10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2011
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 333-155375

PIONEER POWER SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

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

One Parker Plaza

400 Kelby Street, 9th Floor

Fort Lee, New Jersey 07024

(Address of principal executive offices)

(Zip Code)

(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 x No o

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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a 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 o No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

Class	Outstanding at August 15, 2011
Common Stock, $0.001 par value	5,907,255

EXPLANATORY NOTE

This Amendment No. 1 amends the Quarterly Report on Form 10-Q of Pioneer Power Solutions, Inc. for the quarterly period ended June 30, 2011 (the “Form 10-Q”), as filed with the Securities and Exchange Commission on August 15, 2011, for the sole purpose of furnishing the Interactive Data Files as Exhibit 101 in accordance with Rule 405 of Regulation S-T.  Exhibit 101 provides the financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

No other changes have been made to the Form 10-Q other than furnishing the exhibit described above.  This Form 10-Q/A speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the Form 10-Q.

Item 6.  Exhibits

Exhibit No.	Description
3.1	Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on December 2, 2009).
3.2	Bylaws (Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on December 2, 2009).
4.1	Form of Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on December 7, 2009).
4.2	Form of $10.00 Warrant (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on December 7, 2009).
4.3	Form of $16.25 Warrant (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on December 7, 2009).
4.4	Form of Lock-up Agreement (Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on December 7, 2009).
4.5	Warrant to Purchase Common Stock, dated April 30, 2010, issued to Thomas Klink (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on May 4, 2010).
4.6	Warrant to Purchase Common Stock, dated April 26, 2010 (Incorporated by reference to Exhibit 4.6 to Post-Effective Amendment No. 1 to Registration Statement on Form S-1 of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on June 1, 2010).
4.7	Form of Warrant to Purchase Common Stock, dated May 11, 2010, issued to investor relations firm and its designees (Incorporated by reference to Exhibit 4.7 to the Registration Statement on Form S-1 of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on April 20, 2011).
10.1	Letter Loan Agreement, dated as of June 28, 2011 among Pioneer Electrogroup Canada Inc., Pioneer Transformers Ltd., Pioneer Wind Energy Systems Inc. and Bemag Transformer Inc., as Borrowers, and Bank of Montreal, as lender (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on July 5, 2011).
10.2	Amendment Agreement, dated June 30, 2011, between Fiducie Familiale Mazoyer, Bon-Ange Inc., Gilles Mazoyer and 7834080 Canada Inc. (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on July 5, 2011).
10.3	Equipment Purchase Agreement, dated July 1, 2011, between Vermont Transformers Inc., GCEFF Inc., Gilles Mazoyer and 7834080 Canada Inc. (Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of Pioneer Power Solutions, Inc. filed with the Securities and Exchange Commission on July 5, 2011).

2

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, 2011, formatted in XBRL (eXtensible Business Reporting Language), (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Earnings, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Shareholders’ Equity and Comprehensive Income, and (v) Notes to Consolidated Financial Statements.

___________________________

* Previously filed in Pioneer Power Solutions, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011.

** Furnished herewith.  Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

3

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: September 14, 2011	/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: September 14, 2011	/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)

4

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2011	Dec. 31, 2010
Consolidated Balance Sheets
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, issued	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized	30,000,000	30,000,000
Common stock, issued	5,907,255	5,907,255
Common stock, outstanding	5,907,255	5,907,255

