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Item 1A. Risk Factors

2022-03-31 compared with 2021-03-31 · 175 added, 406 removed, 29 unchanged (95% of the section changed)

We are subject to various risks that may materially

harm our business, prospects, financial condition and results of operations.

An investment in our common stock is speculative and involves

a high degree of risk.

In evaluating an investment in shares of our common stock, you should carefully consider the risks described below,

together with the other information included in this report.

The risks described below are not the only risks

If any of the events described in the following risk factors actually occurs, or if additional risks and uncertainties later

materialize that are not presently known to us or that we currently deem immaterial, then our business, prospects, results of operations

and financial condition could be materially adversely affected.

In that event, the trading price of our common stock could decline, and

you may lose all or part of your investment in our shares.

The risks discussed below include forward-looking statements, and our actual

results may differ substantially from those discussed in these forward-looking statements.

We are subject to various risks that may materially harm our business, prospects, financial condition and results of operations.

An investment in our common stock is speculative and involves a high degree of risk.

In evaluating an investment in shares of our common stock, you should carefully consider the risks described below, together with the other information included in this report.

The risks described below are not the only risks we face.

If any of the events described in the following risk factors actually occurs, or if additional risks and uncertainties later materialize that are not presently known to us or that we currently deem immaterial, then our business, prospects, results of operations and financial condition could be materially adversely affected.

In that event, the trading price of our common stock could decline, and you may lose all or part of your investment in our shares.

The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

Risks Related to Our Business

We are a company with a limited operating history and our future

profitability is uncertain.

We are a company with a limited operating history and our future profitability is uncertain.

We anticipate future losses and negative cash flows and we may never be profitable.

We are a company with a limited operating history

and limited revenues to date.

We have incurred losses since our inception and expect to experience operating losses and negative cash

flows for the foreseeable future.

We are a company with a limited operating history and limited revenues to date.

We have incurred losses since our inception and expect to experience operating losses and negative cash flows for the foreseeable future.

As of December 31, 2021, we had a total accumulated deficit of approximately $82.8 million.

We anticipate

our losses will continue to increase from current levels because we expect to incur additional costs and expenses related to prototype

development, consulting costs, laboratory development costs, marketing and other promotional activities, the addition of engineering and

manufacturing personnel, and our continued efforts to form relationships with strategic partners.

We may never generate significant revenue

and we may never be profitable.

If we do not receive additional financing when and as needed

in the future, we may not be able to continue our research and development or commercialization efforts and our business may fail.

Our business is capital-intensive and requires

capital investments in order for it to develop.

Our cash on hand will likely not be sufficient to meet all of our future needs because

our target customers are, in general, slow to adopt new technologies, and we anticipate that we will require substantial additional funds

in excess of our current financial resources for research, development and commercialization of our technology, to obtain and maintain

patents and other intellectual property rights in our technology, and for working capital and other purposes, the timing and amount of

which are difficult to ascertain.

Until our technology generates revenues sufficient to support our operations, we plan to obtain

the necessary working capital for operations through the sale of our securities, but we may not be able to obtain financing in amounts

sufficient to fund our business plans.

We anticipate our losses will continue to increase from current levels because we expect to incur additional costs and expenses related to commercialization activities, product development, consulting costs, marketing and other promotional activities.

In addition, we expect to continue incurring costs related to human capital development and strategic partnership development.

We may never generate significant revenue and we may never be profitable.

If we do not receive additional financing when and as needed in the future, we may not be able to continue our development and commercialization efforts and our business may fail.

Our business is capital-intensive and requires capital investments in order for it to develop.

Our cash on hand will likely not be sufficient to meet all of our future needs because our target customers are, in general, slow to adopt new technologies, and we anticipate that we will require substantial additional funds in excess of our current financial resources for research, development and commercialization of our technology, to obtain and maintain patents and other intellectual property rights in our technology, and for working capital and other purposes, the timing and amount of which are difficult to ascertain.

Until our technology generates revenues sufficient to support our operations, we plan to obtain the necessary working capital for operations through the sale of our securities, but we may not be able to obtain financing in amounts sufficient to fund our business plans.

If we cannot obtain additional funding when and as needed, our business might fail.

Market acceptance of our technology and business is difficult

Market acceptance of our technology and business is difficult to predict.

If our technology does not achieve market acceptance, our business could fail.

We are continuing to develop our technology, which

is being implemented and tested in the field by customers in various markets.

If we are unable to effectively develop and demonstrate

our technology in a timely fashion, gain recognition in our market segments, and develop a critical level of successful sales and product

installations, we may not be able to successfully achieve sales revenue and our results of operations and financial condition would then

Our ability to achieve future revenue will depend significantly upon achieving a critical mass of market awareness and sales to

potential customers of our products.

While we plan to achieve this awareness over time, there can be no assurance that awareness of our

company and technology will develop in a manner or pace that is necessary for us to achieve acceptance and profitability in the near term.

Further, we cannot predict the rate of adoption

or acceptance of our technology by potential customers.

While we may be able to effectively demonstrate the feasibility of our technology,

this does not guarantee the industrial combustion market will accept it, nor can we control the rate at which such acceptance may be achieved.

