What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-03-31 compared with 2021-03-31 · 303 added, 575 removed, 33 unchanged (96% of the section changed)

design and develop technologies that have been shown to significantly improve key performance characteristics of combustion systems, including

emission and operational performance, energy efficiency, safety and overall cost-effectiveness.

We believe that our patented ClearSign

technology can enhance the performance of combustion systems in a broad range of markets, including the energy (upstream oil

production and down-stream refining), institutional, commercial and industrial boiler, chemical, and petrochemical industries.

Our ClearSign

Core technology, which is our primary technology, uses a porous ceramic structure or metal flame holder device held at a distance from

the injection planes of a burner to significantly reduce flame length and achieve very low emissions without the need for external flue

gas recirculation, selective catalytic reduction, or excess air systems.

To date, our operations have been funded primarily through sales

of our equity securities.

We design and develop technologies that have been shown to significantly improve key performance characteristics of industrial combustion systems, including emission and operational performance, energy efficiency, safety and overall cost-effectiveness.

We believe that our patented ClearSign Core™ technology can enhance the performance of combustion systems in a broad range of markets, including the energy (upstream oil production and down-stream refining), institutional, commercial and industrial boiler, chemical, and petrochemical industries.

Our ClearSign Core technology, which is our primary technology, uses either a porous ceramic structure or metal flame holder device held at a distance from the injection planes of a burner to significantly reduce flame length and achieve low emissions without the need for external flue gas recirculation, selective catalytic reduction, or high excess air systems.

To date, our operations have been funded primarily through sales of our equity securities.

We have earned nominal revenue since inception in 2008.

Our combustion technology has been successfully

installed in commercial projects across four different combustion applications.

These applications include our process burner technology

which is currently being optimized to suit high-intensity multiple burner industrial applications and our boiler burner technology which

is being configured to achieve performance certification for commercialization in China and also deployment in the USA.

Based on the results

of our testing and initial field installations, we believe that combustion equipment utilizing ClearSign Core technology is more effective

and cost-efficient than current industry-standard air pollution control technologies, such as selective catalytic reduction devices, low-

and ultra-low NOx burners (which address nitrogen oxides or NOx), external flue gas recirculation systems and other similar technologies.

Such air pollution control systems are widely used in places within our current target markets such as in petroleum refining and petrochemical

process heaters, large-scale once through steam generators (OTSGs), enclosed flares, institutional commercial and industrial boilers and

other similar equipment.

We believe that our ClearSign Core technology can provide value to our prospective customers not only by helping

them meet current and possible future legislative mandates to reduce pollutant emissions, but by also increasing operating efficiency

and reducing capital expenditures while remaining compliant with operating permit emissions requirements.

Based on the limited operating data we have obtained

from installations, burners utilizing ClearSign Core technology provide increased heat transfer efficiency compared to standard burner

Our combustion technology has been successfully deployed in commercial projects such as down-stream refining, upstream oil production and industrial boiler installations.

These applications include both our process burner and boiler burner technologies.

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.

We believe that combustion equipment utilizing ClearSign Core technology is more effective and cost-efficient than current industry-standard air pollution control technologies, which reduce NOx down to the levels required by new emission regulations.

NOx is a regulated greenhouse gas pollutant comprised of nitrogen oxide and nitrogen dioxide.

These current technologies include selective catalytic reduction devices (SCRs), low- and ultra-low NOx burners, external flue gas recirculation systems and other similar technologies.

Such air pollution control systems are widely used in places within our current target markets such as in petroleum refining and petrochemical process heaters, large-scale once through steam generators (OTSGs), enclosed flares, institutional commercial and industrial boilers and other similar equipment.

We believe that our ClearSign Core technology can provide value to our customers not only by helping them meet current and possible future legislative mandates to reduce pollutant emissions, but also by improving operating efficiency and increasing overall return on investment.

Based on the operating data we have obtained from our installed products, burners utilizing ClearSign Core technology can provide increased heat transfer efficiency as compared to standard burner designs.

This is consistent with the physics of heat transfer and the mechanisms by which the technology functions.

The increased heat

transfer efficiency as reported potentially results in cost savings in the low to mid-single digit percentage range, which we believe

would produce an extremely attractive pay-back period for an investment in ClearSign Core technology-based burners.

In addition, since

the flames in a ClearSign Core system are established from a predominantly premixed stream of fuel, combustion air and flue gasses, and

are stabilized on a downstream structure that promotes turbulence and ignition the flames form with minimal “bulking up”

typically results from the traditional slow mixing of the fuel and air, and dilutive inert flue gasses.

The result of this is that flame

volumes are small, thus virtually eliminating flame impingement and enabling the burners to function better in tightly spaced heaters

compared to the flames of traditional low NOx burners.

As a result, heaters utilizing ClearSign Core technology appear to require less

maintenance, operate at a lower cost, and have increased productivity compared to heater operations constrained by traditional enlarged

low NOx flames and limited internal furnace volumes.

Most importantly, using our technology has the potential to decrease process downtime.

Although less developed at this time, we are designing

and commercializing a range of sensing products.

The market potential can be viewed as a primary addressable market and a secondary potential

The primary addressable market is similar to that of our ClearSign Core technology.

We expect our technology to replace the existing

flame sensing technology.

In addition, the flame sensing products are applicable to all installed burners, including in markets and regions

beyond those where reducing emissions is a high priority.

The secondary potential market is outside of the typical combustion industry

and includes transportation industries.

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.

We believe our sensing technologies provide valuable diversification for our future business and that they have wide-ranging global applications,

as compared to our burner technology which is focused on regions requiring emissions reduction.

Like the burner technology, the burner

sensing technology is being developed to provide convenient replacement and retrofit solutions in existing equipment in addition to inclusion

in newly built equipment.

We believe that the opportunities for applications of our sensor technology in the transportation market are

global and of great value but will also take longer to commercialize for the reasons stated above.

We anticipate that this will allow

for the continued expansion and growth of our business beyond the maturation of our combustion related businesses.

The reported increased heat transfer efficiency may potentially result in cost savings in the low to mid-single digit percentage range for burners employing our technology.

We believe that these potential costs savings could produce an extremely attractive pay-back period for an investment in ClearSign Core technology-based burners.

In addition, because the flame volumes in heaters utilizing ClearSign Core technology are typically small, heaters using our technology are expected to operate at a lower cost, have increased productivity, and require less maintenance and downtime compared to heaters that operate with enlarged flames produced by traditional low NOx burners.

The flames in a ClearSign Core system are established from a predominantly premixed stream of fuel, combustion air and flue gasses stabilized on a downstream structure that promotes turbulence and ignition with minimal “bulking up”.

In comparison, flames resulting from the traditional legacy process of slow mixing of the fuel and air, and dilutive inert flue gasses have a much larger size.

With a lower volume flame in a ClearSign Core system, surfaces in the heater or boiler experience less touching by the flame and it is anticipated that our systems can virtually eliminate flame impingement.

Our technology also enables burners to function better in tightly spaced heaters compared to the flames of traditional low NOx burners.

Most importantly, using our technology has the potential to decrease process downtime required during installation compared to retrofits utilizing the legacy technology of SCRs or flue gas recirculation systems.

We are also designing and commercializing a range of sensing products called the ClearSign Eye TM for two potential markets.

The primary addressable market is similar to that of our ClearSign Core technology, although not limited to regions requiring emissions reduction.

The flame sensing products are applicable to all installed burners that use a pilot for ignition, including in markets and regions beyond those where reducing emissions is a high priority.

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.

We expect our flame sensing technology products to replace existing flame sensing technology.

