NOTE 6 – STOCK OPTIONS

The following table summarizes stock option activity:

Effective July 8, 2016 the Company’s board of directors approved the Polar Power 2016 Omnibus Incentive Plan (the “2016 Plan”), authorizing the issuance of up to 1,754,385 shares of common stock as incentives to employees and consultants to the Company with awards limited to a maximum of 350,877 shares to any one participant in any calendar year.

During the six months ended June 30, 2018, the Company granted options to purchase an aggregate of 330,000 shares of the Company’s common stock to three of its executive officers, with exercise prices ranging from $5.09 to $5.60 per share, that expire ten years from the date of grant, and with one-third of the total options granted vesting on each of the first, second, and third anniversaries of the grant date. The fair value of each of the option award was estimated on the date of grant using the Black-Scholes option pricing model based on the following assumptions: (i) volatility rate of 57.71%, (ii) discount rate of 2.42%, (iii) zero expected dividend yield, and (iv) expected life of 6.5 years, which is the average of the term of the options and their vesting periods. The total fair value of these options at their grant dates was approximately $948,000.

During the six months ended June 30, 2018, the Company expensed total stock-based compensation related to the vested options of $128,383, and the remaining unamortized cost of the outstanding options at June 30, 2018 was approximately $910,000. This cost will be amortized on a straight-line basis over the weighted average remaining vesting period of 3 years. At June 30, 2018, the 360,000 outstanding stock options had an intrinsic value of approximately $298,000.