What changed in this filing

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Item 9A. Controls and Procedures

2023-03-31 compared with 2022-03-31 · 649 added, 12 removed, 125 unchanged (84% of the section changed)

17 unchanged sentences

Changes in Internal Control over Financial Reporting

During the fourth quarter of 2021, we implemented balance sheet reconciliation control procedures which address a previously identified material weakness related to our ability to record transactions in the accounting records and preparation of financial statements that are in compliance with accounting principles generally accepted in the United States of America, which resulted in numerous adjustments that were recorded after the close of the Company’s books of record and preparation of the financial statements for the purposes of the Company’s Quarterly Report for the period ended June 30, 2021.

During the fourth quarter of fiscal year 2021, we successfully completed the testing necessary to conclude that the material weakness has been remediated.

Except as noted above, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no changes in the Company’s internal control over financial reporting that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

4 unchanged sentences

Code of Business Conduct and Ethics

The Company has adopted a Code of Business Conduct and Ethics that applies to all ClearSign employees and directors.

The Company has adopted a Code of Business Conduct and Ethics that applies to all of our ClearSign employees and directors.

The Code of Business Conduct and Ethics is posted on the Company’s website at www.clearsign.com .

11 unchanged sentences

(a) (1) Consolidated Financial Statements

The financial statements filed as part of this report are listed and indexed in the Index to Consolidated Financial Statements included at Item 8.

The financial statements filed as part of this report are listed and indexed in the Index to Consolidated Financial Statements on page 33 located in this Annual Report on Form 10-K.

Financial statement schedules have been omitted because they are not applicable, or the required information has been included elsewhere in this report.

4 unchanged sentences

The Company has identified in the Exhibit Table each management contract and compensation plan filed as an exhibit to this Annual Report on Form 10-K in response to Item 15(a) (3) of Form 10-K.

(b) The exhibits set forth in the following index of exhibits are filed or incorporated by reference as a part of this Annual Report on

Description of Document

25 unchanged sentences

Second Amendment to Lease, entered into as of January 14, 2020, between Tulsa Portfolio Oklahoma Realty LP and ClearSign Technologies Corporation (15)

Purchase Right Waiver of clirSPV LLC (18)

Gary DiElsi’s Offer Letter (19)

Amendment to Employment Agreement between the Company and Colin James Deller (20)+

Subsidiaries of the registrant (7)

Consent of BPM LLP, Independent Registered Public Accounting Firm*

Consent of Gumbiner Savett Inc., Independent Registered Public Accounting Firm*

Consent of BPM CPA LLP, Independent Registered Public Accounting Firm*

Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

22 unchanged sentences

Incorporated by reference from the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 17, 2018.

Incorporated by by reference from the registrant’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 30, 2020

Incorporated by reference from the registrant’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on March 30, 2020

(13) Incorporated by reference from the registrant’s Current Report on Form 8-K filed with the Securities and Exchange

2 unchanged sentences

Securities and Exchange Commission on May 7, 2021.

(15) Incorporated by reference from the registrant’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 31, 2022

Incorporated by reference from the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, filed with the Securities and Exchange Commission on August 20, 2021.

(16) Incorporated by by reference from the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021,

(17) Incorporated by reference from the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021,

filed with the Securities and Exchange Commission on November 12, 2021.

(18) Incorporated by reference from the registrant’s Current Report on Form 8-K, filed with the Securities and Exchange

Commission on May 31, 2022.

(19) Incorporated by reference from the registrant’s Current Report on Form 8-K, filed with the Securities and Exchange

Commission on August 2, 2022.

(20) Incorporated by reference from the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, filed

with the Securities and Exchange Commission on August 15, 2022.

FORM 10-K SUMMARY

ClearSign Technologies Corporation

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

ANNUAL FINANCIAL INFORMATION

Report of Independent Registered Public Accounting Firm (PCAOB ID 207 )

Consolidated Balance Sheets at December 31, 2022 and 2021

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021

Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2022

Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

ClearSign Technologies Corporation and Subsidiary

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ClearSign Technologies Corporation and subsidiary (the "Company") as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of this critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Carrying Value of Patents and Other Intangible Assets

As described in Notes 2 and 4 to the consolidated financial statements, the Company’s patents and other intangible assets, net balance was $0.8 million as of December 31, 2022.

The Company capitalizes third-party legal costs and filing fees, if any, associated with obtaining patents or other intangible assets.

Once a patent asset has been placed in service, the Company amortizes these costs over the shorter of the asset’s legal or estimated economic life using the straight-line method.

The Company also evaluates for potential impairment of long-lived assets, including intangible assets composed of patents, no less frequently than annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The principal considerations for our determination that performing procedures relating to the carrying value of intangible assets is a critical audit matter are the significant amount of judgment by management in developing the assumptions of future economic benefit in an impairment analysis, which in turn led to significant auditor judgment, subjectivity and effort in performing audit procedures and evaluating audit evidence relating to the analysis.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, reviewing current and forecasted operating conditions for indication of impairment.