The secondary potential market for our sensing technology is outside of the typical combustion industry and includes transportation industries.

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.

We believe that the opportunities for application of our sensing technology in the transportation market are global and of great value, but it will also take longer to commercialize products targeted for this market for the reasons stated above.

Overall, our sensing technologies could provide future diversification as well as the opportunity for continued business expansion and growth beyond the maturation of our combustion-related businesses.

Corporate History

We were incorporated in Washington on January 23,

The address of our corporate headquarters is 12870 Interurban Avenue South, Seattle, Washington 98168 and our telephone number is

(206) 673-4848.

We were incorporated in the State of Washington on January 23, 2008.

The address of our corporate headquarters is 8023 East 63rd Place, Suite 101, Tulsa, OK and our telephone number is (206) 673-4848.

Our website can be accessed at www.clearsign.com .

The information contained on or that may be obtained from our

website is not a part of this report.

We currently operate in the United States and through a subsidiary in the People’s Republic

The combustion and emissions control markets are

significant, both in the wide array of industries in which the systems are used and in the amount of money spent in installing and upgrading

Combustion systems are used to provide heat for all manner of industrial processes, including boilers, furnaces, kilns and gas

In order to maximize energy efficiency while keeping pace with regulatory guidelines for air pollution emissions, operators

of combustion systems are continually installing, maintaining and upgrading a variety of costly process control, air pollution control

and monitoring systems.

Although we believe that there are many potential markets for our ClearSign Core technology, to date we have limited

the introduction of this technology to petroleum refining process heaters, energy infrastructure process heaters, steam generation, boiler

burners, and enclosed flares.

Our initial target markets center on the energy

sector, including upstream crude oil production through the use of OTSGs and wellhead enclosed flares and downstream oil refineries through

the use of process heaters and boilers.

In recent years, the energy sector has been significantly affected by the volatile market price

of crude oil and marginal economic growth.

Crude oil prices stabilized during 2016 and 2017 and enjoyed appreciation with the general

post 2016 upswing in certain commodities and improved economic outlook.

Prices plunged with the economic uncertainties that emerged from

the pandemic in the spring of 2020 but stabilized through the summer and returned to pricing that is close to the five year average by

the end of 2020.

Regardless of the effect of crude oil price volatility, based upon our experience and feedback from current and prospective

customers, we believe that the value of our ClearSign Core burner technology to the energy sector continues to be validated because of

the technology’s ability to cost-effectively lower emissions and drive certain operational efficiencies.

We believe operators in all of our domestic target

markets are under pressure to meet current and proposed federal, state and local pollution emissions standards.

The standards applicable

to our target markets have been developed over the past 50 years with broad political input.

Due to the localized effects of poor air

quality, we expect these standards to continue to become more stringent regardless of political leadership.

We believe this to be the

case in the U.S.

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 combustion and emissions control systems markets are significant, both with respect to the wide array of industries in which the systems are used and the amount of capital spent installing and upgrading the systems.

Combustion systems are used to provide heat for many different industrial and commercial processes, including boilers, petrochemical process heaters, and waste disposal systems.

In order to maximize energy efficiency while keeping pace with regulatory guidelines for air pollution emissions, operators of combustion systems are continually installing, maintaining, and upgrading a variety of costly process control, air pollution control and monitoring systems.

Although we believe that there are many potential markets for our ClearSign Core technology, to date we have limited the introduction of this technology to petroleum refining process heaters, energy infrastructure process heaters, boilers for steam and hot water generation, boilers for building heating systems, and enclosed flares.

Our initial target markets centers on the energy sector, including downstream oil refineries through the use of process heaters and boilers as well as upstream crude oil production through the use of Once Through Steam Generator (OTSGs) and wellhead enclosed flares.

In recent years, the energy sector has been significantly affected by the volatile market price of crude oil and marginal economic growth.

Crude oil prices stabilized during 2016 and 2017 and enjoyed appreciation with the general post 2016 upswing in certain commodities and improved economic outlook.

Prices plunged with the economic uncertainties that emerged from the pandemic in the spring of 2020 but stabilized through the summer and returned to pricing that is close to the five-year average by the end of 2020 and has now experienced increased prices during 2021.

While oil price levels and volatility impact the planning of capital expenditure in the oil processing industry, based upon our experience and feedback from current and prospective customers, we believe that the value, and anticipated demand for our technology continues to be validated notwithstanding energy sector market conditions.

This validation is grounded in our technology’s ability to cost-effectively lower emissions to meet new air pollution requirements, and potentially deliver operational efficiencies by increasing overall throughput for a more attractive return on investment.

We believe operators in our domestic target markets are under pressure to meet current and proposed federal, state and local pollution emissions standards.

The standards applicable to our target markets have been developed over the past 50 years with broad political input.

Due to the localized effects of poor air quality, we expect these standards to continue to become more stringent regardless of political leadership.

As an illustration, air pollution emission standards are most stringent in the states of California and Texas, which historically have had leadership from different political parties.

We believe this to be the case in the U.S.

and worldwide in most major developed and developing countries.

As an illustration, air pollution emission standards

are most stringent in the states of California and Texas, two states which, historically have had leadership from different political

As a result, these standards are a significant driver for our development and sales efforts.

We believe that our ClearSign Core

technology can provide a unique, cost-effective pollution control solution for operators in comparison to all known competing products.

standards largely emanate from the Clean Air Act, which is administered by the Environmental Protection Agency (EPA) and regulates six

common criteria air pollutants, including ground-level ozone.

These regulations are enforced by state and local air quality districts

as part of their compliance plans.

As a precursor to ground-level ozone, NOx is a regulated pollutant by local air quality districts in

order to achieve the EPA limits.

The 8-hour ground-level ozone regulations have been reduced from 84 parts per billion (ppb) in 1997,

to 75 ppb in 2008, and 70 ppb in 2015, with the requirement of realizing these levels approximately 25 years following the year of legislation.

have noted that local air quality districts in EPA designated “severe non-attainment zones”

in California and Texas have undertaken

a review of their air pollutant emissions regulations.

In most regions these reviews are ongoing but the amended regulations for the San

Joaquin Valley region of California issued in December 2020 indicate a significant reduction in the target NOx emissions from boilers,

steam generators and process heaters and it is anticipated that the outcome of the rule revisions from the other non-attainment regions

will be similar.

NOx emissions from refineries and other oil production and processing operations are highly regulated as they are considered a significant

source of stationary NOx emissions, enclosed flares have not historically been viewed as a source requiring the same level of regulation.

We believe that our ClearSign Core technology is uniquely able to address the emissions challenges being faced by oil producers and other

industries as those challenges relate to both current and reasonably predictable future local air emission standards.

Additionally, we believe that current emissions

standards in Europe, the Middle East, parts of Asia and Canada will continue to trend towards stricter air emission standards as these

jurisdictions seek to achieve cleaner air.

Existing and new emissions standards in such jurisdictions may create additional market opportunities

We believe that our ClearSign Core technology can provide a unique, cost-effective pollution control solution for operators in comparison to all known competing products.

In the US, emissions standards largely emanate from the Clean Air Act, which is administered by the Environmental Protection Agency (EPA) and regulates six common criteria air pollutants, including ground-level ozone.

These regulations are enforced by state and local air quality districts as part of their compliance plans.

As a precursor to ground-level ozone, NOx is a pollutant that is regulated by local air quality districts in order to achieve the EPA limits.

The 8-hour ground-level ozone regulations

have been reduced from 80 parts per billion (ppb) in 1997, to 75 ppb in 2008, and 70 ppb in 2015, with the requirement of realizing these levels approximately 20 years following the year of legislation.