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Consolidated Statements of Earnings (Unaudited) (USD $) In Thousands, except Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Consolidated Statements Of Earnings
Revenue	$ 16,412	$ 12,350	$ 32,138	$ 20,601
Cost of goods sold	12,860	9,367	24,265	15,811
Gross profit	3,552	2,983	7,873	4,790
Operating Expenses
Selling, general and administrative	2,711	1,987	5,501	3,137
Foreign exchange (gain) loss	5	(150)	(12)	(57)
Total operating expenses	2,716	1,837	5,489	3,080
Operating income	837	1,146	2,384	1,710
Interest and bank charges	105	81	227	94
Other expense (income)	441	350	441	350
Gain on bargain purchase		(1,052)		(1,052)
Earnings before income taxes	291	1,767	1,716	2,318
Provision for income taxes	65	394	528	555
Net earnings	$ 226	$ 1,373	$ 1,188	$ 1,763
Earnings per common share
Basic	$ 0.04	$ 0.23	$ 0.20	$ 0.30
Diluted	$ 0.04	$ 0.23	$ 0.20	$ 0.30
Weighted average common shares outstanding
Basic	5,907	5,874	5,907	5,837
Diluted	5,983	5,947	5,968	5,883

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Document and Entity Information	3 Months Ended
	Jun. 30, 2011	Aug. 15, 2011
Document And Entity Information
Entity Registrant Name	PIONEER POWER SOLUTIONS, INC.
Entity Central Index Key	0001449792
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,907,255
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2011

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Credit Facilities

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Credit Facilities

6. Credit Facilities

Canadian Credit Facilities

In June 2011, Pioneer Electrogroup Canada Inc., a wholly owned subsidiary of Pioneer Power Solutions, Inc. and the parent company of Pioneer Transformers Ltd., Pioneer Wind Energy Systems Inc., 7834080 Canada Inc. and Bemag Transformer Inc. (the “Borrowers”), entered into a letter loan agreement with the Company’s Canadian bank (the “Canadian Facilities”) that replaced and superseded all the Company’s prior financing arrangements with the bank. Bemag Transformer Inc. became a party to the Canadian Facilities on July 1, 2011, upon the acquisition of all of its capital shares by 7834080 Canada Inc. (see Note 14 “Subsequent Event”).

The Canadian Facilities provide for up to $23.0 million CAD (approximately $23.9 million expressed in U.S. dollars) consisting of a $10.0 million CAD demand revolving credit facility (“Facility A”) to finance ongoing operations, a $2.0 million CAD term credit facility (“Facility B”) with principal repayments becoming due on a five year amortization schedule to refinance the existing term loan granted to Pioneer Transformers Ltd. for its plant expansion, a $10.0 million CAD term credit facility (“Facility C”) with principal repayments becoming due on a five year amortization schedule to finance acquisitions, capital expenditures or to provide funding to Pioneer Power Solutions, Inc., a $50,000 CAD Corporate MasterCard credit facility (“Facility D”) and a $1.0 million CAD foreign exchange settlement risk facility (“Facility E”).

The Canadian Facilities are secured by a first-ranking lien in the amount of approximately $25 million CAD on all of the present and future movable and immovable property of the borrowers and their subsidiaries.

The Canadian Facilities require the Borrowers to comply on a consolidated basis with various financial covenants, including maintaining a minimum fixed charge coverage ratio of 1.25, a maximum funded debt to EBITDA ratio of 2.75 and a limitation on funded debt to less than 60% of capitalization.  The Canadian Facilities also restrict the ability of the Borrowers to, among other things, (i) provide any funding to any person, including affiliates, in an aggregate amount exceeding $5.0 million CAD or (ii) to make distributions in an aggregate amount exceeding 50% of Pioneer Electrogroup Canada Inc.’s previous year’s net income.

Facility A is subject to margin criteria and borrowings bear interest at the bank’s prime rate plus 0.50% per annum on amounts borrowed in Canadian dollars, or the 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 the bank’s prime rate plus 1.00% per annum.  Borrowings under Facility C bear interest at the following rates: if the funded debt to EBITDA ratio is equal to or greater than 2.00, the bank’s prime rate plus 1.25% per annum on amounts borrowed in Canadian dollars, or the U.S. base rate plus 1.25% per annum or LIBOR plus 2.50% per annum on amounts borrowed in U.S. dollars; or, if the funded debt to EBITDA ratio is less than 2.00, the bank’s prime rate plus 1.00% per annum on amounts borrowed in Canadian dollars, or the U.S. base rate plus 1.00% per annum or LIBOR plus 2.25% per annum on amounts borrowed in U.S. dollars.  In addition, Facility C is subject to a standby fee which is calculated monthly using the unused portion of the facility at either 0.625% per annum if the funded debt to EBITDA ratio is equal to or greater than 2.00, or 0.5625% per annum if the funded debt to EBITDA ratio is less than 2.00.

