line Items]

Schedule of Business Acquisitions, by Acquisition

The following table summarizes the consideration paid for the Titan acquisition and presents the allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of December 2, 2014 (in thousands):

	Titan Acquisition
Purchase Price
Cash consideration	$	953
Common stock consideration		1,005
	$	1,958
Purchase Price Allocation
Current assets, including cash and cash equivalents of $0.1 million	$	3,721
Property, plant and equipment		410
Identifiable intangible assets		5,147
Goodwill		2,719
Total assets acquired		11,997
Current liabilities		(6,881)
Notes payable		(3,158)
Net assets acquired	$	1,958

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination

The major classes of intangible assets arising from the acquisition of Titan, their respective amortization periods, and the amount of amortization expense recognized during the six months ended June 30, 2015 are as follows (in thousands):

	Weighted Average Amortization Years	Titan Acquisition
Acquired Intangible Assets
Customer relationships	4	$	4,320
Distributor territory license	4		474
Internally developed software	7		289
Trade names	1		64
		$	5,147

Harmonics Holdings Inc. [Member]

Business Acquisition [Line Items]

Schedule of Business Acquisitions, by Acquisition

The following table summarizes the consideration paid for the Harmonics acquisition and presents the preliminary allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of January 16, 2015 (in thousands):

	Harmonics Acquisition
Purchase Price
Cash consideration	$	93
Forgiveness of trade payables and indebtedness due to purchaser		609
Deferred payments due to seller		500
	$	1,202
Purchase Price Allocation
Current assets	$	21
Property, plant and equipment		4
Goodwill		1,177
Total assets acquired		1,202
Current liabilities		-
Net assets acquired	$	1,202