10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

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

Commission file number: 001-53510

 ARISTA POWER, INC.

(Exact name of Registrant as specified in its charter)

New York	16-1610794
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1999 Mount Read Blvd
Rochester, New York	14615
(Address of principal executive offices)	(Zip Code)

(585) 243-4040

(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   ¨

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 has been required to submit and post such files).* Yes  ¨ No  ¨

* Registrant is not yet required to submit Interactive Data Files pursuant to Rule 405 of Regulation S-T 

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    ¨	Accelerated filer                       ¨
Non-accelerated filer      ¨ (Do not check if a smaller reporting company)	Smaller reporting company     x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act).     Yes  ¨    No  x

As of August 10, 2011, the Registrant had outstanding 227,426,215 shares common stock, $0.0001 par value.

ARISTA POWER INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Balance Sheets as of  June 30, 2011 (Unaudited) and December 31, 2010	1
	Unaudited Condensed Statements of Operations for the Three and Six Months  Ended June 30, 2011 and 2010	2
	Unaudited Condensed Statements of Cash Flows for the Six Months Ended June  30, 2011 and 2010	3
	Unaudited Statement of Stockholders' Equity through  June 30, 2011	4
	Notes to Unaudited Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 4.	Controls and Procedures	20
PART II. OTHER INFORMATION		20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
Signatures		22
Exhibits

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements and Notes

ARISTA POWER,  INC.

Balance Sheets

	June 30,			December 31,
	2011			2010
	(Unaudited)
ASSETS
Current assets
Cash	$	105,785		$	584,085
Accounts Receivable(less allowance for doubtful accounts of $0 at June 30, 2011 and December 31, 2010)		15,313			13,260
Prepaid expenses and other current assets		246,795			130,509
Inventory		555,920			520,641
Total current assets		923,813			1,248,495
Intangible assets, net		34,181			35,337
Property and equipment, net		199,208			221,789
Total assets	$	1,157,202		$	1,505,621
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	540,486		$	731,263
Line of credit		0			1,000,000
Customer deposits		224,679			254,738
Accrued liabilities		443,736			295,960
Total current liabilities		1,208,901			2,281,961
Stockholders' equity
Preferred stock, 5,000,000 shares authorized, $0.0001 par value; none issued or outstanding at June 30, 2011 or December 31, 2010		0			0
Common stock, 500,000,000 shares authorized, $0.0001 par value; 179,360,831 and 145,125,887 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively		17,935			14,512
Additional paid-in capital		17,881,504			15,474,996
Deficit accumulated		(17,951,138	)		(16,265,848	)
Total stockholders' equity		(51,699)			(776,340	)
Total liabilities and stockholders' equity	$	1,157,202		$	1,505,621

The accompanying notes are an integral part of the financial statements.

1

ARISTA POWER, INC.

Statements of Operations (Unaudited)

	Three Months Ended			Three Months Ended				Six Months Ended			Six Months Ended
	June 30,			June 30,				June 30,			June 30,
	2011			2010				2011			2010
Sales	$	193,729						$	199,979
Cost of Goods Sold		420,630							649,213
Gross Loss		(226,901	)						(449,234	)
Operating Expenses/(Income):
Research and development expenses		258,683			$	878,222			618,905		$	1,445,640
Selling, general and administrative expenses		500,242				7,540,960			1,608,797			8,221,149
Gain arising from debt extinguishment		0				0			(1,000,000	)		0
Total expenses		758,925				8,419,182			1,227,702			9,666,789
Loss from operations		(985,826	)			(8,419,182	)		(1,676,936	)		(9,666,789	)
Non-operating revenue/(expense)
Interest income/(expense)		39				(2,454	)		(8,354	)		(801	)
Net loss before income taxes		(985,787	)			(8,421,636	)		(1,685,290	)		(9,667,590	)
Income taxes		0				0			0			0
Net loss	$	(985,787	)		$	(8,421,636	)	$	(1,685,290	)	$	(9,667,590	)
Net loss per common share - basic and diluted		(.01	)			(.09	)		(.01	)		(.09	)
Weighted average number of common shares outstanding - basic and diluted		176,989,768				93,074,515			165,655,203			104,266,181

The accompanying notes are an integral part of the financial statements.

2

ARISTA POWER,  INC.

Statements of Cash Flows (Unaudited)

	Six Months Ended June 30, 2011			Six Months Ended June 30, 2010
Operating activities
Net loss	$	(1,685,290	)	$	(9,667,590	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation expense		53,965			106,156
Stock-based compensation		934,753			1,136,827
Financing fees- issuance of warrants, non-cash		156,047			6,235,000
Stock issued for services and rent		146,631			98,083
Extinguishment of line of credit debt		(1,000,000	)		0
Changes in operating assets and liabilities:
(Increase)/decrease  in prepaid expenses and other current assets		(116,286	)		42,544
(Increase) in trade accounts receivable		(2,053	)		0
Increase in inventory		(35,279	)		(851,475	)
(Decrease)/increase in customer deposits		(30,059	)		159,907
(Decrease)/Increase in trade accounts payable and accrued liabilities		(43,001	)		803,611
Net cash provided by/(used in) operating activities		(1,620,572	)		(1,936,937	)
Investing Activities
Acquisition of fixed assets		(30,228	)		(75,566	)
Net cash used in investing activities		(30,228	)		(75,566	)
Financing activities
Proceeds from issuance of common stock		1,172,500			1,000,000
Borrowings on line of credit, net of repayments		0			9,302
Net cash provided by financing activities		1,172,500			1,009,302
Increase (decrease) in cash		(478,300	)		(1,003,201	)
Cash – beginning of period		584,085			1,027,977
Cash – end of period	$	105,785		$	24,776
Supplemental Information:
Income Taxes Paid/(Tax credits received)	$	0		$	0
Interest Paid	$	12,421		$	2,454

The accompanying notes are an integral part of the financial statements.

3

ARISTA POWER, INC.

Statement of Stockholders’ Equity

(Unaudited)

	Number of Shares		Par Value		Additional Paid-In Capital		Accumulated Deficit			Total Stockholders' Equity
Balance, December 31, 2010		145,125,887	$	14,512	$	15,474,996	$	(16,265,848	)	$	(776,340	)
Issuance of common stock		26,500,000	$	2,650	$	924,850				$	927,500
Issuance of common stock for rent and services		584,785	$	58	$	119,140				$	119,198
Issuance of warrants with private placements					$	114,887				$	114,887
Stock option expense					$	867,397				$	867,397
Net loss for quarter							$	(699,503	)	$	(699,503	)
Balance, March 31, 2011		172,210,672	$	17,220	$	17,501,270	$	(16,965,351	)	$	553,139

Issuance of common stock	7,000,000	$	700	$	244,300				$	245,000
Issuance of common stock for rent and services	150,159	$	15	$	27,418				$	27,433
Issuance of warrants with private placements				$	41,160				$	41,160
Stock option expense				$	67,356				$	67,356
Net loss for quarter						$	(985,787	)	$	(985,787	)
Balance, June 30, 2011	179,360,831	$	17,935	$	17,881,504	$	(17,951,138	)	$	(51,699	)

The accompanying notes are an integral part of the financial statements.

4

ARISTA POWER, INC.

Notes to The Financial Statements

Six-Month Period ended June 30, 2011

(Unaudited)

Note 1 – Description of Business and Summary of Significant Accounting Policies

Description of Business

Arista Power, Inc. (the “Company” or Arista Power) was incorporated on March 30, 2001 in the State of New York as Future Energy Solutions, Inc. and in November 2008 changed its name to WindTamer Corporation. In May 2011, the Company changed its name to Arista Power, Inc.  The name change more accurately reflects the broadening of the Company’s focus beyond the WindTamer® brand and entry into areas within the energy storage and power management industries.  The Company is a developer, manufacturer, and supplier of energy storage systems, power management systems, and wind turbines, and a supplier of solar energy systems.

Basis of Preparation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information required by GAAP for complete annual financial statement presentation.

In the opinion of management, all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the results of operations have been included in the accompanying unaudited condensed financial statements.  Operating results for the three and six-month periods ended June 30, 2011, are not necessarily indicative of the results to be expected for other interim periods or the full fiscal year.  These financial statements should be read in conjunction with the financial statements and accompanying notes contained in the WindTamer Corporation Form 10-K for the fiscal year ended December 31, 2010.

Method of Accounting

The accompanying financial statements have been prepared in accordance with GAAP.  Arista Power, Inc. maintains its books and prepares its financial statements on the accrual basis of accounting.

The Company operated as a development stage enterprise until June 30, 2010, as substantially all of its efforts were planning, raising capital, research and development, and developing markets for its products. Effective July 1, 2010, the company exited development stage, as it shifted its efforts toward product commercialization and sale.  As a result, the financial statements of the Company are no longer prepared in accordance with the accounting and reporting principles prescribed by Accounting Standards Codification (ASC) 915, “Development Stage Entities”.

5

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

For financial statement presentation purposes, the Company considers all short-term, highly liquid investments with original maturities of three months or less to be cash and cash equivalents.  The Company maintains its cash and cash equivalents in bank deposit accounts, which at times may exceed federally insured limits.  The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions.

Inventory

Inventory consists primarily of parts and subassemblies for wind turbines, solar photovoltaic (“PV”) systems, and batteries, and is stated at the lower of cost or market value.  The Company capitalizes applicable direct and indirect costs incurred in the Company’s manufacturing operations to bring its products to a sellable state.  The inventory as of June 30, 2011 consisted of raw materials amounting to $384,420 and work-in-process amounting to $171,500. Inventory is reviewed quarterly to determine the need for an excess and obsolete inventory reserve.  As of June 30, 2011, no such reserve was necessary.

Fixed Assets

Fixed assets are recorded at cost.  Depreciation is on a straight line basis over the shorter of the estimated useful lives or the related lease for leasehold improvements.  Leasehold improvements for space leased on a month-to-month basis are expensed when incurred. Expenditures for renewals and betterments are capitalized.  Expenditures for minor items, repairs and maintenance are charged to operations as incurred.  Any gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

Intangible Assets

Intangible assets consist of costs associated with the application and acquisition of the Company’s patents and trademarks. Patent application costs are capitalized and amortized over the estimated useful life of the patent, which generally approximates its legal life.  

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset, including its ultimate disposition.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.  Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets.   For the six months ended June 30, 2011, the Company impaired assets totaling $17,453. For the year ended December 31, 2010, the Company impaired leasehold improvements totaling $86,765 as a result of a moving its corporate headquarters from Geneseo, New York to a larger location in Rochester, New York.

Fair Value of Financial Instruments

The carrying amount of cash, accounts payable and accrued expenses are reasonable estimates of their fair value due to their short maturity.

6

Revenue Recognition

Revenue is recognized when all of the following conditions are satisfied:   (1) there is persuasive evidence of an arrangement; (2) the service or product has been provided to the customer; (3) the sale price to be paid by the customer is fixed or determinable; and (4) the collection of the sale price is reasonably assured.  Amounts billed and/or collected prior to satisfying our revenue recognition policy are reflected as customer deposits.

Research and Development Costs

All costs related to research and development are expensed when incurred, unless these costs have an alternative future value to research and development, in which case they are capitalized.  Research and development costs consist of expenses to enhance the WindTamer® wind turbine design, and costs associated with the development of the Company’s Power on Demand system, including an integral part of the Power on Demand system, the inverter, and a Mobile Renewable Power Station.  Specifically, these costs consist of labor, materials, and consulting.

Warranty Costs

The Company’s standard warranty on each Power on Demand system, wind turbine, and solar system sold protects against defects in design, material, and workmanship under normal use for varying periods, based upon the product sold. Several warranties have specific additional terms and conditions.  The Company provides for estimated cost of warranties at the time the revenue is recognized.  Factors that affect the warranty reserve are projected cost of repair and/or replacement, component life cycles, manufacturer’s warranty on component parts, and limited historical data. These estimates are reviewed quarterly and are updated as new information becomes available. The impact of any change in estimates will be taken into account when analyzing future warranty reserve requirements.

Stock-Based Compensation

The Company accounts for stock option awards granted under the Company’s Equity Incentive Plan in accordance with ASC 718. Under ASC 718, compensation expense related to stock-based payments is recorded over the requisite service period based on the grant date fair value of the awards.  Compensation previously recorded for unvested stock options that are forfeited is reversed upon forfeiture.  The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock.

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 505-50.  Accordingly, the measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant’s or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

Income Taxes

The Company accounts for income taxes using the asset and liability approach, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such assets and liabilities.  This method utilizes enacted statutory tax rates in effect for the year in which the temporary differences are expected to reverse and gives immediate effect to changes in income tax rates upon enactment.  Deferred assets are recognized, net of any valuation allowance, for temporary differences and net operating loss and tax credit carry forwards.  Deferred income tax expense represents the change in net deferred assets and liability balances.

7

Basic and Diluted Loss Per Share

Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period.  Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued.  In a loss year, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potentially issued common shares would be anti-dilutive.

As of June 30, 2011 there were 6,713,000 stock options and 31,012,500 warrants outstanding that, upon exercise, could dilute future earnings.