As of June 30, 2011, the Company had approximately $11.8 million CAD outstanding under the Canadian Facilities and the Borrowers were in compliance with their financial covenant requirements.

United States Credit Facilities

Jefferson Electric, Inc. has a bank loan agreement with a U.S. bank that includes a revolving credit facility with a borrowing base limit of $5.0 million and a term credit facility (“the U.S. Facilities”). Monthly payments of accrued interest must be made under the revolving credit facility and monthly payments of principal and accrued interest must be made under the term credit facility, with a final payment of all outstanding amounts due on October 31, 2011. Borrowings under the bank loan agreement are collateralized by substantially all the assets of Jefferson Electric, Inc. which had a net carrying value of approximately $8.8 million as of June 30, 2011 and are guaranteed by its Mexican subsidiary. In addition, an officer of Jefferson Electric, Inc. is a guarantor under the bank loan agreement and has provided additional collateral to the bank in the form of common stock and a warrant to purchase shares of common stock of the Company held by him.

The bank loan agreement requires Jefferson Electric, Inc. to comply with certain financial covenants, including a requirement to exceed minimum quarterly targets for tangible net worth and maintain a minimum debt service coverage ratio. The bank loan agreement also restricts Jefferson Electric, Inc.’s ability to pay dividends or make distributions, advances or other transfers of assets. The interest rate under the revolving credit facility is equal to the greater of the bank’s reference rate (currently 3.25% per annum) or 6.5% per annum. The interest rate under the term credit facility is 7.27% annually.

As of June 30, 2011, Jefferson Electric, Inc. had approximately $3.8 million outstanding under the revolving credit facility, approximately $2.5 million outstanding under the term credit facility and was in compliance with its financial covenant requirements.

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Pension Plan

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Pension Plan

11. Pension Plan

The Company sponsors a defined benefit pension plan in which a majority of its Canadian employees are members. The employer contributes 100% to the plan. The benefits, or the rate per year of credit service, are established by the Company and updated at its discretion.

Cost of Benefits

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Current service cost, net of employee contributions	$	9		$	10		$	17		$	20
Interest cost on accrued benefit obligation		37			36			73			71
Expected return on plan assets		(39	)		(35	)		(78	)		(69	)
Amortization of transitional obligation		3			3			7			6
Amortization of past service costs		2			1			4			2
Amortization of net actuarial gain		8			8			16			14
Total cost of benefit	$	20		$	23		$	39		$	44

The Company’s policy is to fund the pension plan at or above the minimum level required by law. The Company made $96,000 and $115,000 of contributions to its defined benefit pension plan during the six months ended June 30, 2011 and 2010, 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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Adoption of New Accounting Standards

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Adoption of New Accounting Standards

2. Adoption of New Accounting Standards and recently issued accounting pronouncements

New accounting standards

Fair Value Measurements and Disclosures

In January 2010, the Financial Accounting Standards Board (‘FASB’) issued Accounting Standards Update (“ASU”) No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820)” (“ASU 2010-06”). ASU 2010-06 requires reporting entities to make more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, including information on purchases, sales, issuances, and settlements on a gross basis, and (4) the transfers between Levels 1, 2, and 3. ASU 2010-06 is effective for fiscal years beginning on or after December 15, 2009, except for the disclosure regarding Level 3 activity, which is effective for fiscal years beginning after December 15, 2010. The adoption of ASU 2010-06 for Levels 1, 2 and 3 did not have a material impact on the Company’s consolidated financial statements.

