Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 4 – 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.

In April and May 2012, the Company completed an initial public offering (IPO) whereby 3,450,000 shares of common stock were issued at $4.00 per share, which included the exercise of the overallotment allowance by the underwriter, MDB Capital Group LLC (MDB). Gross proceeds from the IPO totaled $13.8 million and net cash proceeds approximated $11.2 million. Expenses of the offering approximated $2.7 million, including underwriter fees of $1.2 million paid to MDB along with a warrant to purchase 345,000 shares of ClearSign’s common stock at $5.00 per share exercisable from April 2013 to April 2017 and valued at $128,000, qualified independent underwriter fees of $110,000, underwriter legal fees of $125,000, underwriter expenses of $35,000, and issuer legal fees of $822,000, which was paid in part through the issuance of 110,000 shares of the Company’s common stock to its legal counsel at a price of $4.00 per share.   

Equity Incentive Plan

The Company has an Equity Incentive Plan (the Plan) which provides for the granting of options to purchase shares of common stock, stock awards to purchase shares at no less than 85% of the value of the shares, and stock bonuses to officers, employees, board members, consultants, and advisors. 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, 2013, the number of shares reserved for issuance under the Plan totaled 989,559 shares. 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 January 2013, the Company granted 203,990 stock options under the Plan to certain employees. The stock options have an exercise price of $4.88 per share, the grant date fair value, a contractual life of 10 years, and vest over four years. The fair value of stock options granted in January 2013 estimated on the date of grant using the Black-Scholes option valuation model was $302,000. The recognized compensation expense associated with these grants for the three and nine months ended September 30, 2013 was $19,000 and $57,000, respectively.  The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options:

Expected life	6.25 years
Weighted average volatility	33%
Forfeiture rate	13%
Weighted average risk-free interest rate	1.29%
Expected dividend rate	-

In January 2013, the Company granted 30,000 shares of common stock from the Plan to its three independent directors in accordance with agreements for board service in 2013.  The fair value of the stock at the time of grant was $5.00 per share for a total value of $150,000 which the Company will recognize in general and administrative expense on a quarterly basis in 2013, including $37,000 and $112,000 for the three and nine months ended September 30, 2013, respectively.

Outstanding stock option grants at September 30, 2013 and December 31, 2012 totaled 563,365 and 359,375 with 305,636 and 242,188 being vested and exercisable at September 30, 2013 and December 31, 2012, respectively. Stock grants made to date through September 30, 2013 and December 31, 2012 totaled 175,799 shares and 145,799 shares, respectively.  Of these amounts, 48,000 and 60,000 at September 30, 2013 and December 31, 2012, respectively, are subject to declining repurchase rights by the Company at $0.0001 per share through September 30, 2016. The recognized compensation expense associated with these grants for the three and nine months ended September 30, 2013 and 2012 and for the period from inception (January 23, 2008) to September 30, 2013 totaled $35,000, $110,000, $20,000, $115,000, and $432,000, respectively. At September 30, 2013, the number of shares reserved under the Plan but unissued totaled 250,395.  At September 30, 2013, there was $393,000 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 2.5 years.

Consultant Stock Plan

On May 2, 2013, the shareholders approved the 2013 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 grants 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 the date of adoption of May 2, 2013 and September 30, 2013 totaled 75,000 and 75,113 shares, respectively. 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 11,250 shares from the Consultant Plan to a consultant for 2013 services. The fair value of the stock at the time of grant was $9.12 per share for a total value of $102,000 which the Company will recognize in general and administrative expense on a quarterly basis over the remainder of 2013. The Consultant Plan expense for the three and nine months ended September 30, 2013 was $34,000 and $68,000, respectively.

 

Warrants

The Company has the following warrants outstanding at September 30, 2013:

		Total Outstanding Warrants
Exercise Price		Warrants	Weighted Average Exercise Price		Life (in years)
$	1.80	80,000	$	1.80	7.39
$	2.20	118,959	$	2.20	2.61
$	5.00	345,000	$	5.00	3.57
		543,959	$	3.92

In August 2013, a warrant to purchase 17,409 shares of common stock at $2.20 per share was exercised whereby the Company received $39,000 in proceeds.