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What changed in ClearSign Technologies Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ClearSign Technologies Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+171 added−167 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-31)

Top changes in ClearSign Technologies Corp's 2023 10-K

171 paragraphs added · 167 removed · 119 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

48 edited+17 added−9 removed99 unchanged
Biggest changeAccordingly, we seek to collaborate with strategic partners to the extent possible to sell our products and maximize the profitability of those sales. 9 ​ Table of Contents Our strengths include our technology, which has been developed to provide a standard set of “core” components that can be incorporated into any generic OEM burner body.
Biggest changeOur strengths include our technology, which has been developed to provide a standard set of “core” components that can be incorporated into any generic OEM burner body. These components enable unique performance that minimizes emissions and controls flame size. Our strengths also include the market opportunity potentially created by new and anticipated environmental emissions control regulations.
In December of 2020, the San Joaquin Valley region of California revised its regulations to require significant reductions in target NOx emissions from boilers, steam generators and process heaters. The greater Los Angeles area also revised its regulations in November of 2021.
In December of 2020, the San Joaquin Valley region of California revised its regulations to require significant reductions in target NOx emissions from boilers, steam generators and process heaters. And, in November of 2021, the greater Los Angeles area also revised its regulations.
The industries using our technology take a conservative approach to adopting new technology and place significant reliance on references from existing customers when selecting new equipment. A major focus of our current business development activities is to make early sales and build our reference list in both the process burner and boiler industries.
The industries using our technology take a conservative approach to adopting new technology and place significant reliance on references from existing customers when selecting new equipment. A major focus of our current business development activities is to make early sales and build our reference list in both the process burner and boiler burner industries.
Wellhead Enclosed Flares Based upon discussions with local regulators and the examination of regulatory reports, we believe that certain regions are targeting enclosed flare emissions for increased future regulation. California, for example, has already added new low NOx emissions regulations for flares. We have adapted the ClearSign Core technology to suit this application.
Wellhead Enclosed Flares Based upon discussions with local regulators and the examination of regulatory reports, we believe that certain regions are targeting enclosed flare emissions for increased future regulation. California, for example, has already added new low NOx emissions regulations for flares. We have adapted ClearSign Core technology to suit this application.
We expect that delays, interruptions or non-optimal scheduling of production related to interruptions in raw materials supplies would result in an increase to our costs.
We expect that delays, interruptions or non-optimal scheduling of production related to interruptions in raw materials supplies would result in an increase to our production costs.
We believe that heaters using the ClearSign Core will be able to remain in operation for an extended time before the need for maintenance as its flame structure and heat transfer profile minimize the possibility of flame impingement, reduce the likelihood of carbon deposits forming on the inside surfaces of the process tubes (coking) and reduce the likelihood of process tube failure all while operating with enhanced thermal efficiency. 4 ​ Table of Contents ​ Refinery and Petrochemical Heater Technology ​ ​ ​ Boiler Technology ​ ClearSign Core Plug & Play Burners Our ClearSign Core Plug & Play burners provide a simplified, pre-engineered and standardized direct burner replacement for traditional refinery process heaters.
We believe that heaters using the ClearSign Core will be able to remain in operation for an extended time before the need for maintenance as its flame structure and heat transfer profile minimize the possibility of flame impingement, reduce the likelihood of carbon deposits forming on the inside surfaces of the process tubes (coking) and reduce the likelihood of process tube failure all while operating with enhanced thermal efficiency. 4 ​ Table of Contents ​ Refinery and Petrochemical Heater Technology ​ ​ ​ Boiler Technology ​ ClearSign Core Process Burner Technology Our ClearSign Core burners provide a simplified, pre-engineered and standardized direct burner replacement for traditional refinery process heaters.
We can give no assurance that the COVID-19 pandemic, global supply-chain constraints or geopolitical conflicts will not adversely affect our ability or our subcontractors’ ability to procure raw materials and components necessary to build our products. ​ Research and Development Program The experience and industry contacts of our management team, board of directors, and consultants, along with potential customers in the petroleum, petrochemical, and industrial steam applications industries inform our research and development program.
We can give no assurance that global supply-chain constraints or geopolitical conflicts will not adversely affect our ability or our subcontractors’ ability to procure raw materials and components necessary to build our products. ​ Research and Development Program The experience and industry contacts of our management team, board of directors, and consultants, along with potential customers in the petroleum, petrochemical, and industrial steam applications industries inform our research and development program.
Worldwide, suppliers of burners and air pollution control equipment include but are not limited to companies such as Callidus, Eclipse and Maxon 8 ​ Table of Contents (all three are subsidiaries of Honeywell), John Zink Hamworthy Combustion (a subsidiary of Koch Industries and including Coen), General Electric, Haldor Topsøe, Hitachi, Linde, Zeeco, Fives Group, Cleaver Brooks, Power Flame (a subsidiary of Aztec Inc.), and others.
Worldwide, suppliers of burners and air pollution control equipment include but are not limited to companies such as Callidus, Eclipse and Maxon (all three are subsidiaries of Honeywell), John Zink Hamworthy Combustion (a subsidiary of Koch Industries and including Coen), General Electric, Haldor Topsøe, Hitachi, Linde, Zeeco, Fives Group, Cleaver Brooks, Power Flame (a subsidiary of Aztec Inc.), and others.
While use of this fundamental technology in applications intended for transportation markets is proven, the development and refinement of specific products, obtaining the certifications required for commercial deployment and establishing an efficient manufacturing source and channels to market will take some time, and we cannot assure that these goals will be achieved.
While use of this fundamental technology in applications intended for transportation markets is proven, the 2 ​ Table of Contents development and refinement of specific products, obtaining the certifications required for commercial deployment and establishing an efficient manufacturing source and channels to market will take some time, and we cannot assure that these goals will be achieved.
We believe that the simplicity of the actions required to retrofit refinery process heaters with the ClearSign Core Plug & Play, and the potential ability to install the ClearSign Core Plug & Play will potentially contribute to demand for our ClearSign Core Plug & Play burners. ​ ClearSign Core Boiler Burner Technology Our ClearSign Core technology for boiler burners is essentially the same as our technology for process burners but with different component details.
We believe that the simplicity of the actions required to retrofit refinery process heaters with the ClearSign Core technology, and the potential ability to install these burners will potentially contribute to demand for our ClearSign Core process burners. ​ ClearSign Core Boiler Burner Technology Our ClearSign Core technology for boiler burners is essentially the same as our technology for process burners, but with different component details.
In addition, we have a collaborative agreement with California Boiler to sell and produce both fire tube boiler burner and flare products. We are also pursuing various licensing types of arrangements for other market verticals and ClearSign Core applications. Pricing Strategy .
In addition, we have a collaborative agreement with California Boiler to sell and 10 ​ Table of Contents produce both fire tube boiler burner and flare products. We are also pursuing various licensing types of arrangements for other market verticals and ClearSign Core applications. Pricing Strategy .
Like our burner technology, our burner sensing 2 ​ Table of Contents technology is being developed to provide convenient replacement and retrofit solutions for existing equipment as well as for inclusion in newly built equipment. The secondary potential market for our sensing technology is outside of the typical combustion industry and includes transportation industries.
Like our burner technology, our burner sensing technology is being developed to provide convenient replacement and retrofit solutions for existing equipment as well as for inclusion in newly built equipment. The secondary potential market for our sensing technology is outside of the typical combustion industry and includes transportation industries.
Our business development strategy seeks to obtain recognition of our technology’s value while minimizing the challenges inherent in this market including the strengths of the other market participants. Major barriers faced by a new equipment manufacturer seeking to enter this market include: 1.
Our business development strategy seeks to obtain recognition of our technology’s value while minimizing the challenges inherent in this market including the strengths of the other market participants. 9 ​ Table of Contents Major barriers faced by a new equipment manufacturer seeking to enter this market include: 1.
As we seek to expand the markets into which we can sell our products, we plan to continue extending the range of ClearSign Core Plug & Play products to enable the replacement of other burner shapes and configurations, as well as for use in alternate process applications.
As we seek to expand the markets into which we can sell our products, we plan to continue extending the range of ClearSign Core process burners to enable the replacement of other burner shapes and configurations, as well as for use in alternate process applications.
Human Capital As of December 31, 2022, we had 16 full-time employees, and no part-time employees. Our employees are not covered by collective bargaining agreements, and we believe our relationship with our employees is good. Corporate History We were incorporated in the State of Washington on January 23, 2008.
Human Capital As of December 31, 2023, we had 15 full-time employees, and no part-time employees. Our employees are not covered by collective bargaining agreements, and we believe our relationship with our employees is good. Corporate History We were incorporated in the State of Washington on January 23, 2008.
Unlike the traditional technology, called “flame rods”, the ClearSign Eye sensing electrodes do not need to make contact with the flame. We are continuing to pursue “first adopter” installation opportunities for this patent pending sensing technology.
Unlike the traditional technology, called “flame rods”, the ClearSign Eye sensing electrodes do not need to make contact with the flame. We are continuing to pursue “first adopter” installation opportunities for this patented sensing technology.
Development of Our Technology To date, we have deployed our ClearSign Core technology through retrofits and replacements of existing burners and complete replacement units in the case of our Plug & Play and boiler burner products.
Development of Our Technology To date, we have deployed our ClearSign Core technology through retrofits and replacements of existing burners and complete replacement units in the case of our process burner and boiler burner products.
By developing our ClearSign Core technology into a replacement product, we have been able to standardize our designs and simplify supply-chain demands. In addition, by removing the need to individually engineer every application, we have enabled collaboration with other commercial equipment suppliers with the intent to incorporate our ClearSign Core technology into their standard product lines.
By developing our ClearSign Core technology into a replacement product, we have been able to standardize our designs and simplify supply-chain demands. In addition, we have enabled collaboration with other commercial equipment suppliers with the intent to incorporate our ClearSign Core technology into their standard product lines.
