This is a conventional early-stage company stock ownership offer. The primary purpose of giving you an equity share is to give you, the employee, an incentive to make the company successful. Its secondary purpose is to save the company a bit of cash on salary costs.
By offering stock, they're hoping to attract employees who want to do what it takes to make the company enormously successful. So you need to look at the company's prospects. Do you have a sense of confidence in the founders? Do they have a good idea? Have they evaluated whether anybody will buy what they're inventing and making? Do they have the flexibility of mind to adapt if they need to? Is this group of founders and this company worth five years of your life?
If you don't think the company's shares will be worth a lot some day, don't work at this company.
They're pitching this to you as a tradeoff between stock and salary. In truth it is not. That's a mildly deceptive pitch designed to persuade you to accept a lower salary. This equity stake is not an investment, it is an incentive. Don't bother accounting for it as an investment.
The 17% reduction in cash salary ($12K to $10K) is aggressive but not unreasonable if this company is using investor money to pay you and the other employees. The longer their cash lasts, the better chance they have at success. You might be able to negotiate a bit more cash pay if you need it.
The four year vesting schedule with a one-year cliff is very common.
0.1% of the shares of the company is a reasonable offer for a skilled but inexperienced individual contributor if the company is already financed, still in its first year of operation, and not almost out of cash. If they aren't already financed, it's far too low.
These shares are most likely not liquid. That is, nobody can buy or sell them on the stock market. If this is in the USA, there's no way you can sell them to an individual unless that person is a so-called "qualified investor." (Hint: your uncle probably isn't. If he is he knows it.) In any case you'll need the company's permission to sell them, and they will not grant that permission unless the circumstances are truly extraordinary.
But if the company goes public you will be able to sell your shares on the stock market after a waiting period, usually six months. If the company is sold to another company you'll get paid by that other company. This can be a very, very, good deal. It's the whole point of startup equity ownership.
If the company raises another round of financing from investors after your shares are granted, your ownership will become diluted. Your fraction of ownership will go down. That's also expected. If the company is doing well the share price will go up even as your percentage ownership goes down. The executives / founders of the company will explain this to you in detail as it happens.
If this is a stock option, you'll receive the right to purchase a certain number of shares of the company's stock at a certain price, called the strike price. For example, suppose the company has ten million shares of stock outstanding, and they most recently sold six million of those shares to investors for a dollar each. In that case, your 0.1% grant would be ten thousand shares, and your strike price will be perhaps $1.20 per share.
You don't have to pay that money -- the strike price -- until you exercise your options, that is, buy your shares. Let's say you decide to leave the company after two years (half the four-year vesting period). That means you'll be have the right to buy 5,000 shares (half your shares) when you leave, and you'll have to come up with the $6,000.
Now, if the company goes public a year later and you can sell your 5,000 shares for $35 each, well, you figure it out. Ka-ching!
If the company fails you'll have an interesting souvenir -- a worthless stock certificate -- to tack on your home office wall.
Good luck! I've personally had some success with this, and I hope you do too.