Reclassifications

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

Note 2 - Going Concern

The financial statements have been prepared assuming that the Company will continue as a going concern. The Company exited development stage during the quarter ended September 30, 2010 and had recognized minimal revenues prior to that date. Since its formation, the Company has incurred a cumulative net loss of ($17,951,138). The minimal sales volumes to date and recurring losses from operations raise substantial doubt about the Company’s ability to continue as a going concern. Continuation of the Company is dependent on achieving sufficiently profitable operations and obtaining additional financing.

From 2007 through 2010, the Company raised approximately $4.1 million through multiple private placement offerings at varying prices.  The Company yielded $1.67 million from the exercise of 33.4 million stock options for the year ended December 31, 2009.  The Company established a $1.0 million line of credit with First Niagara Bank on April 26, 2010. On March 17, 2011, the Company received written notice from the Guarantors of the loan agreement (two Company officers and one shareholder) that the Guarantors were required by First Niagara Bank to repay the $1.0 million principal balance of the Company’s line of credit.  The Company has no liability to the Guarantors as a result of the repayment by the Guarantors of the line of credit.  Other than accrued interest and applicable fees, which are being repaid, the Company has no liability to the Lender under the line of credit. As a result of this debt extinguishment, the Company recorded a $1.0 million non-cash gain during the three months ended March 31, 2011.

During March, May, July and August 2011, the Company raised $927,500, $245,000, $1,295,000 and $385,000, respectively, through private placement sales of “units” that included shares of commons stock and a warrant to purchase common stock. This working capital is not expected to be sufficient to fund operational growth, and the Company expects to need to raise additional capital.  There can be no assurance that the Company will continue to be able to raise sufficient capital, at terms that are favorable to the Company or at all, to fund operations.

Note 3 – Long-lived Assets

The following table summarizes the Company’s long-lived assets as of

	June 30, 2011			December 31,  2010
Property and equipment
Equipment	$	145,320		$	140,444
Leasehold Improvements		1,950			1,950
Furniture and fixtures		38,950			40,785
Software		71,625			54,594
Product Tooling		49,946			49,034
Total property and equipment before accumulated depreciation		307,791			286,807
Less accumulated depreciation		(108,583	)		(65,018	)
Total property and equipment	$	199,208		$	221,789

8

Intangible assets
Patents	$	34,862		$	34,862
Trademark		4,525			4,525
Total intangible assets before accumulated amortization		39,387			39,387
Less accumulated amortization		(5,206	)		(4,050	)
Total intangible assets	$	34,181		$	35,337

During the six months ended June 30, 2011, the Company impaired assets totaling $17,453.

Note 4 – Debt

In April 2010, the Company established a $1.0 million line of credit with First Niagara Bank to provide the Company with liquidity.  The facility was secured by the guarantees of two officers of the Company and one shareholder of the Company. The line of credit interest rate was at prime rate, plus 0%, but at no time would the applicable interest rate be less than 3.25%.

The borrowings under the loan agreement were secured by limited guarantees provided by two of our officers, William Schmitz and Molly Hedges, and one of our shareholders, Michael Hughes.  The guarantees were supported by cash collateral accounts maintained by the individuals at First Niagara Bank. Additionally, Gerald Brock, a former director of the Company, granted the guarantors the right to sell 20,000,000 of his shares of our common stock in the event they were required to pay under the guarantees.  Mr. Brock pledged his 20,000,000 shares of the Company’s common stock owned by him as security for his obligations to the guarantors.

In connection with the guarantees, the Company issued to Mr. Brock and the guarantors warrants to purchase an aggregate of 29,000,000 shares of our common stock at $0.25 per share.  The warrants have a term of 10 years, with a six-month incremental vesting schedule in tranches of 25% of the shares under each warrant from the date of issue. As of June 30, 2011, 14,500,000 of these warrants have vested.

On February 26, 2011, the Company received a notice of potential opportunity to cure default from First Niagara Bank, which included a demand payment for interest due of $10,976 as of February 23, 2011 under the Company’s loan agreement.  The notice provided that if the events of default were not cured by March 4, 2011, First Niagara Bank, at its sole discretion, could accelerate or demand payment in full of the obligations and take all enforcement actions or otherwise implement remedies under the applicable loan agreements.  The default was not cured by the Company by March 4, 2011.  Pursuant to the loan agreement, the interest rate under the line of credit had increased by 6% to 9.25% as of the date of the notice.  On March 12, 2011, we received a demand notice from First Niagara Bank, demanding payment for full indebtedness to the bank including line of credit principal and interest of $1,012,421, and credit card debt of $25,351 by no later than March 17, 2011.  On March 17, 2011, the Company received written notification from the guarantors of the loan agreement that the guarantors were required by the lender, and did, on March 17, 2011, repay the $1.0 million principal balance of the Company’s working capital revolving line of credit with the Lender.  The Company has no liability to the guarantors as a result of the repayment by the guarantors of the line of credit, and accordingly, the Company recorded a $1.0 million gain on the extinguishment of the line of credit debt during the three months ending March 31, 2011.  Other than accrued interest and applicable fees, which are being repaid, the Company has no liability under the line of credit.

9

Note 5 – Stockholders’ Equity

During the six months ended June 30, 2011, approximately 735,000 shares of our common stock, totaling approximately $147,000, were issued to several vendors in exchange for services which included 224,000 shares of our common stock issued to the Company’s landlord of its Rochester, New York headquarters for base rent payments and 30,000 shares of our common stock issued to the Company’s former landlord as a settlement in lieu of future rental payment.

During March 2011, the Company sold 53 “units” in a private placement that yielded $927,500, and in May 2011, the Company raised $245,000 with the sale of 14 “units”.  In a July 2011 private placement, the Company sold 74 “units”, which yielded $1,295,000, and in August 2011 the Company sold an additional 22 “units” for $385,000. Each unit consisted of 500,000 shares of common stock, and a warrant to purchase 17,500 shares of common stock at $.50 per share. The warrants fully vest two years from the date of the unit purchase, and have a ten-year term.

Note 6 – Stock Based Compensation

The Company has established the 2008 Equity Incentive Plan, which is a shareholder-approved plan that permits the granting of stock options and restricted stock to employees, directors and consultants.   The 2008 Equity Incentive Plan originally provided for the issuance of up to 8,000,000 shares of common stock of which 1,000,000 shares are available for grant as Incentive Stock Options.  The exercise price for options awarded is no less than 100% of the fair market value of the common stock on the day of grant.  The options generally vest either immediately on the date of grant or 1 to 3 years from the date of grant.  On December 30, 2009, the Board of Directors approved an amendment to increase the number of shares available for award under the plan from 8,000,000 to 16,000,000, and this amendment was approved by the Company’s shareholders at its Annual Meeting on April 28, 2010.

Management has valued the options at their date of grant utilizing the Black Scholes option pricing model.  Prior to the fourth quarter of 2009, there was not a public market for the Company shares.  Accordingly, the fair value of the underlying shares was determined based on recent transactions by the Company to sell shares to third parties and other factors determined by management to be relevant to the valuation of such shares.  Beginning in the fourth quarter of 2009, the quoted price for the Company’s shares on the OTCBB was used to value the underlying shares.  Expected volatility is based upon a weighted average historical volatility of peer companies operating in a similar industry.   The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options depending on the date of the grant and expected life of the options.  The expected life of options used was based on the contractual life of the option granted.  The Company determined the expected dividend rate based on the assumption and expectation that earnings generated from operations are not expected to be adequate to allow for the payment of dividends in the near future.  The following weighted-average assumptions were utilized in the fair value calculations for options granted:

	Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010
Expected dividend yield		0	%		0	%
Expected stock price volatility		97-98	%		86	%
Risk-free interest rate		3.91-4.20	%		1.14-4.06	%
Expected life of options	3.0-9.9 Years			1.5-10 Years

The following table summarizes the status of the Company’s aggregate stock options granted:

	Number of Shares Remaining Options			Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2011		5,910,000		$	.28
Options granted during 2011		1,208,000		$	.22
Options cancelled during 2011		( 405,000	)	$	.28
Outstanding at June 30, 2011		6,713,000		$	.27		8.50	$	0
Exercisable at June 30, 2011		4,297,000		$	.27		8.42	$	0

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The weighted average fair value of options granted during six months ended June 30, 2011 was approximately $.22 ($.42 for the six months ended June 30, 2010).   During the six months ended June 30, 2010, 1,583,333 options were granted, and no options vested or expired. There were no options exercised for the six months ending June 30, 2011 or 2010.

The following table summarizes the status of the Company’s restricted share awards:

Restricted Shares	Number of Restricted Shares		Weighted Average Fair Value at Grant Date
Outstanding at January 1, 2011		4,506,737	$	.14
Vested at June 30, 2011		1,119,388	$	.14

The aggregate expense associated with the restricted stock awards is $630,943, of which $104,192 was expensed in 2010 and $525,636 was expensed during the six months ended June 30, 2011.  On March 30, 2011, the Compensation Committee of the Company’s Board of Directors approved a change in the vesting date for restricted stock held by certain employees from April 1, 2011 to August 1, 2011. On July 29, 2011, the Compensation Committee of the Company’s Board of Directors approved an amendment to change the vesting date of these restricted shares to March 1, 2012.  A total of 1,119,388 shares vested on April 1, 2011, and the remaining 3,387,349 shares are scheduled to vest on March 1, 2012. The expense associated with the restricted stock grants has been recorded over the remaining requisite period through April 1, 2011 or March 1, 2012, respectively.

Note 7 – Warrants

Management has valued warrants at their date of issue utilizing the Black Scholes option pricing model.   The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the warrants depending on the date of the issue and their expected life.  The expected life of warrants used was based on the term of the warrant.  The Company determined the expected dividend rate based on the assumption and expectation that earnings generated from operations are not expected to be adequate to allow for the payment of dividends in the near future.  The following weighted-average assumptions were utilized in the fair value calculations for warrants granted:

	Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010
Expected dividend yield		0	%		0	%
Expected stock price volatility		97-98	%		86	%
Risk-free interest rate		3.95-4.24	%		4.36	%
Expected life of warrants	8.8-9.9 years			9.8 years

The following table summarizes the status of the Company’s warrants granted:

	Number of Shares Remaining Warrants			Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2011		29,840,000	$	.26
Warrants granted during 2011		1,172,500	$		.50
Warrants expired/cancelled during 2011		0
Outstanding at June 30, 2011		31,012,500	$		.27		8.9	$	0
Exercisable at June 30, 2011		14,500,000	$		.25		8.8	$	0

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The weighted average fair value of warrants issued during six months ended June 30, 2011 was $.50 ($.25 for the six months ended June 30, 2010).   During the six months ended June 30, 2011, 7,250,000 warrants vested, none expired, were cancelled, or were exercised. During the six months ended June 30, 2010, no warrants had vested, nor were any expired or cancelled.

Note 8 – Consulting Agreements

On May 24, 2010, the Company entered into an agreement with an individual to become a technical consultant, and to assist in further optimization of the Company’s ducted wind turbines.   This individual is currently a professor of senior aircraft design and performance courses at the Clarkson University, in Potsdam, New York, the location of one of the Company’ s wind turbine test sites. Payment for services is on an hourly basis at an agreed upon rate for work performed for the Company.  In conjunction with the agreement, the individual received 200,000 stock options, vesting over a one-year period.  During the six months ended June 30, 2011, the Company expensed $6,746 relating to options awarded to the consultant.

On October 11, 2010, the Company entered into an agreement with an individual to become a technical consultant, and to assist further in the development of the Company’s ducted wind turbines. This individual is currently an associate professor of architectural engineering and an adjunct professor of mechanical and nuclear engineering at the Pennsylvania State University in University Park, Pennsylvania. Payment for services is on an hourly basis at an agreed upon rate for work performed for the Company. In conjunction with the agreement, the individual received 110,000 stock options vesting over a three-year period. The Company expensed $7,822 relating to these options for the six months ended June 30, 2011.

Note 9 – Commitments and Contingencies

Employment Agreements

As of June 30, 2011, the Company has employment agreements in place with five members of senior management.  The terms of the agreements are for three years, with the Company’s option to extend employment for a fourth year.  Annual compensation required under the agreements includes base salary aggregating $872,000, as well as annual bonuses based upon achieving certain performance milestones.  All of these agreements contain severance provisions in the event of termination of the employee without cause that require continued payment of the annual salary through the term of the agreement but for a minimum period of at least two years.  The agreements expire at varying times over the period from November 14, 2012 through March 1, 2013.

Operating Lease

On August 20, 2009, the Company entered into a lease for office space in Geneseo, New York requiring a monthly rental payment of $1,400, which commenced on November 1, 2009 and expired October 31, 2011 with a two year renewal option.  In June 2010, the Company relocated its headquarters from Geneseo, New York to Rochester, New York into a larger location. Inventory, warehousing, and assembly space at the Geneseo facility was neither large enough, nor flexible enough, to allow for continued growth, and therefore management determined that it was prudent to move to a location that could accommodate both manufacturing and assembly growth, as well as to house research and development activities and administrative office space. On January 27, 2011, the Company signed an agreement and mutual release with the landlord of the Geneseo facility, which provided for the issuance of 30,000 shares of the Company’s common stock as settlement for the early termination of the lease.

In October 2010, a lease was executed for the Rochester facility.  The lease term is from August 2010 through July 2015.  The first year of the lease term requires monthly base rent payments of $5,396, payable in cash or in the Company’s common stock. The base rent increases by 3% on August 1st of the each year of the lease.  The Company also is required to pay its proportionate share of real estate taxes and common area maintenance costs for the Rochester facility.