Details regarding the localized effect of environmental regulation in the United States are described in the section of this report titled “Our Industry.” In general, our immediate regional opportunities are in the West and Gulf Coasts of the United States and the regions of Northern China with high populations and cooler environments.
Details regarding the localized effect of environmental regulation in the United States are described in the section of this report titled “Our Industry.” In general, our immediate regional opportunities are in the West and Gulf Coasts of the United States and China.
We also believe that emissions regulations could require a reduction in pollutants such as NOx thereby potentially enhancing market demand for our technology upon implementation of any such regulations.
We believe that we offer major advances in emissions reductions and efficiency improvements. We also believe that emissions regulations could require a reduction in pollutants such as NOx thereby potentially enhancing market demand for our technology upon implementation of any such regulations.
As announced in June 2019, we already have an agreement in place with Zeeco, who is one of the world’s largest burner manufacturers, to globally manufacture ClearSign Core process burners. The selling and marketing of our process burners pursuant to this agreement, however, is contingent on the successful completion of a comprehensive product performance and validation test.
As announced in June 2019, we already have an agreement in place with Zeeco, who is one of the world’s largest burner manufacturers, to globally manufacture ClearSign Core process burners. The selling and marketing of our process burners pursuant to this agreement, however, is contingent upon terms still under negotiation.
Installing clean-up apparatus is very expensive especially for small to mid-sized heaters. We believe that the incumbent burner OEM product development approaches are, and will continue to be, incremental in nature, and are unlikely to pose a significant threat to the value provided by ClearSign Core technology in the foreseeable future.
We believe that the incumbent burner OEM product development approaches are, and will continue to be, incremental in nature, and are unlikely to pose a significant threat to the value provided by ClearSign Core technology in the foreseeable future.
ClearSign Core Technology Product Applications To date, we have deployed our ClearSign Core technology through the retrofit or replacement of existing burners. As noted above, retrofits often involve engineering around an existing burner architecture that can complicate the installation. This was the case with the old “Duplex” technology, which we no longer promote although we continue servicing installed units.
ClearSign Core Technology Product Applications To date, we have deployed our ClearSign Core technology through the retrofit or replacement of existing burners. As noted above, retrofits often involve engineering around an existing burner architecture that can complicate the installation.
As a result, we may create additional patent applications from an existing application, consolidate existing patent applications, abandon applications, or otherwise modify applications based upon our judgment in order to protect our intellectual property in a reasonably cost-efficient manner. 11 ​ Table of Contents Government Regulation Government regulation, particularly with respect to the environment, is likely to play an important role in shaping our product mix and offerings.
As a result, we may create additional patent applications from an 11 ​ Table of Contents existing application, consolidate existing patent applications, abandon applications, or otherwise modify applications based upon our judgment in order to protect our intellectual property in a reasonably cost-efficient manner.
In our target markets, boilers exist in two different industry-standard forms: water tube, which tend to be larger and in which the water or steam flows through a series of tubes that surround the space in which the flame forms; or fire tube in which the flame is formed inside a large tube that passes through the outer vessel holding the water.
In our target markets, boilers exist in two different industry-standard forms: water tube, which tend to be larger and in which the water or steam flows through a series of tubes that surround the space in which the flame forms; or fire tube in which the flame is formed inside a large tube that passes through the outer vessel holding the water. 7 ​ Table of Contents Our “Core” boiler burner technology has been developed to enable it to be used in a series of consistently designed sizes ranging from small fire tube boilers up to large industrial water tube boilers.
The ClearSign Core “Plug & Play” design provides a more simplified, pre-engineered and standardized direct burner replacement for traditional refinery process heaters that we believe can be mass produced and reduce the need for the customized engineering associated with typical retrofits. The ClearSign Core “Plug & Play” design (including the boiler burner version) is our most developed burner product.
Sites include four locations in California and one in Europe. The ClearSign Core design provides a more simplified, pre-engineered and standardized direct burner replacement for traditional refinery process heaters that we believe can be mass produced and reduce the need for the customized engineering associated with typical retrofits.
As a result, we expect that products containing ClearSign Core technology will sell at prices based on the value they offer rather than pursuant to standard competitive pricing that our competitors are forced to use in these mature markets. Sensing Products. We are currently seeking first adopters to install our flame sensors for field demonstration.
As a result, we expect that products containing ClearSign Core technology will sell at prices based on the value they offer rather than pursuant to standard competitive pricing that our competitors are forced to use in these mature markets. Suppliers and Subcontractors Due to our “asset light” model, we use subcontractors to source, warehouse and manufacture our products.
We believe that it is in the best interests of the Company and our shareholders to develop our business utilizing an “asset light” model.
We believe that it is in the best interests of the Company and our shareholders to develop our business utilizing an “asset light” model. Accordingly, we seek to collaborate with strategic partners to the extent possible to sell our products and maximize the profitability of those sales.
Our process burner technology is able to operate in high-intensity multiple burner industrial applications at sites that are required to meet low air pollutant emissions. Our boiler burner technology, which has been proven to achieve ground-breaking low air pollutant emissions, has been deployed in the US and is currently undergoing commercialization in China.
Our process burner technology is able to operate in high-intensity multiple burner industrial applications at sites that are required to meet low air pollutant emissions.
These boiler burners have achieved performance levels meeting the most stringent new California NOx regulations, in a typical commercial fire tube boiler produced by one of the industry’s largest suppliers in the U.S.
For fire tube products, we have developed our own patent protected burner replacement product that is similar in concept to our ClearSign Core burners for process heaters. These boiler burners have achieved performance levels meeting the most stringent new California NOx regulations, in a typical commercial fire tube boiler produced by one of the industry’s largest suppliers in the U.S.
We cannot predict when our patent applications may result in issued patents, if at all. Further, we may modify a patent application in the future as we develop additional information.
We maintain an active review process to monitor for new inventions across the globe that threaten our intellectual property protection. We cannot predict when our patent applications may result in issued patents, if at all. Further, we may modify a patent application in the future as we develop additional information.
Additionally, we demonstrated the operation of our small fire tube burner for Chinese officials, who subsequently certified it for sale in China. We plan to seek certification of larger fire tube and water tube boiler burners with our collaborative partner Jiangsu Shuang Liang Boiler Co. Ltd, which is a subsidiary of China's Shuang Liang Group Co.
We plan to seek certification of larger fire tube and water tube boiler burners with our collaborative partner Jiangsu Shuang Liang Boiler Co. Ltd, which is a subsidiary of China's Shuang Liang Group Co. Ltd and one of China's top 500 enterprises.
The interest we have received to date, however, suggests that this could potentially be a significant future business opportunity for ClearSign. 10 ​ Table of Contents Suppliers and Subcontractors Due to our “asset light” model, we use subcontractors to source, warehouse and manufacture our products.
The interest we have received to date, however, suggests that this could potentially be a significant future business opportunity for ClearSign. 8 ​ Table of Contents Our Target Markets Our ClearSign Core products compete in the combustion and emissions control markets.
In addition, we fulfilled a multi-burner order for a Fortune 500 infrastructure company that continues to consistently meet all performance requirements including compliance with the California site’s air quality permit. We also received a purchase order in 2022 from a California refinery for our ClearSign Core “Plug & Play” burners.
This international order was installed in 2021 and successfully placed it into full operation by the customer in January 2022. In addition, we fulfilled a multi-burner order for a Fortune 500 infrastructure company that continues to consistently meet all performance requirements including compliance with the California site’s air quality permit.
Under these revised regulations, it substantially reduced target emissions for process heaters, boilers and other similar equipment in accordance with a new and comprehensive Best Available Retrofit Control Technology (BARCT) analysis, which we believe will result in an increased demand for our services and products. 3 ​ Table of Contents In addition, new regulations are starting to be adopted with respect to the NOx emissions of enclosed ground flares, which historically have not been viewed as a source of NOx emissions or subject to the same level of regulation.
These revised regulations substantially reduced target emissions for process heaters, boilers and other similar equipment pursuant to a new and comprehensive Best Available Retrofit Control Technology (BARCT) analysis, which we believe will result in an increased demand for our services and products.
Process Heaters in the Oil Refining, Petrochemical and Gas Processing Industries To date, we have retrofitted five process heaters with our new ClearSign Core burners for refineries and fuel distributors some of which are owned by global supermajor companies and Fortune 500 companies. Sites include three locations in California and one in Europe.
We believe that this further development of our products has greatly increased our ability to collaborate with partners to extend our potential market reach and the resources we make available to our prospective customers. 6 ​ Table of Contents Process Heaters in the Oil Refining, Petrochemical and Gas Processing Industries To date, we have retrofitted six process heaters with our new ClearSign Core process burners for refineries and fuel distributors, some of which are owned by global supermajor companies and Fortune 500 companies.
As of December 31, 2022, we have 116 active patent grants and another 31 patents pending with Patent Offices in the United States, China, and various European countries. We maintain an active review process to monitor for new inventions across the globe that threaten our intellectual property protection.
Intellectual Property Protection We have generated inventions that we believe to be patentable subject matter and for which we have been seeking protection through patent application filings. As of December 31, 2023, we have 103 active patent grants and another 34 patents pending with Patent Offices in the United States, China, and various European countries.
The address of our corporate headquarters is 8023 East 63rd Place, Suite 101, Tulsa, OK and our telephone number is (918) 236-6461. Our website can be accessed at www.clearsign.com. The information contained on our website is not a part of this report. We currently operate in the United States, People’s Republic of China and Hong Kong. ​
The information contained on our website is not a part of this report. We currently operate in the United States, People’s Republic of China and Hong Kong. ​
Due to the “zero tolerance” SARS-COV-2 virus (“coronavirus” or “COVID-19”) regulations enacted by Chinese authorities during 2022, our commercialization efforts in China were significantly delayed. ​ We believe that combustion equipment utilizing ClearSign Core technology is more effective and cost-efficient than current industry-standard air pollution control technologies, and can reduce NOx down to the levels required by new stringent emission regulations.
