What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-31 compared with 2021-03-31 · 8 added, 231 removed, 2 unchanged (99% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is listed on the Nasdaq Capital

Market under the symbol “CLIR”.

to our transfer agent, as of March 28, 2021 we had approximately 143 shareholders of record .

This number does not include

an indeterminate number of holders whose shares are held by brokers in street name.

Our stock transfer agent is VStock Transfer, LLC,

18 Lafayette Place, Woodmere, NY 11598.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is listed on the Nasdaq Capital Market under the symbol “CLIR”.

According to our transfer agent, as of March 15, 2022, we had 285 shareholders of record.

This number does not include an indeterminate number of holders whose shares are held by brokers in street name.

Our stock transfer agent is VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598.

Recent Issuances of Unregistered Securities

On December 31, 2020, we issued 3,750 shares

of common stock, having a per share value of $2.33, the closing price of our common stock on November 5, 2020, the date of grant,

from our 2013 Consultant Stock Plan to our investor relations firm, Firm IR Group, LLC, for services provided in the three months ended

December 31, 2020.

We relied on Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D promulgated

thereunder to issue the stock.

On December 31, 2021, we issued 3.8 thousand shares of common stock, having a per share value of $1.93, the closing price of our common stock on November 19, 2021, the date of grant, from our 2013 Consultant Stock Plan to our investor relations firm, Firm IR Group, LLC, for services provided in the three months ended December 31, 2021.

We relied on Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder to issue the stock.

Equity Compensation Plan Information

See Item 12, Security Ownership of Certain Beneficial

Owners and Management and Related Stockholder Matters, for information about our equity compensation plans.

SELECTED FINANCIAL DATA.

As a smaller reporting company, we are not required

to provide this information.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our

financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and related

notes included elsewhere in this Annual Report on Form 10-K.

In addition to historical information, this discussion and analysis

here and throughout this Form 10-K contains forward-looking statements that involve risks, uncertainties and assumptions.

results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including but not

limited to, the risks described in the section titled “Risk Factors”.

We design and develop technologies for the purpose

of improving key performance characteristics of combustion systems, including emission and operational performance, energy efficiency

and overall cost-effectiveness.

Our ClearSign Core technology is currently in test furnace and field development.

We have generated nominal

revenues from operations to date to meet operating expenses.

have incurred losses since inception totaling $74,874,000 and we expect to experience operating losses and negative cash flow for the

foreseeable future.

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

Since inception, we

have raised approximately $78.0 million in gross proceeds through the sale of our equity securities.

We may need to raise additional capital

in the future, however, the significant volatility in the capital markets relating to the ongoing spread of the coronavirus may

negatively affect our ability to do so.

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 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 resulting in delays to the delivery of materials and

services, and has resulted in delays to our projects.

It is not possible at this time to estimate the

full impact that the coronavirus pandemic will have on our business or on our potential customers, suppliers or other business partners.

However, the continued spread of the coronavirus, the measures taken by the governments of affected countries, actions taken to protect

employees, the limitations placed on travel and border crossings, and the impact of the pandemic on various business activities in affected

countries could adversely impact our operational results and financial condition.

In order to generate meaningful revenues, our

technologies must be fully developed, gain market recognition and acceptance and develop a critical level of successful sales and

product installations.

In addition, management believes that the successful growth and operation of our business is dependent upon

our ability to obtain adequate sources of funding through co-development agreements, strategic partnering agreements, or equity or

debt financing to adequately support research and development efforts, protect intellectual property, form relationships with

strategic partners and provide for working capital and general corporate purposes.

There can be no assurance that we will be

successful in achieving our long-term plans, or that such plans, if consummated, will result in profitable operations or enable us

to continue in the long-term as a going concern .

Our costs include employee salaries and benefits,

compensation paid to consultants, materials and supplies for research, costs associated with development activities including materials,

sub-contractors, travel and administration, legal and accounting expenses, sales and marketing costs, general and administrative expenses,

and other costs associated with an early stage, publicly-traded technology company.

We currently have 15 full-time employees.

using third party expertise and resources is more efficient than maintaining full time resources, we also expect to incur consulting expenses

related to technology development and some administrative, sales and legal functions commensurate with our current levels.

The amount that we spend for any specific purpose

may vary significantly, and could depend on a number of factors including, but not limited to, the pace of progress of our commercialization

and development efforts, actual needs with respect to product testing, development and research, market conditions, and changes in or

revisions to our sales and marketing strategies.

