The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
During the three months ended March 31, 2017, the
Company issued 136,110 shares of common stock to its officers in satisfaction of $490,000 of accrued compensation at December 31,
2016.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
Notes to Unaudited Condensed Consolidated
Financial Statements
Note 1 – Organization and Description of Business
ClearSign Combustion Corporation (ClearSign or the Company)
designs and develops technologies for the purpose of improving key performance characteristics of combustion systems, including
emission and operational performance, energy efficiency and overall cost-effectiveness. The Company’s primary technologies
include its Duplex™ technology, which achieves very low emissions without the need of external flue gas recirculation, selective
catalytic reduction, or higher excess air operation, and its Electrodynamic Combustion Control or ECC technology, which introduces
a computer-controlled electric field into the combustion region that may better control gas-phase chemical reactions and improve
system performance and cost-effectiveness. The Company is headquartered in Seattle, Washington and was incorporated in the state
of Washington in 2008. On July 28, 2017, the Company incorporated a subsidiary, ClearSign Asia, Limited, in Hong Kong. As
of March 31, 2018, the subsidiary was still in the process of formation and had not yet commenced any business activities.
Liquidity
The Company’s technologies are currently in field development
and have generated nominal revenues from operations to date to meet operating expenses. In order to generate meaningful revenues,
the technologies must be fully developed, gain market recognition and acceptance, and develop a critical level of successful sales
and product installations. The Company has historically financed its operations primarily through issuances of equity securities,
including the $11.9 million in proceeds, net of offering costs, from the stock offering completed on February 27, 2018 as described
in Note 6. The Company has incurred losses since its inception totaling $52,289,000 and expects to experience operating losses
and negative cash flow for the foreseeable future. Management believes that the successful growth and operation of the Company’s
business is dependent upon its ability to obtain adequate sources of funding through co-development agreements, strategic partnering
agreements, or equity or debt financing to adequately support research and development efforts, protect intellectual property,
form relationships with strategic partners, and provide for working capital and general corporate purposes. There can be no assurance
that the Company will be successful in achieving its long-term plans as set forth above, or that such plans, if consummated, will
result in profitable operations or enable the Company to continue in the long-term as a going concern.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements include the accounts of Clearsign and its subsidiary and have been prepared in accordance with the rules and regulations
of the Securities and Exchange Commission for Form 10-Q. Accordingly, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. The condensed consolidated balance sheet at December 31, 2017 has been derived from the Company’s
audited consolidated financial statements.
In the opinion of management, these consolidated financial statements
reflect all normal recurring and other adjustments necessary for a fair presentation. These consolidated financial statements should
be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2017. Operating results for interim periods are not necessarily indicative of operating results for an entire
fiscal year or any other future periods.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition and Cost of Goods Sold
The Company recognizes revenue and related cost of goods sold
in accordance with FASB ASC 606
Revenue from Contracts with Customers
(ASC 606). Revenues and cost of goods sold are recognized
once the goods or services are delivered to the customer’s control and performance obligations are satisfied. Typically,
the Company’s contracts with customers have performance obligations regarding air emissions and operational performance
that are satisfied upon completion of service. Since this is the singular performance obligation and cannot be achieved until
the air emissions and operational performance have been successfully tested, revenue related to the contracts is recognized upon
project completion.
The Company’s contracts generally include progress payments
from the customer upon completion of defined milestones. As these payments are received they are offset against accumulated project
costs and recorded as either contract assets or contract liabilities. Upon completion of the performance obligations and acceptance
by the customer the projects can be recorded as revenue.
The Company's contracts with customers contain no variable considerations
or incentives or discounts that would cause revenue to be allocated or adjusted over time. Therefore, no separate methods of evaluating
the contracts other than consideration of the price at achievement of the performance objectives was used in satisfying the review
requirements of ASC 606.
Contract acquisition costs and practical expedients
For contracts that have a duration of less than one year, the
Company follows practical expedients provisions of ASC 606 and expenses those costs when incurred; for contracts with a life exceeding
one year, the Company records those costs when performance obligations related to the contract are completed. The Company generally
expenses sales commissions when earned and records those costs within general and administrative expenses.
