12. Stock-Based Compensation

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

On May 11, 2011, the board of directors of the Company adopted the Pioneer Power Solutions, Inc. 2011 Long-Term Incentive Plan (the “2011 Plan”) which was subsequently approved by stockholders of the Company on May 31, 2011. The 2011 Plan replaces and supersedes the 2009 Plan. The Company’s outside directors and employees, including the Company’s principal executive officer, principal financial officer and other named executive officers, and certain contractors are all eligible to participate in the 2011 Plan. The 2011 Plan allows for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other awards, which may be granted singly, in combination, or in tandem, and upon such terms as are determined by the Board or a committee of the Board that is designated to administer the Plan. Subject to certain adjustments, the maximum number of shares of the Company’s common stock that may be delivered pursuant to awards under the 2011 Plan is 700,000 shares. As of December 31, 2013, 261,400 stock options had been granted, consisting of 160,200 incentive stock options and 101,200 non-qualified stock options.

Expense for stock-based compensation recorded for the years ended December 31, 2013 and 2012 was approximately $0.2 million and $0.3 million, respectively. All of the stock-based compensation expense is included in selling, general and administrative expenses in the accompanying consolidated statements of earnings. As of December 31, 2013, the Company had total stock-based compensation expense remaining to be recognized of approximately $0.1 million.

The fair value of the stock options granted was measured using the Black-Scholes valuation model with the following assumptions:



	Year Ended December 31,
	2013	2012
Expected Volatility	41 - 43%	39 - 43%
Expected life in years	5.0 - 6.0	3.5 - 6.0
Risk-free interest rate	0.92 - 2.49%	0.70 - 1.34%
Dividend yield	0%	0%

A summary of stock option activity for the years ended December 31, 2013 and 2012, and changes during the years then ended is presented below:



	Stock	Weighted average	Weighted average remaining	Aggregate
	options	exercise price	contractual term	intrinsic value

Balance December 31, 2011	118,400	$ 15.07	7.0	$ -
Granted	50,000	4.22	7.9	309,500
Exercised	-	-	-	-
Forfeited	-	-	-	-
Balance December 31, 2012	168,400	$ 11.85	6.6	$ 309,500
Granted	93,000	6.10	9.3	390,600
Exercised	-	-	-	-
Forfeited	-	-	-	-
Outstanding as of December 31, 2013	261,400	$ 9.81	6.9	$ 700,100
Exercisable as of December 31, 2013	202,400	$ 11.10	6.4	$ 402,795

Intrinsic value is the difference between the market value of the stock at December 31, 2013 and the exercise price which is aggregated for all options outstanding and exercisable. A summary of the weighted-average grant-date fair value of options, total intrinsic value of options exercised, and cash receipts from options exercised is shown below (in thousands, except per share amounts):



	Year Ended December 31,
	2013	2012	2011

Weighted-average fair value of options granted (per share)	$ 2.48	$ 1.54	$ 5.20
Intrinsic value gain of options exercised	-	-	-
Cash receipts from exercise of options	-	-	-