We also reviewed board minutes, news, and industry reports for indications of impairment.

Last, we obtained an understanding of potential future customers indicating future recoverability.

/s/ BPM CPA LLP

Santa Monica, California

March 31, 2023

We have served as the Company's auditor since 2011.

ClearSign Technologies Corporation

Consolidated Balance Sheets

(in thousands, except share and per share data)

Current Assets:

Cash and cash equivalents

Short-term held-to-maturity investments

Accounts receivable, net

Contract assets

Prepaid expenses and other assets

Total current assets

Fixed assets, net

Patents and other intangible assets, net

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable and accrued liabilities

Current portion of lease liabilities

Accrued compensation and related taxes

Contract liabilities

Total current liabilities

Long Term Liabilities:

Long term lease liabilities

Total liabilities

Commitments and contingencies (note 11)

Stockholders’ Equity:

Preferred stock, $ 0.0001 par value, zero shares issued and outstanding

Common stock, $ 0.0001 par value, 38,023,701 and 31,581,666 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated deficit

Total Liabilities and Equity

The accompanying notes are an integral part of these consolidated financial statements.

ClearSign Technologies Corporation

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

For the Year Ended

Cost of goods sold

Gross profit (loss)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Interest, net

Government assistance

Gain from sale of assets

Other income, net

Total other income

Net loss attributed to non-controlling interest

Net loss attributed to common stockholders

Net loss per share - basic and fully diluted

Weighted average number of shares outstanding - basic and fully diluted

Comprehensive loss

Foreign-exchange translation adjustments

Comprehensive loss

The accompanying notes are an integral part of these consolidated financial statements.

ClearSign Technologies Corporation

Consolidated Statements of Stockholders’ Equity

For the Year Ended December 31, 2022

Total ClearSign

Accumulated Other

Technologies Corp.

(in thousands, except per share data)

Comprehensive

Stockholders’

Noncontrolling

Paid-In Capital

Income (loss)

Balances at December 31, 2021

Shares issued upon exercise of options ($ 0.89 per share)

Shares issued upon exercise of options ($ 2.93 per share)

Fair value of stock issued in payment of accrued compensation

Fair value of stock options granted in payment of accrued compensation

Share based compensation

Shares issued through the use of At-The Market issuance ($ 1.24 average per share)

Shares issued for services ($ 1.93 per share)

Shares issued for services ($ 0.66 per share)

Shares issued in stock offering ($ 1.11 per share)

Shares issued pursuant to purchase right ($ 1.11 per share)

Foreign-Exchange Translation Adjustment

Balances at December 31, 2022

ClearSign Technologies Corporation

Consolidated Statements of Stockholders’ Equity

For the Year Ended December 31, 2021

Total ClearSign

Accumulated Other

Technologies Corp.

Comprehensive

Stockholders'

Noncontrolling

Paid-In Capital

Income (loss)

Balances at December 31, 2020

Shares issued through the use of At-The Market issuance ($ 5.03 average per share)

Shares issued upon exercise of options ($ 3.80 per share)

Shares issued upon exercise of options ($ 3.10 per share)

Shares issued upon exercise of options ($ 2.93 per share)

Shares issued upon exercise of options ($ 1.90 per share)

Shares issued upon exercise of options ($ 1.85 per share)

Shares issued upon exercise of options ($ 1.21 per share)

Shares issued upon exercise of options ($ 0.98 per share)

Shares issued upon exercise of options ($ 0.89 per share)

Shares issued upon exercise of options ($ 1.80 per share)

Shares issued for services ($ 2.33 per share)

Shares issued for services ($ 1.93 per share)

Fair value of stock issued in payment of accrued compensation

Fair value of stock options issued for board service

Share based compensation

Foreign-Exchange Translation Adjustment

Balances at December 31, 2021

The accompanying notes are an integral part of these consolidated financial statements.

ClearSign Technologies Corporation

Consolidated Statements of Cash Flows

(in thousands)

For the Year Ended December 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Common stock issued for services

Share-based compensation

Depreciation and amortization

Impairment of intangible assets

Gain from sale of fixed assets

Right of use asset amortization

Realized gain from market securities

Gain on forgiveness of Payroll Protection Program Loan and interest

Change in operating assets and liabilities:

Contract assets

Accounts receivable

Prepaid expenses and other assets

Accounts payable and accrued liabilities

Accrued compensation and related taxes

Contract liabilities

Net cash used in operating activities

Cash flows from investing activities:

Acquisition of fixed assets

Disbursements for patents and other intangible assets

Proceeds from sale of fixed assets

Purchases of held-to-maturity short-term US treasuries

Redemption of held-to-maturity US treasuries

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock, net of offering costs

Proceeds from exercise of stock options and warrants

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Cash and cash equivalents:

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental disclosure of cash flow information:

Officer and employee equity awards for prior year accrued compensation

The accompanying notes are an integral part of these consolidated financial statements.