Product Warranties
The Company warrants all installed products against defects
in materials and workmanship for a period specified in each contract by replacing failed parts. Accruals for product warranties
are based on historical warranty experience and current product performance trends, and are recorded at the time revenue is recognized
as a component of cost of goods sold. The warranty liabilities are reduced by material and labor costs used to replace parts over
the warranty period in the periods in which the costs are incurred. The Company periodically assesses the adequacy of its recorded
warranty liabilities and adjusts the amounts as necessary, and such adjustments could be material in the future if estimates differ
significantly from actual warranty expense. The warranty liabilities are included in accrued liabilities in the consolidated balance
sheets.
Cash and Cash Equivalents
Highly liquid investments purchased with an original maturity
of three months or less are considered cash equivalents. Cash is maintained with a commercial bank where accounts are generally
guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company’s deposits may at times exceed this limit.
The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk on cash and
cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount. An
allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management’s
judgment, deserve current recognition in estimating bad debts. The determination of the collectability of amounts due from customer
accounts requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined
based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a
review of historical collection experience, current aging status of the customer accounts, and the financial condition of the Company’s
customers. Based on a review of these factors, the Company may establish or adjust the allowance for specific customers and the
accounts receivable portfolio as a whole. There was no allowance for doubtful accounts at March 31, 2018.
Fixed Assets
Fixed assets are recorded at cost. Leases are recorded
in accordance with FASB ASC 842
Leases
. For those leases with a term greater than one year, the Company recognizes on the
balance sheet at the time of lease inception or modification a right-of-use asset and a lease liability, initially measured at
the present value of the lease payments. Lease costs are recognized in the income statement over the lease term on a straight-line
basis. Operating leases with a term of 1 year or less are recognized on a straight line basis over the term. Depreciation is computed
using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated
over the life of the lease or their useful life, whichever is shorter. All other fixed assets are depreciated over two to four
years. Maintenance and repairs are expensed as incurred.
Patents and Trademarks
Patents and trademarks are recorded at cost. Amortization is
computed using the straight-line method over the estimated useful lives of the assets once they are awarded.
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted
cash flows expected to result from the use and eventual disposition of the assets. In that event, a loss is recognized based on
the amount by which the carrying amount exceeds the fair value of the long-lived assets. Fair value is determined based on the
present value of estimated expected cash flows using a discount rate commensurate with the risks involved, quoted market prices,
or appraised values depending upon the nature of the assets. Loss on long-lived assets to be disposed of is determined in a similar
manner, except that fair values are reduced for the cost of disposal.
Fair Value of Financial Instruments
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities
measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the
inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. The three levels of inputs used to establish fair value
are the following:
|
·
|
Level 1 – Quoted prices in active markets for identical assets or liabilities,
|
|
·
|
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar
assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the assets or liabilities; and
|
|
·
|
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair
value of the assets or liabilities.
|
The Company's financial instruments primarily consist of cash
and cash equivalents, accounts payable and accrued expenses. As of the balance sheet dates, the estimated fair values of the financial
instruments were not materially different from their carrying values as presented on the balance sheets. This is primarily attributable
to the short term maturities of these instruments.
As described in Note 3, the Company has recorded lease liabilities
for the estimated present value of the lease payments under its lease agreements. The Company determined the interest rate based
on an estimated incremental borrowing rate. The lease liabilities are classified within Level 3. The Company did not identify any
other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value.
Research and Development
The cost of research and development is expensed as incurred.
Research and development costs consist of salaries, benefits, share based compensation, consulting fees, rent, utilities, depreciation,
and consumables.
Income Taxes
The Company accounts for income taxes using an asset and liability
approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax
benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire
before the Company is able to realize their benefits, or that future deductibility is uncertain. Tax benefits from an uncertain
tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a
position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate
resolution.
Stock-Based Compensation
The costs of all employee stock options, as well as other equity-based
compensation arrangements, are reflected in the consolidated financial statements based on the estimated fair value of the awards
on the grant date. That cost is recognized over the period during which an employee is required to provide service in exchange
for the award. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received
or the fair value of equity instruments issued, whichever is more reliably measured.
