Additional Paid-in Capital

9 Months Ended

Sep. 30, 2011

11.	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 September 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 nine months ended September 30, 2011 and 2010 was approximately $190,000 and $100,000, respectively. As of September 30, 2011, the Company had total stock-based compensation expense remaining to be recognized of approximately $400,000.

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

	Stock Options		Weighted- Average Exercise Price (Per Share)		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance December 31, 2010		110,000	$	15.28
Granted		8,400	$	12.29
Exercised		-		-
Forfeited		-		-
Outstanding on September 30, 2011		118,400	$	15.07		7.30	$	-
Exercisable on September 30, 2011		38,000		-		7.27	$	-

Warrants

As of September 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 nine months ended September 30, 2011.

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

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