We have noted that local air quality districts designated by the EPA as “severe non-attainment zones” in California and Texas have undertaken a review of their air pollutant emissions regulations.

These reviews are ongoing, in most regions, but two important regions have recently amended their local regulations to improve air quality.

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.

Under these revised regulations, it abandoned a decades old cap and trade system and instituted a new command and control system that regulates each individual emissions source.

It also 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.

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.

We believe that our ClearSign Core technology is well-suited to address the challenges faced by oil producers and other industries in complying with current and predicted future local air emission standards.

There are multiple ClearSign Core flare applications now operational in California with NOx emissions below the levels required by new regulations.

In addition, we believe that current emissions standards in Europe, the Middle East, parts of Asia and Canada will continue to become stricter as these jurisdictions seek to achieve cleaner air.

Existing and new emissions standards in such jurisdictions may create additional market opportunities for us.

To date, we have one installation operating in the refinery of a major global oil refiner in Europe.

The current environmental impetus to reduce CO2 emissions has created an interest in burner technology that can use hydrogen as a fuel source.

Because hydrogen burns at a higher temperature than most other fuel gasses, it tends to create more NOx emissions.

ClearSign Core burners have demonstrated the ability to burn fuels with up to 80% hydrogen while still controlling NOx emissions to meet required regulatory levels.

We believe that we can extend the capability of our ClearSign Core technology to burn “pure” hydrogen fuel.

Our Proprietary Technology

ClearSign Core Burner Technology

The name “ClearSign Core”

to describe the inclusion of ClearSign’s burner technology in the products of original equipment burner manufacturers.

our technology in OEM burner products enables us to leverage our technology by providing OEMs with the ability to offer a new product

range with our technologies’

unique capabilities and distinctively differentiated product performance in combination with their

global manufacturing, order fulfillment and service capabilities.

ClearSign Core burner technology consists of an industrial burner body and a downstream porous ceramic structure or metal flame stabilizing

When the unreacted mixture of gaseous fuel and air is directed at the ceramic or metal downstream flame stabilizing structure,

the mixture ignites and the flame forms either within or immediately downstream of the structure itself.

Because the fuel and air have

more time to mix, the homogeneous mixture mitigates NOx-forming hot spots and the associated chemistry that is typically produced.

The mixing and combustion propagating from the flame stabilizing structure results in a dramatically shorter flame, and modification of

the structure enables a high level of control over the shape of the flame.

As a result, the flame can be optimized for a wide range of

different applications.

NOx, a regulated greenhouse gas pollutant comprised of nitrogen oxide and nitrogen dioxide, can be greatly reduced,

often to levels of 5 ppm or below, depending on the specific application, without any external fans or associated power, thereby minimizing

harmful emissions while improving system efficiency.

A shorter flame can often allow for operation of the furnace at a higher capacity.

We believe ClearSign Core’s flame structure and heat transfer profile, which results from the premixing of fuel, flue gas and combustion

air in combination with the downstream flame stabilizing device enhances thermal efficiency, minimizes the possibility of flame impingement,

reduces the likelihood of carbon deposits forming on the inside surfaces of the process tubes (coking) and reduces the likelihood of process

tube failure;

thereby extending the length of time a heater can remain in operation before the need for maintenance.

ClearSign Core Plug & Play

Our ClearSign Core Plug & Play product

provides a simplified, pre-engineered and standardized direct burner replacement for traditional refinery process heaters.

that this product will minimize the customized engineering associated with retrofits and lend itself to mass production.

The product derives

its name from the fact that it is designed to allow quick and easy installation into a multi-burner heater or furnace and possibly allow

the heater to continue operating during installation rather than be shut down.

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 while the remaining burner system is operational, will lead to increased demand for, and ultimately sales of,

our ClearSign Core burners.

The name “ClearSign Core” was adopted to describe the inclusion of ClearSign’s burner technology in the products of original equipment burner manufacturers (OEM).

Including our technology in OEM burner products enables us to leverage our technology by providing OEMs with the ability to offer a new product range with our technologies’ unique capabilities and distinctively differentiated product performance in combination with their global manufacturing, order fulfillment and service capabilities.

Our ClearSign Core burner technology consists of an industrial burner body and a downstream flame stabilizing structure made of either porous ceramic or metal.

When the unreacted mixture of gaseous fuel and air is directed at the flame stabilizing structure, the mixture ignites and the flame forms either within or immediately downstream from the structure itself.

Because the fuel and air have more time to become a homogeneous mixture, NOx-forming hot spots and chemistry typically produced by such hot spots is reduced.

In addition, the mixing and combustion propagating from the flame-stabilizing structure results in a dramatically shorter flame.

The ability to modify the flame stabilizing structure enables a high level of control over the flame shape for optimization in a wide range of different applications.

For example, we believe our ClearSign Core products, without any external fans or associated power, can significantly reduce the harmful emission of NOx to levels of 5 ppm or below, depending on the application, while improving system efficiency.

The shorter flame in a ClearSign Core product can also potentially allow a furnace to operate at a higher capacity.

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.

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 this product minimizes the customized engineering associated with retrofits and lends itself to mass production.

The product was designed to enable quick and easy installation while operating in a multi-burner heater or furnace, rather than shutting it down.

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 while the remaining burner system is operational, will potentially contribute to demand for our ClearSign Core Plug & Play burners.

ClearSign Core Boiler Burner Technology

Our ClearSign Core boiler burner technology is,

in essence, the same as the process burner technology.

The details of the components are different due to the different orientation of

the boiler application, the different internal chamber dimensions and the fact that a boiler operates with a relatively high combustion

air pressure, and in the case of a small fire tube boiler, a lower fuel gas pressure.

The concept of incorporating the ClearSign Core

technology into a typical OEM burner remains the same.

Our ClearSign Core technology for boiler burners is essentially the same as our technology for process burners but with different component details.

Boiler burners have a different orientation and internal chamber dimensions, operate with a relatively high combustion air pressure, and, in the case of small fire tube boiler burners, have a lower fuel gas pressure.

Our go to market strategy of incorporating the ClearSign Core technology into a typical OEM process burner is the same as for our boiler burners.

ClearSign Core Flaring Burners

Our ClearSign Core flaring technology incorporates

the same principles as our burner technology, namely directing the fuel gas, in this case typically waste gas, into an air stream with

that air and gas mixture forming a flame stabilized on a downstream flame stabilizing structure.

This technology has been configured into

standard modular designs that can be incorporated into a flare manufacturer’s flare body to provide a flare product with the extremely

low emissions production enabled by our ClearSign technology.

The standardized flare configurations are designed with standard firing

capacities, and these are combined in varying quantities to enable flares to be produced with different firing rates.

ClearSign Eye™

The ClearSign Eye™

flame sensor is an electrical

flame sensor for industrial applications.

Unlike flame rods, sensing electrodes do not have to make contact with the flame.

We are continuing

to pursue opportunities for this patented sensing technology through both laboratory research, where we have demonstrated certain favorable

attributes of this proprietary technology operating at lab scales, in addition to the initial commercial activities currently being conducted

with our pilot flame sensors.

We have multiple options open to us as channels to market, including manufacturing the sensors as a ClearSign

original equipment manufacturer, or OEM, product that we sell either directly or through partners and intermediaries to prospective customers

which is our current commercialization activity for this product line.

The value of our sensing technology is that we believe it provides

a very reliable alternative or replacement technology for critical safety equipment that is typically very unreliable and requires frequent

maintenance on industrial burners.

There are additional favorable opportunities for flame sensors on other combustion equipment such as

flares, thermal oxidizer burners and boiler burners.