In certain of our market segments, there is a well-established channel with a limited number of companies engaged in reselling to our

target customers.

Failure to achieve productive relations with a sufficient number of these prospective partners may impede adoption of

our technology.

Additionally, some potential customers in our target industries are historically risk-averse and have been slow to adopt

new technologies.

If our technology is not widely adopted in the industrial combustion market, we may not earn enough by selling

or licensing our technology to support our operations, recover our research and development costs or become profitable and our business

If we are unable to effectively demonstrate our technology in a timely fashion, gain recognition in our market segments, and develop a critical level of successful sales and product installations, we may not be able to successfully achieve sales revenue and our results of operations and financial condition would then suffer.

Our ability to achieve future revenue will depend significantly upon achieving a critical mass of market awareness and sales to potential customers of our products.

While we plan to achieve this awareness over time, there can be no assurance that awareness of our Company and technology will develop in a manner or pace that is necessary for us to achieve acceptance and profitability in the near term.

Further, we cannot predict the rate of adoption or acceptance of our technology by potential customers.

While we have demonstrated our technology, this does not guarantee the industrial combustion market will accept it, nor can we control the rate at which such acceptance may be achieved.

In certain of our market segments, there is a well-established channel with a limited number of companies engaged in reselling to our target customers.

Failure to achieve productive relations with a sufficient number of these prospective partners may impede adoption of our technology.

Additionally, some potential customers in our target industries are historically risk-averse and have been slow to adopt new technologies.

If our technology is not widely adopted in the industrial combustion market, we may not earn enough by selling or licensing our technology to support our operations, recover our research and development costs or become profitable and our business could fail.

Our efforts may never demonstrate the feasibility of our product.

Our research and development efforts remain subject

to all of the risks associated with the development of new products based on emerging and innovative technologies, including without limitation

unanticipated technical or other problems, our ability to scale our technology to large industrial applications, conditions in the field

during installation and the possible insufficiency of funds for completing development of these products.

Technical problems, including

those specific to customer site implementation, may result in delays and cause us to incur additional expenses that would increase our

If we cannot complete, or if we experience significant delays in completing, research and development of our technology for use

in potential commercial applications, particularly after incurring significant expenditures, our business may fail.

Changes to environmental regulations could make our technology

less desirable.

The negative environmental impacts of industrial

activity have given rise to significant environmental regulation in industrialized countries.

These regulations are important incentives

in the adoption of technologies like ours.

To the extent that environmental regulations in the United States and in other industrialized

countries are modified in the future, or even relaxed, our technology may not produce the results required, or may even be unnecessary,

to comply with the modified regulations.

If federal, state or local regulatory agencies relax the clean air regulations our technologies

are designed to address, our business and results of operations could be materially adversely affected.

We may fail to adequately protect our proprietary technology,

which would allow our competitors to take advantage of our research and development efforts.

Our long-term success largely depends on our ability

to market our technology.

We rely on a combination of patents, trade secrets and other intellectual property laws, confidentiality and

security procedures and contractual provisions to establish and protect our proprietary rights in our technology, products and processes.

Our research and development efforts remain subject to all of the risks associated with the development of new products based on emerging and innovative technologies, including without limitation unanticipated technical or other problems, our ability to scale our technology to large industrial applications, conditions in the field during installation and the possible insufficiency of funds for completing development of these products.

Technical problems, including those specific to customer site implementation, may result in delays and cause us to incur additional expenses that would increase our losses.

If we cannot complete, or if we experience significant delays in completing, research and development of our technology for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail.

Changes to environmental regulations could make our technology less desirable.

The negative environmental impacts of industrial activity have given rise to significant environmental regulation in industrialized countries.

These regulations are important incentives in the adoption of technologies like ours.

To the extent that environmental regulations in the United States and in other industrialized countries are modified in the future, or even relaxed, our technology may not produce the results required, or may even be unnecessary, to comply with the modified regulations.

If federal, state or local regulatory agencies relax the clean air regulations our technologies are designed to address, our business and results of operations could be materially adversely affected.

We may fail to adequately protect our proprietary technology, which would allow our competitors to take advantage of our research and development efforts.

Our long-term success largely depends on our ability to market our technology.

We rely on a combination of patents, trade secrets and other intellectual property laws, confidentiality and security procedures and contractual provisions to establish and protect our proprietary rights in our technology, products and processes.

If we fail to obtain or maintain these protections, we may not be able to prevent third parties from using our proprietary technologies.

Our pending or future patent applications may not result in issued patents.

In addition, any patents issued to us, or that may be issued

to us in the future, may not contain claims sufficiently broad to protect us against third parties with similar technologies or products

or from third parties infringing such patents or misappropriating our trade secrets or provide us with any competitive advantage.

effective patent and other intellectual property protection may be unenforceable or limited in foreign countries.

If a third party initiates

litigation regarding the validity of our patents and is successful, a court could revoke our patents or limit the scope of coverage for

those patents.

We also rely upon trade secrets, proprietary know-how

and continuing technological innovation to remain competitive.

We protect this information with reasonable security measures, including

the use of confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with

strategic customers and partners.

