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Item 2. Management’s Discussion and Analysis

2026-05-15 compared with 2025-11-14 · 53 added, 82 removed, 57 unchanged (70% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated condensed financial statements and related notes included elsewhere in this Form 10-Q as well as our audited consolidated financial statements and related notes included in our most recent Annual Report on Form 10-K.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q as well as our audited consolidated financial statements and related notes included in our most recent Annual Report on Form 10-K.

In addition to historical information, this discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties, and assumptions.

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We have historically financed our operations primarily through issuances of equity securities.

As of September 30, 2025, we have raised approximately $105.3 million in gross proceeds through the sale of our equity securities.

As of March 31, 2026, we have raised approximately $105.3 million in gross proceeds through the sale of our equity securities.

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.

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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.

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.

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Recent Developments

Special Committee and Cooperation Agreements

On February 10, 2025, the Company’s board of directors (the “Board”) formed a special committee of all of its then-serving independent directors (the “Special Committee”) to review and analyze purported director nominations by certain of our stockholders, and non-stockholders, in connection with the Company’s 2025 annual meeting of stockholders (the “2025 Annual Meeting”), and to manage communications and to negotiate and agree settlements with such purported nominating individuals.

As a result of such review and analysis, the Special Committee entered into that certain Cooperation Agreement, dated May 22, 2025 (the “DiGiandomenico Cooperation Agreement”), between us and Anthony DiGiandomenico (collectively with his affiliates and associates, the “DiGiandomenico Parties”), and that certain Cooperation Agreement, dated May 22, 2025 (the “Clarkson Cooperation Agreement,” and together with the DiGiandomenico Cooperation Agreement, the “Cooperation Agreements”), between us and Richard Clarkson (collectively with his affiliates and associates, the “Clarkson Parties”), which agreements required, among other things, the appointment of Mr.

DiGiandomenico and Louis J.

Basenese to the Board.

Accordingly, the Board increased its size from five to seven directors, appointed Messrs.

DiGiandomenico and Basenese to the Board, and nominated each such director as a candidate for election to the Board at the 2025 Annual Meeting.

Following the 2025 Annual Meeting, the Special Committee was dissolved.

At The Market Agreement with H.C.

On July 17, 2025, we entered into an ATM Offering Agreement (the “ATM Agreement”) with Wainwright.

In accordance with the terms of the ATM Agreement, we may offer and sell from time to time through Wainwright, acting as sales agent, shares of our common stock having an aggregate offering price of up to $10,390,000 (the “Placement Shares”).

The Placement Shares will be issued pursuant to our “shelf” registration statement on Form S-3 (File No.

333-288736) filed with the SEC on July 17, 2025 (the “Registration Statement”) and the prospectus relating to the offer and sale of the Placement Shares that forms a part of the Registration Statement, which was declared effective on July 28, 2025.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard

On April 1, 2025, we received a letter (the “Notice”) from Nasdaq’s Listing Qualifications Staff (the “Staff”) indicating that, based upon the closing bid price of our common stock for the 30 consecutive business days beginning on February 18, 2025, and ending on March 31, 2025, we no longer meet the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).

On September 30, 2025, we received a second letter from Nasdaq granting our request for a 180-day extension to regain compliance with the Bid Price Rule.

We now have until March 30, 2026, to meet the requirement.

As part of our request for the 180-day extension, we notified Nasdaq that we intend to regain compliance with the Bid Price Rule by effecting a reverse stock split, if necessary.

If at any time prior to March 30, 2026, the bid price of our common stock closes at $1 per share or more for a minimum of 10 consecutive business days, we will regain compliance with the Bid Price Rule.

If the Company does not regain compliance with the Bid Price Rule during the additional 180-day extension, Nasdaq will provide written notification to us that our common stock will be delisted.

At that time, we may appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules.

However, there can be no assurance that, if we appeal the delisting determination by Nasdaq to the hearings panel, that such appeal would be successful.

We will continue to monitor the closing bid price of our common stock and evaluate its available options to regain compliance with the Bid Price Rule.

