What changed in this filing

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Item 1A. Risk Factors

2023-03-31 compared with 2022-03-31 · 72 added, 20 removed, 184 unchanged (33% of the section changed)

38 unchanged sentences

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.

To the extent that environmental regulations in the U.S.

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

If federal, state or local regulatory agencies relax the clean air regulations our technologies are designed to address, or our customers cannot obtain air emission permits with our products, 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.

39 unchanged sentences

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 are inherent dangers involved in the combustion process that utilize our technologies and products and the occurrence of any associated accident may negatively impact our business.

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.

There is only limited data or experience available from the operation of our equipment in both testing and commercial applications to validate suitability for general commercial use.

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.

Any such liabilities could have an adverse effect on our results of operations and financial condition and adversely affect our projected development and production estimates.

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

15 unchanged sentences

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.

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.

19 unchanged sentences

As a result, the Company has experienced delays in the completion of boiler burner demonstration projects during 2020, 2021 and 2022.

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

In addition to our own work, the work of our partners and suppliers in China have been, and continue to be affected.

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

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

Finally, the U.S.

2 unchanged sentences

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.

The impact of inflation on our operating results has been moderate in recent years, despite the recent increase in inflation generally across the economy.

While 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.

2 unchanged sentences

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.

The impact of the global supply-chain constraints has been moderate for our company, reflecting generally modest increases in 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.

We are dependent on third-party suppliers.

Although we are not dependent on any one supplier, we are dependent on the ability of our third-party suppliers to supply our raw materials, such as raw steel and fabricated steel.

The third-party suppliers upon which we depend may default on their obligations to us due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud, loss of key personnel, or other reasons.

We cannot assure that our third-party suppliers will dedicate sufficient resources to meet our scheduled delivery requirements or that our suppliers will have sufficient resources to satisfy our requirements during any period of sustained demand.

Failure of suppliers to supply, or delays in supplying, our raw materials or certain components, or allocations in the supply of certain high demand raw components, for any reason, including, without limitation, disruptions in our suppliers’ business activities due to cybersecurity incidents, terrorist activity, public health crises (such as coronavirus), fires or other natural disasters could materially adversely affect our operations and ability to meet our own delivery schedules on a timely and competitive basis.

Additionally, our third-party suppliers may provide us with raw materials or component parts that fail to meet our expectations or the expectations of our customers, which could subject us to product liability claims, other claims and litigation.

Failure of third parties to manufacture quality products or provide reliable services in a timely manner could cause delays in developing, constructing, and operating our projects, which could damage our reputation, adversely affect our partner relationships or adversely affect our growth.

Our success depends on our ability to develop, construct, and operate projects in a timely manner, which depends in part on the ability of third parties to provide us with timely and reliable products and services.

In developing, constructing, and operating our projects, we rely on products meeting our design specifications and components manufactured and supplied by third parties, and on services performed by subcontractors.

We also rely on subcontractors to perform substantially all of manufacturing work related to our projects, and we may need to engage subcontractors with whom we have no experience.

We currently have a collaboration agreement in place with Zeeco, Inc.

If Zeeco, or any of our subcontractors, is unable to provide services that meet or exceed our customers’ expectations or satisfy our contractual commitments, our reputation, business and operating results could be harmed.

In addition, if we are unable to avail ourselves of warranties and other contractual protections with providers of products and services, we may incur liability to our customers or additional costs related to the affected products and services, which could adversely affect our business, financial condition and results of operations.

Moreover, any delays, malfunctions, inefficiencies or interruptions in these products or services could adversely affect the quality and performance of our projects and require considerable expense to find replacement products and to maintain and repair our projects.

This could cause us to experience interruption in our production and distribution of our products, difficulty retaining current relationships and attracting new relationships, or harm our brand, reputation or growth.

Additionally, because the Company’s contracts generally include progress payments from customers upon the completion of certain defined milestones, the revenue recognition of

such project will depend on our subcontractor’s services in order for us to be able to achieve such milestones timely.

Any subcontractor delays in fulfilling our contracts may result in delay of revenue recognition by the Company, which in turn can affect our financial condition and results of operations.