It is possible that these agreements may not be sufficient or that these individuals or companies may

breach these agreements and that any remedies for a breach will be insufficient to allow us to recover our costs and damages.

our trade secrets, know-how and other technology may otherwise become known or be independently discovered by our competitors.

We may incur substantial costs as a result of litigation or other

proceedings relating to patent and other intellectual property rights.

A third party may sue us for infringing its intellectual

property rights.

Likewise, we may need to resort to litigation to enforce our patent rights or to determine the scope and validity of

third-party intellectual property rights.

The cost to us of any litigation or other proceeding relating to intellectual property rights,

even if resolved in our favor, could be substantial, and the litigation would divert our efforts from our business activities.

our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially

greater resources.

In addition, any patents issued to us, or that may be issued to us in the future, may not contain claims sufficiently broad enough to protect us against third parties with similar technologies or products or from third parties infringing such patents or misappropriating our trade secrets or provide us with any competitive advantage.

In addition, effective patent and other intellectual property protection may be unenforceable or limited in foreign countries.

If a third party initiates litigation regarding the validity of our patents and is successful, a court could revoke our patents or limit the scope of coverage for those patents.

We also rely upon trade secrets, proprietary know-how and continuing technological innovation to remain competitive.

We protect this information with reasonable security measures, including the use of confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with strategic customers and partners.

It is possible that these agreements may not be sufficient or that these individuals or companies may breach these agreements and that any remedies for a breach will be insufficient to allow us to recover our costs and damages.

Furthermore, our trade secrets, know-how and other technology may otherwise become known or be independently discovered by our competitors.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.

A third party may sue us for infringing its intellectual property rights.

Likewise, we may need to resort to litigation to enforce our patent rights or to determine the scope and validity of third-party intellectual property rights.

The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert our efforts from our business activities.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.

If we do not prevail in this type of litigation, we may be required to pay monetary damages and/or expenses;

stop commercial

activities relating to our products;

obtain one or more licenses in order to secure the rights to continue the manufacturing or marketing

our products;

stop commercial activities relating to our products;

obtain one or more licenses in order to secure the rights to continue the manufacturing or marketing of our products;

or attempt to compete in the market with substantially similar products.

Uncertainties resulting from the initiation and

continuation of any litigation could limit our ability to continue some of our operations.

A cybersecurity incident or other technology disruptions could

negatively impact our business and our relationships with customers.

We use computers in substantially all aspects of

our business operations.

We also use mobile devices and other online activities to connect with our employees, suppliers and customers.

Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft, the compromise of trade

secrets and inadvertent release of information.

Our business involves the storage and transmission of sensitive and/or confidential information

and intellectual property, including customers’

and suppliers’

information, private information about employees and financial

and strategic information about us.

If we fail to assess and identify cybersecurity risks associated with our operations, we may become

increasingly vulnerable to such risks.

Additionally, while we have implemented measures to prevent security breaches and cyber incidents,

our preventative measures and incident response efforts may not be entirely effective.

The theft, destruction, loss, misappropriation,

or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems,

could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability

and competitive disadvantage all of which could have a material adverse effect on our business, financial condition or results of operations.

We cannot guarantee that any research and development partnership

we enter into will be successful.

We intend to form research and development arrangements

to develop our technology within targeted segments.

Collaborative arrangements involve risks that participating parties may disagree on

business decisions and strategies.

These disagreements could result in delays, additional costs, risks of litigation, and failure of the

development of our technology within the combustion market segment.

Success of any collaborative arrangements we enter into will depend,

in part, on whether those with whom we collaborate fulfill their contractual obligations satisfactorily.

If a party with whom we collaborate

fails to perform its contractual obligations satisfactorily, we may be unable to make the additional investments or provide the added

services that would be required to compensate for that failure.

If we are unable to adequately address any such performance issues, our

reputation may be materially adversely affected and we may be exposed to legal liability.

Our inability to successfully maintain collaborative

relationships, once we enter into them, or to enter into new collaborative arrangements, could have a material adverse effect on our results

of operations.

If we are unable to keep up with rapid technological changes,

our products may become obsolete.

The market for alternative environmental products

is characterized by significant and rapid technological change and innovation.

Although we intend to employ our technological capabilities

to create innovative products and solutions that are practical and competitive in today’s marketplace, future research and discoveries

by others may make our products and solutions less attractive or even obsolete compared to other alternatives that may emerge.

Our technology for some industrial applications has not been

safety tested yet.

There is inherent danger in dealing with the combustion

There is additional danger in modifying this process in ways that are new and have only been implemented on a limited basis at

a commercial scale.

Although we have not yet encountered any areas of risk in the development or testing of our products beyond those

already inherent in the combustion process or those particular to an industrial site, we may be exposed to liabilities should an industrial

accident occur during development, testing, or operation in our laboratory or during field implementation of our technology.

We depend on approval from various local, state and federal agencies

to implement and operate our technology.

Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue some of our operations.

A cybersecurity incident or other technology disruptions could negatively impact our business and our relationships with customers.

We use computers in substantially all aspects of our business operations.

We also use mobile devices and other online activities to connect with our employees, consultants, suppliers and customers.

Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft, the compromise of trade secrets and inadvertent release of information.