Nasdaq’s extension notice has no immediate effect on the listing or trading of our common stock, which continues to trade on Nasdaq under the ticker symbol “CLIR.”

Advancement Claim

On January 16, 2026, the Former Directors filed a petition for advancement (case number 2026-0082-CDW) in the Delaware court of Chancery for an advancement of legal fees relating to a request, by us, for the Former Directors to return material generated by the Special Committee, which was dissolved following our 2025 annual meeting of stockholders.

The advancement proceeding effectuated an advancement of monies to the Former Directors counsel for monies incurred to represent the Former Directors in this matter.

The advancement proceeding followed a prescribed court process where the legal fees were reviewed to determine a reasonable amount payable to the Former Directors’ counsel for representation in this matter.

We do not believe this advancement claim will have a material adverse effect on the future operations of the Company, and we do not anticipate any additional claims for advancement of legal fees in this case in the future.

The total advancement claim amounted to $319 thousand, of which $180 thousand was accrued during the three months ended December 31, 2025.

We delivered the full amount of the advancement claim to their legal counsel during the three months ended March 31, 2026.

Reverse Stock Split

On February 26, 2026, at our special meeting of stockholders, our stockholders approved a certificate of amendment to our certificate of incorporation, as amended (a “Charter Amendment”) to effect a reverse stock split of our outstanding shares of common stock at a ratio to be determined by the Board (the “Reverse Split”).

On March 6, 2026, we filed a Charter Amendment with the Secretary of State of Delaware to effect a 1-for-10 Reverse Split of our outstanding shares of common stock as of 12:01 a.m.

Eastern Time on March 16, 2026, in order to regain compliance with Listing Rule 5550(a)(2) of The Nasdaq Stock Market LLC (“Nasdaq”).

Nasdaq Bid Price Compliance

On March 30, 2026, we received a letter from Nasdaq stating that, because our shares of common stock had a closing bid price at or above $1.00 per share for a minimum of 10 consecutive business days, we had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2), and that the matter is now closed.

Critical Accounting Policies

The following discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States.

The following discussion and analysis of financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States.

Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations.

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Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.

We believe the current assumptions and other considerations used to estimate amounts reflected in the condensed consolidated financial statements included in this Form 10-Q are appropriate.

We believe the current assumptions and other considerations used to estimate amounts reflected in the unaudited condensed consolidated financial statements included in this Form 10-Q are appropriate.

This Form 10-Q and our most recent Annual Report on Form 10-K include discussions of our accounting policies, as well as methods and estimates used in the preparation of our audited consolidated financial statements.

For further information on our critical accounting policies and estimates, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K, the notes to our audited consolidated financial statements included in our most recent Annual Report on Form 10-K and “Note 2 – Summary of Significant Accounting Policies” of our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

For further information on our critical accounting policies and estimates, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K, the notes to our audited consolidated financial statements included in the Form 10-K and “Note 2 – Summary of Significant Accounting Policies” of our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

Since our most recent Annual Report on Form 10-K, we have not experienced a material change to our critical accounting policies or the methods and applications used to develop our accounting estimates.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

Comparison of the Three Months Ended March 31, 2026 and 2025

Highlights of our quarter financial performance are as follows:

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(in thousands, except per share data)

September 30,

Cost of goods sold

Research and development

General and administrative

Operating expenses

Other income, net

Basic and diluted net loss per common share

For the Nine Months Ended

(in thousands, except per share data)

September 30,

Cost of goods sold

Gross profit (loss)

Research and development

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Basic and diluted net loss per common share

Revenues and Gross Profit

Consolidated revenues for the three months ended September 30, 2025 were $1,029 thousand compared to $1,859 thousand for the same period in 2024, which were predominantly generated by delivering spare parts to multiple customers, delivering a flare order, delivering a mid-stream order, completing a customer witness test, finalizing a CFD analysis, and providing engineering services.

Revenues for the three months ended September 30, 2024 were predominantly generated by shipping multiple burners to a California refinery customer.