Intangibles – Goodwill & Other

In December 2010, the FASB issued ASU No. 2010-28, “Intangibles - Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (“ASU 2010-28”). ASU 2010-28 affects all entities that have recognized goodwill and have one or more reporting units whose carrying amount for purposes of performing Step 1 of the goodwill impairment test is zero or negative. ASU 2010-28 modifies Step 1 so that for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASU 2010-28 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The adoption of ASU 2010-28 did not have a material impact on the Company’s consolidated financial statements.

Business Combinations

In December 2010, the FASB issued ASU No. 2010-29, “Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations (“ASU 2010-29”). The objective of ASU 2010-29 is to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. ASU 2010-29 specifies that if a public entity presents comparative financial statements, it should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the required supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. ASU 2010-29 affects any public entity as defined by Topic 805 that enters into business combinations that are material on an individual or aggregate basis. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after December 15, 2010. The adoption of ASU 2010-29 did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 creates fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of the requirements in Topic 820. Some of the amendments clarify the FASB’s intent regarding the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. For public entities, ASU 2011-04 is effective during interim and annual periods beginning after December 15, 2011 and early application is not permitted. The Company is currently evaluating the impact of ASU 2011-04 on its consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”).   Under the amendments, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.  ASU 2011-05 should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2011-05 on its consolidated financial statements.

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Common Stock

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Common Stock

8. Common Stock

On April 30, 2010, the Company issued 97,255 common shares in conjunction with the acquisition of Jefferson Electric, Inc.

During the quarter ended June 30, 2010, the Company also issued 10,000 common shares as payment for investor relations services. The issuance of the shares and related expense was accounted for at the fair value of the shares on the issue date which amounted to $140,000.

The board of directors is authorized, subject to any limitations prescribed by law, without further vote or action by the shareholders, to issue from time to time shares of preferred stock in one or more series. Each such series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

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Geographical Information

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Geographical Information

13. Geographical Information

The Company has one material operating segment, the sale of electrical equipment. Revenues are attributable to countries based on the location of the Company's customers (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Canada	$	10,499	$	7,927	$	20,381	$	15,719
United States		5,829		4,237		11,059		4,474
Others		84		186		698		408
Total	$	16,412	$	12,350	$	32,138	$	20,601

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Additional Paid-in Capital

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Additional Paid-in Capital

9. Additional Paid-in Capital

Stock Options

On December 2, 2009, the Company adopted the 2009 Equity Incentive Plan (the “2009  Plan") for the purpose of issuing incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, restricted stock, stock appreciation rights, performance unit awards and stock bonus awards to employees, directors, consultants and other service providers. A total of 320,000 shares of common stock are reserved for issuance under the 2009 Plan. Options may be granted under the 2009 Plan on terms and at prices as determined by the board of directors or by the plan administrators appointed by the board of directors. As of June 30, 2011, 118,400 stock options had been granted, consisting of 65,200 incentive stock options and 53,200 non-qualified stock options.

On March 24, 2011, the Company granted an aggregate of 5,200 incentive stock options to four employees to purchase common shares. Options to purchase 3,200 common shares are exercisable for common shares at an exercise price of $12.00 per share, expire on March 24, 2021 and vest over three years with one-third vesting on the first anniversary of the date of grant and one-third vesting on each of the second and third anniversaries of the date of grant. Options to purchase 2,000 common shares are exercisable for common shares at an exercise price of  $13.20 per share, expire on March 24, 2016 and vest over three years with one third vesting on the first anniversary of the date of grant and one third vesting on each of the second and third anniversaries of the date of grant.

On March 24, 2011, the Company granted an aggregate of 3,200 non-qualified stock options to eight directors to purchase common shares. The stock options are exercisable for common shares at an exercise price of $12.00 per share, expire on March 24, 2021 and vest on the first anniversary of the date of grant.

On May 11, 2011, the board of directors of the Company adopted the Pioneer Power Solutions, Inc. 2011 Long-Term Incentive Plan (the “2011 Plan”) which was subsequently approved by stockholders of the Company on May 31, 2011.