Our business involves the storage and transmission of sensitive and/or confidential information and intellectual property, including customers’ and suppliers’ information, private information about employees and financial and strategic information about us.

If we fail to assess and identify cybersecurity risks associated with our operations, we may become increasingly vulnerable to such risks.

Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective.

The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems, could result in business

disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a material adverse effect on our business, financial condition or results of operations.

We cannot guarantee that any collaborative business research and development partnership we enter into will be successful.

Collaborative arrangements involve risks that participating parties may disagree on business decisions and strategies.

These disagreements could result in delays, additional costs, risks of litigation, and failure of the development of our technology within the combustion market segment.

Success of any collaborative arrangements we enter into will depend, in part, on whether those with whom we collaborate fulfill their contractual obligations satisfactorily.

If a party with whom we collaborate fails to perform its contractual obligations satisfactorily, we may be unable to make the additional investments or provide the added services that would be required to compensate for that failure.

If we are unable to adequately address any such performance issues, our reputation may be materially adversely affected and we may be exposed to legal liability.

Our inability to successfully maintain collaborative relationships, once we enter into them, or to enter into new collaborative arrangements, could have a material adverse effect on our results of operations.

If we are unable to keep up with rapid technological changes, our products may become obsolete.

The market for alternative environmental products is characterized by significant and rapid technological change and innovation.

Although we intend to employ our technological capabilities to create innovative products and solutions that are practical and competitive in today’s marketplace, future research and discoveries by others may make our products and solutions less attractive or even obsolete compared to other alternatives that may emerge.

Our technology for some industrial applications has not been safety tested yet.

There is inherent danger in dealing with the combustion process.

There is additional danger in modifying this process in ways that are new and have only been implemented on a limited basis at a commercial scale.

Although we have not yet encountered any areas of risk in the development or testing of our products beyond those already inherent in the combustion process or those particular to an industrial site, we may be exposed to liabilities should an industrial accident occur during development, testing, or operation in our laboratory or during field implementation of our technology.

We depend on approval from various local, state and federal agencies to implement and operate our technology.

There is no assurance that these agencies will approve our technology.

Our technology includes enhancement of the combustion

process to reduce certain emissions at a lower cost of ownership than current air pollution control devices.

Field implementation of our

technology will therefore require permits from various local, state and federal agencies that regulate mechanical and electrical infrastructure

and fire and air pollution control.

Our technology includes enhancement of the combustion process to reduce certain emissions at a lower cost of operation than current air pollution control devices.

Field implementation of our technology will therefore require permits from various local, state and federal agencies that regulate mechanical and electrical infrastructure and fire and air pollution control.

Our technology may be subject to heightened scrutiny since it will be new to these governing bodies.

As such, there may be delays or rejections in applications of portions of or all of our technology in the individual jurisdictions involved.

are uncertain of our profit margins and whether such profit margins, if achieved, will be able to sustain our business ,

b ecause our technology has not yet been fully developed or implemented.

We have not fully developed all of our products,

their cost of goods or pricing.

We are uncertain of our profit margins and whether such profit margins, if achieved, will be able to sustain our business.

We have not fully developed all of our products and those products that have been developed have experienced limited sales.

As a result, we cannot reliably predict our profit margins.

Our operating costs could increase significantly

compared to those we currently anticipate due to unanticipated results from the development process, application of our technology to

unique or difficult processes, regulatory requirements and particular field implementations.

Further, we envision our pricing to be highly

dependent on the benefits that our customers believe they will achieve using our products.

Accordingly, we cannot predict whether or when

we will achieve profitability, and if achieved, the amount of such profit margins.

Many of our potential competitors have greater resources, and

it may be difficult to compete against them.

The combustion industry is characterized by intense

Many of our potential competitors have better name recognition and substantially greater financial, technical, manufacturing,

marketing, personnel and/or research capabilities than we do.

Although at this time we do not believe that any of our potential competitors have

technology similar to ours, we are aware certain potential competitors are attempting to develop similar products.

Many firms in the combustion

industry have made and continue to make substantial investments in improving their technologies and manufacturing processes.

they may be able to price their products below the marginal cost of production in an attempt to establish, retain or increase market share.

Our operating costs could increase significantly compared to those we currently anticipate due to unanticipated results from the commercialization process, application of our technology to unique or difficult processes, regulatory requirements and particular field implementations.

Further, we envision our pricing to be highly dependent on the benefits that our customers believe they will achieve using our products.

Accordingly, we cannot predict whether or when we will achieve profitability, and if achieved, the amount of such profit margins.

Many of our potential competitors have greater resources, and it may be difficult to compete against them.

The combustion industry is characterized by intense competition.

Many of our potential competitors have better name recognition and substantially greater financial, technical, manufacturing, marketing, personnel and/or research capabilities than we do.

Although at this time we do not believe that any of our potential competitors have technology similar to ours, we are aware certain potential competitors are attempting to develop similar products.

Many firms in the combustion industry have made and continue to make substantial investments in improving their technologies and manufacturing processes.

In addition, they may be able to price their

products below the marginal cost of production in an attempt to establish, retain or increase market share.

Because of these circumstances, it may be difficult for us to compete successfully in the combustion market.