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Annual commitments by year under the Company’s lease agreements are as follows:

	Rental Commitment
2011 2012 2013 2014 2015	$65,561           $67,528           $69,554           $71,641           $42,513

Warranty

During the year ended December 31, 2010, and for the six months ended June 30, 2011, the Company entered into a number of sales orders for Power on Demand systems, wind turbine units and for solar installations.  These sales orders required certain deposits of the agreed-upon purchase price upon acceptance of the sales order.  The advance payments received as of June 30, 2011 amounted to $224,679 (the December 31, 2010 total was $254,738) and have been included in customer deposits.  We expect to install the systems and units associated with these deposits during the next two quarters, as we obtain permits and zoning approvals from customer’s town officials, complete site assessments, and continue product evaluation. The sales orders included product warranties of varying periods, depending on the product sold, against defects in materials and workmanship. The Company provides for estimated cost of warranties at the time the revenue is recognized and has established a corresponding warranty reserve.  Factors that affect the balance required in the warranty reserve are projected cost of repair and/or replacement, component life cycles, manufacturer’s warranty on parts and components, and limited historical data. These estimates are reviewed quarterly and are updated as new information becomes available. The impact of any change in warranty cost estimates will be taken into account when analyzing future warranty reserve requirements. As of June 30, 2011, the warranty reserve totals $95,308, and is reported in the accrued liabilities section of the balance sheet.

Note 10 – Income Taxes

The Company filed its 2010 New York State corporate income tax return during March 2011, and anticipates a refund upon approval by state tax authorities in the amount of $233,634 for 2010, related to tax credits for being a Qualified Emerging Technology Company.  These refunds will be recognized when received by the Company.

Note 11 - Subsequent Event

Subsequent to June 30, 2011, the Company issued 65,385 shares of common stock to the landlord in lieu of base rent payments. In July 2011, the Company sold 74 “units”, primarily to the Company’s officers and directors, for an aggregate purchase price of $1,295,000. In August, an additional 22 “units” were sold for an aggregate purchase price of $385,000.   Each “unit” consists of 500,000 shares of common stock and a ten-year warrant to purchase 17,500 shares of common stock for $0.50 per share.

Note 12 - Recent Accounting Pronouncements

In April 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-17, “Revenue Recognition - Milestone Method (Topic 605): Milestone Method of Revenue Recognition - a consensus of the FASB Emerging Issues Task Force (“EITF”)”.  ASU No. 2010-17 is limited to research or development arrangements and requires that this ASU be met for an entity to apply the milestone method (record the milestone payment in its entirety in the period received) of recognizing revenue.  However, the FASB clarified that, even if the requirements in this ASU are met, entities would not be precluded from making an accounting policy election to apply another appropriate policy that results in the deferral of some portion of the arrangement consideration.  The guidance in this ASU will apply to milestones in both single-deliverable and multiple-deliverable arrangements involving research or development transactions.  ASU No. 2010-17 will be effective prospectively for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010.  Early adoption is permitted.  We are currently evaluating the impact that ASU No. 2010-17 will have on our financial statements.

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In October 2009, the FASB issued ASU No. 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements - a consensus of the FASB EITF”.  ASU No. 2009-13 eliminates the residual method of accounting for revenue on undelivered products and instead requires companies to allocate revenue to each of the deliverable products based on their relative selling price.  In addition, this ASU expands the disclosure requirements surrounding multiple-deliverable arrangements.  ASU No. 2009-13 will be effective for revenue arrangements entered into for fiscal years beginning on or after June 15, 2010.  We are currently evaluating the impact that ASU No. 2009-13 will have on our financial statements.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited historical financial statements and the related notes and the other financial information included elsewhere in this report and in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2011. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of any number of factors, including those set forth under “Information Concerning Forward-Looking Statements” and under other captions contained elsewhere in this report.

Company Overview

We are a developer, manufacturer, and supplier of energy storage systems, power management systems, and wind turbines, and a supplier of solar energy systems.  Our patent-pending Power on Demand system utilizes inputs from multiple energy sources including wind, solar, fuel cells, and the electric grid, in conjunction with a custom-designed battery storage system and a proprietary smart monitoring technology, that releases energy at optimal times to reduce peak power demand, thereby lowering electricity costs for large energy users who are subject to peak usage pricing.  We also sell a Mobile Renewable Energy Station that generates wind and solar energy to an onboard storage unit for military and other applications, and a Renewable Power Station that is a scalable system that can be containerized and drop-shipped to the end-user and assembled onsite at off-grid locations to be used as a “micro-grid”.  Our diffuser-augmented WindTamer® wind turbine utilizes a patented technology for the production of electrical power.   

We were incorporated in New York on March 30, 2001, under the name Future Energy Solutions, Inc.  In November 2008, we changed our name to WindTamer Corporation.  On March 2, 2011, our Board of Directors approved changing our name to Arista Power, Inc., which was approved by our shareholders at our Annual Meeting of Shareholders held on May 18, 2011.  Our name change reflects management’s decision to broaden our focus beyond wind turbines into a wider range of power solutions, with an expanded suite of products and services.   Our corporate headquarters is located at 1999 Mt. Read Boulevard, Rochester, New York.  Our website address is www.aristapower.com.

The WindTamer® wind turbine was invented in 2002, and in 2003 a patent was issued for the WindTamer® wind turbine technology.  From 2002 until the fourth quarter of 2009, we focused primarily on research and development of our technology and production and testing of WindTamer® wind turbine prototypes.  In the fourth quarter of 2009, we began selling our wind turbines.

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In 2010, we continued selling and installing our wind turbines in a variety of grid-tied and off-grid applications.  Throughout 2010, we also continued research and development efforts on our WindTamer® wind turbine in order to increase the power production of the wind turbine and to decrease its installation and manufacturing costs.  

In the first half of 2010, we developed and sold our first Mobile Renewable Power Station for testing and use by the U.S. Army, which was delivered in August 2010.  

During the second half of 2010, we developed and began to sell our Power on Demand energy management system, the first of which was commissioned in the first quarter of 2011.  Late in the fourth quarter of 2010, we began selling solar PV as free-standing systems and integrated into our Power on Demand system. During the first quarter of 2011, we installed, as part of a Power on Demand system, our first solar PV system.  In April 2011, we received a multiple unit wind turbine order from a foreign distributor, and we received our second order for a Power on Demand system.  In June 2011, the Company received its third order for a Power on Demand system, and an order from the Federal Bureau of Investigation (FBI) for a Mobile Renewable Power Station (MRPS), which sells in the low six figure range.

As of August 5, 2011, the Company’s current order backlog is approximately $1,230,000, which consists of orders for several Power on Demand systems, a Mobile Renewable Power Station, wind turbines, and solar PV systems. Approximately $267,000 of this amount relates to orders booked prior to December 31, 2010.

Financial Operations

From 2002 until the fourth quarter of 2009, we focused primarily on research and development of our technology and production and testing of WindTamer® wind turbine prototypes.  In the fourth quarter of 2009, we began hiring our management team and selling our turbines.  In 2010, we continued selling and installing our wind turbines in a variety of grid-tied and off grid applications.  Other than the Mobile Renewable Power Station that we sold for use by the U.S. Army, substantially all of our revenue generated in 2010 was attributable to the sales of WindTamer® wind turbines.  Throughout 2010, we also continued research and development efforts on our WindTamer® wind turbine in order to increase the power production of the wind turbine and to decrease the cost to manufacture and install the wind turbine. Our focus thus far in 2011 has been on refining the Power on Demand system to increase system efficiencies, as well as on the development of an inverter which is an integral part of the Power on Demand system, and the continued development of the Mobile Renewable Power Station.

In fiscal 2010, we had revenues of $494,000 and an operating loss of $(12,211,000), as compared with no revenue in 2009 and operating loss of $(2,823,000) in fiscal 2009.   Of the $(12,211,000) and $(2,823,000) operating loss in fiscal 2010 and fiscal 2009, ($8,277,000) and ($1,117,000), respectively, were attributable to non-cash expenses, primarily related to charges incurred in connection with the issuance of warrants and stock options, depreciation and amortization.  Our accumulated deficit as of December 31, 2011 was $(16,265,848).  During the six months ended June 30, 2011, we incurred losses of $(1,685,290), including non-cash expenses of approximately $300,000, on revenues of $199,979.

The Company expects to incur substantial additional costs, including costs related to continued product development and expansion. We have utilized the proceeds raised from our private placements to develop and commercialize our Power on Demand system, our Mobile Renewable Power Station, our Renewable Power Station, and our WindTamer® wind turbines, as well as to sustain our operations.  Our future cash requirements will depend on many factors, including the volume and the timing of future orders and sales, continued progress in our product development and cost effectiveness programs, costs to continue to develop both domestic and international sales and distribution channels, and competing technological and market development. The timing of our ability to generate a positive cash flow will be directly dependent on the way we are able to succeed in managing these factors.

We may require additional external financing to sustain our operations if we cannot achieve positive cash flow from our anticipated operations.  Additionally, even if we are able to achieve positive cash flow from operations, we may continue to seek to raise additional capital to accelerate our growth or expand our manufacturing and distribution infrastructure. Success in our future operations is subject to a number of technical and business risks, including our continued ability to obtain future funding, satisfactory product development, and market acceptance for our products.

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Results of Operations

Results of Operations for Quarter Ended June 30, 2011 Compared to Quarter Ended June 30, 2010.

Revenues

During the quarter ended June 30, 2011, we reported revenues of $194,000 as compared with no sales for the quarter ending June 30, 2010, when we were operating as a development stage company focusing on product development.  We have received deposits from customers totaling approximately $225,000 as of June 30, 2011.  We expect to realize sales associated with these deposits during the next several quarters, as we obtain permits and zoning approvals from customer’s town officials, complete site assessments, and complete installations and inner-connection agreements, although there can be no assurance that we will be able to meet this schedule.

We continue to expand our selling efforts where, by coupling our power management systems with renewable solar and wind energy, we can provide our customers with an attractive return on investment.

Gross Loss

For the quarter ended June 30, 2011, gross loss amounted to $227,000.  This is primarily attributable to the costs associated with maintaining an operations staff, responsible for not only assembly and installation of wind turbines, solar products, and Power on Demand systems, but also for troubleshooting customer issues, inventory management, and maintaining day to day operations.  For the quarter ended June 30, 2010, as a development stage company, we focused our efforts on research and turbine design, and therefore had no sales revenue or related product cost of sales.

Research and Development

Research and development costs for the quarter ended June 30, 2011 totaled $259,000, a decrease of $620,000 or 71%, when compared to the quarter ended June30, 2010. This decrease reflects the shift in the Company’s efforts as we moved from a development stage company during the first half of 2010 to full-scale operations on July 1, 2010.

Selling, General and Administrative

Selling, general and administrative expenses, or SG&A expenses, for the quarter ended June 30, 2011, were $500,000, a decrease of $7,041,000, when compared to the quarter ended June 30, 2010.  The decrease over the prior year was related primarily to the non-recurring non-cash financing costs associated with the guarantee of the Company’s line of credit in 2010.

Depreciation and Amortization

Depreciation and amortization charges were $29,000 for the quarter ended June 30, 2011, compared to $93,000 during the quarter ended June 30, 2010 at which time we impaired leasehold improvements relating to our former headquarters in Geneseo, New York.

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Other Income (Expense)

Interest income for the quarter ended June 30, 2011 was nominal, as compared to and expense of $2,000 for the quarter ended June 30, 2010, which related to borrowing activity on our line of credit.

Net Loss

We incurred net losses of $986,000 and $8,422,000 for the quarters ended June 30, 2011 and 2010, respectively. Results from the quarter ended June 30, 2010 reflect several non-cash expenses totaling $6.7 million relating primarily to financing costs on the Company’s line of credit agreement established in April, 2010.

Results of Operations for Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010.

Revenues

During the six months ended June 30, 2011, we reported revenues of $200,000 as compared with no sales for the six months ending June 30, 2010, when we were operating as a development stage company, focusing on product development.  We have received deposits from customers totaling approximately $225,000 as of June 30, 2011.  We expect to realize sales associated with these deposits during the next several quarters, as we obtain permits and zoning approvals from customer’s town officials, complete site assessments, and complete installations and inner-connection agreements, although there can be no assurance that we will be able to meet this schedule.

We continue to expand our selling efforts where, by coupling our power management systems with renewable solar and wind energy, we can provide our customers with an attractive return on investment.

Gross Loss

For the six months ended June 30, 2011, gross loss amounted to $449,000.  This is primarily attributable to the costs associated with maintaining an operations staff, responsible for not only assembly and installation of wind turbines, solar products, and Power on Demand systems, but also for troubleshooting customer issues, inventory management, and maintaining day to day operations.  For the six months ended June 30, 2010, as a development stage company, we focused our efforts on research and development of our wind turbine design, and therefore had no sales revenue or related product cost of sales.

Research and Development

Research and development costs for the six months ended June 30, 2011 totaled $619,000, a decrease of $827,000 or 57%, when compared to the six months ended June 30, 2010. This decrease reflects the shift in the Company’s efforts as we moved from a development stage company in the first half of 2010 to full-scale operations on July 1, 2010.

Selling, General and Administrative

Selling, general and administrative expenses, or SG&A expenses, for the six months ended June 30, 2011, were $1,609,000, a decrease of $6,612,000, when compared to the six months ended June 30, 2010.  The decrease over the prior year was related primarily to the non-recurring, non-cash financing costs associated with the guarantee of the Company’s line of credit in 2010.