The 2011 Plan replaces and supersedes the 2009 Plan. The Company’s outside directors and employees, including the Company’s principal executive officer, principal financial officer and other named executive officers, and certain contractors are all eligible to participate in the 2011 Plan. The 2011 Plan allows for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other awards, which may be granted singly, in combination, or in tandem, and upon such terms as are determined by the Board or a committee of the Board that is designated to administer the Plan. Subject to certain adjustments, the maximum number of shares of the Company’s common stock that may be delivered pursuant to awards under the 2011 Plan is 700,000 shares.

Expense for stock-based compensation recorded during the six months ended June 30, 2011 and 2010 was approximately $126,000 and $47,000, respectively. As of June 30, 2011, the Company had total stock-based compensation expense remaining to be recognized of approximately $0.5 million.

A summary of stock option activity under all plans as of June 30, 2011, and changes during the six months ended June 30, 2011, are presented below:

			Weighted-		Weighted-
	Stock		Average Exercise		Average Remaining		Aggregate
	Options		Price ( Per Share)		Contractual Term		Intrinsic Value
Balance December 31, 2010		110,000	$	15.28
Granted		8,400		12.29
Exercised		-		-
Forfeited		-		-
Outstanding on June 30, 2011		118,400	$	15.07		7.55	$	45
Exercisable on June 30, 2011		28,000		-		6.95	$	7

Warrants

As of June 30, 2011, the Company had warrants outstanding to purchase 640,000 shares of common stock with an average exercise price of approximately $14.00 per share. The warrants expire on dates beginning on December 2, 2014 and ending on April 30, 2015. No warrants were exercised during the six months ended June 30, 2011.

The following table summarizes the continuity of the Company's warrants:

	Number of		Weighted average
	Shares		exercise price
Balance December 31, 2010		640,000	$	14.00
Granted		-		-
Exercised		-
Balance June 30, 2011		640,000	$	14.00

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Long-Term Debt

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Long-Term Debt

7. Long-Term Debt

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

	June 30,			December 31,
	2011			2010
Revolving credit facilities	$	5,245		$	3,217
Term credit facilities		12,793			2,832
Capital lease obligations		24			31
Total debt and capital lease obligations		18,062			6,080
Less current portion		(8,150	)		(6,063	)
Total long-term debt and capital lease obligations	$	9,912		$	17

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Consolidated Statements of Shareholders' Equity/Comp. Income (Unaudited) (USD $) In Thousands, except Share data	Other Comprehensive Income	Common Stock	Additional paid-in capital	Retained Earnings	Accumulated other comprehensive (loss)	Total
Beginning balance, Value at Dec. 31, 2010		$ 6	$ 7,540	$ 7,850	$ (305)	$ 15,092
Beginning balance, Shares at Dec. 31, 2010		5,907,255
Net earnings	1,188			1,188		1,188
Stock-based compensation			126			126
Foreign currency translation adjustment	253				253	253
Pension adjustment, net of taxes	(26)				(26)	(26)
Total comprehensive income	1,415			1,188	227	1,415
Ending balance, Value at Jun. 30, 2011		$ 6	$ 7,666	$ 9,038	$ (78)	$ 16,632
Ending balance, Shares at Jun. 30, 2011		5,907,255

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Fair Value Measurements

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Fair Value Measurements

3. Fair Value Measurements

FASB ASC 820 “Fair Value Measurement and Disclosure” applies to all assets and liabilities that are being measured and reported on a fair value basis. ASC 820 establishes a framework for measuring fair value in U.S GAAP, and expands disclosure about fair value measurements. ASC 820 enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. ASC 820 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1:	Quoted market prices in active markets for identical assets or liabilities.
Level 2:	Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3:	Unobservable inputs that are not corroborated by market data.

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to ASC 820. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

The fair value represents management’s best estimates based on a range of methodologies and assumptions. The carrying value of receivables and payables arising in the ordinary course of business approximate fair value because of the relatively short period of time between their origination and expected realization. These items have been classified as Level 1.