The loss of the services of our key management and personnel

or the failure to attract additional key personnel could adversely affect our ability to operate our business.

loss of one or more of our current officers or key employees could severely and negatively impact our operations.

Of particular note,

the loss of services of Dr.

Deller, our President, Manuel C.

Menendez III, President of ClearSign Asia, or Jeffrey Lewallen,

our Business Leader –

Refining and Petrochemical, could significantly harm our business.

We have no present intention to

obtain key-man life insurance on any of our executive officers or management.

Additionally, competition for highly skilled technical,

managerial and other personnel is intense.

As our business develops, we might not be able to attract, hire, train, retain and motivate

the highly skilled executives and employees we need to be successful.

If we fail to attract and retain the necessary technical and managerial

personnel, our business will suffer and might fail.

The loss of the services of our key management and personnel or the failure to attract additional key personnel could adversely affect our ability to operate our business.

A loss of one or more of our current officers or key employees could severely and negatively impact our operations.

We have no present intention to obtain key-man life insurance on any of our executive officers or management.

Additionally, competition for highly skilled technical, managerial and other personnel is intense.

As our business develops, we might not be able to attract, hire, train, retain and motivate the highly skilled executives and employees we need to be successful.

If we fail to attract and retain the necessary technical and managerial personnel, our business will suffer and might fail.

There are many risks we are exposed to by doing business in China.

We are exposed to risks of doing business in China.

a result, the economic, political, legal and social conditions in China could have a material adverse effect on our business.

addition, the legal system in China has inherent uncertainties that may limit the legal protections available in the event of any claims

or disputes that we may have with third parties, including our ability to protect the intellectual property we use in China.

As China’s

legal system is still evolving, the interpretation of many laws, regulations and rules is not always uniform and enforcement of these

laws, regulations and rules involve uncertainties, which may limit the remedies available in the event of any claims or disputes

with third parties.

As a result, the economic, political, legal and social conditions in China could have a material adverse effect on our business.

In addition, the legal system in China has inherent uncertainties that may limit the legal protections available in the event of any claims or disputes that we may have with third parties, including our ability to protect the intellectual property we use in China.

As China’s legal system is still evolving, the interpretation of many laws, regulations and rules is not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit the remedies available in the event of any claims or disputes with third parties.

Some of the other risks related to doing business in China include:

the Chinese government exerts substantial influence over the

manner in which we must conduct our business activities;

restrictions on currency exchange may limit our ability to receive

and use our cash effectively;

the Chinese government may favor local businesses and make it

more difficult for foreign businesses to operate in China on an equal footing, or in general;

there are uncertainties related to the enforcement of contracts

with certain parties;

more restrictive rules on foreign investment could adversely

affect our ability to expand our operations in China.

As a result of our anticipated growing operations

in China, these risks could have a material adverse effect on our business, results of operations and financial condition.

our operations in China have been impacted by the outbreak of a strain of the coronavirus, which has resulted in the limitation

of flights in and out of China, quarantines, and travel restrictions on the local work force and personnel from our U.S.

result, the Company has experienced ongoing delays in the completion of two boiler demonstration projects in China.

The disruptions resulting

from the coronavirus outbreak could have a negative impact on our financial condition, results of operations and business relationships.

● the Chinese government exerts substantial influence over the manner in which we must conduct our business activities;

● restrictions on currency exchange may limit our ability to receive and use our cash effectively;

● the Chinese government may favor local businesses and make it more difficult for foreign businesses to operate in China on an equal footing, or in general;

● there are uncertainties related to the enforcement of contracts with certain parties;

● more restrictive rules on foreign investment could adversely affect our ability to expand our operations in China.

As a result of our anticipated growing operations in China, these risks could have a material adverse effect on our business, results of operations and financial condition.

Furthermore, our operations in China have been impacted by COVID 19, which has resulted in the limitation of flights in and out of China, quarantines, and travel restrictions on the local work force and personnel from our U.S.

As a result, the Company has experienced delays in the completion of boiler burner demonstration projects during 2020 and 2021.

The disruptions resulting from the coronavirus outbreak could have a negative impact on our financial condition, results of operations and business relationships.

Finally, the U.S.

Foreign Corrupt Practices Act

and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing

anything of value to improperly influence foreign government officials for the purpose of obtaining or retaining business or obtaining

an unfair advantage.

While we make every attempt to comply with these laws, our operations outside the United States may increase the

risk of violating such laws.

Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business and

result in a material adverse effect on our reputation, business and results of operations or financial condition.

Our business and operations have been

and may continue to be adversely affected by the recent coronavirus outbreak.

In order to mitigate the

impact of the coronavirus pandemic we have significantly limited the personnel working full time in both our Seattle, Washington and Tulsa,

Oklahoma offices to those providing services that cannot be provided remotely, including research and development activities.

limit the in-person attendance of other employees to times when their interactions with others are necessary and can be done safely, and

in compliance with the CDC guidelines.

It is not possible to say what inefficiencies result for this working arrangement but is it is

probable that some projects have been prolonged or delayed as a result.

Our operations in China

have also been impacted by the severity of the pandemic, which has prevented our USA based employees, other than our President of ClearSign

Asia from visiting the country.