Gain on Debt Extinguishment

The Company recorded a $1,000,000 non-cash gain for the six months ended June 30, 2011, as a result of the default and settlement of the Company’s $1,000,000 working capital loan by the guarantors of the loan. The Company has no obligation to the guarantors as of result of the guarantors’ repayment of the loan.

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Depreciation and Amortization

Depreciation and amortization charges were $54,000 for the six months ended June 30, 2011, compared to $106,000 during the six months ended June 30, 2010 as a result of the impairment of leasehold improvements relating to our former headquarters in Geneseo, New York in 2010, offset by increases due to new fixed asset additions in 2011.

Other Income (Expense)

Interest expense for the six months ended June 30, 2011 was $8,000 as compared to $1,000 for the six months ended June 30, 2010, which related to borrowing activity on our line of credit.

Net Loss

We incurred net losses of $1,685,000 and $9,668,000 for the six months ended June 30, 2011 and 2010, respectively. Results from the six months ended June 30, 2010 reflect several non-cash expenses totaling $6.7 million relating primarily to financing costs on the Company’s line of credit agreement established in April 2010 .

Liquidity and Capital Resources

As of June 30, 2011, we had working capital deficit of $285,000 as compared to a working capital deficit of $424,000 as of June 30, 2010.  The increase in working capital resulted from the extinguishment of short term debt during the six months ended June 30, 2011, offset by the net loss generated from operations.  On February 26, 2011, the Company received a notice of potential opportunity to cure default from First Niagara Bank, with whom the Company had established a $1.0 million working capital line of credit in April 2010, which included a demand payment for interest due of $10,976 as of February 23, 2011 under the Company’s loan agreement.  The notice provided that if the events of default were not cured by March 4, 2011, First Niagara Bank, at its sole discretion, may accelerate or demand payment in full of the obligations and take all enforcement actions or otherwise implement remedies under the applicable loan agreements.  The default was not cured by the Company by March 4, 2011.  Pursuant to the loan agreement, the interest rate under the line of credit was increased by 6% to 9.25% as of the date of the notice.  On  March 12, 2011, we received a demand notice from First Niagara Bank, demanding payment for full indebtedness to the bank including line of credit principal and interest of $1,012,421, and credit card debt of $25,351 by no later than March 17, 2011.  On March 17, 2011, the Company received written notification from the guarantors of the loan agreement that the guarantors were required by the lender, and did, on March 17, 2011, repay the $1.0 million principal balance of the Company’s working capital revolving line of credit with the Lender.  The Company has no liability to the guarantors as a result of the repayment by the guarantors of the line of credit.  Other than accrued interest and applicable fees, which are being repaid, the Company has no liability under the line of credit.

In addition to our $1.0 million working capital loan, our principal source of liquidity has been through private placement offerings of our common stock and warrants to purchase common stock. We completed a private placement in 2008 with proceeds of $907,000 (net proceeds were $880,742), and we received proceeds from a private placement conducted in 2009 for $816,000 (net proceeds were $799,658), and we received $1,666,660 from the exercise of 33,400,000 stock options in 2009. In June 2010, the Board of Directors approved a $1.5 million private placement offering, $1,000,000 of which was raised in June 2010, and the additional $500,000 was completed in November 2010. In December 2010, the Board of Directors approved the sale of 115 “units”, with each “unit” consisting of 500,000 shares of common stock, and a warrant to purchase up to 17,500 shares of common stock at $.50 per share. The warrant vests two years from the date of purchase, and has a ten-year term. The Company sold 48 “units” in December 2010, which yielded $840,000.  In March 2011, an additional 53” units” were sold for a total of $927,500, and in May 2011, the remaining 14 “units” were sold for $245,000. In May 2011, our Board of Directors approved a similar private placement offering plan to sell up to 115 “units”, and in July 2011, 74 “units” were sold, primarily to Officers and Directors that yielded $1,295,000.  In August 2011 an additional 22 “units” were sold for $385,000.  Costs associated with these private placements were minimal.

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We have utilized our funds to form our management team, purchase inventory to satisfy short term customer demand, and to further our research and product development by, among other things, product testing at both wind tunnel settings and at outside test sites.  In addition, we have used resources to develop and test our Power on Demand system and our Mobile Renewable Power Station.  We have also utilized funds to develop and launch marketing for our Company initiative to focus into broader applications of renewable energy and power management, including, but not limited to, our Power on Demand system and Mobile Renewable Power Station.

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on our audited annual financial statements as of and for the years ended December 31, 2010 and 2009, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our independent auditors. There is substantial doubt about our ability to continue as a going concern as the continuation and expansion of our business is dependent upon obtaining further financing, successful and sufficient market acceptance of our products, and, finally, achieving a profitable level of operations.

The issuance of additional equity securities by us may result in a significant dilution in the equity interests of our current shareholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations. Furthermore, our ability to raise additional capital may be made more difficult by a global financial crisis.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to shareholders.

Critical Accounting Policies

As of June 30, 2011, the Company’s critical accounting policies and estimates have not changed materially from those set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Information Concerning Forward-Looking Statements

All statements in this Form 10-Q, future filings by the Company with the Securities and Exchange Commission (“Commission”), the Company’s press releases and oral statements by authorized officers of the Company, other than statements of historical facts, that address future activities, events or developments are “forward-looking statements.”

These forward-looking statements include, but are not limited to, statements relating to our anticipated financial performance, business prospects, new developments, new merchandising strategies and similar matters, and/or statements preceded by, followed by or that include the words “believes,” “could,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “projects,” “seeks,” or similar expressions. We have based these forward-looking statements on certain assumptions and analyses made by us in light of our experience and on our assessment of historical trends, current conditions, expectations, and projections about expected future developments and events, as well as on other factors we believe are appropriate under the circumstances and other information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including those described under the heading “Risk Factors” in Item 1A of Part I of the Company’s 10-K filed with the Commission, for the fiscal year ended December 31, 2010, that may affect the operations, performance, development and results of our business. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date hereof.

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Although we believe that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties. All forward-looking statements and reasons why results may differ contained herein are made as of the date hereof, and we assume no obligation to update any such forward-looking statement or reason why actual results might differ. All of the forward-looking statements contained herein are qualified by these cautionary statements.

Item 4. Controls and Procedures

The Company’s management has established disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within time periods specified in the SEC rules and forms. Such disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management to allow timely decisions regarding required disclosure.

Based on the evaluation of the effectiveness of our disclosure controls and procedures, our Chief Executive Officer and Acting Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2010.  

There can be no assurance, however, that our disclosure controls and procedures will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be set forth in our periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the six months ended June 30, 2011 that has materially affected, or is likely to materially affect, the Company’s internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we are involved with legal proceedings, claims and litigation arising in the ordinary course of business. We believe that the final disposition of such matters will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

During July and August 2011, the Company issued 65,385 shares of common stock to the landlord in lieu of base rent payments.

In July 2011, the Company sold 74 “units” of common stock for an aggregate purchase price of $1,295,000, with each “unit” selling for $17,500 and consisting of 500,000 shares of common stock and a warrant to purchase 17,500 shares common stock for $0.50 per share.  This private placement of units was approved by the Board of Directors in May 2011 as part of an approval to sell up to 115 “units”.  In August 2011, the Company sold an additional 22 “units”, for an aggregate purchase price of $385,000.  Costs associated with these private placements were minimal.

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Item 3.  Defaults Upon Senior Securities

None.

Item 5.  Other Information

None

Item 6. 

(a)	Exhibits:
	10.1	Form of Subscription Agreement between Arista Power, Inc. and certain Subscribers of Units.
	10.2	Form of Warrant Agreement between Arista Power, Inc. and certain holders of warrants.
	10.3	Form of Lock-Up Agreement between Arista Power, Inc. and certain officers and directors of Arista Power, Inc.
	31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification Pursuant to 18 U.S.C. Section 1350 by the Chief Executive Officer, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification Pursuant to 18 U.S.C. Section 1350 by the Chief Financial Officer, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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.

	ARISTA POWER, INC.
August 12, 2011
		By:	/s/ WILLIAM A. SCHMITZ
			William A. Schmitz
			President and Chief Executive Officer

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EX-10.1

Exhibit 10.1

SUBSCRIPTION AGREEMENT

Arista Power, Inc.

1999 Mt. Read Boulevard

Rochester, New York 14615

Gentlemen:

1.Subscription. This Subscription Agreement relates to an offering (the “Offering”) of up to ten units (the “Units”) for a purchase price of $17,500 per Unit, with each Unit consisting of (a) 500,000 shares of common stock, par value $.0001 per share (“Common Stock”), of Arista Power, Inc. (the “Company”) and (b) a warrant to purchase 17,500 shares of Common Stock with a purchase price of $0.50 per share (the “Warrant”).  The Units are being offered pursuant to one or more exemptions from registration under Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Each individual or entity that completes a Subscriber signature page hereto (each a “Subscriber” and collectively, the “Subscribers”), on the date hereof shall purchase the number of Units set forth on such Subscriber’s signature page hereto, on the terms and conditions set forth herein, and the Company hereby accepts each such subscription and, on the date hereof shall issue and sell to each such Subscriber such Units.  The Subscribers understand that the Company will rely on the Subscriber’s representations and warranties herein.  This Subscription Agreement shall become effective upon execution by the parties hereto.

2.Payment of Purchase Price.  Against delivery of the Shares, and in consideration of the other provisions hereof, each Subscriber shall pay to the Company the total purchase price set forth on such Subscriber’s signature page hereto by check made payable to “Arista Power, Inc.” or by wire transfer of immediately available funds to the Company at:

Citizen’s Bank

ABA Number:

Account Name: Arista Power, Inc.

Account Number:

FBO:  Add Subscriber’s Name

Promptly after the execution of this Agreement, the Company shall deliver to each Subscriber a stock certificate representing the number of shares of Common Stock comprising the Units set forth next to such Subscriber’s name.

3.Representations and Warranties of the Subscriber.  Each Subscriber represents and warrants as follows:

(a)The Subscriber has been given the opportunity to ask questions of, and receive answers from, the Company and the Company’s authorized representative(s) concerning the terms and conditions of the offering.

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(b)The Subscriber has such knowledge and experience in financial matters and investments that the Subscriber is capable of evaluating the merits and risks of the Subscriber’s investment in the Company and has obtained sufficient information relating to the Company and the Offering to enable the Subscriber to evaluate the merits and risks of such investment.

(c)The Subscriber is acquiring the Common Stock and Warrant for the Subscriber’s own account for investment purposes only and not for distribution or resale to others in violation of the Securities Act.  Subscriber is not an “underwriter” of any of the Company’s securities as that term is defined in Section 2(11) of the Securities Act, and Subscriber shall not take or cause to be taken any action that would cause Subscriber to be deemed an underwriter of the Company’s securities.

(d)Subscriber understands that the Units, Common Stock, the Warrant and the Common Stock underlying the Warrant, have not been registered under the Securities Act pursuant to the provisions of the securities or other laws of any applicable jurisdictions.  The Subscriber understands that the Company has made no representation that it will register any of the Units, Common Stock, the Warrants and the Common Stock underlying the Warrants sold hereunder.

(e)The Subscriber has reviewed or had the opportunity to review all public filings made by the Company with the Securities and Exchange Committee (“SEC”) through the SEC website at www.sec.gov.

(f)THE SUBSCRIBER RECOGNIZES THAT AN INVESTMENT IN THE COMPANY INVOLVES SUBSTANTIAL RISKS.  THE SUBSCRIBER UNDERSTANDS THAT INVESTMENT IN THE COMPANY’S SECURITIES IS SPECULATIVE AND THAT THE SUBSCRIBER COULD LOSE THE SUBSCRIBER’S ENTIRE INVESTMENT.  THE SUBSCRIBER REPRESENTS AND WARRANTS THAT SUBSCRIBER CAN SUSTAIN SUCH AN ENTIRE LOSS.

(g)The Subscriber’s overall commitment to investments that are not marketable is not disproportionate to the Subscriber’s net worth, and the Subscriber has no need for liquidity in the Subscriber’s investment in the Units, in that the Subscriber has other sources of income or funds to provide for the Subscriber’s current needs and possible contingencies.

(h)Subscriber knows of no public solicitation or advertisement of any offer in connection with the proposed issuance and sale of the securities hereunder.  Subscriber is not purchasing the Units as a result of any advertisement, article, notice or other communication regarding the Company or the Units published in any newspaper, magazine, or similar media or broadcast over television or radio or the Internet or presented at any seminar or through any other general solicitation or general advertisement and acknowledges that the Subscriber had a pre-existing business or personal relationship with an officer or director or authorized representative of the Company.

(i)If an individual, the Subscriber is a United States citizen whose principal residence is as set forth on the signature page hereto.

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(j)If a corporation, partnership, limited liability company, trust or other non-individual entity, the Subscriber is authorized and otherwise duly qualified to purchase and hold the Units, the Common Stock and the Warrant and has its principal office as set forth on the signature page hereto.  Further, such non-individual entity was not formed for the specific purpose of making an investment in the Company.

