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.

In August 2020, the Company completed an underwritten public offering of 2,587,500 shares of common stock at a price of $2.00 per share. Gross proceeds from the offering totaled approximately $5.2 million and net cash proceeds approximated $4.75 million.

In September 2020, the Company completed a private offering of 654,425 shares of common stock at a price of $2.00 per share to clirSPV LLC. Proceeds from the offering totaled approximately $1.3 million.

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 September 30, 2020, the number of shares of common stock reserved for issuance under the Plan totaled 4,008,939. 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 nine months ended September 30, 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 for 2019 in lieu of cash 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 September 30, 2020 and December 31, 2019 totaled 2,665,119 shares and 2,131,058 shares, respectively, with the right to purchase 2,321,558 shares and 1,461,073 shares being vested and exercisable at September 30, 2020 and December 31, 2019, respectively. The recognized compensation expense associated with stock option awards for the three and nine months ended September 30, 2020 and 2019 totaled $48,000 and $163,000, and $58,000 and $274,000 respectively. On September 30, 2020 the number of shares reserved under the Plan but unissued totaled 751,941. At September 30, 2020, there was $132,000 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 $1,812,000 at September 30, 2020.

The Company’s directors are compensated soley in stock option awards. In addition to being paid for their services as directors, individual directors are paid for committee membership, for services as a committee chair and for services as a lead director. 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. On May 18, 2020 the Company awarded from the Plan to certain directors stock options for the purchase of 79,500 shares of common stock as payment for services rendered to the Company in the second quarter of 2020. The stock options have an exercise price based on the grant date fair value, which was $0.54. On August 18, 2020 the Company awarded from the Plan to certain directors stock options for the purchase of 62,500 shares of common stock as payment for services rendered to the Company in the third quarter of 2020, The stock options have an exercise price based on the grant date fair value, which was $2.30. All of the options have a contractual life of 10 years. The recognized compensation expense associated with director stock option awards for the three and nine months ended September 30, 2020 and 2019 totaled $122,000 and $209,000, and $34,000 and $103,000 respectively. The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options:


2020 Director Awards

Expected life	10.00	years
Weighted average volatility	81	%
Forfeiture rate	0	%
Weighted average risk-free interest rate	0.67	%
Expected dividend rate	0	%

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 September 30, 2020 totaled 253,657 with 182,907 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 as to 2,500 shares in general and administrative expense. The contract was renewed and the consultant was granted an additional 10,000 shares for services 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 as to 2,500 shares in general and administrative expense. The Consultant Plan expense for the three and nine months ended September 30, 2020 and 2019 was $3,000 and $8,000 and $4,000 and $11,000, 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 nine months ending September 30, 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 and nine months ended September 30, 2020 and 2019 was $13,000 and $39,000 and $24,000 and $183,000, respectively. The remaining unrecognized compensation expense associated with these awards is $26,000.

Warrants

At September 30, 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 0.38 years. The intrinsic value of outstanding warrants was $37,000 at September 30, 2020.