Research, development, and commercial acceptance

of new technologies are, by their nature, unpredictable.

Although we undertake development and commercialization efforts with

reasonable diligence, there can be no assurance that the net proceeds from our securities offerings will be sufficient to enable us to

develop our technology to the extent needed to create future sales to sustain operations.

If the net proceeds from these offerings

are insufficient for this purpose, we will consider other options to continue our path to commercialization, including, but not limited

to, additional financing through follow-on equity offerings, debt financing, co-development agreements, sale or licensing of developed

intellectual or other property, or other alternatives.

We cannot assure that our technologies will be

accepted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable.

Furthermore, we have

no committed source of financing and we cannot assure that we will be able to raise money as and when we need it to continue our operations.

If we cannot raise funds as and when we need them, we may be required to scale back our development plans by reducing expenditures for

employees, consultants, business development and marketing efforts or to otherwise severely curtail, or even to cease, our operations.

Critical Accounting Policies

The following discussion and analysis of financial

condition and results of operations is based upon our financial statements, which have been prepared in conformity with accounting principles

generally accepted in the United States of America.

Certain accounting policies and estimates are particularly important to the understanding

of our financial position and results of operations and require the application of significant judgment by our management or can be materially

affected by changes from period to period in economic factors or conditions that are outside of our control.

As a result, they are subject

to an inherent degree of uncertainty.

In applying these policies, our management uses their judgment to determine the appropriate assumptions

to be used in the determination of certain estimates.

Those estimates are based on our historical operations, our future business plans

and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our

customers and information available from other outside sources, as appropriate.

See Note 2 to our audited consolidated financial statements

included elsewhere in this report for a more complete description of our significant accounting policies.

Recognition and Cost of Goods Sold The Company recognizes revenue and cost of goods sold in accordance with ASC606, Revenue

from Contracts with Customers .

Revenues and costs of sales are recognized once the goods or services are delivered to the customer’s

control and performance obligations are satisfied.

The Company’s contracts with customers generally have performance obligations

and a schedule of non-refundable cancellation obligations.

The contracts generally will be fully performed upon delivery of certain drawings

or equipment.

Revenue related to the contracts is recognized in accordance with ASC 606 in accordance with the non-refundable performance

obligations which are laid out in each sales order.

The Company warrants all installed products against defects in materials and workmanship for a period specified

in each contract by replacing failed parts.

Accruals for product warranties are based on historical warranty experience and current product

performance trends, and are recorded at the time revenue is recognized as a component of cost of sales.

The warranty liabilities are reduced

by material and labor costs used to replace parts over the warranty period in the periods in which the costs are incurred.

periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary and such adjustments could

be material in the future if estimates differ significantly from actual warranty expense.

The warranty liabilities are included in accrued

liabilities in the balance sheets.

and Development .

The cost of research and development is expensed as incurred.

Research and development costs consist of salaries,

benefits, share-based compensation, consulting fees, rent, utilities, depreciation, and consumables.

Compensation .

The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected

in the consolidated financial statements based on the estimated fair value of the awards on the grant date.

That cost is recognized over

the period during which an employee is required to provide service in exchange for the award.

Stock compensation for stock granted to

non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever

is more reliably measured.

Value of Financial Instruments .

Fair value is the price that would be received to sell an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date.

Assets and liabilities measured at fair value are categorized

based on whether or not the inputs are observable in the market and the degree that the inputs are observable.

The categorization of financial

assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company's financial instruments primarily consist

of cash and cash equivalents, accounts payable, accrued expenses and short-term investments in government securities.

As of the balance

sheet date, the estimated fair values of the financial instruments were not materially different from their carrying values as presented

on the balance sheets.

This is primarily attributed to the short maturities of these instruments.

The Company did not identify any other

non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value.

Results of Operations

Comparison of the Years Ended December 31, 2020 and 2019

Cost of Goods Sold, and Gross Profit .

The Company reported no annual revenue in 2020.

We recognized cost of goods sold of $450,000

from a project that we anticipate will show a loss on the sale when completed and from a second project that has been deemed as potentially

uncollectable.

This was offset by a recorded adjustment of $171,000 representing reversal of accruals for product warranties that expired

during the period.