(k)With respect to the United States federal, state and foreign tax aspects of Subscriber investment, Subscriber is relying solely upon the advice of Subscriber’s own tax advisors, and/or upon Subscriber’s own knowledge with respect thereto. Subscriber has not relied, and will not rely upon, any information with respect to this offering other than the information contained herein and in the SEC Reports.

(l)The answers provided by the Subscriber to the questions contained in Section 5 below, as well as all other information that the Subscriber has provided to the Company, either directly or indirectly, concerning the Subscriber’s financial position and knowledge of financial and business matters, is correct and complete as of the date hereof and as of the date of delivery of this Subscription Agreement to the Company.

4.Representations and Warranties of the Company.  The Company represents and warrants to the Subscriber as follows:

(a)The Company is a corporation duly organized, validly existing and in good standing under the laws of New York;

(b)The Company has the requisite corporate power and authority to execute, deliver and carry out the transactions contemplated by this Agreement, and all other instruments, documents and agreements contemplated or required by the provisions of any of the such documents to be executed, delivered or carried out by the Company hereunder;

(c)The execution and delivery of this Agreement, the issuance of the Common Stock, the issuance of the Warrant, the issuance of the Common Stock underlying the Warrant, the execution and delivery of all other instruments, documents and agreements contemplated or required by the provisions hereof or thereof to be executed and delivered by the Company and the consummation by the Company of the transactions herein and therein contemplated to be consummated by the Company have each been duly authorized by all necessary corporate action on the part of the Company.  This Agreement is valid and binding against the Company and enforceable against the Company in accordance with their respective terms;

(d)The Common Stock to be issued in connection herewith and upon the exercise of the Warrant is duly and validly issued, fully paid, and non-assessable;

(e)As of their respective dates, to the Company’s knowledge, all forms, reports and documents filed by the Company with the SEC (the “SEC Reports”) (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act or the Securities Exchange Act of 1934, as the case may be, and the rules and regulations of the SEC thereunder applicable to such SEC Reports and (ii) did not, at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

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(f)Except as disclosed in the SEC Reports, there has been no change or development which would reasonably be expected to have a material adverse effect on the business, prospects or financial condition of the Company; and

(g)The Company has not provided any material non-public information regarding the Company to Subscriber.

5.Accredited Investor Status.  Please mark any box below corresponding to a paragraph in which the Subscriber is accurately described (A SUBSCRIBER MAY ONLY INVEST IN THE OFFERING IF HE OR SHE QUALIFIES UNDER ONE OF THE CATEGORIES SET FORTH BELOW):

¨           (a)           A director or executive officer of the Company;

¨           (b)           A natural person whose individual net worth, or joint net worth along with such person’s spouse, as of the date hereof exceeds $1,000,000;

¨           (c)           A natural person who had individual income in excess of $200,000 in each of the two most recent years or a joint income with such person’s spouse in excess of $300,000 in each of those years, and has a reasonable expectation of achieving the same income level in the current year;

¨           (d)           A bank (as defined in Section 3(a)(2) of the Securities Act), or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(13) of the Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of the Investment Company Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”), if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or if a self-directed plan, with investment decisions made solely by persons that are Accredited Investors;

¨           (e)           A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

¨           (f)           Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) promulgated under the Securities Act;

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¨           (g)           An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Common Stock, with total assets in excess of $5,000,000;

¨           (h)           An entity in which all of the owners are Accredited Investors under any of the above paragraphs of this Section 5.

5.1           Definitions.  As used above, the term “net worth” means the excess of total assets over total liabilities.  In computing net worth, the principal residence of the Subscriber must be valued at cost, including cost of improvements, or at recently appraised value by an institutional lender making a secured loan, net of encumbrances.  In determining “income,” the Subscriber should add to adjusted gross income any amounts attributable to tax exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depletion, contributions to an IRA or KEOGH retirement plan, alimony payments and any amount by which income from long term capital gains has been reduced in arriving at adjusted gross income.

6.Governing Law.  This Subscription Agreement shall be governed by and construed in accordance with the laws of the State of New York, excluding any conflicts or choice of law rules or principles that might refer to the governance or construction of this Subscription Agreement by the law of another jurisdiction.  If any provisions of this Subscription Agreement shall be unenforceable or invalid, the same shall not affect the remaining provisions of this Subscription Agreement and, to this end, the provisions of this Subscription Agreement are intended to be and shall be severable.  Any legal action or proceeding arising under this Subscription Agreement shall be brought in the federal courts of the State of New York located in New York County, and the appellate courts thereof, and the parties hereby consent to the personal jurisdiction and venue therein.

7.Legend. Any certificate representing Subscriber’s interest in the Company shall bear the following or a similar legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS  IN WHICH THE TRANSFEROR PROVIDES THE COMPANY WITH AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT NECESSSARY.

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8.Indemnification.  Subscriber hereby agrees to indemnify and hold harmless the Company and its affiliated persons and entities (other than Subscriber) from any and all damages, losses, costs, and expenses (including reasonable attorneys’ fees) which it may incur by reason of Subscriber’s failure to fulfill any of the terms and conditions of this purchase or by reason of any misrepresentation or breach of any of the warranties contained herein. In this regard, Subscriber agrees to hold the Company and its controlling persons harmless from all expenses, liabilities, and damages deriving from an assignment or disposition of any shares of our Common Stock subscribed for and/or purchased hereby in a manner which violates the Securities Act, or of any applicable state securities law or which may be suffered by the indemnified person by reason of any misrepresentation or breach of any warranty or agreement by Subscriber set forth herein.

9.Additional Information.  Each party agrees to furnish such additional information as the other party reasonably requests.

10.Entire Agreement.  This Subscription Agreement contains the entire agreement between the parties hereto and supersedes all prior and contemporaneous understandings and agreements of the parties whether oral or written, regarding the subject matter hereof.  The provisions of this Subscription Agreement may not be modified or waived except in writing and the representations, warranties and covenants contained herein shall survive the closing of the purchase of the Units by the Subscriber and any investigation at any time made by any person.

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COMPANY SIGNATURE PAGE

IN WITNESS WHEREOF, the Company has hereby executed this Subscription Agreement on __________, 2011.

ARISTA POWER, INC.

By:           _____________________________

Name:

Title:

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SIGNATURE PAGE FOR INDIVIDUAL SUBSCRIBERS

IN WITNESS WHEREOF, the Subscriber has hereby executed this Subscription Agreement on ______________, 2011.  When signing as attorney, executor, administrator or guardian, please give title as such. If tenant in common ownership, both tenants must sign (unless husband and wife).

Please Print Your Name Above	Please Sign Your Name Above
Please Print Your Address	Social Security Number
Please Print Name of Tenant in Common/	Signature of Tenant in Common/Joint Tenant
Joint Tenant (if applicable)	(if applicable)
Please Print Tenant in Common’s Address:	Social Security Number of Tenant in Common

Units

Number of shares of Common Stock

Number of shares of Common Stock underlying the Warrant

Total purchase price of Units

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SIGNATURE PAGE FOR CORPORATIONS, PARTNERSHIPS,

LIMITED LIABILITY COMPANIES AND TRUSTS

IN WITNESS WHEREOF, the Subscriber has hereby executed this Subscription Agreement on July ____, 2011.

Please Print Entity Name Above	Please Sign Your Name Above
Please Print Address:	Taxpayer Identification Number

Units

Number of shares of Common Stock

Number of shares of Common Stock underlying the Warrant

Total purchase price of Units

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EX-10.2

Exhibit 10.2

WARRANT TO PURCHASE COMMON STOCK

OF

ARISTA POWER, INC.

No. B- _________, 2011

THIS CERTIFIES THAT, ____________, or his permitted registered assigns (the “Holder”), is entitled, subject to the terms and conditions of this Warrant, at any time or from time to time after the issuance date of this Warrant (the “Effective Date”), and before 5:00 p.m. Eastern Time on the tenth anniversary of the Effective Date (the “Expiration Date”), to purchase from ARISTA POWER, INC., a New York  corporation (the “Company”), the vested portion of the Shares (as defined below) at a per-share price equal to the Purchase Price.  Both the number of shares of Common Stock purchasable upon exercise of this Warrant and the Purchase Price are subject to adjustment and change as provided herein.

1.CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have the following respective meanings:

1.1“Common Stock” shall mean the Common Stock of the Company and any other securities at any time receivable or issuable upon exercise of this Warrant.

1.2 “Purchase Price” shall mean a price of $0.50per share.

1.3“Registered Holder” shall mean any holder in whose name this Warrant is registered upon the books and records maintained by the Company.

1.4“Shares” shall mean ______________________ (________) shares of the Company’s Common Stock.

1.5“Warrant” as used herein shall include this Warrant and any warrant delivered in substitution or exchange therefor as provided herein.

2.EXERCISE OF WARRANT.

2.1Payment.  Subject to compliance with the terms and conditions of this Warrant, including without limitation Section 2.4, and applicable securities laws, this Warrant may be exercised, in whole or in part at any time or from time to time, on or before the Expiration Date by the delivery (including, without limitation, delivery by facsimile) of the form of Notice of Exercise attached hereto as Exhibit A (the “Notice of Exercise”), duly executed by the Holder, at the principal office of the Company, and as soon as practicable after such date, surrendering:

(a)this Warrant at the principal office of the Company, and

(b)payment, (i) in cash (by check) or by wire transfer, (ii) by cancellation by the Holder of indebtedness of the Company to the Holder; or (iii) by a combination of (i) and (ii), of an amount equal to the product obtained by multiplying the number of shares of Common Stock being purchased upon such exercise by the then effective Purchase Price (the “Exercise Amount”).

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2.2Stock Certificates; Fractional Shares.  As soon as practicable on or after the date of any exercise of this Warrant, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of whole shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share equal to such fraction of the current fair market value of one whole share of Common Stock as of such date of exercise as determined by the Company.  No fractional shares or scrip representing fractional shares shall be issued upon an exercise of this Warrant.

2.3Partial Exercise; Effective Date of Exercise.  In case of any partial exercise of this Warrant, the Company shall cancel this Warrant upon surrender hereof and shall execute and deliver a new Warrant of like tenor and date for the balance of the shares of Common Stock purchasable hereunder. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of delivery of a Notice of Exercise (provided that surrender of this Warrant and payment of the Exercise Amount occur as provided above). The person entitled to receive the shares of Common Stock issuable upon exercise of this Warrant shall be treated for all purposes as the holder of record of such shares as of the close of business on the date the Holder is deemed to have exercised this Warrant.

2.4Vesting and Exercisability.  This Warrant shall vest in full on the second anniversary of the Effective Date.

3.VALID ISSUANCE; TAXES.  All shares of Common Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and non-assessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof.  The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Common Stock in any name other than that of the Registered Holder of this Warrant.

4.ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.  The number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property receivable or issuable upon exercise of this Warrant) and the Purchase Price are subject to adjustment upon occurrence of the following events:

4.1Adjustment for Stock Splits, Stock Subdivisions or Combinations of Shares. The Purchase Price of this Warrant shall be proportionally decreased and the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased to reflect any stock split or subdivision of shares of Common Stock.  The Purchase Price of this Warrant shall be proportionally increased and the number of shares of Common Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall be proportionally decreased to reflect any combination or reverse split of shares of Common Stock.

4.2Adjustment for Dividends or Distributions of Stock or Other Securities or Property. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution with respect to Common Stock (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) payable in (a) securities of the Company or (b) assets (excluding cash dividends), then, in each such case, the Holder on exercise of this Warrant at any time after the consummation, effective date or record date of such dividend or other distribution, shall receive, in addition to the shares of Common Stock (or such other stock or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Company to which the Holder would have been entitled upon such date if the Holder had exercised this Warrant on the date hereof and had thereafter, during the period from the Effective Date to and including the date of such exercise, retained such shares and all such additional securities or other assets distributed with respect to such shares as aforesaid during such period giving effect to all adjustments called for by this Section 4.

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4.3Reclassification.  If the Company, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change, and the Purchase Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 4. No adjustment shall be made pursuant to this Section 4.3 upon any conversion or redemption of Common Stock that is the subject of Section 4.5.

4.4Adjustment for Capital Reorganization, Merger or Consolidation.  In case of any capital reorganization of the capital stock of the Company (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all the assets of the Company (any such transaction a “Sale of the Company”) then, and in each such case, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Amount then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 4.  The foregoing provisions of this Section 4.4 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per-share consideration payable to the Holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.

5.CERTIFICATE AS TO ADJUSTMENTS.  In each case of any adjustment in the Purchase Price, or number or type of shares issuable upon exercise of this Warrant, the Chief Financial Officer or Controller of the Company shall compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based, including a statement of the adjusted Purchase Price.  The Company shall promptly send (by either first class mail, postage prepaid or overnight delivery) a copy of each such certificate to the Holder.

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6.LOSS OR MUTILATION.  Upon receipt of evidence reasonably satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilated Warrant.

7.RESERVATION OF COMMON STOCK.  The Company hereby covenants that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of shares of Common Stock or other shares of capital stock of the Company as are from time to time issuable upon exercise of this Warrant and, from time to time, will take all steps necessary to amend its Certificate of Incorporation to provide sufficient reserves of shares of Common Stock issuable upon exercise of this Warrant.  All such shares shall be duly authorized, and when issued upon such exercise, shall be validly issued, fully paid and non-assessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights, except encumbrances or restrictions arising under federal or state securities laws. Issuance of this Warrant shall constitute full authority to the Company’s officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the exercise of this Warrant.