Our sensing technology detects the capacitance

of a flame, thereby permitting the sensors to function while being physically outside of the flame envelope.

This allows the entire sensor

probe to be positioned in a cool region, enabling the use of materials and manufacturing processes that provide an extremely long functional

The electrodes are optimized in shape to provide the most robust signal while being easy to retrofit into existing burner equipment.

Development and Deployment 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 products.

Retrofits often involve engineering around an existing burner architecture that can complicate the ClearSign Core burner installation,

whereas replacements are more straightforward and more amenable to being sold and installed by third parties, enabling more expansive

channels to market.

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.

Because of this, we have focused the development of our technology to provide designs that can be included into our prospective customers’

equipment as self-contained modules or assemblies rather than projects involving the re-engineering of existing burner systems.

form, we believe that the ClearSign Core burner technology is ideally suited for installation into new heaters and burner replacements,

including heater and furnace types requiring large quantities of burners.

We have also developed the ClearSign Core flare and boiler burner

technologies into similar repeatable forms to aid its inclusion in standard industry equipment on a commercial scale.

For simplification and marketing, we have adopted

the term “ClearSign Core”

to refer to the inclusion of our standardized proprietary combustion technology into a variety of

combustion equipment types including, but not limited to, process heater burners, boiler burners, burners for thermal oxidizers and flares.

Earlier heater retrofits in which a continuous ceramic “wall”

was suspended above the existing burners also still operate

and continue to be referred to as “Duplex”

The combustion controlling principles of both the “ClearSign

and “Duplex”

technologies are the same, however the difference is in the ease of use, channel to market and standardization

of the technology.

We have now achieved emission results in multiple

applications that were superior to current local Best Available Control Technology (BACT) levels in multiple installations in California

related to three of our five target industries.

We intend to continue to demonstrate ClearSign Core capabilities through (i) working

with local air quality officials to demonstrate the effectiveness of the technology, (ii) operating in-place units, (iii) engineering

and testing with new customers, (iv) pursuing additional lab research and developing new applications (e.g.

institutional commercial

and industrial boilers) and next generation improvements to ClearSign Core design and standardization, including the pursuit of more complete

systems similar to the ClearSign Core Plug & Play for application in other vertical markets, and (v) assisting our customers

in making emission results available for designation as BACT by local regulatory bodies.

Our ClearSign Core flaring technology incorporates the same mechanisms as our burner technology, namely directing the fuel gas (typically waste gas), into an air stream with that air and gas mixture forming a flame stabilized downstream on a flame stabilizing structure.

This technology has been configured into standard modular designs that can be used individually, or in combination, to provide a flare product with extremely low NOx emissions.

We have designed standardized flare configurations with standard firing capacities that can be combined in varying quantities to produce flares with different firing rates.

ClearSign Eye™ Flame Sensor

The ClearSign Eye™ flame sensor is an electrical flame sensor for industrial applications.

Unlike 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.

We have multiple options open to us as channels to market one of which includes manufacturing the sensors ourselves as an OEM and selling them to customers either directly or indirectly through intermediaries.

We believe our sensing technology is valuable because it potentially provides a very reliable alternative or replacement technology for critical industrial burner safety equipment.

The currently available flame sensors are unreliable and require frequent maintenance.

Our flame sensors can potentially be used with other combustion equipment such as flares, thermal oxidizer burners and boiler burners.

Our sensing technology can detect the capacitance of a flame while being physically outside of the flame envelope.

As a result, our sensors can be easily retrofitted into existing burner technology.

In addition, because the entire sensor probe can be positioned in a cool region, the ClearSign Eye can be manufactured with electrodes that have an optimized shape to provide the most robust signal and using processes and materials that provide an extremely long functional life.

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.

Retrofits often involve engineering around an existing burner architecture that can complicate the ClearSign Core burner installation, whereas replacements are more straightforward and more amenable to being sold and installed by third parties, enabling more expansive channels to market.

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.

Because of this, we have focused the development of our technology to provide designs that can be included into our prospective customers’ equipment as self-contained modules or assemblies rather than projects involving the re-engineering of existing burner systems.

In this form, we believe that the ClearSign Core burner technology is ideally suited for installation into new heaters and burner replacements, including heater and furnaces requiring large quantities of burners.

In addition, this strategy also provides for simple new burner installations, or burner replacements to reduce emissions in boilers ranging from small fire tube boilers to large water tube boilers.

We have also developed the ClearSign Core flare technology into similar repeatable forms to aid its inclusion in standard industry installations on a commercial scale with multiple installations now operational in California.

For simplification and marketing, we have adopted the term “ClearSign Core” to refer to the inclusion of our standardized proprietary combustion technology into a variety of combustion equipment types including, but not limited to, process heater burners, boiler burners, burners for thermal oxidizers and flares.

Earlier ClearSign technology-based heater retrofits, in which a continuous ceramic “wall” was suspended above the existing burners, also continue to operate, and are referred to as “Duplex” technology.

Although the combustion controlling principles of both the “ClearSign Core” and “Duplex” technologies are the same, ClearSign Core products have standardized technology and we believe they are easier to use and have a different channel to market.

ClearSign Core burners currently operate in multiple boilers, heaters and flares and meet new compliance standards enacted by California air authority.

We also have products in commercial use in Europe and certified for sale in the Chinese boiler market.

As noted above, our principal technologies have been developed into standardized designs.

Our business development activities are now focused on developing customer acceptance and adoption within what we believe are the most efficient channels to market.

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.

We also seek to provide comprehensive technical support to our sales efforts as well as demonstrate our technology and products in operation.

We are currently able to demonstrate our products while operating in rental boilers, industrial scale process burner test furnaces, and at customer locations when permissible.

ClearSign Core Technology Product Applications

To date, we have deployed our ClearSign Core technology

through retrofits and replacements of existing burners.

As noted above, retrofits often involved engineering around an existing burner

architecture that can complicate the installation.

This was the case with the old “Duplex”

technology, which we no longer

install other than for the servicing of existing units.

Replacements are more straightforward, especially after the introduction of our

Plug & Play technology in February 2017, now developed into our ClearSign Core.

By developing our ClearSign Core technology

to enable a replacement product, we are able to standardize our designs, simplify inventory and, by removing the need to individually

engineer every application, we are able to collaborate with other commercial equipment suppliers to incorporate our ClearSign Core technology

into their standard product lines, greatly increasing our potential market reach and the resources we are able to make available to our

prospective customers.

Process Heaters in the Oil Refining Industry

To date, we have retrofitted two multi burner process

heaters with our new ClearSign Core burners, two process heaters with the old standard Duplex design and one demonstration unit with the

prior Duplex Plug & Play design.

The ClearSign Core “Plug & Play”

design provides a more simplified, pre-engineered

and standardized direct burner replacement for traditional refinery process heaters.

We believe that this product will reduce the customized

engineering associated with typical retrofits and lend itself to mass production.

This is our most developed burner product, able to operate

in the same way as a standard burner and to fit into a heater and 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.

At this time we have a collaboration agreement in place with the world’s second largest combustion equipment manufacturer Zeeco

This agreement is contingent on the successful completion of a comprehensive product performance and validation test which is part

of an equipment supply order for ExxonMobil.

We believe we are close to achieving success with this test.

In February 2021 we received

a purchase order from a second global supermajor refining company, and our first international order for a ClearSign Core refining process

We plan to continue extending the range of ClearSign

Core Plug & Play devices to allow the replacement of other burner shapes and configurations, as well as alternate process applications,

to further enhance the market available for this product.

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.