Our boiler burner technology, which has been proven to achieve ground-breaking low air pollutant emissions, has been deployed in the US and is currently undergoing commercialization in China. ​ We believe that combustion equipment utilizing ClearSign Core technology is more effective and cost-efficient than current industry-standard air pollution control technologies, and can reduce nitrogen oxide (NOx) emissions down to the levels required by new stringent emission regulations.
It operates essentially in the same way as a standard burner, including fitting into a heater and integrating with existing control systems. We believe that this product is suitable for licensing as well as potential manufacturing arrangements with OEMs that have established manufacturing and distribution capabilities.
The ClearSign Core design (including the boiler burner version) is our most developed burner product. It operates essentially in the same way as a standard burner, including fitting into a heater and integrating with existing control systems.
This later phase of development is influenced by customer feedback, product and component standardization, design for manufacture and inventory management simplification, both with respect to the manufacture of and lifetime support for our products. Our technology and products for flame sensing applications have been proven at bench scale in our laboratory and at full scale in “first article” form.
This later phase of development is influenced by customer feedback, product and component standardization, design for manufacture and inventory management simplification, both with respect to the manufacture of and lifetime support for our products. We will continue to assess research and development opportunities to develop new product offerings where appropriate based on customer feedback and market trends.
In 2021, we received our first international purchase order for a ClearSign Core refining process heater from a global supermajor refining company. This marked the second order we received from a global supermajor company. This international order was installed in 2021 and successfully placed it into full operation by the customer in January 2022.
The selling and marketing of our process burners pursuant to this agreement, however, is contingent upon terms still under negotiation. In 2021, we received our first international purchase order for a ClearSign Core refining process heater from a global supermajor refining company. This marked the second order we received from a global supermajor company.
In addition, field implementation of our technologies requires permits from various local, state and federal agencies that regulate mechanical and electrical infrastructure and fire and air pollution control. We believe that we offer major advances in emissions reductions and efficiency improvements.
Government Regulation Government regulation, particularly with respect to the environment, is likely to play an important role in shaping our product mix and offerings. In addition, field implementation of our technologies requires permits from various local, state and federal agencies that regulate mechanical and electrical infrastructure and fire and air pollution control.
We believe our new standardized boiler burner range of products is also well suited to this application. Our Target Markets Our ClearSign Core products compete in the combustion and emissions control markets. These industries are highly competitive and currently dominated by companies that have comparatively more established products and substantially greater infrastructure, customer support networks, and financial resources.
These industries are highly competitive and currently dominated by companies that have comparatively more established products and substantially greater infrastructure, customer support networks, and financial resources.
These components enable unique performance that minimizes emissions and controls flame size. Our strengths also include the market opportunity potentially created by new and anticipated environmental emissions control regulations. These regulations will potentially require combustion performance that either exceeds the technology available from the incumbent equipment manufacturers or requires retrofitting existing equipment with a post-combustion clean up apparatus.
These regulations will potentially require combustion performance that either exceeds the technology available from the incumbent equipment manufacturers or requires retrofitting existing equipment with a post-combustion clean up apparatus. Installing clean-up apparatus is very expensive especially for small to mid-sized heaters.
To date, this purchase order is the largest received by ClearSign with the total order quantity amounting to twenty ClearSign Core “Plug & Play” burners.
To date, this purchase order is the largest received by ClearSign with the total order quantity amounting to twenty burners. Due to project delays, which were outside of our control, the process burner for this order has not yet been shipped to the jobsite.
At this time, we have a collaboration agreement in place with Zeeco Inc., which is one of the world’s largest combustion equipment manufacturers (“Zeeco”). The selling and marketing of our process burners pursuant to this agreement, however, is contingent on the successful completion of a comprehensive product performance and validation test.
We believe that this product is suitable for licensing as well as potential manufacturing arrangements with OEMs that have established manufacturing and distribution capabilities. At this time, we have a collaboration agreement in place with Zeeco Inc., one of the world’s largest combustion equipment manufacturers (“Zeeco”).
Ltd and one of China's top 500 enterprises. If further testing and certification is successful in China, our goal will be to sell the boiler burner technology into the very large Chinese 7 ​ Table of Contents market through our collaborative partnership. Water tube boilers are larger and more varied in their designs and verification projects are ongoing.
If further testing and certification is successful in China, our goal will be to sell the boiler burner technology into the very large Chinese market through our collaborative partnership. We anticipate making continued progress during 2024 both demonstrating and commercializing such equipment.
Removed
This is especially the case after the introduction of our Plug & Play technology in February 2017 and the simplified control and operation of this technology enabled by the inclusion of a new start up and flame initiation system in April 2019.
Added
On February 2, 2024, the South Coast Air Quality Management District of California (SCAQMD) as part of its periodic public participation process to enhance existing Best Available Control Technologies (BACT) determinations, assessed the process burner performance of our ClearSign Core ™ burner technology in certain currently operating customer installations.
Removed
Our replacement 6 ​ Table of Contents products have become more attractive since the 2017 introduction of our Plug & Play technology and the 2019 introduction of our start up and flame initiation system, which simplifies the control and operation of our products.
Added
As a result of this assessment, SCAQMD approved new BACT performance guidelines for both single and multi-burner configurations. BACT guidelines are periodically updated by SCAQMD to reflect advancements in technology and to ensure affected equipment utilize the most efficient technologies.
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We believe that this further development of our products has greatly increased our ability to collaborate with partners to extend our potential market reach and the resources we make available to our prospective customers.
Added
While the establishment of a new BACT benchmark does not specifically endorse ClearSign or our products, it does establish a limit in the industry that favors our products.
Removed
Our “Core” boiler burner technology has been developed to enable it to be used in a series of consistently designed sizes ranging from small fire tube boilers up to large industrial water tube boilers.
Added
According to SCAQMD, BACT is the most stringent 3 ​ Table of Contents emission limitation or control technique for a class and category of equipment that is “Achieved in Practice,” or “Contained in a State Implementation Plan” (SIP), or “Technologically Feasible.” In addition, new regulations are starting to be adopted with respect to the NOx emissions of enclosed ground flares, which historically have not been viewed as a source of NOx emissions or subject to the same level of regulation.
Removed
For fire tube products, we have developed our own patent protected burner replacement product that is similar in concept to our ClearSign Core Plug & Play device for process heaters.
Added
The process burner installed at this site was used by SCAQMD to set new BACT guidelines (see discussion above under the “Our Industry” section). We also received a purchase order in 2022 from a California refinery for our ClearSign Core process burners.
Removed
We anticipate making continued progress during 2023 both demonstrating and commercializing such equipment, although our progress may continue to be delayed by the effects of the COVID-19. Water tube boiler burners are particularly important in China because of the extensive network of government-run heating districts that provide heat in the northern regions of China.
Added
On May 18, 2023, we received an order for thirteen process burners from an existing California refinery customer. The order covered retrofitting two heaters, one of which we satisfied the contractual obligations for during the fourth quarter of 2023. The process burners installed in this heater passed the customer’s NOx emissions permit level, which was validated by a third-party inspector.
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In these areas of China, district heating is a large source of fossil fuel consumption, and reducing atmospheric pollution is a high priority of both the national and local governments.
Added
We expect to satisfy the contractual obligations for the second heater during 2024. In 2023, we received a purchase order from a heater manufacturer to install a modified ClearSign Core boiler burner into a horizontally fired process heater. The end customer was a chemical company located in Texas.
Removed
This product is currently in the commercialization phase. As discussed above, we also have another form of our sensing technology that we believe can indicate the potential flammability of a hydrocarbon gas and air mixture, which can have great and varied application in other industries such as transport.
Added
We believe this project was a significant achievement to us, specifically for its ability to demonstrate a new product offering; Moreover, we believe this order may be the first step towards more stringent changes to the Texas air emissions regulations, which we expect will turn into additional demand for our technology.
Removed
This product is in an earlier form and is currently undergoing validation and optimization of its intended role in this very different application. ​ Intellectual Property Protection We have generated inventions that we believe to be patentable subject matter and for which we have been seeking protection through patent application filings.
Added
Hydrogen Process Burners We are currently in the research and development phase to design a one-hundred percent 100% hydrogen capable ClearSign Core process burner.
Added
The goal of this project is to develop an ultra-low NOx hydrogen burner, which we believe will enable the adoption of hydrogen fuel for industrial heating, leading to reductions in the industrial emissions of both carbon dioxide and nitrogen oxides.
Added
Current burners and previous efforts to decarbonize industrial combustion processes through the utilization of hydrogen fuel are inhibited by the lack of industrial hydrogen burners capable of burning pure hydrogen while controlling emissions of NOx emissions to the most stringent levels required in the industry.
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We have received a series of grants from the Department of Energy (DOE) to fund the development of this technology. In total, the two DOE awards approximate $1.9 million with a target end date occurring in 2025. Refer to the financial statement “Note 11 – Government Assistance” for further details about these monies.
Added
In 2023, we received two purchase orders for our ClearSign Core boiler burner technology. Both boiler burner purchase orders were sold as a package with our partner California Boiler into the San Joaquin Valley Air Pollution Control District of California. The NOx emission permits for these boilers vary, with one boiler noted at 5ppm and the other at 2.5ppm.
Added
Third-party source testing has validated the 5ppm emission order, but due to customer on-site construction delays, the other order has yet to be installed. Additionally, we demonstrated the operation of our small fire tube burner for Chinese officials, who subsequently certified it for sale in China.
Added
We believe our new standardized boiler burner range of products is also well suited to this application. Sensing Products We are currently seeking first adopters to install our flame sensors for field demonstration.
Added
We are currently continuing to develop our flame sensing and hydrogen burner technology, which is discussed in detail under the “ClearSign Core Technology Product Applications” section above in addition to the expansion of our burner technologies into adjacent customer applications and market verticals.