This has delayed progress on our product development and product proving programs there, and we do not

know how long these delays will continue.

In addition to our own

work, the work of our partners and suppliers has been, and continues to be affected.

The resulting delays to the delivery of materials

and services, has resulted in delays to our projects.

If the capital markets continue to experience

volatility in response to the coronavirus pandemic, we may not be able to raise capital.

The capital markets have experienced significant

volatility due to the ongoing spread of the coronavirus, which may negatively affect our ability to raise capital.

The recent decrease in the price of oil could adversely affect

our business and financial results.

The business, operations and financial results

of our potential customers in the energy sector, specifically refining operations, may experience adverse effects resulting from the recent

decline in oil prices.

This event may put pressure on their capital spending budgets, which could make them less likely to invest

time and money in new technologies, such as the ClearSign Core, or make them cancel or delay existing projects in our pipeline.

Any of these outcomes could adversely affect our business and financial results.

Risks Related to Owning Our

Foreign Corrupt Practices Act and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence foreign government officials for the purpose of obtaining or retaining business or obtaining an unfair advantage.

While we make every attempt to comply with these laws, our operations outside the United States may increase the risk of violating such laws.

Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business and result in a material adverse effect on our reputation, business and results of operations or financial condition.

Our business and operations have been and may continue to be adversely affected by the recent coronavirus outbreak.

Our operations in China have been impacted by the severity of the pandemic, which has prevented our USA based employees, other than our President of ClearSign Asia, from visiting the country.

The ClearSign Asia President entered China by adhering to the strict quarantine requirements imposed by China for US travelers.

This caused some delay in the progress on our product development and product demonstrations there.

In addition to our own work, the work of our partners and suppliers has been, and continues to be affected.

The resulting delays to the delivery of materials and services, has resulted in delays to our projects.

As a result of such delays, our business and operations have been and may continue to be adversely affected.

We cannot provide assurance that rising inflation will not adversely affect our operations.

The impact of inflation on our operating results has been moderate in recent years, reflecting generally lower rates of inflation in the economy.

While inflation has not had a material impact upon operating results, there is no assurance that our business will not be affected by inflation in the future.

Due to the nature of our business and products, we may be liable for damages based on product liability and other tort and warranty claims.

We face an inherent risk of exposure to claims in the event that the failure, use or misuse of our products results, or is alleged to result, in death, bodily injury, property damage, or economic loss.

We cannot provide assurance that global supply-chain constraints will not adversely affect our commercialization efforts.

The impact of the global supply-chain constraints has been moderate for our company, reflecting generally reasonable lead-time commitments from our suppliers and strategic partners.

While these constraints have not had a material impact to-date, we can provide no assurance that our business will not be affected by in the future.

Risks Related to Owning Our Securities

The public market for our securities is volatile.

This may affect

not only the ability of our investors to sell their securities, but the price at which they can sell their securities.

We completed the initial public offering of our

common stock in April 2012.

This may affect not only the ability of our investors to sell their securities, but the price at which they can sell their securities.

We completed the initial public offering of our common stock in April 2012.

Since that time, our common stock (CLIR:

NASDAQ) has traded as low as $0.35 per share and as high as

$11.75 per share based upon daily closing prices, and day-to-day trading has been volatile at times.

This volatility may continue or increase

in the future.

The market price for the securities may be significantly affected by factors such as progress in the development of our

technology, agreements with research facilities or co-development partners, commercialization of our technology, variations in quarterly

and yearly operating results, general trends in the alternative energy industry, and changes in state or federal regulations affecting

us and our industry.

Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated

or disproportionate to the operating performance of the affected companies, such as the market reactions to internet marketed ‘short

squeezes’

or the coronavirus outbreak.

NASDAQ) has traded as low as $0.35 per share and as high as $11.75 per share based upon daily closing prices, and day-to-day trading has been volatile at times.

This volatility may continue or increase in the future.

The market price for the securities may be significantly affected by factors such as progress in the development of our technology, agreements with research facilities or co-development partners, commercialization of our technology, variations in quarterly and yearly operating results, general trends in the alternative energy industry, and changes in state or federal regulations affecting us and our industry.

Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies, such as the market reactions to internet marketed ‘short squeezes’ or the coronavirus outbreak.

Such broad market fluctuations may adversely affect the market price of our securities.

We have the right to issue shares of preferred stock.

to issue preferred stock, it is likely to have rights, preferences and privileges that may adversely affect our common stock or other

We are authorized to issue 2,000,000 shares of

“blank check”

preferred stock, with such rights, preferences and privileges as may be determined from time-to-time by our

board of directors.

Our board of directors is empowered, without shareholder approval, to issue preferred stock in one or more series,

and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights,

and other rights, preferences and privileges for the preferred stock.

No shares of preferred stock are presently issued and outstanding

and we have no immediate plans to issue shares of preferred stock.

The issuance of shares of preferred stock, depending on the rights,

preferences and privileges attributable to the preferred stock, could adversely reduce the voting rights and powers of the common stock

and the portion of our assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution

in the book value per share of our common stock.