Our replacement products have become more attractive since the 2017 introduction 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.

By developing our ClearSign Core technology into a replacement product, we have been able to standardize our designs and simplify inventory.

In addition, by removing the need to individually engineer every application, we have enabled collaboration with other commercial equipment suppliers to incorporate our ClearSign Core technology into their standard product lines.

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.

Process Heaters in the Oil Refining, Petrochemical and Gas Processing Industries

To date, we have retrofitted four process heaters with our new ClearSign Core burners for major global oil refineries and at refineries owned by Fortune 500 companies.

Sites include three locations in California and one in Europe.

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.

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.

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.

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.

This international order was installed in 2021 and successfully placed it into full operation by the customer in January 2022.

We also received in 2021 a purchase order from a national Fortune 500 refiner.

This order marks the first phase of a multi-phase opportunity to supply sixteen burners to retrofit two heaters in a Midwest refinery.

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.

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.

Industrial Commercial Boilers

Boilers are used in many industrial applications, and smaller scale commercial and residential applications, to generate steam and hot water.

A large number of boiler manufacturers produce many styles of boiler equipment for these different applications.

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 capacity 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.

We are currently actively working on commercial boiler applications for fire tube and water tube boilers.

For fire tube products, we have recently developed our own prototype burner replacement product that is similar in concept to our ClearSign Core Plug & Play device for process heaters.

This fire tube boiler product has achieved excellent results after being tested in a typical commercial fire tube boiler produced by one of the industry’s largest suppliers in the USA.

We have a collaboration agreement in place with California Boiler to sell, deliver, install and service fire tube boiler burners in the USA.

This collaboration has enabled us to access larger sizes of fire tube boilers in order to verify the function of a full size range of fire tube boiler burners.

If the testing is successful in China, our goal will be to sell the boiler burner technology into the very large Chinese market through our Chinese subsidiary in collaboration with strategic partners in China.

Water tube boilers are larger and more varied in their designs and verification projects are ongoing.

We anticipate being able to make continued progress during 2022 with respect to testing and installing this equipment, although progress has been delayed with respect to fire tube and water tube boilers in China by the effects of the SARS-COV-2 virus (coronavirus or COVID-19).

Our “Core” boiler burner technology has been developed to enable it to be used in a complete range of consistently designed sizes ranging from small fire tube boilers up to large industrial water tube boilers.

These boiler burners have achieved excellent results, including meeting the most stringent new California NOx regulations, in standard commercial boilers.

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.

Ltd and one of China's top 500 enterprises.

We anticipate making continued progress during 2022 both demonstrating and commercializing this equipment, although our progress may continue to be delayed by the effects of the SARS-COV-2 virus (coronavirus or COVID-19).

Water tube boiler burners are particularly important in China because the government-run heating districts that provide heat in the northern regions of China utilize thousands of them.

Successfully testing and certifying our products in China will enable us to sell our boiler burner technology into this very large market through our Chinese subsidiary in collaboration with our strategic partners in China.

Wellhead Enclosed Flares

Based upon discussions with local regulators and

examination of regulatory reports, we believe that enclosed flare emissions are a target for increased regulation in certain regions.

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.

To date with have ten flare units installed and operating.

2019, with the development of our standardized ClearSign Core flare technology, we formed a non-exclusive collaborative alliance with

the flare OEM, ASHCOR, to enhance our potential sales reach and production capabilities while providing ASHCOR with unique product capability.

We have also formed sales and installation agreement with field engineering and servicing company California Boiler.

The most recent installation

of four of these flare units were the result of these collaborations.

Our collaboration agreement with the field engineering and servicing company California Boiler includes flare sales and installation.

To date, we have five flare units installed and operating in California resulting from this collaboration agreement.

OTSGs for the Enhanced Oil Recovery Industry

We have successfully installed our Duplex technology

in three OTSG projects in the enhanced oil recovery industry in California.

We believe that these successful installations are gaining

acceptance by the Southern California regulatory authorities and, as a result, market acceptance as well.

Field data reported by our customer

indicates significant efficiency improvements resulting from the installation of the ClearSign technology.

Industrial Commercial Boilers

There are a large number of boiler manufacturers

producing many styles of boiler equipment for many different applications.

Boilers are used in many industrial applications, as well as

in commercial and residential applications at much smaller scales.

We are currently actively working on commercial boiler applications

for two distinct types of industry standard commercial boilers –

fire tube and water tube boilers.

For fire tube products, we have

recently developed our own prototype burner replacement product that is similar in concept to our ClearSign Core Plug and Play device

for process heaters.

This product has achieved excellent results after testing in a typical commercial fire tube boiler produced by one

of the industry’s largest suppliers in the USA and in a second demonstration installation in China.

Water tube boilers are larger

and more varied in their designs.

Water tube boiler burner and fire tube boiler burner field verification projects are being undertaken

in China and are ongoing.

We anticipate significant progress during 2021 in testing this equipment although progress has been delayed

by the effects of the SARS-COV-2 virus (coronavirus or COVID-19).

We have a collaboration agreement in place with California Boiler to

sell, deliver, install and service fire tube boiler burners in the USA.

This collaboration also allows access to larger sizes of fire

tube boilers to verify the function of a full range of fire tube boiler burners.

If the testing is successful in China, our goal will

be to sell the boiler burner technology into the very large Chinese market through our Chinese subsidiary in collaboration with strategic

partners in China.

We have successfully installed our Duplex technology in three OTSG projects in the enhanced oil recovery industry in California.

We believe that these successful installations are gaining acceptance by the Southern California regulatory authorities and, as a result, market acceptance as well.

Field data reported by our customers indicates significant efficiency improvements resulting from the installation of the ClearSign technology.

We believe our new standardized boiler burner range of products is also well suited to this application.

Technical Components of our ClearSign Core Technology

ClearSign Core burner technology consists of an industrial burner with our ClearSign Core technology added in place of the traditional

burner gas tips, flame stabilization device and refractory tile.

The ClearSign Core consists of a series of gas tips arranged inside the

combustion air stream at the point it passes the boundary into a heater.

Some distance downstream is a primary or ignition device followed

by the porous ceramic structure or metal flame stabilizing device.

Between the injection point of the fuel gas and the primary or ignition

device is a support structure and a mixing tube or tubes that optimize the flow of the fuel and air mixture onto the primary or ignition

device and the flame stabilizing device.

When the unreacted mix of gaseous fuel and air is directed at the flame stabilizing structure,

the mixture ignites and burns within or immediately downstream of the structure.

Because the fuel and air have more time to mix, the

homogeneous mixture greatly reduces NOx- forming hot spots that are typically produced with existing technology.

The premixing of the

fuel and combustion air in combination with the accelerated ignition and flame formation created by the downstream flame stabilization

device results in a dramatically shorter flame.

NOx, a regulated pollutant comprised of nitrogen oxide and nitrogen dioxide, is greatly

reduced, often to levels of 5ppm or below, depending on the specific application, without any external fans or associated power, thereby

minimizing harmful emissions while improving system efficiency.

A shorter flame allows for consistent operation of the furnace at

a higher capacity.

As noted above, we believe ClearSign burner technologies’

heat transfer profile both increases a heater’s

productivity and operational run time and reduces heater maintenance costs by:

(i) enhancing thermal efficiency, (ii) reducing

the probability of flame impingement and the likelihood that carbon deposits form on the inside surfaces of the process tubes (coking),

and (iii) reducing the likelihood of process tube failures.

Our ClearSign Core burner technology consists of an industrial burner exterior body with our ClearSign Core technology in the interior.