Net Loss per Common Share
Basic loss per share is computed by dividing loss available
to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of
stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included
because their effect would be anti-dilutive. At March 31, 2018 and 2017, there were 3,465,168 and 3,713,994 potentially dilutive
shares outstanding, respectively.
Recently Adopted Standards
In May, 2017 the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09
Scope of Modification Accounting,
clarifies Topic 718, Compensation
– Stock Compensation, which requires a company to apply modification accounting
to changes in the terms or conditions of a share-based payment award unless all of the following criteria are met:
(1)
the fair value of the modified award is the same as the fair value of the original award immediately before the
modification. The ASU indicates that if the modification does not affect any of the inputs to the valuation
technique used to value the award, the entity is not required to estimate the value immediately before and after the
modification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award
immediately before the modification; and (3) the classification of the modified award as an equity instrument or a liability
instrument is the same as the classification of the original award immediately before the modification. The ASU is
effective for all entities for fiscal years beginning after December 15, 2017, including interim periods within those years.
The Company currently does not have any modifications to existing stock compensation agreements and will be able to calculate
the impact of the ASU once modifications arise.
Management does not believe that any other recently issued,
but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s consolidated
financial statement presentation or disclosures.
Reclassifications
Certain items in prior period financial statements have been
reclassified to conform to current period financial statements.
Concentration of Credit Risk
The Company encounters a certain amount of risk as a result
of a concentration of revenue from a few significant customers. Credit is extended to customers based on an evaluation of their
financial condition. In limited instances, the Company may require an upfront deposit. The Company performs ongoing credit evaluations
of its customers and records an allowance for potential bad debts based on available information.
The Company had revenue from a major California oil producer
for enclosed ground flares that accounted for 68% of revenue for the three months ended March 31, 2018, and 100% of revenue for
the three months ended March 31, 2017. Another major California oil producer accounted for 24% of revenue for the three months
ended March 31, 2018. The Company had an accounts receivable balance from a major California oil producer for enclosed ground flares
that accounted for 63% of accounts receivable and another major California oil producer for OTSG project that accounted for 37%
of accounts receivable at March 31, 2018.
Note 3 – Fixed Assets
Fixed assets are summarized as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
|
|
Machinery and equipment
|
|
$
|
802,000
|
|
|
$
|
801,000
|
|
Office furniture and equipment
|
|
|
168,000
|
|
|
|
167,000
|
|
Leasehold improvements
|
|
|
147,000
|
|
|
|
147,000
|
|
Right of use asset-operating leases
|
|
|
518,000
|
|
|
|
518,000
|
|
Accumulated depreciation and amortization
|
|
|
(1,194,000
|
)
|
|
|
(1,135,000
|
)
|
|
|
|
441,000
|
|
|
|
498,000
|
|
Construction in progress
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
441,000
|
|
|
$
|
498,000
|
|
The Company has a triple net operating lease for office and
laboratory space in Seattle, Washington through March 2020 with rent of $12,000 per month plus triple net operating costs. The
Company also has a triple net operating lease for office space in Tulsa, Oklahoma through August 2019 with monthly rent of $2,000
per month plus triple net operating costs. Both leases include lessee renewal options for three years at the then prevailing market
rate.