Consolidated revenues for the nine months ended September 30, 2025 were $1,563 thousand compared to $3,006 thousand for the same period in 2024, which were predominantly generated by delivering spare parts orders to multiple customers, delivering a flare order, delivering mid-stream orders, and completing engineering services and a CFD analysis.

Revenues for the nine months ended September 30, 2024 were predominantly generated from by delivering multiple burners, performing engineering feasibility studies, and delivering multiple spare parts orders.

Gross profit decreased by $183 thousand, or 33.2%, and by $411 thousand, or 39.9%, for the three and nine months ended September 30, 2025, respectively, compared to the same time periods in 2024.

The unfavorable decrease in gross profit for the three months ended September 30, 2025 was predominantly due to lower revenues during the three months ended September 30, 2025.

This decrease was partially offset by a $63 thousand increase in profit margin, which was predominantly due to the higher profit margin related to our spare parts orders during three months ended September 30, 2025 compared to the profit margin for the products and services that generated revenues during the same period in 2024.

The unfavorable decrease in gross profit for the nine months ended September 30, 2025 was predominantly due to lower revenues during the nine months ended September 30, 2025.

This decrease was partially offset by a $83 thousand increase in profit margin, which was predominantly due to the higher profit margin related to our spare parts orders during nine months ended September 30, 2025 compared to the profit margin for the products and services that generated revenues during the same period in 2024.

Revenues and Gross Profit (Loss)

Consolidated revenues for the three months ended March 31, 2026 were $191 thousand compared to $401 thousand for the same period in 2025, which were predominantly generated by fulfilling orders related to mid-stream and boiler burner product offerings.

Revenues for the three months ended March 31, 2025 were predominantly generated from spare parts and engineering services offerings.

Gross profit decreased by $589 thousand, or 300.5%, for the three months ended March 31, 2026, compared to the same period in 2025.

Gross profit decreased primarily due to lower revenues and a $410 thousand increase in cost of goods sold expenses for a warranty accrual estimate adjusted during the three months ended March 31, 2026.

The adjusted warranty accrual estimate related to process burners installed during the third quarter of 2025.

These burners are operational and have met applicable emissions requirements up to 80% of the specified normal firing rates.

However, a temporary adjustment to these burners was required to enable operational performance up to the maximum specified firing rate, which in turn affected burner compliance with our emission guarantees.

To establish our technology and customer service reputation within the market, we have established a warranty accrual estimate, that we believe, will provide for us to meet both our product guarantees and maintain our good standing with this customer.

Operating Expenses

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Research and Development

R&D expenses remained relatively consistent year-over-year for both the three and nine months ended September 30, 2025 respectively, compared to the same time periods in 2024.

R&D expenses decreased $198 thousand, or 44.3%, for the three months ended March 31, 2026, compared to the same period in 2025.

The decrease was predominantly due to receipt of $115 thousand in monies for cost-sharing expenses associated with a collaborative R&D project.

These monies were received in accordance with the terms of a

collaborative R&D agreement that we entered into during the fourth quarter of 2025, pursuant to which we agreed to test our boiler burner product using hydrogen fuel for the purpose of assessing its emissions and efficiency.

General and Administrative

G&A expenses increased $153 thousand, or 9.3%, for the three months ended September 30, 2025, compared to the same time period in 2024.

We experienced an increase of approximately $729 thousand in non-cash expenses for the vesting of RSUs in connection with the departure of three directors from the Board.

Legal and audit expenses also increased by approximately $205 thousand related to services provided for the filing of our “shelf” registration statement on Form S-3 and ATM Agreement with Wainwright.

Increases in G&A expenses were partially offset by a year-over-year savings of $394 thousand as a result of a decrease in costs accrued related to the suspension of our China activities that occurred during the three months ended September 30, 2024, which did not occur during the same period in 2025.

We also decreased our Special Committee legal cost accrual by $315 thousand after negotiating discounts with law firms engaged by the Special Committee (see “Recent Developments – Special Committee and Cooperation Agreements” above for additional information).

G&A expense increases were further partially offset by year-over-year labor and overhead cost decreases of $127 thousand related to customer contract work performed during the three months ended September 30, 2025.