With our patented technology, the ClearSign Core replaces the traditional burner internal elements that control flame structure and formation, including the gas tips, flame stabilization device and refractory tile.

Our ClearSign Core technology consists of a series of gas tips arranged inside the combustion air stream at the point it passes the boundary into a heater.

Some distance

downstream is a primary or ignition device followed by a ceramic or metal flame stabilizing structure.

Between the injection point of the fuel gas, and the primary or ignition device, is a support structure and mixing tube or tubes that optimize the flow of the fuel and air mixture onto the primary or ignition device and the flame stabilizing device.

When the unreacted mix of gaseous fuel and air is directed at the flame stabilizing structure, the mixture ignites and burns within or immediately downstream of the structure.

Because the fuel, air and any entrained flue gas have more time to mix in the ClearSign Core, the homogeneous mixture greatly reduces hot spots that are typically produced with existing technology and form NOx.

The premixing of the fuel and combustion air in combination with the accelerated ignition and flame formation created by the downstream flame stabilization device also results in a dramatically shorter flame.

In addition, NOx is greatly reduced, often to levels of 5ppm or below, depending on the specific application, without any external fans or associated power, thereby minimizing harmful emissions while improving system efficiency.

A shorter flame also allows for consistent operation of a furnace at a higher capacity.

As noted above, we believe the heat transfer profile of ClearSign’s burner technology both increases a heater’s and boiler’s productivity and operational run time and reduces heater maintenance costs by:

(i) enhancing thermal efficiency, (ii) reducing the probability of flame impingement and the likelihood that carbon deposits form on the inside surfaces of heater process tubes (coking), and (iii) reducing the likelihood of heater process tube failures.

Refinery and Petrochemical

Heater Technology

Boiler Technology

ClearSign Core Performance

We have now achieved emission results in multiple

applications that exceeded current local BACT levels, including in multiple installations in California related to three of our five target

As indicated above, we intend to continue to demonstrate ClearSign Core capabilities through (i) working with local air

quality officials to demonstrate the effectiveness of the technology, (ii) operating in-place units, (iii) engineering and testing

with new customers and applications, (iv) pursuing additional lab research and development of new applications and next generation

improvements to ClearSign Core design and standardization, including the pursuit of more complete systems similar to the process burner

ClearSign Core Plug & Play for applications in other vertical markets, and (v) assisting our customers in making emission

results available for designation as BACT by local regulatory bodies.

We currently have ClearSign Core burners operating in multiple boilers, heaters and flares.

These operating burners meet new compliance standards enacted by California air authority.

We also have products in commercial use in Europe and that are certified for sale in the Chinese boiler market.

Our principal technologies have been developed into standardized designs and our business development activities are now focused on developing customer acceptance and adoption, and efficient channels to market.

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.

We also seek to provide comprehensive technical support to our sales efforts as well as demonstrate our technology and products in operation.

Currently, we have the ability to demonstrate our products in rental boilers, industrial scale process burner test furnaces, and, where permissible, in operational installations at customer locations.

Our Target Markets

Our ClearSign Core products compete in the combustion

and emissions control markets.

These are highly competitive industries that are currently dominated by companies which, compared to ClearSign,

have more established products and substantially greater infrastructure, customer support networks, and financial resources.

the testing and the field installations completed to date, however, we believe that our ClearSign Core technology provides a unique and

powerful ability to improve energy efficiency and operational performance, while at the same time significantly reducing emissions, leading

to an overall cost-effective installation.

Further, we believe that our technology is well suited to create substantial synergistic value

through its incorporation into the mainstream commercial offerings of the market incumbents as a “ClearSign Core”, thus leveraging

the ClearSign technology and the established breadth and capabilities of collaborating companies.

We are targeting the following segments of the

combustion market for our ClearSign Core technology:

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.

Based on testing and completed field installations to date, however, we believe that our ClearSign Core technology provides a unique and powerful combination of an overall cost-effective installation, energy efficiency, operational performance, and significantly reduced emissions.

Further, we believe that our technology is well-suited to create substantial synergistic value by incorporating it into mainstream commercial offerings of the market incumbents as a “ClearSign Core”, thus leveraging the ClearSign technology and the established breadth and capabilities of collaborating companies.

We are targeting the following segments of the combustion market for adoption of our ClearSign Core technology:

● institutional, commercial and industrial boilers;

● refinery, energy infrastructure and petrochemical process heaters;

large industrial boilers;

● enclosed flares;

● enhanced oil recovery steam generators

In each segment, we are marketing solutions that

include our ClearSign Core technology which we believe could simultaneously improve productivity, operational efficiency and pollution

Our target markets are greatly affected by air

emission regulations and economic conditions.

Accordingly, our target market segments are also prioritized geographically based on the

needs of the local industries and current and anticipated future demands of local environmental legislature.

Details of the localized

effect of these influences in the United States are described in the section of this report titled “Our Industry.”

our immediate regional opportunities are the West Coast and Gulf Coast of the United States, and the regions of Northern China with high

populations and cooler environments where district heating is a large source of fossil fuel consumption and where reducing atmospheric

pollution is a high priority of the national and local governments.

In each of these segments, we are marketing solutions that include our ClearSign Core technology which we believe could simultaneously improve productivity, operational efficiency and pollution control.

Our target markets are greatly affected by air emission regulations and economic conditions.

Accordingly, we prioritize our activities in target market segments geographically based on the needs of the local industries and the current and anticipated future requirements imposed by local environmental regulation.

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.

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.

Competition, Barriers to Entry and Go to Market Strategy

The industry in which we operate is global in scope

and is populated by large, established suppliers of burners and post-combustion air pollution control systems, most of which possess substantially

greater resources than we do.

Worldwide, suppliers of burners and air pollution control equipment include but are not limited to companies

such as UOP, Callidus, Eclipse and Maxon (all four are subsidiaries of Honeywell), John Zink Hamworthy Combustion (a subsidiary of Koch

Industries and including Coen), General Electric, Haldor Topsøe, Hitachi, Linde, Zeeco and Fives Group, among others.

These systems include low and ultra-low NO X burners,

selective and non-selective catalytic reduction systems and other pollution control technologies.

The companies that provide these systems

are well established and their combustion and emissions control technologies are mostly based on mature, well-understood technologies

that are proven in the market.

We believe the further development of their technologies, however, will be limited largely to marginal

performance improvements.

As a consequence of the relatively slow pace of adopting innovation, we believe current technology offerings

from the large competitors have become largely commoditized, and differentiation between suppliers is very often based largely on price.

This provides both an opportunity and a barrier to more nimble, disruptive companies.

From a customer's perspective, legacy air pollution

control technologies are viewed as a cost of doing business, and as a means to operate within current and anticipated future regulatory

requirements and to avoid fines.

Unlike most other kinds of capital equipment that

provide an economic return through enhanced productivity or efficiency, we believe customers of traditional emissions control equipment

do not expect any positive return on emissions control investments other than the right to continue operations or avoidance of fines.

believe the ClearSign Core suite of products offers prospective customers the unique opportunity to greatly reduce capital investment

and to realize a return on investment through increased efficiency and/or increased productivity, thereby further differentiating the

Company’s technologies from the competition.

As indicated above, we are seeking to develop our

business in the combustion and emissions control market and to establish ourselves in a highly competitive industry among companies that

have substantial financial resources, a well-developed infrastructure and established products.

The business development strategy

for ClearSign is planned and being implemented to enable recognition of the ClearSign technology’s value while minimizing the challenges

set forth below - many of which stem from the nature of the customers in this market as well as from the strengths of the other market

participants.