Lease costs for the three months ended March 31, 2018 and 2017
and other quantitative disclosures are as follows:
|
|
For the three months ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Lease cost:
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
53,000
|
|
|
$
|
55,000
|
|
Short-term lease cost
|
|
|
-
|
|
|
|
-
|
|
Total lease cost
|
|
$
|
53,000
|
|
|
$
|
55,000
|
|
|
|
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
|
|
|
|
$
|
43,000
|
|
|
|
|
|
|
|
|
|
|
For operating lease:
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term (in years)
|
|
|
|
|
|
|
1.94
|
|
Weighted average discount rate
|
|
|
|
|
|
|
5.00
|
%
|
Minimum future payments under the Company’s leases at
March 31, 2018 and their application to the corresponding lease liabilities are as follows:
|
|
Discounted lease
liability payments
|
|
|
Payments due
under lease
agreements
|
|
2018
|
|
$
|
120,000
|
|
|
$
|
130,000
|
|
2019
|
|
|
158,000
|
|
|
|
164,000
|
|
2020
|
|
|
37,000
|
|
|
|
37,000
|
|
Total
|
|
$
|
315,000
|
|
|
$
|
331,000
|
|
Note 4 – Patents and Other Intangible Assets
Patents and other intangible assets are summarized as follows
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(unaudited)
|
|
|
|
|
Patents
|
|
|
|
|
|
|
|
|
Patents pending
|
|
$
|
1,234,000
|
|
|
$
|
1,167,000
|
|
Issued patents
|
|
|
966,000
|
|
|
|
930,000
|
|
|
|
|
2,200,000
|
|
|
|
2,097,000
|
|
Trademarks
|
|
|
|
|
|
|
|
|
Trademarks pending
|
|
|
44,000
|
|
|
|
41,000
|
|
Registered trademarks
|
|
|
23,000
|
|
|
|
23,000
|
|
|
|
|
67,000
|
|
|
|
64,000
|
|
Other
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
|
2,275,000
|
|
|
|
2,169,000
|
|
Accumulated amortization
|
|
|
(372,000
|
)
|
|
|
(313,000
|
)
|
|
|
$
|
1,903,000
|
|
|
$
|
1,856,000
|
|
Future amortization expense associated with issued patents and
registered trademarks as of March 31, 2018 is estimated as follows:
2018
|
|
$
|
177,000
|
|
2019
|
|
|
215,000
|
|
2020
|
|
|
129,000
|
|
2021
|
|
|
54,000
|
|
2022
|
|
|
23,000
|
|
Thereafter
|
|
|
19,000
|
|
|
|
$
|
617,000
|
|
Note 5 – Sales, Billings, and
Costs on Uncompleted Contracts
In the quarter ended March 31, 2018, the
Company completed
a multi-flare contract with a third party contractor to supply its Duplex
technology to a major California oil producer to retrofit its enclosed wellhead ground flares. This contract was valued
at approximately $900,000 and included certain performance obligations related to emission levels. As such, each flare retrofit
was considered a separate transaction where revenues were recognized upon delivery of the unit and satisfaction of the performance
obligation. In 2017, revenue totaling $540,000 was recognized with the completion of the contractual obligations. The remaining
units with a contract value totaling $360,000 were completed and revenue was recognized during the three months ended March 31,
2018. The Company also recognized revenue of $128,000 upon completion of a once through steam generator (OTSG) project and revenue
of $42,000 from a small project in the quarter ended March 31, 2018. At March 31, 2018, costs to date of $57,000 exceeded
billings to date of $18,000 and are reflected on the balance sheet as contract assets. To date, all of the company’s sales
have been Duplex products sold in the United States.
Note 6 – 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 February 2018, the Company completed an underwritten public
offering of shares of common stock at a sales price of $2.25 per share (the Stock Offering) wherby 5,750,000 shares of common stock
were issued. Gross proceeds from the Stock Offering totaled $12.9 million and net cash proceeds approximated $11.9 million.
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 March 31, 2018, the number of shares of common stock reserved for issuance under the Plan totaled 1,662,780.
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. As a result, the number of shares reserved for issuance under the Plan at April 1, 2018 totaled 2,238,030
shares.
Outstanding stock option grants at March 31, 2018 and December
31, 2017 totaled 969,384 shares and 993,860 shares, respectively, with the right to purchase 769,233 shares and 754,989 shares
being vested and exercisable at March 31, 2018 and December 31, 2017, respectively. The recognized compensation expense associated
with these grants for the three months ended March 31, 2018 and 2017 totaled $50,000 and $143,000, respectively. At March 31, 2018
and April 1, 2018, the number of shares reserved under the Plan but unissued totaled 216,372 and 791,622, respectively. At March
31, 2018, there was $329,000 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 2.3 years.
There were no stock options granted during the three months
ended March 31, 2018.