8.TRANSFER AND EXCHANGE.  Subject to the terms and conditions of this Warrant, this Warrant and all rights hereunder may be transferred to any Registered Holder’s parent, subsidiary or affiliate, or, if the Registered Holder is a partnership, to any partner of such Registered Holder, in whole or in part, on the books of the Company maintained for such purpose at the principal office of the Company, by the Registered Holder hereof in person, or by duly authorized attorney, upon surrender of this Warrant properly endorsed.  Upon any permitted partial transfer, the Company will issue and deliver to the Registered Holder a new Warrant or Warrants with respect to the shares of Common Stock not so transferred. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that, when this Warrant shall have been so endorsed, the person in possession of this Warrant may be treated by the Company, and all other persons dealing with this Warrant, as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, any notice to the contrary notwithstanding.

9.COMPLIANCE WITH SECURITIES LAWS.  By acceptance of this Warrant, the Holder hereby represents, warrants and covenants that any shares of stock purchased upon exercise of this Warrant shall be acquired for investment only and not with a view to, or for sale in connection with, any distribution thereof; that the Holder has had such opportunity as the Holder has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Holder to evaluate the merits and risks of its investment in the Company; that the Holder is able to bear the economic risk of holding such shares as may be acquired pursuant to the exercise of this Warrant for an indefinite period; that the Holder understands that the shares of stock acquired pursuant to the exercise of this Warrant will not be registered under the Securities Act (unless otherwise required pursuant to exercise by the Holder of the registration rights, if any, granted to the Registered Holder) and will be “restricted securities” within the meaning of Rule 144 and that the exemption from registration under Rule 144 will not be available for at least six (6) months from the date of exercise of this Warrant, and even then will not be available unless a public market then exists for the stock, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 are complied with; and that all stock certificates representing shares of stock issued to the Holder upon exercise of this Warrant or upon conversion of such shares may have affixed thereto a legend substantially in the following form:

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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

10.NO RIGHTS OR LIABILITIES AS SHAREHOLDERS.  This Warrant shall not entitle the Holder to any voting rights or other rights as a shareholder of the Company. In the absence of affirmative action by the Holder to purchase Common Stock by exercise of this Warrant or Common Stock upon conversion thereof, no provisions of this Warrant, and no enumeration herein of the rights or privileges of the Holder hereof shall cause any holder of this Warrant  to be a shareholder of the Company for any purpose.

11.NOTICES.  Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Warrant shall be in writing and shall be conclusively deemed to have been duly given (a) when hand-delivered to the other party; (b) when received when sent by facsimile at the address and number set forth below; (c) three business days after deposit in the U.S. mail with first class or certified mail receipt requested postage prepaid and addressed to the other party as set forth below; or (d) the next business day after deposit with a national overnight delivery service, postage prepaid, addressed to the parties as set forth below with next-business-day delivery guaranteed, provided that the sending party receives a confirmation of delivery from the delivery service provider.

To the Company:	To the Holder:
Arista Power, Inc.
1999 Mt. Read Boulevard
Rochester, NY  14615
Phone
Fax
Attention: Chief Executive Officer

Each person making a communication hereunder by facsimile shall promptly confirm by telephone to the person to whom such communication was addressed each communication made by it by facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any such communication.  A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 11 by giving the other party written notice of the new address in the manner set forth above.

12.HEADINGS.  The headings in this Warrant are for purposes of convenience in reference only, and shall not be deemed to constitute a part hereof.

5

13.GOVERNING LAW.  This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to conflicts of law principles.  With respect to any matters that may be heard before a court of competent jurisdiction, the Holder and the Company consent to the jurisdiction and venue of the state and federal courts located in Monroe County, New York.

14.NO IMPAIRMENT.  The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Registered Holder of this Warrant against impairment.  Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon exercise of this Warrant.

15.SEVERABILITY.  If any term, provision, covenant or restriction of this Warrant is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Warrant shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

16.COUNTERPARTS.  For the convenience of the parties, any number of counterparts of this Warrant may be executed by the parties hereto and each such executed counterpart shall be, and shall be deemed to be, an original instrument.

17.SATURDAYS, SUNDAYS AND HOLIDAYS.  If the Expiration Date falls on a Saturday, Sunday or legal holiday, the Expiration Date shall automatically be extended until 5:00 p.m., Eastern Time, the next business day.

18.ENTIRE AGREEMENT.  This Warrant, together with all the exhibits attached hereto, contains the sole and entire agreement and understanding of the parties with respect to the entire subject matter of this Warrant, and any and all prior discussions, negotiations, commitments and understandings, whether oral or otherwise, related to the subject matter of this Warrant are hereby merged herein.

[Signature Page Follows]

6

IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the Effective Date.

	ARISTA POWER, INC.
By:	By:	/s/
		Name:
		Title:
Printed Name:

7

EXHIBIT A

NOTICE OF EXERCISE

(To be executed upon exercise of Warrant)

The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant Certificate for, and to purchase thereunder, the securities of Arista Power, Inc., a New York corporation, as provided for therein, and tenders herewith payment of the exercise price in full in the form of cash or check in same-day funds in the amount of $________________ for ____________ shares of such securities.

Please issue a certificate or certificates for such securities in the name of, and pay any cash for any fractional share to (please print name, address and social security/taxpayer identification number):

Name:

Address:

Social Security/ Taxpayer Identification Number

Signature:

Note:  The above signature should correspond exactly with the name on the first page of this Warrant Certificate or with the name of the assignee appearing in the assignment form below.

If said number of shares shall not be all the shares purchasable under the within Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher whole number of shares.

8

ASSIGNMENT

(To be executed only upon assignment of Warrant Certificate)

For value received, the undersigned hereby sells, assigns and transfers unto _________________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ____________________________ attorney, to transfer said Warrant Certificate on the books of the within-named Company with respect to the number of Shares set forth below, with full power of substitution in the premises:

Name(s) of Assignee(s) Address # of Shares

And if said number of Shares shall not be all the Shares subject to the Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the Shares subject to the Warrant Certificate.

Dated:

Signature:

Note:  The signature to the foregoing Assignment must correspond to the name as written upon the face of this security in every particular, without alteration or any change whatsoever.

9

EX-10.3

Exhibit 10.3

Lock-Up Agreement

July ___, 2011

Arista Power, Inc.

1999 Mt. Read Boulevard

Rochester, NY 14615

Re: Arista Power, Inc. – Lock-Up Agreement

Dear Sirs:

In connection with the establishment of the purchase of units (the “Units”) by me from Arista Power, Inc. (the “Company”) as of the date hereof, with such units consisting of common stock of the Company (the “Common Stock”) and warrants to purchase common stock of the Company (the “Warrants”), the undersigned agrees that, commencing on the date hereof (the “Effective Date”), and during the period specified below (the “Lock-Up Period”), subject to the provisions below, the undersigned will not, directly or indirectly, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any of the Units, any of shares of the Common Stock purchased via the Units or any of the Warrants purchased via the Units (collectively the “Undersigned’s Units, Shares and Warrants”), whether any such aforementioned transaction is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. 

The foregoing restriction is expressly agreed to preclude, without limitation, the undersigned from engaging in any hedging, swap or other arrangement or transaction which is designed to or which reasonably could be expected to lead to, result in or have the same effect of a sale, transfer or disposition of any of the Undersigned’s Units, Shares and Warrants even if such securities would be disposed of by someone other than the undersigned.  Such prohibited hedging or other transactions would include, without limitation, any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Undersigned’s Units, Shares and Warrants or with respect to any security that includes, relates to, or derives any significant part of its value from such securities.

The undersigned agrees not to publicly disclose during the Lock-Up Period the intention to make or enter into any such transaction regarding the Undersigned’s Units, Shares and Warrants described in the above paragraphs.

The Lock-Up Period will commence on the date hereof and continue until the one-year anniversary of the Effective Date. 

Notwithstanding the foregoing, the undersigned may transfer the Undersigned’s Units, Shares and Warrants (i) as a bona fide gift or gifts to a member of members of the immediate family of the undersigned, provided that the donee or donees thereof agree to be bound in writing by the restrictions set forth herein or (ii) to any trust for the direct or indirect benefit of the undersigned or members of the immediate family of the undersigned, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value.  For purposes of this Lock-Up Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. 

The undersigned represents and warrants that he now has, and, except as contemplated by clauses (i) and (ii) in the above paragraph, for the duration of this Lock-Up Agreement will have, good and marketable title to the Undersigned’s Units, Shares and Warrants, free and clear of all liens, encumbrances, and claims whatsoever. 

The undersigned also agrees and consents to the entry of stop transfer instructions during the Lock-Up Period with the Company’s transfer agent and registrar against the transfer of the Undersigned’s Units, Shares and Warrants except in compliance with the foregoing restrictions. The Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of Common Stock if such transfer would constitute a violation or breach of this Lock-Up Agreement.

The undersigned understands and agrees that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors, and assigns.

This Lock-Up Agreement may be executed in two counterparts, each of which shall be deemed an original but both of which shall be considered one and the same instrument.

Nothing in this Lock-Up Agreement shall affect the undersigned’s ability to purchase, sell or otherwise transfer shares of common stock of the Company or other equity of the Company not included the Units purchased as of the date hereof.

This Lock-Up Agreement will be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice of law or conflicting provision or rule (whether of the State of New York or any other jurisdiction) that would cause the laws of any jurisdiction other than the State of New York to be applied.  In furtherance of the foregoing, the internal laws of the State of New York will control the interpretation and construction of this Lock-Up Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.

		Very truly yours,
		Exact Name of Shareholder
		Signature of Shareholder
Agreed to and Acknowledged:
ARISTA POWER, INC.
By:
	Name:
	Title:

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer as required by Rule 13a-14 Or 15d-14 of the Securities Exchange Act of 1934,  as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002

I, William A. Schmitz, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of Arista Power, 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 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, 2011

/s/ William A. Schmitz                            

William A. Schmitz

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer as required by Rule 13a-14 Or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002

I, Molly Hedges, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of Arista Power, 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 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, 2011

/s/ Molly Hedges                                                  

Molly Hedges

Acting Chief 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

In connection with the Quarterly Report of Arista Power, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William A. Schmitz, as Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 to the best of my knowledge, that:

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

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 12, 2011

/s/ William A. Schmitz                             

William A. Schmitz

President and Chief Executive Officer

This Certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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

In connection with the Quarterly Report of Arista Power, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Molly Hedges, as Acting Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 to the best of my knowledge, that:

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

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: August 12, 2011

/s/ Molly Hedges                        

Molly Hedges

Acting Chief Financial Officer

This Certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended

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Balance Sheets Parenthetical (USD $) In Thousands, except Share data	Jun. 30, 2011	Dec. 31, 2010
Statement of Financial Position [Abstract]
Accounts Receivable (less allowance for doubtful accounts)	$ 0	$ 0
Preferred stock,par value	$ 0.0001	$ 0.0001
Preferred stock,shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock,par value	$ 0.0001	$ 0.0001
Common stock,shares authorized	500,000,000	500,000,000
Common stock,shares issued	179,360,831	145,125,887
Common stock,shares outstanding	179,360,831	145,125,887

XML



Statements of Operations (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Sales	$ 193,729		$ 199,979
Cost of Goods Sold	420,630		649,213
Gross Loss	(226,901)		(449,234)
Operating Expenses/(Income):
Research and development expenses	258,683	878,222	618,905	1,445,640
Selling, general and administrative expenses	500,242	7,540,960	1,608,797	8,221,149
Gain arising from debt extinguishment	0	0	(1,000,000)	0
Total expenses	758,925	8,419,182	1,227,702	9,666,789
Loss from operations	(985,826)	(8,419,182)	(1,676,936)	(9,666,789)
Interest income/(expense)	39	(2,454)	(8,354)	(801)
Net loss before income taxes	(985,787)	(8,421,636)	(1,685,290)	(9,667,590)
Income taxes	0	0	0	0
Net loss	$ (985,787)	$ (8,421,636)	$ (1,685,290)	$ (9,667,590)
Net loss per common share - basic and diluted	$ (0.01)	$ (0.09)	$ (0.01)	$ (0.09)
Weighted average number of common shares outstanding - basic and diluted	176,989,768	93,074,515	165,655,203	104,266,181

XML



Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 10, 2011
Document and Entity Information [Abstract]
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Period End Date	Jun. 30, 2011
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Registrant Name	Arista Power, Inc.
Entity Central Index Key	0001424640
Entity Common Stock, Shares Outstanding		227,426,215
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Document Type	10-Q

XML



Stock Based Compensation

6 Months Ended

Jun. 30, 2011

Share-based Compensation [Abstract]

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Note 6 – Stock Based Compensation

The Company has established the 2008 Equity Incentive Plan, which is a shareholder-approved plan that permits the granting of stock options and restricted stock to employees, directors and consultants. The 2008 Equity Incentive Plan originally provided for the issuance of up to 8,000,000 shares of common stock of which 1,000,000 shares are available for grant as Incentive Stock Options. The exercise price for options awarded is no less than 100% of the fair market value of the common stock on the day of grant. The options generally vest either immediately on the date of grant or 1 to 3 years from the date of grant. On December 30, 2009, the Board of Directors approved an amendment to increase the number of shares available for award under the plan from 8,000,000 to 16,000,000, and this amendment was approved by the Company’s shareholders at its Annual Meeting on April 28, 2010.