Added
Effective June 14, 2023, we changed our domicile from the State of Washington to the State of Delaware by means of a plan of conversion. The address of our corporate headquarters is 8023 East 63rd Place, Suite 101, Tulsa, Oklahoma 74133 and our telephone number is (918) 236-6461. Our website can be accessed at www.clearsign.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

30 edited+15 added−19 removed85 unchanged
Biggest changeFurther, clirSPV may choose to sell or otherwise transfer a large number of shares of our common stock, which may put downward pressure on the trading price of shares of our common stock. ​ If we fail to comply with the continued minimum closing bid requirements of The Nasdaq Capital Market LLC (“Nasdaq”) by May 1, 2023 or other requirements for continued listing, including stockholder equity requirements, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
Biggest changeHoffman, could conflict with or differ from our interests or the interests of our other shareholders. Further, clirSPV may choose to sell or otherwise transfer a large number of shares of our common stock, which may put downward pressure on the trading price of shares of our common stock. ​ ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
Since that time, our common stock (CLIR: NASDAQ) has traded as low as $0.35 per share and as high as $11.75 per share based upon daily closing prices, and day-to-day trading has been volatile at times. This volatility may continue or increase in the future.
Since that time, our common stock (NASDAQ: CLIR) has traded as low as $0.35 per share and as high as $11.75 per share based upon daily closing prices, and day-to-day trading has been volatile at times. This volatility may continue or increase in the future.
While we have demonstrated our technology, this does not guarantee the industrial combustion market will accept it, nor can we control the rate at which such acceptance may be achieved. In certain of our market segments, there is a well-established channel with a limited number of companies engaged in reselling to our target customers.
While we have demonstrated our technology, this does not guarantee the industrial combustion market will accept it, nor can we control the rate at which such acceptance may be achieved. In certain market segments of ours, there is a well-established channel with a limited number of companies engaged in reselling to our target customers.
As a public company reporting to the Securities and Exchange Commission, we incur significant legal, accounting, investor relations, printing, board compensation, and other expenses that we did not incur as a private company. These costs totaled $1.3 million in 2022.
As a public company reporting to the Securities and Exchange Commission, we incur significant legal, accounting, investor relations, printing, board compensation, and other expenses that we did not incur as a private company. These costs totaled $1.3 million in 2023.
The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems, could result in business 14 ​ Table of Contents disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a material adverse effect on our business, financial condition or results of operations.
The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a material adverse effect on our business, financial condition or results of operations.
We cannot guarantee that any collaborative business research and development partnership we enter into will be successful. Collaborative arrangements involve risks that participating parties may disagree on business decisions and strategies. These disagreements could result in delays, additional costs, risks of litigation, and failure of the development of our technology within the combustion market segment.
We cannot guarantee that any collaborative business research and development partnership we enter into will be successful. Collaborative arrangements involve risks that participating parties may disagree on business decisions and strategies. These disagreements could result in delays, additional costs, risks of litigation, and failure of the development of our technology within the 14 ​ Table of Contents combustion market segment.
Accordingly, we cannot predict whether or when we will achieve profitability, and if achieved, the amount of such profit margins. 15 ​ Table of Contents Many of our potential competitors have greater resources, and it may be difficult to compete against them. The combustion industry is characterized by intense competition.
Accordingly, we cannot predict whether or when we will achieve profitability, and if achieved, the amount of such profit margins. Many of our potential competitors have greater resources, and it may be difficult to compete against them. The combustion industry is characterized by intense competition.
For example, the ultimate impact of the conflict in Ukraine on fuel prices, inflation, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect global economic growth, disrupting discretionary spending habits and generally decreasing demand for our products and services.
For example, the ultimate impact of the conflict in Ukraine, Israel and Strait of Hormuz on fuel prices, inflation, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect global economic growth, disrupting discretionary spending habits and generally decreasing demand for our products and services.
In addition, there are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Wall Street Reform and Protection Act that as we grow could increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our 19 ​ Table of Contents personnel, systems and resources.
In addition, there are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Wall Street Reform and Protection Act that as we grow could increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our personnel, systems and resources.
Additionally, because the Company’s contracts generally include progress payments from customers upon the completion of certain defined milestones, the revenue recognition of 17 ​ Table of Contents such project will depend on our subcontractor’s services in order for us to be able to achieve such milestones timely.
Additionally, because the Company’s contracts generally include progress payments from customers upon the completion of certain defined milestones, the revenue recognition of such project will depend on our subcontractor’s services in order for us to be able to achieve such milestones timely.
Because of these circumstances, it may be difficult for us to compete successfully in the combustion market. The loss of the services of our key management and personnel or the failure to attract additional key personnel could adversely affect our ability to operate our business.
Because of these circumstances, it may be difficult for us to compete successfully in the combustion market. 15 ​ Table of Contents The loss of the services of our key management and personnel or the failure to attract additional key personnel could adversely affect our ability to operate our business.
Our board of directors is empowered, without shareholder approval, 18 ​ Table of Contents to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights, and other rights, preferences and privileges for the preferred stock.
Our board of directors is empowered, without shareholder approval, to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights, and other rights, preferences and privileges for the preferred stock.
While these constraints have not had a material impact to-date, we can provide no assurance that our business will not be affected by in the future. ​ We are dependent on third-party suppliers.
While these constraints have not had a material impact to-date, we can provide no assurance that our business will not be affected by in the future. ​ 16 ​ Table of Contents We are dependent on third-party suppliers.
To the extent that environmental regulations in the U.S. and in other industrialized countries are modified in the future, or even relaxed, our technology may not produce the results required, or may even be unnecessary, to comply with the modified regulations.
To the extent that 13 ​ Table of Contents environmental regulations in the U.S. and in other industrialized countries are modified in the future, or even relaxed, our technology may not produce the results required, or may even be unnecessary, to comply with the modified regulations.
We are a company with a limited operating history and limited revenues to date. We have incurred losses since our inception and expect to experience operating losses and negative cash flows for the foreseeable future. As of December 31, 2022, we had a total accumulated deficit of approximately $88.5 million.
We are a company with a limited operating history and limited revenues to date. We have incurred losses since our inception and expect to experience operating losses and negative cash flows for the foreseeable future. As of December 31, 2023, we had a total accumulated deficit of approximately $93.7 million.
As a result of our anticipated growing operations in China, these risks could have a material adverse effect on our business, results of operations and financial condition.
As a result of our anticipated growing operations in China, these risks could have a material adverse effect on our business, results of operations and financial condition. Finally, the U.S.
Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies, such as the market reactions to internet marketed ‘short squeezes’ or the coronavirus outbreak. Such broad market fluctuations may adversely affect the market price of our securities.
Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies, such as the market reactions to internet marketed ‘short squeezes’. Such broad market fluctuations may adversely affect the market price of our securities. We have the right to issue shares of preferred stock.
The negative environmental impacts of industrial activity have given rise to significant environmental regulation in industrialized countries. These regulations are important incentives in the adoption of technologies like ours.
Changes to environmental regulations could make our technology less desirable. The negative environmental impacts of industrial activity have given rise to significant environmental regulation in industrialized countries. These regulations are important incentives in the adoption of technologies like ours.
While the demand of our services in the U.S. has not yet been affected by this conflict in Ukraine and fuel prices, we cannot predict the impact that the conflict may have on future financial results.
While the demand of our services in the U.S. have not yet been affected by these conflicts, we cannot predict the impact that the conflicts may have on future financial results.
We are authorized to issue 2.0 million shares of “blank check” preferred stock, with such rights, preferences and privileges as may be determined from time-to-time by our board of directors.
If we were to issue preferred stock, it is likely to have rights, preferences and privileges that may adversely affect our common stock or other securities. We are authorized to issue 2.0 million shares of “blank check” preferred stock, with such rights, preferences and privileges as may be determined from time-to-time by our board of directors.
We have not paid dividends in the past and have no immediate plans to pay dividends. We plan to reinvest all of our earnings, to the extent we have earnings, in order to continue to develop our products, to market our products, to cover operating costs and to otherwise become and remain competitive.
We plan to reinvest all of our earnings, to the extent we have earnings, in order to continue to develop our products, to market our products, to cover operating costs and to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future.
For example, domestic customers for some of our product lines may choose to reduce discretionary spending on goods and services such as ours until fuel and oil price volatility subsides. ​ We are exposed to fluctuations in the market values of our investments and in interest rates, either of which could impair the market value of our investments and harm our financial results. ​ As of December 31, 2022, we had $2,606 thousand of investments in short-term held-to-maturity debt security investments, consisted primarily of U.S. treasuries.
For example, domestic customers for some of our product lines may choose to reduce discretionary spending on goods and services such as ours until this volatility subsides. ​ We are exposed to fluctuations in the market values of our investments and in interest rates, either of which could impair the market value of our investments and harm our financial results. ​ As of December 31, 2023, we had zero investments in short-term held-to-maturity debt security investments, 17 ​ Table of Contents consisted primarily of U.S. treasuries; however, in the future we may further invest in long- or short-term U.S. treasuries or other marketable securities with maturities of up to one year.
This potential inability to obtain a control premium could reduce the price of our common stock or other securities. clirSPV LLC has substantial influence in our ability to enter into corporate transactions, and if clirSPV LLC decides to sell or otherwise transfer their shares of common stock, it may put downward pressure on the trading price of our common stock. ​ The interests of clirSPV and its affiliates, which include our director Robert T.
As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. 20 ​ Table of Contents clirSPV LLC has substantial influence in our ability to enter into corporate transactions, and if clirSPV LLC decides to sell or otherwise transfer their shares of common stock, it may put downward pressure on the trading price of our common stock. ​ The interests of clirSPV and its affiliates, which include our director Robert T.
Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business and result in a material adverse effect on our reputation, business and results of operations or financial condition. ​ 16 ​ Table of Contents We cannot provide assurance that rising inflation will not adversely affect our operations. ​ The impact of inflation on our operating results has been moderate in recent years, despite the recent increase in inflation generally across the economy.
We cannot provide assurance that rising inflation will not adversely affect our operations. ​ The impact of inflation on our operating results has been moderate in recent years, despite the recent increase in inflation generally across the economy.