Major barriers faced by a new equipment manufacturer

seeking to enter this market include:

The industry in which we operate is global in scope and populated by large, established suppliers of burners and post-combustion air pollution control systems.

These suppliers possess resources that are substantially greater than ours.

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.

These companies provide systems that include low and ultra-low NOx burners, selective and non-selective catalytic reduction systems, and other pollution control technologies.

They are well-established and their combustion and emissions control systems are based mostly on mature, well-understood and proven technologies.

As a result of the relatively slow pace of developing and adopting innovation, we believe the technology and products currently being offered by our large competitors have become commoditized with differentiation between suppliers most often based on price.

These industry characteristics provide both an opportunity and a barrier to more nimble, disruptive companies.

From a customer's perspective, installation of legacy air pollution control technologies is viewed as a method of avoiding fines, as a cost of doing business, and as a means to operate within current and anticipated future regulatory requirements.

Unlike most other kinds of capital equipment that provide an economic return through enhanced productivity or efficiency, we believe customers of traditional emissions control equipment do not expect any positive return on emissions control investments other than the ability to continue to operate or avoid fines.

We believe the ClearSign Core suite of products are further differentiated from its competitors because they give prospective customers the unique opportunity to greatly reduce capital investment and to realize a return on investment through increased efficiency and/or increased productivity.

As indicated above, we are seeking to develop our business in the combustion and emissions control market and to establish ourselves in a highly competitive industry among companies that have substantial financial resources, a well-developed infrastructure and established products.

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:

Developing engineering, order fulfillment and customer service staff:

Especially in the refining

and petrochemical industries, customers require specialist support throughout the purchasing, order execution and life cycle of the combustion

Recruiting and developing sufficient staff with the specialist skills necessary to provide the level of service required by

customers in this market would take time and result in a significant ongoing overhead cost.

Especially in the refining and petrochemical industries, customers require specialist support throughout the life cycle of the combustion equipment including with order execution when purchasing.

Recruiting and developing sufficient staff with the special skills necessary to provide the level of service required by customers in this market would take time and result in a significant ongoing overhead cost.

Developing operational infrastructure:

Again, especially in the refining and petrochemical industries,

customers require thorough quality assurance procedures, which include seeing one article from the product order demonstrated in order

meet performance guarantees.

Again, especially in the refining and petrochemical industries, customers require thorough quality assurance procedures, including demonstration of an item from their order, to prove that it meets performance guarantees.

This requires, among other things, having access to a test furnace.

Developing such an operation would require

significant investment and ongoing costs.

Developing such an operation would require significant investment and ongoing costs.

Conservative customers:

Because of the complexity of the customers’

infrastructures,

the cost of downtime in any part of a processing plant and due to the potential safety hazards posed by the nature of their operations,

the customers are very careful and methodical about adopting a new technology or product from a new unproven supplier.

Our customers are very careful and methodical about adopting a new technology or product because of the complexity of their infrastructures, the cost of downtime in any part of a processing plant and the potential safety hazards of their operations.

Profit opportunity:

There is very little differentiation between the products of the established

burner equipment providers resulting in thin profit margins on the sale of new or replacement burners.

A significant portion of a company’s

profit results from the sales of replacement parts and equipment upgrades.

Any new entrant without a differentiating technology will not

have this established source of significant and immediate profit.

The “go to market”

strategy for the

ClearSign Core combustion business has been developed considering both the Company’s strengths and weaknesses.

The most important

weaknesses are highlighted by the barriers to entry identified above:

we are a small company with limited financial resources and we do

not have the infrastructure to meet the requirements of our sophisticated target global customers.

Although we have highly skilled and

experienced employees, we do not have the manpower to provide comprehensive service and customer support ourselves.

We could overcome

these limitations with a significant investment and an increase in operational costs;

we believe, however, that it is in the best interests

of the Company and our shareholders to develop our business with an asset light model to the extent this can enable a timely path to mainstream

operations and maximum profitability.

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 and

enable unique performance that both minimize 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.

Installation of 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.

Our business has been, and continues to be, developed

with the goal of combining our technology with the infrastructure and resources of major OEM equipment manufacturers.

Through such a collaborative

arrangement, an OEM burner manufacturer can reap the benefits of adding a truly differentiated and unique product line to its offering

and ClearSign can overcome the barriers to market resulting from the need for a capital and operating expense-intensive infrastructure

and a large specialist staff.

In addition, we believe that having orders fulfilled by a well-known and trusted supplier will reduce the

risk, as perceived by prospective customers, of dealing with a small company and aid in the adoption of our technology.

business plan contemplates forming collaborative partnerships with major OEM equipment manufacturers.

At this time, our technology has

been demonstrated to have commercial viability and has generated interest from end users and OEMs.

We expect that the development

of strategically chosen collaborative partnerships will result in the supply of ClearSign Core technology to major global customers in

large quantities and with the engineering, quality control, customer support and project management services such sophisticated customers

These relationships will also enable our OEM partners to offer a unique product in the marketplace, providing a potentially significant

commercial opportunity for both them and us.

We believe forming such alliances will dramatically

accelerate the global sales and market adoption rate of our technology.

As announced in June 2019, we already have an

agreement in place with Zeeco Inc., the world’s second largest burner manufacturer.

Under this agreement, Zeeco will provide ClearSign

Core process burners globally.

This agreement is contingent on the successful completion of a burner demonstration that is part of ongoing

supply order for ExxonMobil which we believe that we are close to achieving.

In addition, we have a collaborative agreement with ASHCOR

with respect to our flare product and a collaborative agreement with California Boiler to sell and produce both fire tube boiler burner

and flare products.

We are also pursuing various other licensing like arrangements for other market verticals and ClearSign Core applications.

Our target markets are characterized by well-established competitors in mature businesses.

As a result, competitive

pricing rather than pricing based on broad product value is the standard for these markets.

However, we believe that our technology improves

combustion equipment performance with unique capabilities and therefore provides significant economic value to our customers compared

to the next best alternative solutions available.

This, in turn, should enable products containing ClearSign Core technology to sell at

prices reflecting the value they offer.

Consequently, we believe that the value the ClearSign Core technology provides to the OEMs partnering

with us will result in compensation to us based on that value.

Our sensing products are not yet through the final commercialization phase of the development and product launch

We have obtained clear and consistent customer feedback guiding the first application of this technology.

The target market for

this technology is potentially every burner with a pilot on which flame sensors are deployed, providing a global and very high-volume

There is very little differentiation between the products offered by the established burner equipment providers, which results in thin profit margins for the sale of new or replacement burners.

A significant portion of a company’s profit results from the sales of replacement parts and equipment upgrades.

Any new entrant without a differentiating technology will not have this established source of significant and immediate profit.

We developed our “go to market” strategy for the ClearSign Core combustion business considering our strengths and weaknesses.

The most important weaknesses are related to the barriers to entry identified above.

We are a small company with limited financial resources and do not have the infrastructure to meet the requirements of our sophisticated target global customers without significant investment and increase in operational costs.

Although we have highly skilled and experienced employees, we do not have the manpower to provide comprehensive service and customer support ourselves.

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 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.

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.

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.

Our business has been, and continues to be, developed with the goal of combining our technology with the infrastructure and resources of major OEM equipment manufacturers.

Through such collaborative arrangements, OEM burner manufacturers can reap the benefits of adding truly differentiated and unique product lines to their offerings and ClearSign can overcome the barrier to market of needing to build capital and operating expense-intensive infrastructure and hiring a large specialist staff.

In addition, we believe that having orders fulfilled by a well-known and trusted supplier will reduce the risk, as perceived by prospective customers, of dealing with a small company and aid in the adoption of our technology.