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Inventories

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Inventories

4. Inventories

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

	June 30,		December 31,
	2011		2010
Raw materials	$	3,631	$	3,693
Work in process		2,136		2,029
Finished goods		3,383		2,092
Total inventories	$	9,150	$	7,814

Included in raw materials at June 30, 2011 and December 31, 2010 are goods in transit of approximately $0.1 million and $0.3 million, respectively.

The preceding amounts are net of inventory reserves of approximately $0.4 million at June 30, 2011 and December 31, 2010.

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Related Party Transactions

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Related Party Transactions

12. Related Party Transactions

The following table summarizes the Company's related party transactions for the three months and six months ended June 30, 2011 and 2010 measured at the exchange amount which is the amount of the consideration established and agreed to by the related parties (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Companies under common significant influence
Consulting and administration fee expenses	$	-	$	-	$	-	$	66

During the six months ended June 30, 2011 and 2010, the Company paid $0 and $66,000, respectively, to a company controlled by a limited partner of a shareholder of the Company, as reimbursement for rent, office services, and travel and entertainment expenses.

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Goodwill and Other Intangible Assets

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Goodwill and Other Intangible Assets

5. Goodwill and Other Intangible Assets

Changes in goodwill and intangible asset balances for the six months ended June 30, 2011, consisted of the following (in thousands):

	Goodwill		Intangible Assets
Balance December 31, 2010	$	5,534	$	4,436
Additions due to acquisitions		-		-
Amortization		-		(108	)
Balance June 30, 2011	$	5,534	$	4,328

	Intangible		Accumulated			Intangible Assets,
	Assets		Amortization			Net
Customer relationships	$	2,050	$	(225	)	$	1,825
Non-compete agreement		80		(27	)		53
Trademarks		1,790		-			1,790
Technology-related industry accreditations		660		-			660
Total intangible assets	$	4,580	$	(252	)	$	4,328

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Subsequent Event

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Subsequent Event

15. Subsequent Event

Acquisitions

On July 1, 2011, 7834080 Canada Inc., an indirect wholly-owned subsidiary of the Company, completed the acquisition of all of the capital shares of Bemag Transformer Inc.  Pursuant to the share purchase agreement, as amended, 7834080 Canada Inc. purchased all the capital shares of Bemag Transformer Inc. in a transaction valued at approximately $9.3 million CAD, this amount includes approximately $2.9 million CAD of Bemag Transformer Inc.’s revolving and long-term debt which was repaid at closing.

On July 1, 2011, 7834080 Canada Inc. also entered into an equipment purchase agreement with the former shareholders of Vermont Transformers, Inc., pursuant to which 7834080 Canada Inc.  acquired, on such date, all of the equipment used by Vermont Transformers, Inc. in the operation of its business in exchange for $1.6 million US.

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Operating activities
Net earnings	$ 1,188	$ 1,763
Depreciation	338	232
Amortization of intangibles	108	34
Deferred tax expense	(281)	(124)
Accrued pension	(36)	(68)
Stock-based compensation	126	47
Warrant issuance expense		92
Common stock issuance expense		140
Gain on bargain purchase		(1,052)
Changes in current operating assets and liabilities
Accounts receivable, net	(152)	461
Inventories	(1,179)	494
Prepaid expense and other current assets	(452)	(207)
Income taxes	97	(1,475)
Accounts payable and accrued liabilities	801	1,282
Net cash provided by (used in) operating activities	558	1,619
Investing activities
Additions to property, plant and equipment	(422)	(673)
Acquisition of subsidiaries, net of cash acquired		(399)
Net cash used in investing activities	(422)	(1,072)
Financing activities
Increase (decrease) in bank overdrafts	1,441	673
Increase (decrease) in long-term debt	10,269
Increase (decrease) in revolving credit facilities	2,009	(2,090)
Repayment of long-term debt and capital lease obligations	(340)	(304)
Repayment of advances from limited partners of a shareholder		(150)
Issuance of warrants		12
Transaction costs		(108)
Net cash provided by (used in) financing activities	13,379	(1,967)
Increase (decrease) in cash and cash equivalents	13,515	(1,420)
Effect of foreign exchange on cash and cash equivalents	66	(6)
Cash and cash equivalents
Beginning of year	516	1,560
End of period	$ 14,097	$ 134