While we do not purchase any of significant raw materials directly from Russia, it is a significant global producer of fuel, nickel, and copper. Disruptions in the markets for those inputs could negatively impact the world and domestic economy.
While we do not purchase any of significant raw materials directly from these regions, they have significant global reach on commodity prices. Disruptions in the markets for those inputs could negatively impact the world and domestic economy. Also, these conflicts have exacerbated geopolitical tensions globally.
As of December 31, 2022, we had outstanding options for the purchase of 3,120 thousand shares of common stock and 423 thousand shares of outstanding restricted stock units (“RSUs”).
Sales of the underlying shares of common stock could adversely affect the market price of our common stock. As of December 31, 2023, we had outstanding options for the purchase of 2,759 thousand shares of common stock and 671 thousand shares of outstanding restricted stock units (“RSUs”).
We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend.
We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend. We have a significant number of options and restricted stock units outstanding and we may issue additional awards in the future to employees, officers, directors, independent contractors and agents.
While we make every attempt to comply with these laws, our operations outside the United States may increase the risk of violating such laws.
While we make every attempt to comply with these laws, our operations outside the United States may increase the risk of violating such laws. Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business and result in a material adverse effect on our reputation, business and results of operations or financial condition.
Technical problems, including those specific to customer site implementation, may result in delays and cause us to incur additional expenses that would increase our losses.
Technical problems, including those specific to customer site implementation, may result in delays and cause us to incur additional expenses that would increase our losses. If we cannot complete, or if we experience significant delays in completing, research and development of our technology for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail.
We have incurred and will incur significant costs as a result of being a public company that reports to the Securities and Exchange Commission and our management is required to devote substantial time to meet compliance obligations.
As a result, we and our stockholders may have more limited rights to recover money damages from our directors and officers than might otherwise exist absent these provisions in our bylaws or that might exist with other companies, which could limit your recourse in the event of actions that are not in our best interests. ​ We have incurred and will incur significant costs as a result of being a public company that reports to the Securities and Exchange Commission and our management is required to devote substantial time to meet compliance obligations.
Removed
If we cannot complete, or if we experience significant delays in completing, research and development of our technology for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail. 13 ​ Table of Contents Changes to environmental regulations could make our technology less desirable.
Added
There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.
Removed
Furthermore, our operations in China have been impacted by COVID-19, which has resulted in the limitation of flights in and out of China, quarantines, and travel restrictions on the local work force and personnel from our U.S. offices. As a result, the Company has experienced delays in the completion of boiler burner demonstration projects during 2020, 2021 and 2022.
Added
On November 24, 2023, we received a notice (the “Notice”) from the Listing Qualifications Department of Nasdaq stating 18 ​ Table of Contents that the previously announced resignation of Gary DiElsi from the our board of directors resulted in noncompliance with the board of directors independence requirements set forth in Nasdaq Listing Rule 5605(b)(1) and the requirement in Nasdaq Listing Rule 5605(c)(2)(A) to have an audit committee of at least three independent directors. ​ More specifically, when the Notice was issued, the board of directors did not have a majority of directors who would be considered “independent directors,” as that term is defined in Nasdaq Listing Rule 5605(a)(2) and the audit committee of the board of directors consisted of only two independent directors.
Removed
In addition to our own work, the work of our partners and suppliers in China have been, and continue to be affected. The resulting delays to the delivery of materials and services, has resulted in delays to our projects.
Added
Consistent with Nasdaq Listing Rules 5605(b)(1)(A) and Rule 5605(c)(4), Nasdaq has provided us a cure period in order to regain compliance until the earlier of (i) our next annual shareholders’ meeting or November 11, 2024, or (ii) if the next annual shareholders’ meeting is held before May 7, 2024, then we must evidence compliance no later than May 7, 2024. ​ There can be no assurances that we will be able to regain compliance with Nasdaq’s listing standards or if we do later regain compliance with Nasdaq’s listing standards, will be able to continue to comply with the applicable listing standards.
Removed
As a result of such delays, our business relationships and results of operations have been and may continue to be adversely affected. ​ Finally, the U.S.
Added
If we are unable to maintain compliance with these Nasdaq requirements, our common stock will be delisted from Nasdaq.
Removed
We cannot predict the extent or duration of sanctions in response to the conflict in Ukraine, nor can we predict the effects of legislative or other governmental actions or regulatory scrutiny of Russia, Russia's other allies or other countries with which Russia has significant trade or financial ties, including China. The conflict in Ukraine may also exacerbate geopolitical tensions globally.
Added
If Nasdaq delists our common stock, we could face significant material adverse consequences, including: ​ ● a limited availability of market quotations for our securities; ● a determination that our common stock is a “ penny stock ” which will require brokers trading in our common stock to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock; ● a limited amount of news and analyst coverage for our company; and ● a decreased ability to issue additional securities or obtain additional financing in the future. ​ We have not paid dividends in the past and have no immediate plans to pay dividends.
Removed
In the future, we may further invest in long- or short-term U.S. treasuries or other marketable securities with maturities of up to one year.
Added
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. ​ Our certificate of incorporation provides that, with certain limited exceptions, the Court of Chancery of the State of Delaware is the exclusive forum for: ​ ● any derivative action or proceeding brought on our behalf; ● any action asserting a claim of breach of fiduciary duty owed by any director, officer or stockholder; ● any action asserting a claim against us arising under the Delaware General Corporation Law ( “ DGCL ” ), or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; ● any action arising pursuant to any provision of our bylaws or certificate of incorporation; and 19 ​ Table of Contents ● any action asserting a claim against us or any current or former director, officer or stockholder that is governed by the internal-affairs doctrine.
Removed
We have the right to issue shares of preferred stock. If we were to issue preferred stock, it is likely to have rights, preferences and privileges that may adversely affect our common stock or other securities.
Added
This provision does not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction.
Removed
We have a significant number of options and restricted stock units outstanding and we may issue additional awards in the future to employees, officers, directors, independent contractors and agents. Sales of the underlying shares of common stock could adversely affect the market price of our common stock.
Added
In addition, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint. ​ For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering.
Removed
As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. Our charter documents and Washington State law may inhibit a takeover that shareholders consider favorable.
Added
However, these choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees.
Removed
Provisions of our articles of Incorporation and bylaws and applicable provisions of the state of Washington law may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which shareholders might otherwise receive a premium for their shares, or transactions that our shareholders might otherwise deem to be in their best interests.
Added
Further, these choice of forum provisions may increase the costs for a stockholder to bring such a claim and may discourage them from doing so. ​ While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions.
Removed
The provisions in our articles of incorporation and bylaws: ● authorize our board of directors to issue preferred stock without shareholder approval and to designate the rights, preferences and privileges of each class; if issued, such preferred stock would increase the number of outstanding shares of our capital stock and could include terms that may deter an acquisition of us; ● limit who may call shareholder meetings; ● do not provide for cumulative voting rights; and ● provide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, unless the vacant office is to be held by a director elected by the holders of one or more classes or series of shares entitled to vote thereon, in which case the vacancy can be filled only by the vote of the holders of such class or series.
Added
If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
Removed
In addition, Chapter 23B.19 of the state of Washington Revised Code generally limits our ability to engage in any business combination with a person who beneficially owns 10% or more of our outstanding voting stock unless certain conditions are satisfied. This restriction lasts for a period of five years following the share acquisition.
Added
For example, the Court of Chancery of the State of Delaware recently determined that the exclusive forum provisions of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable.
Removed
These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices.
Added
We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. ​ The rights of our stockholders to take action against our directors and officers are limited.
Removed
Hoffman, could conflict with or differ from our interests or the interests of our other shareholders.
Added
Our certificate of incorporation provides for indemnification of our directors and officers to the fullest extent authorized or permitted under Delaware law, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or hereafter may be amended. ​ Our bylaws obligates us to indemnify each of our directors or officers who is or is threatened to be made a party to or witness in a proceeding by reason of his or her service in those or certain other capacities, to the maximum extent permitted by Delaware law, from and against any claim or liability to which such person may become subject or which such person may incur by reason of his or her status as a present or former director or officer of us or serving in such other capacities.
Removed
Our common stock is listed for trading on Nasdaq, therefore, we must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for 30 consecutive business days.
Added
In addition, we may be obligated to reimburse the expenses reasonably incurred by our present and former directors and officers in connection with such proceedings.
Removed
On November 1, 2022, the Nasdaq staff notified us that we did not comply with the minimum $1.00 per share bid price requirement for continued listing, as set forth in Nasdaq Listing Rule 5550(a)(2). We have been granted 180 calendar days, through May 1, 2023, to regain compliance.
Removed
In the event that we do not regain compliance within this 180 day period, we may be eligible to seek an additional compliance period of 180 calendar days if we meet certain requirements. There can be no assurance that we will be able to regain compliance with Nasdaq’s listing rules.
Removed
If we are unable to regain compliance with the minimum closing bid price requirement or if we fail to meet any of the other continued listing requirements, including stockholder equity requirements, our securities may be delisted from Nasdaq, which could reduce the liquidity of our common stock materially and result in a corresponding material reduction in the price of our common stock.
Removed
In addition, delisting could harm our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and business development opportunities. 20 ​ Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS. None.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed0 unchanged
Biggest changeAt our principal office in Tulsa, we lease 3,922 square feet of office space, under a lease which expires in September 2027. Monthly minimum rent is approximately $5 thousand with an annual 2.0% increase. The Company also leases 9,200 square feet of office space located in Seattle, Washington and 656 square feet in Beijing, China.
Biggest changeMonthly minimum rent is approximately $5 thousand with an annual 2.0% increase. The Company also sub-leases 940 square feet of office space located in Seattle, Washington and 656 square feet in Beijing, China. The minimum monthly rent for our Seattle location is approximately $2 thousand with a termination date of September 30, 2024.
The monthly minimum rent for our Beijing location is approximately $2 thousand (20,000RMB).
The term of the Beijing lease began on June 1, 2023 and expires in June 2024. The monthly minimum rent for our Beijing location is approximately $2 thousand (20,000RMB).