Macroeconomic pressures in the markets in which we operate may adversely affect our financial results.

Geopolitical issues around the world can impact macroeconomic conditions and could have a material adverse impact on our financial results.

For example, the ultimate impact of the conflict in Ukraine on fuel prices, inflation, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect global economic growth, disrupting discretionary spending habits and generally decreasing demand for our products and services.

While we do not purchase any of significant raw materials directly from Russia, it is a significant global producer of fuel, nickel, and copper.

Disruptions in the markets for those inputs could negatively impact the world and domestic economy.

We cannot predict the extent or duration of sanctions in response to the conflict in Ukraine, nor can we predict the effects of legislative or other governmental actions or regulatory scrutiny of Russia, Russia's other allies or other countries with which Russia has significant trade or financial ties, including China.

The conflict in Ukraine may also exacerbate geopolitical tensions globally.

While the demand of our services in the U.S.

has not yet been affected by this conflict in Ukraine and fuel prices, we cannot predict the impact that the conflict may have on future financial results.

For example, domestic customers for some of our product lines may choose to reduce discretionary spending on goods and services such as ours until fuel and oil price volatility subsides.

We are exposed to fluctuations in the market values of our investments and in interest rates, either of which could impair the

market value of our investments and harm our financial results.

As of December 31, 2022, we had $2,606 thousand of investments in short-term held-to-maturity debt security investments,

consisted primarily of U.S.

In the future, we may further invest in long- or short-term U.S.

treasuries or other marketable

securities with maturities of up to one year.

Currently, we do not use financial derivatives to hedge our interest rate exposure.

These investments, as well as any cash deposit in bank accounts, are subject to general credit, liquidity, market, inflation and

interest rate risks, which may be exacerbated by unusual events, such as the recent hike in interest rates, potential recession and the

recent debt-ceiling debate, which affected various sectors of the financial markets and led to global economic slowdown and high

If the global credit and capital market continues to experience volatility or deteriorates, and to the extent we make future

investments, our investment portfolio may be impacted, and we could determine that some or all of our investments experienced an

other-than-temporary decline in fair value, requiring impairment, which could adversely impact our financial position and operating results.

Risks Related to Owning Our Securities

11 unchanged sentences

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.

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.

4 unchanged sentences

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.

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.

9 unchanged sentences

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.

Furthermore, the Plan provides for increases in the number of shares available for awards based on the terms outlined in such 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.

5 unchanged sentences

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.

personnel, systems and resources.

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

13 unchanged sentences

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

clirSPV LLC has substantial influence in our ability to enter into corporate transactions, and if clirSPV LLC decides to sell or otherwise transfer their shares of common stock, it may put downward pressure on the trading price of our common stock.

The interests of clirSPV and its affiliates, which include our director Robert T.

Hoffman, could conflict with or differ from our interests or the interests of our other shareholders.

Further, clirSPV may choose to sell or otherwise transfer a large number of shares of our common stock, which may put downward pressure on the trading price of shares of our common stock.

If we fail to comply with the continued minimum closing bid requirements of The Nasdaq Capital Market LLC (“Nasdaq”) by May 1, 2023 or other requirements for continued listing, including stockholder equity requirements, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.

Our common stock is listed for trading on Nasdaq, therefore, we must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for 30 consecutive business days.

On November 1, 2022, the Nasdaq staff notified us that we did not comply with the minimum $1.00 per share bid price requirement for continued listing, as set forth in Nasdaq Listing Rule 5550(a)(2).

We have been granted 180 calendar days, through May 1, 2023, to regain compliance.

In the event that we do not regain compliance within this 180 day period, we may be eligible to seek an additional compliance period of 180 calendar days if we meet certain requirements.

There can be no assurance that we will be able to regain compliance with Nasdaq’s listing rules.

If we are unable to regain compliance with the minimum closing bid price requirement or if we fail to meet any of the other continued listing requirements, including stockholder equity requirements, our securities may be delisted from Nasdaq, which could reduce the liquidity of our common stock materially and result in a corresponding material reduction in the price of our common stock.

In addition, delisting could harm our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and business development opportunities.

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