Our business plan contemplates forming collaborative partnerships with major OEM equipment manufacturers.

At this time, we have demonstrated that our technology has commercial viability by generating interest from OEMs and end users.

We expect that developing strategically chosen collaborative partnerships will result in supplying ClearSign Core technology to major global customers in large quantities together with the attendant engineering, quality control, customer support and project management services required by these sophisticated customers.

We also believe that our collaborative partnerships will enable our OEM partners

to offer a unique product in the marketplace and provide both parties with a potentially significant commercial opportunity.

Forming such alliances is expected to dramatically accelerate the global sales and market adoption of our technology.

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.

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 .

We believe that the unique capabilities of our technology improve combustion equipment performance and provide significant economic value to our customers compared to the next best alternative solutions available.

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.

Although we have not yet completed the product launch of our sensing products and subsequent commercialization, we have obtained clear and consistent customer feedback guiding its first application.

The target market for this technology is potentially every burner with a pilot on which flame sensors are deployed, providing a global and very high-volume opportunity.

This market is not limited by emissions mandates or the type or manufacturer of the burners.

The product is also of value

for both retrofit applications, where it is applied to existing burners, and to new burners, where it will be installed in the burners

by the original burner manufacturer.

The technology is proven, final product design

details are being completed for our target application and we are assessing various product business strategies.

Unlike the ClearSign

Core burner technology, we are assessing both the possibility that we manufacture the sensing products along with the alternative of partnering

with one or more established OEM suppliers.

We have manufactured demonstration units and are currently planning to manufacture the sensor

ourselves for the foreseeable future.

The fundamental technology for the sensors envisioned

for transport applications is the same as for the flame sensors, but the application and form of the final product will be very different.

We have received notable interest in this product from a major global customer giving us the confidence that this is a market and technology

worthy of future investment.

This product is in the very early stages of development, and the application will be highly regulated so

it will require a thorough product development process.

However, we believe indications to date suggest this is potentially a significant

future business opportunity for ClearSign.

The product has value for retrofit applications, where it is applied to existing burners, and for new burners, where it can be installed in burners by OEMs.

We are assessing the possibility of manufacturing the sensing products ourselves as well as partnering with one or more established OEM suppliers.

Demonstration units have been manufactured and we are currently planning to manufacture the sensor ourselves for the foreseeable future.

We are also exploring alternative paths to monetize the technology.

The fundamental technology for the sensors envisioned for transport applications is the same as for the flame sensors, but the application and form of the final product will be very different.

We have received notable interest in this product from a major global customer giving us the confidence that there is a potential market for this technology, which is therefore worthy of future investment.

This sensor product is in the very early stages of development and would be deployed in a highly regulated environment requiring a thorough product development process.

The interest we have received to date, however, suggests that this could potentially be a significant future business opportunity for ClearSign.

Research and Development Program

The experience and industry contacts of our management

team, board of directors, and consultants with potential customers in the petroleum, petrochemical, and industrial steam applications

industries inform our research program.

These are supported by field evaluation agreements, research agreements, and memoranda of understanding

with potential development partners, customers and research institutions.

Our research and development activities make use of employees

and consultants who are experts in the areas of industrial combustion, statistical experimental design, gas turbines, fluid mechanics

and heat transfer.

With the maturation of our ClearSign Core technology,

our development process has transitioned from research to commercialization.

This has included optimizing the technology to perform in

a manner readily adoptable by our prospective customers and easy to implement into the burner structures of our collaborative alliance

There are many influences on this later phase of development including customer feedback, product and component standardization,

design for manufacture and considerations to simplify inventory management, both for the manufacture and the lifetime support of our products.

Our technology and products for flame sensing applications

are proven in our laboratory at bench scale and in full scale “first article”

This product is currently in the commercialization

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.

is in an earlier form and is currently undergoing validation and optimization of its intended role in this very different application.

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.

Field evaluation agreements, research agreements, and memoranda of understanding with potential development partners, customers and research institutions support this process.

Our research and development activities make use of employees and consultants who are experts in the areas of industrial combustion, statistical experimental design, gas turbines, fluid mechanics and heat transfer.

With the maturation of our ClearSign Core technology, our development process has transitioned from research to commercialization.

This has included optimizing the technology to perform in a manner readily adoptable by our prospective customers and easy to incorporate into the burner structures of our collaborative alliance partners.

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 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.

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.

As of December 31,

2020, we have 135 active patent grants and another 51 patents pending with the U.S.

Patent and Trademark Office.

The earliest year in

which any of our patents will expire is 2031.

We have been granted 47 patents related to our ClearSign Core technology and 77 patents

related to our ECC technology.

We maintain an active review process to monitor relevant new inventions to expand our intellectual property

protection globally.

We cannot predict when our patent applications

may result in issued patents, if at all.

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, 2021, we have 113 active patent grants and another 29 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.

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.

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

beneficial manner.

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.

Government Regulation

Government regulation, particularly environmental

regulation, is likely to play an important role in shaping our product mix and offerings.

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

We believe that we offer major advances in emissions

reductions and efficiency improvements.

We also believe emissions regulations could enhance market demand for technology if

such regulations require a reduction in pollutants such as NO X and CO.

In such cases, possible legislation on greenhouse gases,

boiler Maximum Available Control Technology (MACT) rules, or general reductions in required criteria pollutant levels globally, and especially

and China, could bolster our business objectives.

Although the timing of such regulations is uncertain, the general trend

over the last decades continues to be government-mandated reduction for all criteria pollutants.

Ultimately, it may be possible for our

technology to achieve BACT designation.

We believe the availability of our technology, by itself, may accelerate the government’s

willingness to adopt more stringent environmental regulations.

Further, we believe efficiency improvements, combined with the elimination

of flame impingement, could generate market demand regardless of the existing regulatory framework because they could result

in increased productivity or savings for businesses that adopt our technology.

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 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.

Possible legislation related to greenhouse gases, boiler Maximum Available Control Technology (MACT) rules, or other general reductions in required pollutant levels globally, especially in the U.S.

and China, could bolster our ability to meet our business objectives.

Although the timing of any such regulations is uncertain, the general trend over the last decades continues to be government-mandated reduction for all criteria pollutants.

Ultimately, it may be possible for our technology to achieve BARCT [and/or MACT] designation.

We believe that the availability of our technology alone may accelerate the government’s willingness to adopt more stringent environmental regulations.

Further, we believe efficiency improvements, combined with the elimination of flame impingement, could generate market demand regardless of the existing regulatory framework because the potential efficiency, productivity and savings gains from our products could result in the adoption of our technology.

At this time, we believe that the current U.S.

administration is supportive of “green initiatives,”

and we are not aware of any current or proposed federal, state or local

environmental compliance regulations that would have a material detrimental effect on our business objectives.

We do not anticipate

any major expenditures to be required in order for our technology to comply with any environmental protection statutes.

Concurrently the

Chinese government has enacted notable tightening of allowable emissions levels, particularly for NOx emissions, and we anticipate this

trend will continue in the future.

As of March 31, 2021, we had 15 full-time employees.

Our employees

are not covered by collective bargaining agreements, and we believe our relationship with our employees is good.

administration supports “green initiatives,” and we are not aware of any current or proposed federal, state or local environmental compliance regulations that would have a material detrimental effect on our business objectives.

We do not anticipate any major expenditures to be required in order for our technology to comply with any environmental protection statutes.

Concurrently the Chinese government has enacted notable tightening of allowable emissions levels, particularly for NOx emissions, and we anticipate this trend will continue in the future.

Human Capital

As of December 31, 2021, we had 12 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.

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-K

Item 1. Business