G&A expenses for the nine months ended September 30, 2025 increased by $620 thousand, or 12.8%, compared to the same period in 2024.

This unfavorable increase in G&A expenses was primarily due to an increase of approximately $588 thousand in legal fees, including (i) approximately $131 thousand in legal fees pertaining to work performed in connection with a regulatory inquiry by the SEC into the trading of our securities in 2020;

(ii) an accrual of approximately $435 thousand in legal fees pertaining to work performed for the Special Committee;

and (iii) an accrual of $22 thousand for the reimbursement of certain legal fees incurred by the Clarkson Parties and DiGiandomenico Parties in connection with the Cooperation Agreements they entered into with us (see “Recent Developments – Special Committee and Cooperation Agreements” above for additional information).

We also incurred an increase in legal and audit costs of approximately $205 thousand related to services provided for the preparation and filing of our “shelf” registration statement on Form S-3 and work performed in connection with our ATM Agreement with Wainwright.

In addition, non-cash expenses increased approximately $469 thousand year-over-year related to the vesting of RSUs in connection with the departure of three directors from the Board.

Increases in G&A expenses for the nine months ended September 30, 2025 were partially offset by an expense decrease of approximately $394 thousand related to our China exit cost accrual that occurred during the three months ended September 30, 2024, which did not occur during the same

period in 2025.

G&A expense increases were further partially offset by year-over-year labor and overhead cost decreases of $232 thousand related to customer contract work performed during the nine months ended September 30, 2025.

G&A expenses decreased $369 thousand, or 18.4%, for the three months ended March 31, 2026, compared to the same period in 2025.

The decrease was predominantly due to $450 thousand in accrued legal fees during the prior period that were not present during the current period, which legal fees related to work performed by the former Special Committee to respond, manage and otherwise address attempts by several stockholders to submit director nomination notices in connection with our 2025 annual meeting of stockholders.

The decrease in year-over-year legal fees was partially offset by an increase of $139 thousand in legal fees associated with an advancement claim by the Former Directors (refer to “Recent Developments – Advancement Claim” above for further details).

Other Income, Net

Other income, net remained relatively consistent year-over-year for both the three and nine months ended September 30, 2025 respectively, compared to the same time periods in 2024.

Other income, net decreased $92 thousand, or 50.8%, for the three months ended March 31, 2026, compared to the same period in 2025.

The decrease was predominantly due to a decrease in interest income from our short-term U.S.

treasuries and money market accounts of $71 thousand driven by a lower year-over-year cash balance and declining interest rates.

Liquidity and Capital Resources

At September 30, 2025, our cash and cash equivalents balance totaled $10,488 thousand compared to $14,035 thousand at December 31, 2024, a decrease of $3,547 thousand.

The decrease in cash and cash equivalent balance is primarily attributable to our net loss of $5,185 thousand which was partially offset by our non-cash expenses of $1,135 thousand and an increase in contract liabilities of $1,075 thousand.

At September 30, 2025, our current assets were in excess of current liabilities resulting in working capital of $8,168 thousand compared to $12,809 thousand at December 31, 2024.

At March 31, 2026, our cash and cash equivalents balance totaled $7,736 thousand compared to $9,178 thousand at December 31, 2025, a decrease of $1,442 thousand.

The decrease in the cash and cash equivalents balance is primarily attributable to our net loss of $2,190 thousand, which was partially offset primarily by a decrease in accounts receivables of $1,189 thousand.

At March 31, 2026, our current assets were in excess of current liabilities resulting in working capital of $6,609 thousand compared to $8,642 thousand at December 31, 2025.

We believe we have sufficient cash and expected cash collections to fund current operating expenses for over twelve months.

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Until the growth of revenue increases to a level that covers our operating expenses, we intend to continue to fund operations in this manner, although the volatility in the capital markets may negatively affect our ability to do so.

As of September 30, 2025, approximately 21.3 million shares of our common stock are issuable upon exercise of our outstanding warrants, which number excludes the shares of common stock issuable upon exercise of our outstanding pre-funded warrants, and we may receive up to $22.5 million in aggregate gross proceeds from the cash exercises thereof, subject to certain beneficial ownership limitations set forth therein.