The Company reported no revenue and incurred $1,000 in warranty costs for previously completed contracts in 2019.

anticipate gross margins will normalize in the range of 50% as production increases, assuming that the Company will realize revenue in

future periods.

Operating expenses decreased by $1,929,000 to $6,653,000 in 2020 compared to $8,582,000 in operating expenses in

2019, a decrease of approximately 22%.

The Company decreased its research and development (R&D) expenses by $1,027,000 to $2,029,000

for 2020 compared to $3,056,000 for 2019.

R&D expenses decreased due primarily to transitioning from R&D work to field work with

customers, and reduced laboratory related costs.

General & administrative (G&A) expenses decreased by $902,000 to $4,624,000

for 2020 compared to $5,526,000 for 2019.

This decrease is due to a reduction of consulting services, travel expenses, and patent impairment

charges by approximately $1,090,000, offset primarily by a $215,000 increase in G&A compensation costs.

from Operations .

Due to the decrease in operating expenses, our loss from operations decreased during 2020 by $1,651,000 to

$6,932,000, compared to $8,583,000 in 2019, a decrease of approximately 19%.

Other income of $44,000 in 2020 resulted from a non-recurring sale of spare materials and parts for an installation

site on a previously completed contract.

Primarily as a result of the decrease in operating expenses, our net loss for 2020 was $6,886,000 as compared to a net

loss of $8,482,000 for 2019, resulting in a $1,596,000 decrease in the net loss or approximately 19%.

Liquidity and Capital Resources

December 31, 2020, our cash and cash equivalent balance totaled $8,824,000 compared to $8,552,000 at December 31, 2019, which

we believe will be adequate to support our operations for at least the next 12 months from the date of issuance of this report.

we are pursuing sales and co-development agreements, there is no assurance that we will be successful in entering into any such agreements

or, if we do enter into such agreements, that they will provide adequate funds to support our operations and to commercialize our technology.

To the extent sales and co-development agreement funding is insufficient for these purposes, we may undertake offerings of our securities,

debt financing, selling or licensing our developed intellectual or other property, or other alternatives.

From inception, the Company’s

operations have been funded primarily through the sale of its common stock.

In order to continue business operations beyond twelve months

from the date of issuance of this report, the Company currently anticipates that it will need to raise additional capital.

However, there

can be no assurances that the Company will be able to secure any such additional financing on acceptable terms and conditions.

Additionally,

the outbreak of COVID-19 has caused significant disruptions to the global financial markets which could impact the Company’s ability

to raise additional capital.

At December 31, 2020, our current assets were

in excess of current liabilities resulting in working capital of $8,302,000 compared to $7,684,000 at December 31, 2019.

in working capital resulted primarily from a $272,000 increase in cash and cash equivalents, a decrease of $410,000 in accounts payable

and accrued liabilities, and an increase of $75,000 in prepaid expenses and other assets.

Operating activities for 2020 resulted in cash

outflows of $5,964,000 which were due primarily to the net loss for the period of $6,886,000, offset by share based compensation primarily

from the Company’s employee and consultant equity plans of $800,000, services and compensation paid with common stock of $17,000,

and depreciation and amortization expense of $210,000.

Operating activities for 2019 resulted in cash outflows of $6,902,000 which were

due primarily to the loss for the period of $8,482,000, offset by share-based compensation from the Company’s employee and consultant

equity plans of $685,000, services and compensation paid with common stock of $14,000, impairment of capitalized patent costs of $733,000,

and depreciation and amortization expense of $240,000.

Investing activities for 2020 resulted in cash

outflows of $194,000 and cash inflows of $6,505,000 in 2019.

During 2020 and 2019, development of capitalized patents and other intangible

assets resulted in cash outflows of $177,000 and $398,000, respectively.

Acquisition of fixed assets for 2020 and 2019 resulted in cash

outflows of $17,000 and $20,000, respectively.

During 2019, we received proceeds of $6,923,000 from maturities of short-term U.S.

Financing activities for 2020 resulted in cash

inflows of $6,053,000 in net proceeds from the issuance of common stock, $251,000 from PPP loan funding and $126,000 in proceeds from

the exercise of stock options, compared to no financing activities during 2019.

Off-Balance Sheet Transactions

We do not have any off-balance sheet transactions.

See Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, for information about our equity compensation plans.

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 5. Market for Registrant’s Common Equity