ITEM 2. PROPERTIES. Our principal office is located at 8023 East 63rd Place, Suite 101 Tulsa, Oklahoma with satellite offices located in Seattle and Beijing, China. The Board of Directors unanimously approved moving the principal office from Seattle to Tulsa as of January 1, 2022.
ITEM 2. PROPERTIES. Our principal office is located at 8023 East 63rd Place, Suite 101 Tulsa, Oklahoma 74133 with satellite offices located in Seattle and Beijing, China. At our principal office in Tulsa, we lease 3,922 square feet of office space, under a lease which expires in September 2027.
Removed
The minimum monthly rent for our Seattle location is approximately $14 thousand with an annual 3.0% increase. The term of the Seattle lease is set to expire in May 2023, and the company does not intend to renew this lease. The term of the Beijing lease began on June 10, 2022 and expires in June 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed4 unchanged
Biggest changeRecent Issuances of Unregistered Securities On December 31, 2022, we issued 3.8 thousand shares of common stock, having a weighted average per share value of $1.08, from our 2013 Consultant Stock Plan to our investor relations firm, Firm IR Group, LLC, for services provided in the three months ended December 31, 2022.
Biggest changeRecent Issuances of Unregistered Securities On December 31, 2023, we issued 3.8 thousand shares of common stock, having a weighted average per share value of $0.76 from our 2013 Consultant Stock Plan to our investor relations firm, Firm IR Group, LLC, for services provided in the three months ended December 31, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is listed on the Nasdaq Capital Market under the symbol “CLIR”. According to our transfer agent, as of March 23, 2023 we had 287 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is listed on the Nasdaq Capital Market under the symbol “CLIR”. According to our transfer agent, as of March 21, 2024 we had 289 shareholders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

36 edited+20 added−19 removed12 unchanged
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2022 and 2021 Highlights of our annual financial performance are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ ​ ​ ​ ​ (in thousands, except per share data) ​ December 31, ​ ​ ​ ​ ​ ​ ​ 2022 2021 $ Change % Change Revenues ​ $ 374 ​ $ 607 ​ $ (233) ​ (38.4) % Cost of goods sold ​ ​ 258 ​ ​ 1,059 ​ $ (801) ​ (75.6) % Gross profit (loss) ​ ​ 116 ​ ​ (452) ​ $ 568 ​ NM Research and development ​ ​ 505 ​ ​ 2,680 ​ $ (2,175) ​ (81.2) % General and administrative ​ ​ 5,728 ​ ​ 5,013 ​ $ 715 ​ 14.3 % Operating Expenses ​ ​ 6,233 ​ ​ 7,693 ​ $ (1,460) ​ (19.0) % Other income, net ​ ​ 359 ​ ​ 253 ​ $ 106 ​ 41.9 % Net loss ​ $ (5,758) ​ $ (7,892) ​ $ 2,134 ​ 27.0 % Basic and diluted net income per common share ​ $ (0.16) ​ $ (0.25) ​ $ 0.09 ​ 36.0 % NM = Not meaningful ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and Gross Loss Consolidated revenues for the year ended December 31, 2022 totaled $374 thousand compared to $607 thousand reported for the year ended December 31, 2021, mainly due to the timing of performance obligations associated with certain projects during the period.
Biggest changeThis is primarily attributed to the short maturities of these instruments. ​ Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 Highlights of our annual financial performance are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ ​ ​ ​ ​ (in thousands, except per share data) ​ December 31, ​ ​ ​ ​ ​ ​ ​ 2023 2022 $ Change % Change Revenues ​ $ 2,403 ​ $ 374 ​ $ 2,029 ​ 542.6 % Cost of goods sold ​ ​ 1,586 ​ ​ 258 ​ $ 1,328 ​ 514.8 % Gross profit ​ ​ 817 ​ ​ 116 ​ $ 701 ​ 604.4 % Research and development ​ ​ 739 ​ ​ 505 ​ $ 234 ​ 46.4 % General and administrative ​ ​ 6,059 ​ ​ 5,728 ​ $ 331 ​ 5.8 % Operating Expenses ​ ​ 6,798 ​ ​ 6,233 ​ $ 565 ​ 9.1 % Other income ​ ​ 787 ​ ​ 359 ​ $ 428 ​ 119.3 % Net loss ​ $ (5,194) ​ $ (5,758) ​ $ 564 ​ 9.8 % Basic and diluted net income per common share ​ $ (0.13) ​ $ (0.16) ​ $ 0.03 ​ 18.8 % ​ Revenues and Gross Profit ​ Consolidated revenues for the year ended December 31, 2023 totaled $2,403 thousand, compared to $374 thousand for the same period in 2022.
Losses on long-lived assets to be disposed of is determined in a similar manner, except those fair values are reduced for the cost of disposal. Product Warranties The Company warrants all installed products against defects in materials and workmanship, and shortcomings in performance compared to contractual guarantees for a period specified in each contract.
Losses on long-lived assets to be disposed of are determined in a similar manner, except those fair values are reduced for the cost of disposal. ​ Product Warranties ​ The Company warrants all installed products against defects in materials and workmanship, and shortcomings in performance compared to contractual guarantees for a period specified in each contract.
Financing activities for the year ended December 31, 2022, included $6,539 thousand in net proceeds from the sale of 501 thousand shares of our common stock through our ATM program at an average price of $1.24 per share, sale of 4.2 million shares of our common stock through a public offering at a price of $1.11 per share, and sale of 1.6 million shares of our common stock at a price of $1.11 per share pursuant to the Participant Right with clirSPV LLC.
Financing activities for the year ended December 31, 2022 included $6,539 thousand in net proceeds from the sale of 501 thousand shares of our common stock through our ATM program at an average price of $1.24 per share, sale of 4.2 million shares of our common stock through a public offering at an average price of $1.11 per share, and sales of 1.6 million shares of our common stock at a price of $1.11 per share pursuant to the Participant Right with clirSPV.
We may need to raise additional capital in the future, however, the significant volatility in the capital markets may negatively affect our ability to raise this additional capital. 22 ​ Table of Contents In order to generate meaningful revenues, our technologies must gain market recognition and acceptance to develop sufficient recurring sales.
We may need to raise additional capital in the future, however, the significant volatility in the capital markets may negatively affect our ability to raise this additional capital. ​ 23 ​ Table of Contents In order to generate meaningful revenues, our technologies must gain market recognition and acceptance to develop sufficient recurring sales.
Stock-based compensation for stock grants 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. 24 ​ Table of Contents Fair Value of Financial Instruments The Company's financial instruments primarily consist of cash equivalents, accounts payable, accrued expenses and short-term investments in government securities.
Stock-based compensation for stock grants 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. ​ Fair Value of Financial Instruments ​ The Company's financial instruments primarily consist of cash equivalents, accounts payable, accrued expenses and short-term investments in government securities.
See Note 2 to our audited consolidated financial statements included elsewhere in this report for a more complete description of our significant accounting policies. 23 ​ Table of Contents 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).
See Note 2 to our audited condensed consolidated financial statements included elsewhere in this report for a more complete description of our significant accounting policies. ​ 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).
We have generated nominal revenues from operations to date to meet operating expenses. We have incurred losses since inception totaling $88.5 million and we expect to experience operating losses and negative cash flow for the foreseeable future. We have historically financed our operations primarily through issuances of equity securities.
We have generated nominal revenues from operations to date to meet operating expenses. ​ We have incurred losses since inception totaling $93.7 million and we expect to experience operating losses and negative cash flow for the foreseeable future. We have historically financed our operations primarily through issuances of equity securities.
If the net proceeds from these offerings are insufficient for this purpose, we will consider other options to continue our path to commercialization, including, but not limited to, additional financing through follow-on equity offerings, debt financing, co-development agreements, sale or licensing of developed intellectual or other property, or other alternatives.
If the net proceeds from these offerings are insufficient for this purpose, we will consider other options to continue our path to commercialization, including, but not limited to, additional financing through follow-on equity offerings, debt financing, co-development agreements, sale or licensing of developed intellectual or other property, or other alternatives. ​ We cannot assure that our technologies will be accepted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable.
Research, development, and commercial acceptance of new technologies are, by their nature, unpredictable. Although we undertake development and commercialization efforts with reasonable diligence, there can be no assurance that the net proceeds from our securities offerings will be sufficient to enable us to develop our technology to the extent needed to create sufficient future sales to sustain operations.
Although we undertake development and commercialization efforts with reasonable diligence, there can be no assurance that the net proceeds from our securities offerings will be sufficient to enable us to develop our technology to the extent needed to create sufficient future sales to sustain operations.
As of the balance sheet date, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the consolidated balance sheets. This is primarily attributed to the short maturities of these instruments.
As of the balance sheet date, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the consolidated balance sheets.
The Company periodically assesses the adequacy of our recorded warranty liabilities and adjusts the amounts as necessary, and such adjustments could be material if estimates differ significantly from actual warranty expense. The warranty liabilities are included in accounts payable and accrued liabilities in the unaudited condensed consolidated balance sheets.
The Company periodically assesses the adequacy of our recorded warranty liabilities and adjusts the amounts as necessary, and such adjustments could be material if estimates differ significantly from actual warranty expense.
We cannot assure that our technologies will be accepted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. Furthermore, we have no committed source of financing and we cannot assure that we will be able to raise money as and when we need it to continue our operations.
Furthermore, we have no committed source of financing, and we cannot be assured that we will be able to raise money as and when we need it to continue our operations.
Impairment of Long-Lived Assets The Company tests long-lived assets, consisting of fixed assets, patents, and other intangible 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 from the use and eventual disposition of the assets.
For any contract in connection with which the Company is expected to incur costs in excess of the contact price, the Company accrues the estimated loss in full in the period such determination is made. ​ Impairment of Long-Lived Assets ​ The Company tests long-lived assets, consisting of fixed assets, patents, and other intangible 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 from the use and eventual disposition of the assets.
In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates.
As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates.