As of March 31, 2026, approximately 2.1 million shares of our common stock are issuable upon exercise of our outstanding warrants, which number excludes the shares of common stock issuable upon exercise of our outstanding pre-funded warrants, and we may receive up to $22.4 million in aggregate gross proceeds from the cash exercises thereof, subject to certain beneficial ownership limitations set forth therein.

These warrants require the warrant holder to tender cash upon exercise, with the exception of the warrants issued to Public Ventures LLC as compensation for their services in connection with our public offering and concurrent private placement in April 2024, which allow the holder to exercise cashless if they so desire.

These equity financial instruments may from time-to-time fund future cash needs, but the volatility of our common stock price and the risk tolerance of warrant holders will determine the extent in which we will be able to raise funds in this manner.

Operating activities for the nine months ended September 30, 2025, resulted in cash outflows of $3,453 thousand, primarily due to the net loss of $5,185 thousand partially offset by non-cash expenses of $1,135 thousand and an increase in contract liabilities of $1,075 thousand during such period.

The change in contract liabilities during the nine months ended September 30, 2025 was impacted by customer collections for orders we have yet to complete.

Operating activities for the nine months ended September 30, 2024, resulted in cash outflows of $3,958 thousand, primarily due to the net loss of $4,135 thousand during such period, which was partially offset by a non-cash expense of $688 thousand.

The decision to suspend our China operations increased accounts payable and accrued liabilities by $394 thousand during the three months ended September 30, 2024, which represented a one-time accrual estimate for the costs to prepare and place our Beijing China entity into a dormant state.

Investing activities for the nine months ended September 30, 2025, resulted in cash outflows of $78 thousand, which is primarily attributable to disbursements for patents and other intangible assets.

Investing activities for the nine months ended September 30, 2024, resulted in cash outflows of $177 thousand, which is primarily attributable to $159 thousand of disbursements for patents and other intangible assets.

Financing activities for the nine months ended September 30, 2025, resulted in cash outflows of $17 thousand, which is primarily attributable to $41 thousand of disbursements related to taxes paid for the vesting of certain employee restricted stock units, partially offset by $24 thousand in net proceeds received from the exercise of our warrants.

Financing activities for the nine months ended September 30, 2024, resulted in cash inflows of $12,936 thousand, which is primarily attributable to the net proceeds received of $12,967 thousand from the issuance of securities in connection with our 2024 equity offerings.

These equity financial instruments may from time to time fund future cash needs, but the volatility of our common stock price and the risk tolerance of warrant holders will determine the extent to which we will be able to raise funds in this manner.

Operating activities for the three months ended March 31, 2026, resulted in cash outflows of $1,348 thousand, primarily due to the net loss of $2,190 thousand and a decrease in other current liabilities of $180 thousand partially offset primarily by a decrease in accounts receivables of $1,189 thousand during such period.

Operating activities for the three months ended March 31, 2025, resulted in cash outflows of $1,111 thousand, primarily due to the net loss of $2,076 thousand partially offset primarily by non-cash expense of $118 thousand and an increase in contract liabilities of $814 thousand during such period.

The change in contract liabilities during the three months ended March 31, 2025, was impacted by customer collections for uncompleted orders as of March 31, 2025.

Investing activities for the three months ended March 31, 2026, resulted in cash outflows of $64 thousand, which is primarily attributable to disbursements for patents and other intangible assets.

Investing activities for the three months ended March 31, 2025, resulted in cash outflows of $41 thousand, which is primarily attributable to $37 thousand of disbursements for patents and other intangible assets.

Financing activities for the three months ended March 31, 2026, resulted in cash outflows of $32 thousand, which is attributable to disbursements related to taxes paid for the vesting of certain employee restricted stock units.

Financing activities for the three months ended March 31, 2025, resulted in cash outflows of $17 thousand, which is primarily attributable to $41 thousand of disbursements related to taxes paid for the vesting of employee restricted stock units, partially offset by $24 thousand in net proceeds received from the exercise of certain warrants.

Off-Balance Sheet Transactions

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis