Stockholders' Equity

3 Months Ended

Mar. 31, 2019

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 6 – Stockholders’ Equity

Common Stock and Preferred Stock

The Company is authorized to issue 62,500,000 shares of common stock and 2,000,000 shares of preferred stock. Preferences, limitations, voting powers and relative rights of any preferred stock to be issued may be determined by the Company’s Board of Directors. The Company has not issued any shares of preferred stock.

Equity Incentive Plan

The Company has adopted and the Company’s shareholders have approved the ClearSign Combustion Corporation 2011 Equity Incentive Plan (the Plan) which permits the Company to grant to eligible participants, including officers, employees, directors, consultants and advisors, options to purchase shares of common stock, stock awards and stock bonuses. The Compensation Committee of the Board of Directors is authorized to administer the Plan and establish the grant terms, including the grant price, vesting period and exercise date. As of March 31, 2019, the number of shares of common stock reserved for issuance under the Plan totaled 2,180,367. The Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 10% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine.

In the three months ended March 31, 2019, the Company made awards of stock

options for the purchase of an aggregate 559,100 shares of common stock to its employees from the Plan. Of these awards, options covering 159,100 shares of common stock were awarded in lieu of cash bonuses for 2018 and the expense was recorded during the year ended December 31, 2018. The remaining 400,000 stock option awards have exercise prices at the grant date fair value ranging

from $1.21 to $2.25 per share, contractual lives of 10 years, and vest over 2 years. The fair value of the stock options estimated on the date of grant using the Black-Scholes option valuation model was $222,000. The recognized compensation expense associated with these awards for the three months ended March 31, 2019 was $74,000.

The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options:

Expected life	5.89 years
Weighted average volatility	71	%
Forfeiture rate	20	%
Weighted average risk-free interest rate	2.55	%
Expected dividend rate	0	%

Outstanding stock option awards at March 31, 2019 and December 31, 2018 totaled 1,436,540 shares and 880,277 shares, respectively, with the right to purchase 900,399 shares and 587,962 shares being vested and exercisable at March 31, 2019 and December 31, 2018, respectively. The recognized compensation expense associated with stock option awards for the three months ended March 31, 2019 and 2018 totaled $126,000 and $50,000, respectively. On March 31, 2019 the number of shares reserved under the Plan but unissued totaled 743,827. At March 31, 2019, there was $472,000 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 2.2 years.The intrinsic value of outstanding stock options was $0 at March 31, 2019.

Consultant Stock Plan

The Company has a Consultant Stock Plan (the Consultant Plan) which provides for the granting of shares of common stock to consultants who provide services related to capital raising, investor relations, and making a market in or promoting the Company’s securities. The Company’s officers, employees, and board members are not entitled to receive awards from the Consultant Plan. The Compensation Committee of the Board of Directors is authorized to administer the Consultant Plan and establish the grant terms. The number of shares reserved for issuance under the Consultant Plan on March 31, 2019 totaled 253,317 with 197,567 of those shares unissued.

The Consultant Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 1% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine.

The Company granted 10,000 shares of common stock to a consultant under the Consultant Plan for services performed and to be performed during the period from August 13, 2018 to August 31, 2019. The fair value of the stock at the time of grant was $1.44 per share for a total value of $14,000. The Consultant Plan expense for the three months ended March 31, 2019 and 2018 was $3,000 and $9,000, respectively.

Incentive Stock Options

Pursuant to the rules of The Nasdaq Stock Market, the Company has the ability to issue equity awards, including stock options as an inducement to an individual to accept employment with the Company. These awards need not be granted from a plan approved by the Company’s shareholders. During the three months ending March 31, 2019 the Company granted 600,000

incentive stock options as an inducement to its President and Chief Executive Officer to accept the Company’s offer of employment. (see Note 7) The stock options have exercise prices at the award date fair value ranging from

$1.16 to $2.25 per share, contractual lives of 10 years, and vest over

years. The fair value of the stock options estimated on the date of grant using the Black-Scholes option valuation model was $329,000. The recognized compensation expense associated with these awards for the three months ended March 31, 2019 was $110,000.

The remaining unrecognized compensation expense associated with these awards is $219,000. The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options:

Expected life	5.75 years
Weighted average volatility	71	%
Forfeiture rate	20	%
Weighted average risk-free interest rate	2.55	%
Expected dividend rate	0	%

Warrants

At March 31, 2019, warrants for the purchase of 80,000 shares of common stock at an exercise price of $1.80 per share were outstanding and had a remaining life of 1.88 years.

During the quarter ending March 31, 2019, warrants to purchase an aggregate 2,415,784 shares of common stock issued by the Company on March 5, 2014 and January 25, 2017 expired in accordance with their terms. The intrinsic value of the outstanding warrants was $0 at March 31, 2019.