The preferred stock could also be utilized, under certain circumstances, as a method

for raising additional capital or discouraging, delaying or preventing a change in control of the Company, to the detriment of our shareholders.

If we were to issue preferred stock, it is likely to have rights, preferences and privileges that may adversely affect our common stock or other securities.

We are authorized to issue 2.0 million shares of “blank check” preferred stock, with such rights, preferences and privileges as may be determined from time-to-time by our board of directors.

Our board of directors is empowered, without shareholder approval, to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights, and other rights, preferences and privileges for the preferred stock.

No shares of preferred stock are presently issued and outstanding and we have no immediate plans to issue shares of preferred stock.

The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could adversely reduce the voting rights and powers of the common stock and the portion of our assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution in the book value per share of our common stock.

The preferred stock could also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing a change in control of the Company, to the detriment of our shareholders.

We cannot assure you that we will not, under certain circumstances, issue shares of our preferred stock.

We may be required to raise additional capital by issuing new

securities, which may have terms or rights superior to those of our shares of common stock, which could adversely affect the market price

of our shares of common stock and our business.

We will require additional financing to fund research,

development and commercialization of our technology, to obtain and maintain patents and other intellectual property rights in our technology,

and for working capital and other purposes.

We may not be able to obtain financing on favorable terms, if at all.

Additionally, COVID-19

has caused significant disruptions to the global financial markets which could impact our ability to raise additional capital.

additional funds by issuing equity securities, the percentage ownership of our then-current shareholders will be reduced.

may have to offer new investors in our equity securities rights that are superior to the holders of common stock, which could adversely

affect the market price and the voting power of shares of our common stock.

If we raise additional funds by issuing debt securities, the

holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms

of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially

adverse effect on our business and results of operations.

We have not paid dividends in the past and have no immediate

plans to pay dividends.

We plan to reinvest all of our earnings, to the

extent we have earnings, in order to continue to develop our products, to market our products, to cover operating costs and to otherwise

become and remain competitive.

We may be required to raise additional capital by issuing new securities, which may have terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock and our business.

We will require additional financing to fund research, development and commercialization of our technology, to obtain and maintain patents and other intellectual property rights in our technology, and for working capital and other purposes.

We may not be

able to obtain financing on favorable terms, if at all.

If we raise additional funds by issuing equity securities, the percentage ownership of our then-current shareholders will be reduced.

Further, we may have to offer new investors in our equity securities rights that are superior to the holders of common stock, which could adversely affect the market price and the voting power of shares of our common stock.

If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially adverse effect on our business and results of operations.

We have not paid dividends in the past and have no immediate plans to pay dividends.

We plan to reinvest all of our earnings, to the extent we have earnings, in order to continue to develop our products, to market our products, to cover operating costs and to otherwise become and remain competitive.

We do not plan to pay any cash dividends with respect to our securities in the foreseeable future.

assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our

common stock as a dividend.

We have a significant number of options and a small number of

warrants outstanding and we may issue additional options in the future to employees, officers, directors, independent contractors and

We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend.

We have a significant number of options and restricted stock units outstanding and we may issue additional awards in the future to employees, officers, directors, independent contractors and agents.

Sales of the underlying shares of common stock could adversely affect the market price of our common stock.

As of December 31, 2020, we had outstanding

options and warrants for the purchase of 2,697,119 and 80,000 shares of common stock, respectively.

Under the ClearSign Technologies Corporation

2011 Equity Incentive Plan and the ClearSign Technologies Corporation 2013 Consultant Stock Plan (collectively, the “Plans”),

we have the ability to grant awards of shares or options to employees, officers, directors, independent contractors and agents.

as of December 31, 2020, we have reserved an additional 1,429,006 shares of common stock for such awards and the Plans provide that

this number may increase quarterly by a collective amount of up to 16% of the number of shares issued by us each quarter.

Certain holders

may sell these shares in the public markets from time to time, without limitations on the timing, amount or method of sale.

price rises, the holders may exercise their warrants and options and sell a large number of shares.

This could cause the market price

of our common stock to decline.

We have incurred and will incur significant costs as a result

of being a public company that reports to the Securities and Exchange Commission and our management is required to devote substantial

time to meet compliance obligations.

As a public company reporting to the Securities

and Exchange Commission, we incur significant legal, accounting, investor relations, printing, board compensation, and other expenses

that we did not incur as a private company.

These costs totaled $1,123,000 in 2020.

We are subject to the reporting requirements of the

Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002 (with the exception of the requirement of auditor attestation of internal

control over financial reporting from which we are currently excluded as a non-accelerated filer company), as well as rules subsequently

implemented by the Commission that impose significant requirements on public companies, including requiring establishment and maintenance

of effective disclosure and financial controls and changes in corporate governance practices.

In addition, there are significant corporate

governance and executive compensation-related provisions in the Dodd-Frank Wall Street Reform and Protection Act that as we grow could

increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue

strain on our personnel, systems and resources.

Our management and other personnel continually devote a substantial amount of time to

these compliance initiatives.

Furthermore, these rules and regulations may make it more difficult and more expensive for us to obtain

director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher

costs to obtain the same or similar coverage.

As a result, it may be more difficult for us to attract and retain qualified people to serve

on our board of directors, our board committees or as executive officers.