Stock-Based Compensation The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the condensed consolidated financial statements based on the estimated fair value of the awards on the grant date.
During the year ended December 31, 2022, the Company received no monies from strategic partners. ​ Stock-Based Compensation ​ The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the audited, condensed consolidated financial statements based on the estimated fair value of the awards on the grant date.
During the same period in 2021, revenues attributable to our China operations were $21 thousand, or approximately 3.4% compared to our total revenues of $607 thousand. ​ Our costs include employee salaries and benefits, compensation paid to consultants, materials and supplies for prototype development and manufacture, costs associated with development activities including materials, sub-contractors, travel and administration, legal and accounting expenses, sales and marketing costs, general and administrative expenses, and other costs associated with an early stage, publicly-traded technology company.
During the years ended December 31, 2023, and 2022, our China operations reported zero revenues. ​ Our costs include employee salaries and benefits, compensation paid to consultants, materials and supplies for prototype development and manufacture, costs associated with development activities including materials, sub-contractors, travel and administration, legal and accounting expenses, sales and marketing costs, general and administrative expenses, and other costs associated with an early stage, publicly traded technology company.
These policies and estimates require the application of significant judgment by management. These estimates can be materially affected by changes from period to period as economic factors and conditions outside of our control change. As a result, they are subject to an inherent degree of uncertainty.
Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations. These policies and estimates require the application of significant judgment by management. These estimates can be materially affected by changes from period to period as economic factors and conditions outside of our control change.
Until the growth of revenue increases to a level that covers operating expenses, the Company intends to continue to fund operations in this manner, although, the volatility in the capital markets and potential upcoming recession may negatively our ability to do so. ​ Operating activities for the year ended December 30, 2022, resulted in cash outflows of $4,992 thousand, primarily due to the loss for the period of $5,758 thousand, offset with non-cash expenses of $627 thousand.
Until the growth of revenue increases to a level that covers operating expenses, the Company intends to continue to fund operations in this manner, although the volatility in the capital markets may negatively affect our ability to do so. ​ Operating activities for the year ended December 31, 2023 resulted in cash outflows of $3,233 thousand, primarily due to the loss for the period of $5,194 thousand, offset with non-cash expenses of $1,045 thousand, and an increase of $869 thousand of contract liabilities, which represents payments from customers in advance of future project costs.
At this time, these operations in China are immaterial compared to total company operations. As of December 31, 2022, our China asset balance totaled $172 thousand, or approximately 1.6%, compared to our total asset balance of $10,925 thousand. During the year ended December 31, 2022, our China operations reported zero revenues.
At this time, these operations in China are immaterial compared to total company operations. As of December 31, 2023, our China asset balance totaled $334 thousand, or approximately 4%, compared to our total asset balance of $7,620 thousand.
Research and Development The cost of research and development is expensed as incurred. Research and development costs consist of salaries, benefits, share based compensation, consumables, and consulting fees, including costs to develop and test prototype equipment and parts. Research and development costs are offset by any funds received from strategic partners in cost sharing, collaborative projects.
The warranty liabilities are included in accounts payable and accrued liabilities in the audited condensed consolidated balance sheets. ​ Research and Development ​ The cost of research and development is expensed as incurred. Research and development costs consist of salaries, benefits, share based compensation, consumables, and consulting fees, including costs to develop and test prototype equipment and parts.
The amount that we spend for any specific purpose may vary significantly, and could depend on a number of factors including, but not limited to, the pace of progress of our commercialization and development efforts, actual needs with respect to product testing, development and research, market conditions, and changes in or revisions to our sales and marketing strategies.
Because using third party expertise and resources is more efficient than maintaining full time resources, we also expect to incur ongoing consulting expenses related to technology development and some administrative, sales and legal functions commensurate with our current level of activities. ​ The amount that we spend for any specific purpose may vary significantly, and could depend on a number of factors including, but not limited to, the pace of progress of our commercialization and development efforts, actual needs with respect to product testing, development and research, market conditions, and changes in or revisions to our sales and marketing strategies. ​ Research, development, and commercial acceptance of new technologies are, by their nature, unpredictable.
The registration statement on Form S-3 allows us to offer common stock, preferred stock, warrants, subscription rights, debt 26 ​ Table of Contents securities and units from time to time, as market conditions permit to fund, to the extent required beyond the 12 months from the date hereof, the ongoing operations of the Company.
During the year ended December 31, 2023, working capital was funded predominately through customer cash collections for payment milestones outlined in our customer contracts. ​ 27 ​ Table of Contents The Form S-3 shelf registration statement filed with the SEC on July 1, 2022 was declared effective on August 12, 2022.The registration statement on Form S-3 allows us to offer common stock, preferred stock, warrants, subscription rights, debt securities and units from time to time, as market conditions permit to fund, to the extent required beyond the 12 months from the date hereof, the ongoing operations of the Company.
At December 31, 2022, our current assets were in excess of current liabilities resulting in working capital of $8,586 thousand as compared to $7,293 thousand at December 31, 2021. We have no contractual debt obligations, and the Company has sufficient working capital to fund current operating expenses for over twelve months.
At December 31, 2023, our current assets were in excess of current liabilities resulting in working capital of $4,253 thousand as compared to $8,586 thousand at December 31, 2022. We have no contractual debt obligations, and we have historically funded operations predominantly through equity offerings.
OVERVIEW We design and develop technologies for the purpose of improving key performance characteristics of combustion systems, including emission and operational performance, energy efficiency and overall cost-effectiveness. Our ClearSign Core technology has been proven in full scale industrial test furnaces and boilers, and first customer installations are currently operating in normal commercial applications.
Our ClearSign Core™ technology has been proven in full scale industrial test furnaces and boilers and first customer installations are currently operating in normal commercial applications.
Critical Accounting Policies The following discussion and analysis of financial condition and results of operations is based upon our financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations.
We will not make any sales of our shares of common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the SEC; however, the Sales Agreement remains in full force and effect. ​ 24 ​ Table of Contents ​ Critical Accounting Policies The following discussion and analysis of financial condition and results of operations is based upon our financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America.
In addition to historical information, this discussion and analysis here and throughout this Form 10-K contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including but not limited to, the risks described in the section titled “Risk Factors”.
In addition to historical information, this discussion and analysis here and throughout this Form 10-K contains forward-looking statements that involve risks, uncertainties and assumptions.
If we cannot raise funds as and when we need them, we may be required to scale back our development by reducing expenditures for employees, consultants, business development and marketing efforts or to otherwise severely curtail, or even to cease, our operations.
If we cannot raise funds as and when we need them, we may be required to scale back our development by reducing expenditures for employees, consultants, business development and marketing efforts or to otherwise severely curtail, or even to cease, our operations. ​ Recent Developments Letter of Intent for Four ClearSign Core TM (Rogue) Boilers ​ On February 21, 2024, we announced that our collaborative partner California Boiler, received a letter of intent for four boilers to be fitted with the ClearSign Core™ (Rogue) burners as well as the purchase order for the first boiler burner of the series, and has in turn placed their order with ClearSign for the first burner.
Gross profit for the year end December 31, 2022 increased $568 thousand compared to gross profit reported for the year end December 31, 2021, mainly due to recognizing revenues from our ExxonMobil technology validation project. During 2021, a gross loss occurred primarily due to project losses amounting to $762 thousand.
Revenues for the year ended December 31, 2022 were generated predominantly from the closeout of our ExxonMobil technology validation project. ​ Gross profit for the year ended December 31, 2023, increased by $701 thousand compared to gross profit reported for the year ended December 31, 2022.
Operating activities for the year ended December 31, 2021, resulted in cash outflows of $6,707 thousand primarily due to the loss for the period of $7,892 thousand, offset with non-cash expenses of $1,394 thousand. ​ Investing activities for the year ended December 31, 2022, resulted in cash outflows of $2,686 thousand, which is primarily attributable to $2,561 thousand of net investments in short-term held-to-maturity US treasuries, and $154 thousand of disbursements for patents and other intangibles.
Investing activities for the year ended December 31, 2022 resulted in cash outflows of $2,686 thousand, which is primarily attributable to the redemption $3,337 thousand of short-term held-to-maturity U.S. treasuries, offset by $5,898 thousand of purchases for the same type of investments.
Operating Expenses Operating expenses consist of research and development (“R&D”) and general and administrative (“G&A”) expenses, which are addressed separately below. 25 ​ Table of Contents R&D expenses decreased by $2,175 thousand, or approximately 81.2%, to $505 thousand for the year ended December 31, 2022, as compared to $2,680 thousand during the same period in 2021.
These are addressed separately below. ​ Research and Development ​ R&D expenses for the year ended December 31, 2023 increased by $234 thousand, or 46.4%, when compared to the same period in 2022.
To the extent the Company requires additional funds more than 12 months from the date hereof, and customer cash collections cannot fund our needs, the Company may utilize equity offerings to raise these funds. Historically, the Company has funded operations predominately through equity offerings. Currently, the Company can sell shares of common stock through its ATM program.
To the extent we require additional funds more than 12 months from the date hereof, and customer cash collections cannot fund our needs, we may need to utilize additional equity offerings to raise these funds. As of the date of this report, we do not have sufficient working capital to fund our operating expenses for the next 12 months.
Net Loss Net loss for the year ended December 31, 2022, was $5,758 thousand compared to $7,892 thousand for the year ended December 31, 2021, or an approximate 27.0% decrease.
During the year ended December 31, 2023, asset sales decreased by $33 thousand compared to the same period in 2022 strictly due to timing and prioritization of asset sales during our Seattle office decommissioning project. ​ Net Loss ​ Net loss for the year ended December 31, 2023, was $5,194 thousand as compared to $5,758 thousand for the same period in 2022, or an approximate 9.8% decrease.
Other income Other income increased by $106 thousand, or approximately 41.9%, to $359 thousand for the year ended December 31, 2022, as compared to $253 thousand during the same period in 2021.
During the year ended December 31, 2023, other income increased by $197 thousand compared to same period in 2022 predominately due to our Seattle office decommission project, which focused on selling used equipment and materials.