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Basis of Presentation

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Basis of Presentation

1. Basis of Presentation

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, including  Pioneer Electrogroup Canada Inc., Pioneer Transformers Ltd., Pioneer Wind Energy Systems Inc., 7834080 Canada Inc., and Jefferson Electric, Inc.

These unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

These unaudited consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“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.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company and its subsidiaries included in its Annual Report on Form 10-K for the year ended December 31, 2010, which was filed with the SEC on March 31, 2011.

Reverse Stock Split

The Company’s board of directors authorized a one-for-five reverse stock split on June 1, 2011, which took effect on June 20, 2011.  All share and related stock option and warrant information presented in these financial statements and accompanying footnotes has been retroactively adjusted to reflect the reduced number of shares resulting from this action.

Certain prior year amounts have been reclassified to conform to the current year presentation.

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Comprehensive Income

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Comprehensive Income

10. Comprehensive Income

The components of the Company’s comprehensive income was as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Net Earnings	$	226		$	1,373		$	1,188		$	1,763
Foreign currency translation adjustments		43			(391	)		253			(59	)
Pension adjustment net of taxes		(44	)		(64	)		(26	)		(61	)
Total	$	225		$	918		$	1,415		$	1,643

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Basic and Diluted Earnings Per Share

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Basic and Diluted Earnings Per Share

14. 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. Dilutive potential common shares consist of incremental shares issuable upon exercise of certain stock options or warrants as applicable. Certain of the Company’s employee and director stock options and warrants have been excluded from the calculation of diluted earnings per share since they are 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				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Numerator:
Net earnings for basic and diluted earnings per common share	$	226	$	1,373	$	1,188	$	1,763
Denominator:
Weighted average basic shares outstanding		5,907		5,874		5,907		5,837
Effect of dilutive securities:
Employee and director stock option awards		-		-		-		-
Warrants outstanding		76		73		61		46
		76		73		61		46
Denominator for diluted earnings per common share		5,983		5,947		5,968		5,883
Earnings per common share basic and diluted:
Basic	$	0.04	$	0.23	$	0.20	$	0.30
Diluted	$	0.04	$	0.23	$	0.20	$	0.30

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Current Assets
Cash and cash equivalents	$ 14,097	$ 516
Accounts receivable	5,604	5,358
Inventories	9,150	7,814
Income taxes receivable	1,130	1,191
Deferred income taxes	245	245
Prepaid expenses and other current assets	1,029	575
Total current assets	31,255	15,699
Property, plant and equipment	5,281	5,123
Noncurrent deferred income taxes	1,525	1,311
Intangible assets	4,328	4,436
Goodwill	5,534	5,534
Total assets	47,923	32,103
Current Liabilities
Bank overdrafts	1,459
Accounts payable and accrued liabilities	8,344	7,442
Current maturities of long-term debt and capital lease obligations	8,150	6,063
Income taxes payable	166	161
Total current liabilities	18,119	13,666
Long-term debt and capital lease obligations, net of current maturities	9,912	17
Pension deficit	308	308
Noncurrent deferred income taxes	2,252	2,320
Deferred credit	700	700
Total liabilities	31,291	17,011
Shareholders' Equity
Common stock, par value $0.001; 30,000,000 shares authorized; 5,907,255 shares issued and outstanding	6	6
Additional paid-in capital	7,666	7,541
Accumulated other comprehensive income (loss)	(78)	(305)
Retained earnings	9,038	7,850
Total shareholders' equity	16,632	15,092
Total liabilities and shareholders' equity	$ 47,923	$ 32,103