Our charter documents and Washington law may inhibit a takeover

that shareholders consider favorable.

Provisions of our articles of Incorporation and

bylaws and applicable provisions of Washington law may delay or discourage transactions involving an actual or potential change in our

control or change in our management, including transactions in which shareholders might otherwise receive a premium for their shares,

or transactions that our shareholders might otherwise deem to be in their best interests.

The provisions in our articles of incorporation

authorize our board of directors to issue preferred stock without

shareholder approval and to designate the rights, preferences and privileges of each class;

if issued, such preferred stock would increase

the number of outstanding shares of our capital stock and could include terms that may deter an acquisition of us;

As of December 31, 2021, we had outstanding options for the purchase of 2,964 thousand shares of common stock and 112 thousand shares of outstanding restricted stock units (“RSUs”).

Under the ClearSign Technologies Corporation 2021 Equity Incentive Plan and the ClearSign Technologies Corporation 2013 Consultant Stock Plan (collectively, the “Plans”), we have the ability to grant awards of shares, RSU’s or options to purchase shares of our common stock to employees, officers, directors, independent contractors and agents.

Furthermore, the Company operates under an Employee Incentive Plan that provides for increases in the number of awards based on the terms outlined in the Plan.

Certain holders may sell these shares in the public markets from time to time, without limitations on the timing, amount or method of sale.

If our stock price rises, the holders may exercise their options and RSUs and sell a large number of shares.

This could cause the market price of our common stock to decline.

We have incurred and will incur significant costs as a result of being a public company that reports to the Securities and Exchange Commission and our management is required to devote substantial time to meet compliance obligations.

As a public company reporting to the Securities and Exchange Commission, we incur significant legal, accounting, investor relations, printing, board compensation, and other expenses that we did not incur as a private company.

These costs totaled 1.3 million in 2021.

We are subject to the reporting requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002 (with the exception of the requirement of auditor attestation of internal control over financial reporting from which we are currently excluded as a non-accelerated filer company), as well as rules subsequently implemented by the Commission that impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.

In addition, there are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Wall Street Reform and Protection Act that as we grow could increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our personnel, systems and resources.

Our management and other personnel continually devote a substantial amount of time to these compliance initiatives.

Furthermore, these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.

Our charter documents and Washington State law may inhibit a takeover that shareholders consider favorable.

Provisions of our articles of Incorporation and bylaws and applicable provisions of the state of Washington law may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which shareholders might otherwise receive a premium for their shares, or transactions that our shareholders might otherwise deem to be in their best interests.

The provisions in our articles of incorporation and bylaws:

● authorize our board of directors to issue preferred stock without shareholder approval and to designate the rights, preferences and privileges of each class;

if issued, such preferred stock would increase the number of outstanding shares of our capital stock and could include terms that may deter an acquisition of us;

● limit who may call shareholder meetings;

● do not provide for cumulative voting rights;

provide that all vacancies may be filled by the affirmative vote

of a majority of directors then in office, even if less than a quorum, unless the vacant office is to be held by a director elected

by the holders of one or more classes or series of shares entitled to vote thereon, in which case the vacancy can be filled only by

the vote of the holders of such class or series.

In addition, Chapter 23B.19 of the Washington

Revised Code generally limits our ability to engage in any business combination with a person who beneficially owns 10% or more of our

outstanding voting stock unless certain conditions are satisfied.

This restriction lasts for a period of five years following the share

These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your

shares to potential acquirers at a premium over prevailing prices.

This potential inability to obtain a control premium could reduce the

price of our common stock or other securities.

On July 10, 2020, we received a letter from the Financial

Industry Regulatory Authority (“FINRA”) notifying us that FINRA is investigating trading in our securities surrounding the

June 15, 2020 announcement that we received a purchase order from ExxonMobil.

We cannot predict the outcome of the investigation.

Potential negative outcomes could adversely affect our ability to raise capital in the future and the investigation itself could distract

our management, both of which could increase the risk that you would suffer a loss on your investment.

We have been advised that FINRA is conducting a

review of trading in our common stock surrounding the June 15, 2020 announcement of the purchase order we received from ExxonMobil.

have been responding to FINRA’s request for information and intend to continue to cooperate in the investigation.

Although we cannot, at this time, assess either

the duration or the likely outcome or consequences of this investigation, any FINRA action that adversely affects us could also adversely

affect the trading price of our common stock.

In addition, to the extent that the FINRA investigation distracts our management from

pursuing our business plan, our results and the trading price of our common stock could be adversely affected.

● provide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, unless the vacant office is to be held by a director elected by the holders of one or more classes or series of shares entitled to vote thereon, in which case the vacancy can be filled only by the vote of the holders of such class or series.

In addition, Chapter 23B.19 of the state of Washington Revised Code generally limits our ability to engage in any business combination with a person who beneficially owns 10% or more of our outstanding voting stock unless certain conditions are satisfied.

This restriction lasts for a period of five years following the share acquisition.

These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices.

This potential inability to obtain a control premium could reduce the price of our common stock or other securities.

UNRESOLVED STAFF COMMENTS.

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 1A. Risk Factors