Consultant Stock Plan
The Company has a 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 March 31, 2018 totaled 142,434 with 96,684 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. In
August 2017, the Company granted 10,000 shares of common stock under the Consultant Stock Plan to a consultant for services from
June 2017 to May 2018 and subject to completion of service each quarter. The fair value of the stock at the time of grant was $3.50
per share for a total value of $35,000 which the Company will recognize in general and administrative expense on a pro-rated quarterly
basis. The Consultant Plan expense for the three months ended March 31, 2018 and 2017 was $9,000 and $12,000, respectively.
Warrants
The Company has the following warrants outstanding at March
31, 2018:
|
|
|
Total Outstanding Warrants
|
|
Exercise Price
|
|
|
Warrants
|
|
|
Wtd. Avg.
Exercise
Price
|
|
|
Remaining
Life
(in years)
|
|
$
|
1.80
|
|
|
|
80,000
|
|
|
$
|
1.80
|
|
|
|
2.88
|
|
$
|
4.00
|
|
|
|
2,395,471
|
|
|
$
|
4.00
|
|
|
|
0.82
|
|
$
|
10.00
|
|
|
|
20,313
|
|
|
$
|
10.00
|
|
|
|
0.93
|
|
|
|
|
|
|
2,495,784
|
|
|
$
|
3.98
|
|
|
|
|
|
Note 7 – Commitments
The Company and its Chief Executive Officer, Stephen E. Pirnat
entered into an employment agreement on February 3, 2015 that was amended on October 30, 2017(the Agreement) which terminates on
December 31, 2018, unless earlier terminated. Compensation under the Agreement includes an annual salary of $350,000, a grant of
300,000 stock options that vested in 2016 and 2017, an annual cash bonus that may equal up to 60% of his annual salary and equity
bonuses based on performance standards established by the Compensation Committee of the Board of Directors, medical and dental
benefits for Mr. Pirnat and his family, other employee benefits offered to employees generally and relocation expenses up to approximately
$100,000. The Agreement may be terminated by the Company without cause under certain circumstances, as defined in the Agreement,
whereby a severance payment would be due in the amount of compensation that would have been due had employment not been terminated
or one year of the current annual compensation, whichever is greater. In the event of a change in control, Mr. Pirnat would receive
one year’s compensation, and all previously granted stock options would vest in full.
The Company has a field test agreement with a customer to demonstrate
and test the Duplex technology in an OTSG used to facilitate a thermally enhanced oil recovery process. Under the terms of the
agreement, the Company has retrofitted an OTSG unit in order to achieve certain performance criteria. The agreement also includes
time-sensitive pricing, delivery and installation terms, if elected, that will apply to future purchases of this Duplex application
by this customer.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION CONTAINED IN THIS REPORT
This report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give
our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly
to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,”
“believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,”
“intends,” “plans,” “would,” “should,” “could,” “may,”
“will” or other similar expressions in this report. In particular, these include statements relating to future actions;
prospective products, applications, customers, or technologies; future performance or results of anticipated products; anticipated
expenses; and future financial results. These forward-looking statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that
could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited
to:
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our limited cash and our history of losses;
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our ability to successfully develop and implement our technology and achieve profitability;
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our limited operating history;
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emerging competition and rapidly advancing technology in our industry that may outpace our technology;
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significant changes to laws or regulations relating to environmental protection;
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customer demand for the products and services we develop;
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the impact of competitive or alternative products, technologies and pricing;
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our ability to manufacture any products we design;
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general economic conditions and events and the impact they may have on us and our potential customers;
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our ability to obtain adequate financing in the future;
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our ability to continue as a going concern;
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our success at managing the risks involved in the foregoing items; and
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other factors discussed in this report.
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Forward-looking statements may appear throughout
this report, including, without limitation, Item 2 “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” The forward-looking statements are based upon management’s beliefs and assumptions and are
made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included
in this report. You should not place undue reliance on these forward-looking statements.
Unless otherwise stated or the context otherwise
requires, the terms “ClearSign,” “we,” “us,” “our” and the “Company”
refer to ClearSign Combustion Corporation.