Management has valued the options at their date of grant utilizing the Black Scholes option pricing model. Prior to the fourth quarter of 2009, there was not a public market for the Company shares. Accordingly, the fair value of the underlying shares was determined based on recent transactions by the Company to sell shares to third parties and other factors determined by management to be relevant to the valuation of such shares. Beginning in the fourth quarter of 2009, the quoted price for the Company’s shares on the OTCBB was used to value the underlying shares. Expected volatility is based upon a weighted average historical volatility of peer companies operating in a similar industry. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options depending on the date of the grant and expected life of the options. The expected life of options used was based on the contractual life of the option granted. The Company determined the expected dividend rate based on the assumption and expectation that earnings generated from operations are not expected to be adequate to allow for the payment of dividends in the near future. The following weighted-average assumptions were utilized in the fair value calculations for options granted:

	Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010
Expected dividend yield		0	%		0	%
Expected stock price volatility		97-98	%		86	%
Risk-free interest rate		3.91-4.20	%		1.14-4.06	%
Expected life of options	3.0-9.9 Years			1.5-10 Years

The following table summarizes the status of the Company’s aggregate stock options granted:

	Number of Shares Remaining Options			Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2011		5,910,000		$	.28
Options granted during 2011		1,208,000		$	.22
Options cancelled during 2011		( 405,000	)	$	.28
Outstanding at June 30, 2011		6,713,000		$	.27		8.50	$	0
Exercisable at June 30, 2011		4,297,000		$	.27		8.42	$	0

The weighted average fair value of options granted during six months ended June 30, 2011 was approximately $.22 ($.42 for the six months ended June 30, 2010). During the six months ended June 30, 2010, 1,583,333 options were granted, and no options vested or expired. There were no options exercised for the six months ending June 30, 2011 or 2010.

The following table summarizes the status of the Company’s restricted share awards:

Restricted Shares	Number of Restricted Shares		Weighted Average Fair Value at Grant Date
Outstanding at January 1, 2011		4,506,737	$	.14
Vested at June 30, 2011		1,119,388	$	.14

The aggregate expense associated with the restricted stock awards is $630,943, of which $104,192 was expensed in 2010 and $525,636 was expensed during the six months ended June 30, 2011. On March 30, 2011, the Compensation Committee of the Company’s Board of Directors approved a change in the vesting date for restricted stock held by certain employees from April 1, 2011 to August 1, 2011. On July 29, 2011, the Compensation Committee of the Company’s Board of Directors approved an amendment to change the vesting date of these restricted shares to March 1, 2012. A total of 1,119,388 shares vested on April 1, 2011, and the remaining 3,387,349 shares are scheduled to vest on March 1, 2012. The expense associated with the restricted stock grants has been recorded over the remaining requisite period through April 1, 2011 or March 1, 2012, respectively.

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Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 11- Subsequent Event

Subsequent to June 30, 2011, the Company issued 65,385 shares of common stock to the landlord in lieu of base rent payments. In July 2011, the Company sold 74 “units” of common stock, primarily to the Company’s officers and directors, for $1,295,000. In August, an additional 22 “units” were sold for $385,000.   Each “unit” consists of 500,000 shares of common stock and a warrant to purchase 17,500 shares of common stock for $0.50 per share.

XML



Going Concern

6 Months Ended

Jun. 30, 2011

Going Concern [Abstract]

Going Concern [Text Block]

Note 2 - Going Concern

The financial statements have been prepared assuming that the Company will continue as a going concern. The Company exited development stage during the quarter ended September 30, 2010 and had recognized minimal revenues prior to that date. Since its formation, the Company has incurred a cumulative net loss of ($17,951,138). The minimal sales volumes to date and recurring losses from operations raise substantial doubt about the Company’s ability to continue as a going concern. Continuation of the Company is dependent on achieving sufficiently profitable operations and obtaining additional financing.

From 2007 through 2010, the Company raised approximately $4.1 million through multiple private placement offerings at varying prices. The Company yielded $1.67 million from the exercise of 33.4 million stock options for the year ended December 31, 2009. The Company established a $1.0 million line of credit with First Niagara Bank on April 26, 2010. On March 17, 2011, the Company received written notice from the Guarantors of the loan agreement (two Company officers and one shareholder) that the Guarantors were required by First Niagara Bank to repay the $1.0 million principal balance of the Company’s line of credit. The Company has no liability to the Guarantors as a result of the repayment by the Guarantors of the line of credit. Other than accrued interest and applicable fees, which are being repaid, the Company has no liability to the Lender under the line of credit. As a result of this debt extinguishment, the Company recorded a $1.0 million non-cash gain during the three months ended March 31, 2011.

During March, May, July and August 2011, the Company raised $927,500, $245,000, $1,295,000 and $385,000 respectively, through private placement sales of “units” that included shares of commons stock and a warrant to purchase common stock. This working capital is not expected to be sufficient to fund operational growth, and the Company expects to need to raise additional capital. There can be no assurance that the Company will continue to be able to raise sufficient capital, at terms that are favorable to the Company or at all, to fund operations.

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Consulting Agreement

6 Months Ended

Jun. 30, 2011

Consulting Agreement [Abstract]

Consulting Agreement [Text Block]

Note 8 – Consulting Agreements

On May 24, 2010, the Company entered into an agreement with an individual to become a technical consultant, and to assist in further optimization of the Company’s ducted wind turbines. This individual is currently a professor of senior aircraft design and performance courses at the Clarkson University, in Potsdam, New York, the location of one of the Company’ s wind turbine test sites. Payment for services is on an hourly basis at an agreed upon rate for work performed for the Company. In conjunction with the agreement, the individual received 200,000 stock options, vesting over a one-year period. During the six months ended June 30, 2011, the Company expensed $6,746 relating to options awarded to the consultant.

On October 11, 2010, the Company entered into an agreement with an individual to become a technical consultant, and to assist further in the development of the Company’s ducted wind turbines. This individual is currently an associate professor of architectural engineering and an adjunct professor of mechanical and nuclear engineering at the Pennsylvania State University in University Park, Pennsylvania. Payment for services is on an hourly basis at an agreed upon rate for work performed for the Company. In conjunction with the agreement, the individual received 110,000 stock options vesting over a three-year period. The Company expensed $7,822 relating to these options for the six months ended June 30, 2011.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies Disclosure [Abstract]

Commitments Disclosure [Text Block]

Note 9 – Commitments and Contingencies

Employment Agreements

As of June 30, 2011, the Company has employment agreements in place with five members of senior management. The terms of the agreements are for three years, with the Company’s option to extend employment for a fourth year. Annual compensation required under the agreements includes base salary aggregating $872,000, as well as annual bonuses based upon achieving certain performance milestones. All of these agreements contain severance provisions in the event of termination of the employee without cause that require continued payment of the annual salary through the term of the agreement but for a minimum period of at least two years. The agreements expire at varying times over the period from November 14, 2012 through March 1, 2013.

Operating Lease

On August 20, 2009, the Company entered into a lease for office space in Geneseo, New York requiring a monthly rental payment of $1,400, which commenced on November 1, 2009 and expired October 31, 2011 with a two year renewal option. In June 2010, the Company relocated its headquarters from Geneseo, New York to Rochester, New York into a larger location. Inventory, warehousing, and assembly space at the Geneseo facility was neither large enough, nor flexible enough, to allow for continued growth, and therefore management determined that it was prudent to move to a location that could accommodate both manufacturing and assembly growth, as well as to house research and development activities and administrative office space. On January 27, 2011, the Company signed an agreement and mutual release with the landlord of the Geneseo facility, which provided for the issuance of 30,000 shares of the Company’s common stock as settlement for the early termination of the lease.

In October 2010, a lease was executed for the Rochester facility. The lease term is from August 2010 through July 2015. The first year of the lease term requires monthly base rent payments of $5,396, payable in cash or in the Company’s common stock. The base rent increases by 3% on August 1st of the each year of the lease. The Company also is required to pay its proportionate share of real estate taxes and common area maintenance costs for the Rochester facility.

Annual commitments by year under the Company’s lease agreements are as follows:

	Rental Commitment
2011 2012 2013 2014 2015	$65,561 $67,528 $69,554 $71,641 $42,513

Warranty

During the year ended December 31, 2010, and for the six months ended June 30, 2011, the Company entered into a number of sales orders for Power on Demand systems, wind turbine units and for solar installations. These sales orders required certain deposits of the agreed-upon purchase price upon acceptance of the sales order. The advance payments received as of June 30, 2011 amounted to $224,679 (the December 31, 2010 total was $254,738) and have been included in customer deposits. We expect to install the systems and units associated with these deposits during the next two quarters, as we obtain permits and zoning approvals from customer’s town officials, complete site assessments, and continue product evaluation. The sales orders included product warranties of varying periods, depending on the product sold, against defects in materials and workmanship. The Company provides for estimated cost of warranties at the time the revenue is recognized and has established a corresponding warranty reserve. Factors that affect the balance required in the warranty reserve are projected cost of repair and/or replacement, component life cycles, manufacturer’s warranty on parts and components, and limited historical data. These estimates are reviewed quarterly and are updated as new information becomes available. The impact of any change in warranty cost estimates will be taken into account when analyzing future warranty reserve requirements. As of June 30, 2011, the warranty reserve totals $95,308, and is reported in the accrued liabilities section of the balance sheet.

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Warrants

6 Months Ended

Jun. 30, 2011

Warrants and Rights Note Disclosure [Abstract]

Warrants [Text Block]

Note 7 – Warrants

Management has valued warrants at their date of issue utilizing the Black Scholes option pricing model. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the warrants depending on the date of the issue and their expected life. The expected life of warrants used was based on the term of the warrant. The Company determined the expected dividend rate based on the assumption and expectation that earnings generated from operations are not expected to be adequate to allow for the payment of dividends in the near future. The following weighted-average assumptions were utilized in the fair value calculations for warrants granted:

	Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010
Expected dividend yield		0	%		0	%
Expected stock price volatility		97-98	%		86	%
Risk-free interest rate		3.95-4.24	%		4.36	%
Expected life of warrants	8.8-9.9 years			9.8 years

The following table summarizes the status of the Company’s warrants granted:

	Number of Shares Remaining Warrants			Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2011		29,840,000	$	.26
Warrants granted during 2011		1,172,500	$		.50
Warrants expired/cancelled during 2011		0
Outstanding at June 30, 2011		31,012,500	$		.27		8.9	$	0
Exercisable at June 30, 2011		14,500,000	$		.25		8.8	$	0

The weighted average fair value of warrants issued during six months ended June 30, 2011 was $.50 ($.25 for the six months ended June 30, 2010). During the six months ended June 30, 2011, 7,250,000 warrants vested, none expired, were cancelled, or were exercised. During the six months ended June 30, 2010, no warrants had vested, nor were any expired or cancelled.

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Statement of Shareholders' Equity (USD $)	Common Stock	Additional Paid-in Capital	Retained Earnings	Total
Balance, at Dec. 31, 2010	$ 14,512	$ 15,474,996	$ (16,265,848)	$ (776,340)
Balance, (Shares) at Dec. 31, 2010	145,125,887	0	0	0
Issuance of common stock	2,650	924,850	0	927,500
Issuance of common stock (Shares)	26,500,000	0	0	0
Issuance of common stock for rent and services	58	119,140	0	119,198
Issuance of common stock for rent and services (shares)	584,785	0	0	0
Issuance of warrants with private placements	0	114,887	0	114,887
Stock option expense	0	867,397	0	867,397
Net loss	0	0	(699,503)	(699,503)
Balance, at Mar. 31, 2011	17,220	17,501,270	(16,965,351)	553,139
Balance, (Shares) at Mar. 31, 2011	172,210,672	0	0	0
Issuance of common stock	700	244,300	0	245,000
Issuance of common stock (Shares)	7,000,000	0	0	0
Issuance of common stock for rent and services	15	27,418	0	27,433
Issuance of common stock for rent and services (shares)	150,159	0	0	0
Issuance of warrants with private placements	0	41,160	0	41,160
Stock option expense	0	67,356	0	67,356
Net loss	0	0	(985,787)	(985,787)
Balance, at Jun. 30, 2011	$ 17,935	$ 17,881,504	$ (17,951,138)	$ (51,699)
Balance, (Shares) at Jun. 30, 2011	179,360,831	0	0	0

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Long-lived Assets

6 Months Ended

Jun. 30, 2011

Geographic Areas, Long-Lived Assets [Abstract]

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Note 3 – Long-lived Assets

The following table summarizes the Company’s long-lived assets as of

	June 30, 2011			December 31,  2010
Property and equipment
Equipment	$	145,320		$	140,444
Leasehold Improvements		1,950			1,950
Furniture and fixtures		38,950			40,785
Software		71,625			54,594
Product Tooling		49,946			49,034
Total property and equipment before accumulated depreciation		307,791			286,807
Less accumulated depreciation		(108,583	)		(65,018	)
Total property and equipment	$	199,208		$	221,789

Intangible assets
Patents	$	34,862		$	34,862
Trademark		4,525			4,525
Total intangible assets before accumulated amortization		39,387			39,387
Less accumulated amortization		(5,206	)		(4,050	)
Total intangible assets	$	34,181		$	35,337

During the six months ended June 30, 2011, the Company impaired assets totaling $17,453.

