Note 6 –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 Technologies 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, 2020, the number of shares of common stock reserved for issuance under the Plan totaled 4,005,339. The Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 15% 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.

During the three months ended March 31, 2020, the Company granted stock options for the purchase of an aggregate 444,161 shares of common stock to its employees from the Plan. These were awarded in lieu of cash for 2019 bonuses and the expense was recorded during the year ended December 31, 2019. The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options:


Expected life	5.00	years
Weighted average volatility	72	%
Forfeiture rate	15	%
Weighted average risk-free interest rate	1.63	%
Expected dividend rate	0	%

Outstanding stock option awards at March 31, 2020 and December 31, 2019 totaled 2,563,470 shares and 2,131,058 shares, respectively, with the right to purchase 2,147,348 shares and 1,461,073 shares being vested and exercisable at March 31, 2020 and December 31, 2019, respectively. The recognized compensation expense associated with stock option awards for the three months ended March 31, 2020 and 2019 totaled $80,000 and $126,000, respectively. On March 31, 2020 the number of shares reserved under the Plan but unissued totaled 849,990. At March 31, 2020, there was $239,000 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 1 year. The intrinsic value of outstanding stock options was $0 at March 31, 2020.

On April 1, 2020, the Company awarded from the Plan to certain directors stock options for the purchase of 94,500 shares of common stock as payment for services rendered to the Company in the first quarter of 2020. The stock options have an exercise price based on the grant date fair value, which was $0.72, with a contractual life of 10 years. Share-based compensation related to this grant of $53,000 was recognized in the three months ended March 31, 2020.

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, 2020 totaled 253,417 with 187,667 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 contracted services 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,which the Company recognized on a quarterly pro-rated basis for 2,500 shares in general and administrative expense. The contract was renewed and the consultant was granted an additional 10,000 shares for services to be performed from September 1, 2019 through August 31, 2020. The fair value of the stock at the time of grant was $1.03 per share for a total value of $10,000, which the Company is recognizing on a quarterly pro-rated basis for 2,500 shares in general and administrative expense. The Consultant Plan expense for the three months ended March 31, 2020 and 2019 was $2,000 and $3,000, respectively.

Inducement 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 options for the purchase of 600,000 shares of common stock to its President and Chief Executive Officer as an inducement 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 2 years. An option to purchase 258,618 shares of common stock was issued from the Company’s 2011 Equity Incentive Plan and is accounted for with the stock options described above. Non-qualified stock options covering the remaining 341,382 shares of common stock were issued from the Company’s reserve of authorized but unissued shares of common stock. The fair value of the non-qualified stock options estimated on the date of grant using the Black-Scholes option valuation model was $176,000. The recognized compensation expense associated with these awards for the three months ended March 31,2020 and 2019 was $13,000 and $59,000, respectively. The remaining unrecognized compensation expense associated with these awards is $52,000.

Warrants

At March 31, 2020, 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 0.88 years.