Upon completion of the performance obligations and collectability is determined, revenue can be recorded. For any contract in connection with which the Company is expected to incur costs in excess of the contact price, the Company accrues the estimated loss in full in the period such determination is made.
Upon completion of the performance obligations and collectability is determined, revenue can be recorded.
Liquidity and Capital Resources At December 31, 2022, our cash and cash equivalent balance totaled $6,451 thousand compared to $7,607 thousand at December 31, 2021, a decrease of $1,156 thousand. During 2022, we invested in short-term held-to-maturity U.S. treasuries of which we had $2,606 thousand outstanding as of December 31, 2022.
The $564 thousand decrease in net loss is primarily attributable to the $701 thousand increase in gross profit referenced in the above explanation. ​ Liquidity and Capital Resources At December 31, 2023, our cash and cash equivalent balance totaled $5,684 thousand compared to $6,451 thousand at December 31, 2022, a decrease of $767 thousand.
During the year ended December 31, 2022, the Company received no monies from strategic partners. During the year ended December 31, 2021, the Company received $44 thousand from such arrangements.
Research and development costs are offset by any funds received from strategic partners in cost sharing, collaborative projects. During the year 25 ​ Table of Contents ended December 31, 2023, the Company received $60 thousand from such arrangements.
Removed
We currently have 16 full-time employees. Because using third party expertise and resources is more efficient than maintaining full time resources, we also expect to incur ongoing consulting expenses related to technology development and some administrative, sales and legal functions commensurate with our current level of activities.
Added
Our actual results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including but not limited to, the risks described in the section titled “Risk Factors”. ​ Overview ​ We design and develop technologies for the purpose of improving key performance characteristics of combustion systems, including emission and operational performance, energy efficiency and overall cost-effectiveness.
Removed
Because our contracts generally include progress payments from customers upon completion of defined milestones, the timing of these performance obligations can affect our recognition of revenue per ASC 606. Revenues recognized in 2022 were related to the closeout of our ExxonMobil technology validation project, and the sale of our ClearSign Core TM enclosed oxidizer product for a hydrogen production plant.
Added
This purchase order relates to an end customer that is a fruit and vegetable multi-juice processing company located in California’s Central Valley.
Removed
ExxonMobil revenues were recognized upon receipt of cash to close out the contract. This cash receipt eliminated collectability concerns, thus allowing recognition of revenue per ASC 606. During the year 2021, we recognized $499 thousand from contracts related to process burners, boiler burners and installation services.
Added
The additional burner orders will be issued concurrent with the construction of additional planned fruit processing lines of the customer. ​ ATM Suspension On March 18, 2024, we filed a prospectus supplement suspending the sales of common stock under our At-the-Market (“ATM”) program pursuant to that certain Sales Agreement between us and Virtu Americas LLC, as sales agent, dated December 23, 2020 (the “Sales Agreement”).
Removed
Additionally, $108 thousand in revenues related to 2020 projects where collectability constraints were eliminated in 2021, thus allowing the recognition of revenues per ASC 606.
Added
During the three months ended December 31, 2023, we recognized $1,274 thousand of revenues for a shipment of process burners to a California refinery customer. This shipment supplied burners for one of the two heaters associated with such customer order.
Removed
Product and service revenues in 2021 came from a range of customers and locations, such as a United States infrastructure company, a European refinery owned by a global energy company, and a Chinese boiler burner rental company.
Added
Revenues for the year ended December 31, 2023 were generated from orders related to both our product lines, process burners and boiler burners, with the predominate amount of revenues generated from our process burner product line.
Removed
These contract losses were incurred by refinery projects with the majority of the loss generated by our ExxonMobil project. The ExxonMobil loss was caused by rigorous product testing and product development costs.
Added
For the year ended December 31, 2023, gross profit was approximately 34.0% of revenues, resulting in an increase in gross profit margin of approximately 2.9% compared to the same period in 2022.
Removed
During 2022, R&D expenses decreased due to an organizational restructure that occurred at the beginning of 2022. We restructured our organization such that some employees previously performing R&D functions were reassigned to business development functions, which shifted salaries of approximately $527 thousand to G&A expense (as discussed below).
Added
The gross profit increase in 2023 was due to increased product shipments and burner performance tests for our customers in California, whereas in 2022 our gross profit was predominately generated by a technology validation project.
Removed
This reassignment was executed as part of our transition from focusing on research to focusing on the commercialization of our technologies. Decreases in human capital costs also favorably impacted R&D expenses by $438 thousand for the year ended December 31, 2022, when compared to the same period in 2021.
Added
The change in gross profit margin is a result of the lower margin profile for the technology validation project compared to a typical production order due to cost overruns. ​ Operating Expenses ​ 26 ​ Table of Contents Operating expenses consist of research and development (“R&D”) and general and administrative (“G&A”) expenses.
Removed
In addition, product development costs trended down by $645 thousand for the for the year ended December 31, 2022, as compared to the same period in 2021, due in large part to costs incurred during 2021 for the development of our water-tube and fire-tube boiler burner product lines.
Added
This year-over-year difference in R&D expenses is primarily due to expenses related to the hiring of our new Chief Technology Officer, which was comprised of a non-cash, non-recurring expense for the vesting of $43 thousand in inducement stock options, and $40 thousand human capital costs.
Removed
G&A expenses increased by $715 thousand, or approximately 14.3%, to $5,728 thousand during the year ended December 31, 2022, as compared to $5,013 thousand during the year ended December 31, 2021. Our organizational restructure referenced in the R&D explanation above increased expenses by approximately $527 thousand for the year ended December 31, 2022, compared to the same period in 2021.
Added
We also incurred $60 thousand burner development costs during the year ended December 31, 2023, primarily due to our hydrogen burner project.
Removed
Increases in human capital costs also unfavorably impacted G&A expenses by $127 thousand for the year ended December 31, 2022, when compared to the same period in 2021. Expense increases were offset by year-over-year decreases in board compensation expenses of approximately $147 thousand, for the year ended December 31, 2022, compared to the same period in 2021.
Added
The hydrogen burner development project costs are offset by government assistance monies (refer to the “Other Income” note below for further details). ​ General and Administrative ​ During the year ended December 31, 2023, G&A expenses increased by $331 thousand, or 5.8%, when compared to the same period in 2022.
Removed
This compensation decrease was attributed to two key factors: (i) changing payment of director compensation from stock options to restricted stock units, and (ii) deferring compensation expense as required by accounting standard ASC 718 Stock Compensation. Refer to Note 8 - Equity for further details.
Added
This year-over-year difference in G&A expenses is primarily due to an increase of $172 thousand for a non-cash, non-recurring expense for the vesting of restricted stock units triggered by the departure of a member of our board directors, and $81 thousand for the non-cash, non-recurring impairment of demonstration burners.
Removed
During 2022, we received $232 thousand in government assistance which consisted of two government programs: (i) Small Business Innovative Research (SBIR) grant from the Department of Energy (“DOE”) and (ii) Oklahoma 21 st Century Jobs Act. Refer to financial statement Note 12 – Government Assistance for more details about these programs.
Added
These demonstration burners were intended to showcase our burner catalog in operation to potential customers as part of a marketing campaign.
Removed
In addition, during 2022 we earned $83 thousand in interest from our money market account and short-term U.S. Treasury investments. Other income during 2021 reflects a $251 thousand gain on forgiveness of a Paycheck Protection Program ("PPP") loan and accrued interest under the 2020 CARES Act.
Added
These specific burners showcased an older design that we have chosen to retire from our demonstration marketing campaign. ​ Other Income ​ During the year ended December 31, 2023, other income increased by $428 thousand or 119.3%, compared to the same time period in 2022.
Removed
The $2,134 thousand decrease in net loss during the year ended December 31, 2022, is primarily attributable to the reduced R&D costs throughout the year, as further explained in the above discussion.
Added
During the year ended December 31, 2023, interest income from our money market account and short-term investments increased by $241 thousand compared to same period in 2022 due to rising interest rates and timing of year-over-year cash balances.
Removed
As noted in Note 8 – Equity, the remaining aggregate offering price on the ATM is approximately $8.7 million. During 2022, working capital was funded with approximately $6,539 thousand in net cash proceeds from our equity offerings during the year. Refer to financial statement Note 8 – Equity for further details about our equity offerings.
Added
The decrease in cash and cash equivalent balance is primarily attributable to our net loss of $5,194 thousand, which was offset by a decrease in short-term held-to-maturity investments of $2,606 thousand due to working capital needs and an increase in contract liabilities of $869 thousand, representing payments from customers in advance of future project costs.
Removed
We filed a Form S-3 shelf registration statement with the SEC on July 1, 2022 that was declared effective on August 12, 2022.
Added
However, we are contemplating a capital raise through a public offering pursuant to our Form S-3 shelf registration statement in April 2024, and we expect that, to the extent this public offering is consummated, we will not need additional equity capital for a period of 12 months or more following this public offering.
Removed
December 31, 2021, resulted in cash outflows of $213 thousand, primarily due to $140 thousand of disbursements for patents and other intangibles.
Added
Operating activities for the year ended December 31, 2022 resulted in cash outflows of $4,992 thousand, primarily due to the loss for the period of $5,758 thousand, offset with non-cash expenses of $627 thousand.
Removed
Financing activities for the year ended December 31, 2021 resulted in $5,309 thousand in net proceeds from the sale of 1,093 thousand shares of our common stock through our ATM program at an average price of $5.03 per share and $385 thousand from the exercise of option awards and warrants.
Added
Investing activities for the year ended December 31, 2023 resulted in cash inflows of $2,490 thousand, which is primarily attributable to the redemption $4,847 thousand of short-term held-to-maturity U.S. treasuries, offset by $2,162 thousand of purchases for the same type of investments.
Added
Financing activities for the year ended December 31, 2023 included $15 thousand in disbursements for taxes paid related to vesting of employee restricted stock units.

Other CLIR 10-K year-over-year comparisons