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Debt

6 Months Ended

Jun. 30, 2011

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 4 – Debt

In April 2010, the Company established a $1.0 million line of credit with First Niagara Bank to provide the Company with liquidity. The facility was secured by the guarantees of two officers of the Company and one shareholder of the Company. The line of credit interest rate was at prime rate, plus 0%, but at no time would the applicable interest rate be less than 3.25%.

The borrowings under the loan agreement were secured by limited guarantees provided by two of our officers, William Schmitz and Molly Hedges, and one of our shareholders, Michael Hughes. The guarantees were supported by cash collateral accounts maintained by the individuals at First Niagara Bank. Additionally, Gerald Brock, a former director of the Company, granted the guarantors the right to sell 20,000,000 of his shares of our common stock in the event they were required to pay under the guarantees. Mr. Brock pledged his 20,000,000 shares of the Company’s common stock owned by him as security for his obligations to the guarantors.

In connection with the guarantees, the Company issued to Mr. Brock and the guarantors warrants to purchase an aggregate of 29,000,000 shares of our common stock at $0.25 per share. The warrants have a term of 10 years, with a six-month incremental vesting schedule in tranches of 25% of the shares under each warrant from the date of issue. As of June 30, 2011, 14,500,000 of these warrants have vested.

On February 26, 2011, the Company received a notice of potential opportunity to cure default from First Niagara Bank, which included a demand payment for interest due of $10,976 as of February 23, 2011 under the Company’s loan agreement. The notice provided that if the events of default were not cured by March 4, 2011, First Niagara Bank, at its sole discretion, could accelerate or demand payment in full of the obligations and take all enforcement actions or otherwise implement remedies under the applicable loan agreements. The default was not cured by the Company by March 4, 2011. Pursuant to the loan agreement, the interest rate under the line of credit had increased by 6% to 9.25% as of the date of the notice. On March 12, 2011, we received a demand notice from First Niagara Bank, demanding payment for full indebtedness to the bank including line of credit principal and interest of $1,012,421, and credit card debt of $25,351 by no later than March 17, 2011. On March 17, 2011, the Company received written notification from the guarantors of the loan agreement that the guarantors were required by the lender, and did, on March 17, 2011, repay the $1.0 million principal balance of the Company’s working capital revolving line of credit with the Lender. The Company has no liability to the guarantors as a result of the repayment by the guarantors of the line of credit, and accordingly, the Company recorded a $1.0 million gain on the extinguishment of the line of credit debt during the three months ending March 31, 2011. Other than accrued interest and applicable fees, which are being repaid, the Company has no liability under the line of credit.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2011

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent Accounting Pronouncements [Text Block]

Note 12 - Recent Accounting Pronouncements

In April 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-17, “Revenue Recognition - Milestone Method (Topic 605): Milestone Method of Revenue Recognition - a consensus of the FASB Emerging Issues Task Force (“EITF”)”.  ASU No. 2010-17 is limited to research or development arrangements and requires that this ASU be met for an entity to apply the milestone method (record the milestone payment in its entirety in the period received) of recognizing revenue.  However, the FASB clarified that, even if the requirements in this ASU are met, entities would not be precluded from making an accounting policy election to apply another appropriate policy that results in the deferral of some portion of the arrangement consideration.  The guidance in this ASU will apply to milestones in both single-deliverable and multiple-deliverable arrangements involving research or development transactions.  ASU No. 2010-17 will be effective prospectively for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010.  Early adoption is permitted.  We are currently evaluating the impact that ASU No. 2010-17 will have on our financial statements.

In October 2009, the FASB issued ASU No. 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements - a consensus of the FASB EITF”.  ASU No. 2009-13 eliminates the residual method of accounting for revenue on undelivered products and instead requires companies to allocate revenue to each of the deliverable products based on their relative selling price.  In addition, this ASU expands the disclosure requirements surrounding multiple-deliverable arrangements.  ASU No. 2009-13 will be effective for revenue arrangements entered into for fiscal years beginning on or after June 15, 2010.  We are currently evaluating the impact that ASU No. 2009-13 will have on our financial statements.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2011

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 5 – Stockholders’ Equity

During the six months ended June 30, 2011, approximately 735,000 shares of our common stock, totaling approximately $147,000, were issued to several vendors in exchange for services which included 224,000 shares of our common stock issued to the Company’s landlord of its Rochester, New York headquarters for base rent payments and 30,000 shares of our common stock issued to the Company’s former landlord as a settlement in lieu of future rental payment.

During March 2011, the Company sold 53 “units” in a private placement that yielded $927,500, and in May 2011, the Company raised $245,000 with the sale of 14 “units”. In a July 2011 private placement, the Company sold 74 “units”, which yielded $1,295,000, and in August 2011 the Company sold an additional 22 “units” for $385,000. Each unit consisted of 500,000 shares of common stock, and a warrant to purchase 17,500 shares of common stock at $.50 per share. The warrants fully vest two years from the date of the unit purchase, and have a ten-year term.

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Statements of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Operating activities
Net loss	$ (1,685,290)	$ (9,667,590)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation expense	53,965	106,156
Stock-based compensation	934,753	1,136,827
Financing fees- issuance of warrants, non-cash	156,047	6,235,000
Stock issued for services and rent .	146,631	98,083
Extinguishment of line of credit debt	1,000,000	0
Changes in operating assets and liabilities:
(Increase)/decrease in prepaid expenses and other current assets	(116,286)	42,544
(Increase) in trade accounts receivable	(2,053)	0
Increase in inventory	(35,279)	(851,475)
(Decrease)/increase in customer deposits	(30,059)	159,907
(Decrease)/Increase in trade accounts payable and accrued liabilities	(43,001)	803,611
Net cash provided by/(used in) operating activities	(1,620,572)	(1,936,937)
Investing Activities
Acquisition of fixed assets	(30,228)	(75,566)
Net cash used in investing activities	(30,228)	(75,566)
Financing activities
Proceeds from issuance of common stock	1,172,500	1,000,000
Borrowings on line of credit, net of repayments	0	9,302
Net cash provided by financing activities	1,172,500	1,009,302
Increase (decrease) in cash	(478,300)	(1,003,201)
Cash, beginning of period	584,085	1,027,977
Cash, end of period	105,785	24,776
Supplemental Information:
Income Taxes Paid/(Tax credits received)	0	0
Interest Paid	$ 12,421	$ 2,454

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Description of Business and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

Note 1 – Description of Business and Summary of Significant Accounting Policies

Description of Business

Arista Power, Inc. (the “Company” or Arista Power ) was incorporated on March 30, 2001 in the State of New York as Future Energy Solutions, Inc. and in November 2008 changed its name to WindTamer Corporation. In May 2011, the Company changed its name to Arista Power, Inc. The name change more accurately reflects the broadening of the Company’s focus beyond the WindTamer® brand and entry into areas within the energy storage and power management industries. The Company is a developer, manufacturer, and supplier of energy storage systems, power management systems, and wind turbines, and a supplier of solar energy systems.

Basis of Preparation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information required by GAAP for complete annual financial statement presentation.

In the opinion of management, all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the results of operations have been included in the accompanying unaudited condensed financial statements. Operating results for the three and six-month periods ended June 30, 2011, are not necessarily indicative of the results to be expected for other interim periods or the full fiscal year. These financial statements should be read in conjunction with the financial statements and accompanying notes contained in the WindTamer Corporation Form 10-K for the fiscal year ended December 31, 2010.

Method of Accounting

The accompanying financial statements have been prepared in accordance with GAAP. Arista Power, Inc. maintains its books and prepares its financial statements on the accrual basis of accounting.

The Company operated as a development stage enterprise until June 30, 2010, as substantially all of its efforts were planning, raising capital, research and development, and developing markets for its products. Effective July 1, 2010, the company exited development stage, as it shifted its efforts toward product commercialization and sale. As a result, the financial statements of the Company are no longer prepared in accordance with the accounting and reporting principles prescribed by Accounting Standards Codification (ASC) 915, “Development Stage Entities”.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For financial statement presentation purposes, the Company considers all short-term, highly liquid investments with original maturities of three months or less to be cash and cash equivalents. The Company maintains its cash and cash equivalents in bank deposit accounts, which at times may exceed federally insured limits. The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions.

Inventory

Inventory consists primarily of parts and subassemblies for wind turbines, solar photovoltaic (“PV”) systems, and batteries, and is stated at the lower of cost or market value. The Company capitalizes applicable direct and indirect costs incurred in the Company’s manufacturing operations to bring its products to a sellable state. The inventory as of June 30, 2011 consisted of raw materials amounting to $384,420 and work-in-process amounting to $171,500. Inventory is reviewed quarterly to determine the need for an excess and obsolete inventory reserve. As of June 30, 2011, no such reserve was necessary.

Fixed Assets

Fixed assets are recorded at cost. Depreciation is on a straight line basis over the shorter of the estimated useful lives or the related lease for leasehold improvements. Leasehold improvements for space leased on a month-to-month basis are expensed when incurred. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Any gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.

Intangible Assets

Intangible assets consist of costs associated with the application and acquisition of the Company’s patents and trademarks. Patent application costs are capitalized and amortized over the estimated useful life of the patent, which generally approximates its legal life.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset, including its ultimate disposition. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. For the six months ended June 30, 2011, the Company impaired assets totaling $17,453. For the year ended December 31, 2010, the Company impaired leasehold improvements totaling $86,765 as a result of a moving its corporate headquarters from Geneseo, New York to a larger location in Rochester, New York.

Fair Value of Financial Instruments

The carrying amount of cash, accounts payable and accrued expenses are reasonable estimates of their fair value due to their short maturity.

Revenue Recognition

Revenue is recognized when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service or product has been provided to the customer; (3) the sale price to be paid by the customer is fixed or determinable; and (4) the collection of the sale price is reasonably assured. Amounts billed and/or collected prior to satisfying our revenue recognition policy are reflected as customer deposits.

Research and Development Costs

All costs related to research and development are expensed when incurred, unless these costs have an alternative future value to research and development, in which case they are capitalized. Research and development costs consist of expenses to enhance the WindTamer® wind turbine design, and costs associated with the development of the Company’s Power on Demand system, including an integral part of the Power on Demand system, the inverter, and a Mobile Renewable Power Station. Specifically, these costs consist of labor, materials, and consulting.

Warranty Costs

The Company’s standard warranty on each Power on Demand system, wind turbine, and solar system sold protects against defects in design, material, and workmanship under normal use for varying periods, based upon the product sold. Several warranties have specific additional terms and conditions. The Company provides for estimated cost of warranties at the time the revenue is recognized. Factors that affect the warranty reserve are projected cost of repair and/or replacement, component life cycles, manufacturer’s warranty on component parts, and limited historical data. These estimates are reviewed quarterly and are updated as new information becomes available. The impact of any change in estimates will be taken into account when analyzing future warranty reserve requirements.

Stock-Based Compensation

The Company accounts for stock option awards granted under the Company’s Equity Incentive Plan in accordance with ASC 718. Under ASC 718, compensation expense related to stock-based payments is recorded over the requisite service period based on the grant date fair value of the awards. Compensation previously recorded for unvested stock options that are forfeited is reversed upon forfeiture. The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock.

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 505-50. Accordingly, the measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant’s or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

Income Taxes

The Company accounts for income taxes using the asset and liability approach, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such assets and liabilities. This method utilizes enacted statutory tax rates in effect for the year in which the temporary differences are expected to reverse and gives immediate effect to changes in income tax rates upon enactment. Deferred assets are recognized, net of any valuation allowance, for temporary differences and net operating loss and tax credit carry forwards. Deferred income tax expense represents the change in net deferred assets and liability balances.

Basic and Diluted Loss Per Share

Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss year, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potentially issued common shares would be anti-dilutive.

As of June 30, 2011 there were 6,713,000 stock options, and 31,012,500 warrants outstanding that, upon exercise, could dilute future earnings.

Reclassifications

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

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 10 – Income Taxes

The Company filed its 2010 New York State corporate income tax return during March 2011, and anticipates a refund upon approval by state tax authorities in the amount of $233,634 for 2010, related to tax credits for being a Qualified Emerging Technology Company. These refunds will be recognized when received by the Company.

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Balance Sheets (USD $)	Jun. 30, 2011	Dec. 31, 2010
Current assets
Cash	$ 105,785	$ 584,085
Accounts Receivable(less allowance for doubtful accounts of $0 at June 30, 2011 and December 31, 2010)	15,313	13,260
Prepaid expenses and other current assets	246,795	130,509
Inventory	555,920	520,641
Total current assets	923,813	1,248,495
Intangible assets, net	34,181	35,337
Property and equipment, net	199,208	221,789
Total assets	1,157,202	1,505,621
Current liabilities
Accounts payable	540,486	731,263
Line of credit	0	1,000,000
Customer deposits	224,679	254,738
Accrued liabilities	443,736	295,960
Total current liabilities	1,208,901	2,281,961
Stockholders' equity
Preferred stock, 5,000,000 shares authorized, $0.0001 par value; none issued or outstanding at June 30, 2011 or December 31, 2010	0	0
Common stock, 500,000,000 shares authorized, $0.0001 par value; 179,360,831 and 145,125,887 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively	17,935	14,512
Additional paid-in capital	17,881,504	15,474,996
Deficit accumulated	(17,951,138)	(16,265,848)
Total stockholders' equity	(51,699)	(776,340)
Total liabilities and stockholders' equity	$ 1,157,202	$ 1,505,621