I would take that deal, then put it behind you and start on the next thing. Maybe it will be worth something some day.
However, move ahead and start work on your next thing. Don't delay--it is very easy to sit and stew.
Here is what works for me in serious times of stress.
Spend most of your energy working on your next deal.
And then, say, one hour per week, allow yourself to internally mope about this. I am quite serious. I call it "the hour of sniveling", and when that is done, you haven't necessarily solved a problem, but you have let those feelings express themselves, but then move forward.
(I admit this sounds very goofy, but I use this approach to positive effect.)
I would ask politely for 11 months, as that is what you feel you are due given the work you did - anything more is unreasonable. Then take what you are offered on the second round, which may be less, but should be more than 3.5 months. They want the release, you want a bit more for your efforts - there's bound to be a settlement somewhere in the middle.
These shares might be worth a lot in a few years time, or (more likely) they might be worth nothing, they are therefore not necessarily worth sacrificing lots of your time and money over, unless you are convinced that they will soon be worth millions. Remember also that even if you get these options, the board could still dilute them to virtually nothing very easily. They could easily make them worthless by fiat (by expanding the shares pool and assigning you no more) if they want to in future.
What's important for you is to move on with your life feeling you have made the best of a bad situation, rather than wasting energy on a potentially fruitless lawsuit or public spat, neither of which will do your career or character any good. You don't want to end up in Jarndyce v Jarndyce for the next few years and waste some of your life, only to find at the end you have some worthless bits of paper and lasting bitterness.
I agree with pretty much everybody in that you should ask for more. I would also work on those expense reports. You can try to have those paid out or use their total value to negotiate a better equity position.
To leave on good terms you might ask that the equity position allow you to claim 'advisor' status. Let them know you will continue to advocate for the company and are more than happy to answer their questions and handle the handover. You might also consider crafting an agreement whereby you receive a revenue share or additional equity for any business you generate for the company.