ClearSign Technologies Corporation

Notes to Consolidated Financial Statements

Note 1 – Organization and Description of Business

ClearSign Technologies Corporation (“ClearSign” or the “Company”) designs and develops products and technologies that have been shown to significantly improve key performance characteristics of industrial and commercial systems, including operational performance, energy efficiency, emission reduction, safety, and overall cost-effectiveness.

The Company’s patented technologies are designed to be embedded in established OEM products as ClearSign Core™ and ClearSign Eye™ and other sensing configurations in order to enhance the performance of combustion systems and fuel safety systems in a broad range of markets.

These markets include energy (upstream oil production and down-stream refining), commercial/industrial boiler, chemical, petrochemical, transport and power industries.

The Company’s primary technology is its ClearSign Core technology, which achieves very low emissions without the need of external flue gas recirculation or selective catalytic reduction.

The Company was incorporated in the State of Washington in 2008.

During January 2022, the Company relocated its headquarters from Seattle, Washington to Tulsa, Oklahoma.

On July 28, 2017, the Company incorporated a subsidiary, ClearSign Asia Limited, in Hong Kong to represent the Company’s business and technological interests throughout Asia.

Through ClearSign Asia Limited, the Company has established a Wholly Foreign Owned Enterprise (WFOE) in China – ClearSign Combustion (Beijing) Environmental Technologies Co., LTD.

Unless otherwise stated or the context otherwise requires, the terms ClearSign and the Company refer to ClearSign Technologies Corporation and its subsidiary, ClearSign Asia Limited.

The Company's consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

As of December 31, 2022, the Company’s cash and cash equivalents totaled $ 6,451 thousand, and short-term held-to-maturity investments totaled $ 2,606 thousand, which is sufficient to fund current operating expenses beyond twelve months from the date hereof.

The Company’s technologies are currently in field development, but with nominal fully operational commercial installations, and have generated nominal revenues from operations to date to meet operating expenses.

In order to generate meaningful revenues, the technologies must be fully developed, gain market recognition and acceptance, and develop a critical level of successful sales and product installations.

Historically, the Company has financed operations primarily through issuances of equity securities.

Since inception, the Company has raised approximately $ 91 million in gross proceeds through the sale of its equity securities.

During the year ended December 31, 2022, the Company raised approximately $ 6.5 million in net proceeds by issuing approximately 6.3 million shares of common stock.

The Company has incurred losses since its inception totaling $ 88.5 million and expects to experience operating losses and negative cash flows for the foreseeable future.

Management believes that the successful growth and operation of the Company’s business is dependent upon its ability to obtain adequate sources of funding through co-development agreements, strategic partnering agreements, or equity or debt financing to adequately support product commercialization efforts, protect intellectual property, form relationships with strategic partners, and provide for working capital and general corporate purposes.

There can be no assurance that the Company will be successful in achieving its long-term plans as set forth above, or that such plans, if consummated, will result in profitable operations or enable the Company to continue in the long-term as a going concern.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of ClearSign and its subsidiary.

Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Revenue Recognition and Cost of Sales

The Company recognizes revenue and related cost of goods sold in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 606 Revenue from Contracts with Customers (“ASC 606”).

When applying ASC 606, the Company performs the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the promises and performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the performance obligations are satisfied.

Revenues and cost of goods sold are recognized once the goods or services are delivered to the customer’s control or non-refundable 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 following the completion of non-refundable performance obligations as defined in the contract.

The Company’s contracts generally include progress payments from the customer upon completion of defined milestones.

As these payments are received, they are offset against accumulated project costs and recorded as either contract assets or contract liabilities.

Upon completion of the performance obligations and collectability is determined, revenue is recorded.

For any contract that is expected to incur costs in excess of the contract price, the Company accrues the estimated loss in full in the period such determination is made.

Contract Acquisition Costs and Practical Expedients

The Company capitalizes project costs until performance obligations related to the contract are completed.

The Company expenses selling and marketing expenses when incurred within the statement of operations in General and Administrative expenses.

Product Warranties

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 or expected warranty experience and current product performance trends and are recorded as a component of cost of sales at the time revenue is recognized.

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.

The Company 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.

Product warranties are included in accrued liabilities in the consolidated balance sheets.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on deposit in a checking and savings account, and short-term money market instruments with an original maturity of three months or less.

Cash equivalents, which consist of short-term US treasury bills, are based on quoted market prices, a Level 1 fair value measure.

Short-Term Investments

Short-term investments consist of U.S.

treasuries with original maturities of twelve months or less and greater than three months.

These short-term investments are classified as held to maturity and are recorded on an amortized cost basis, based on the Company’s positive intent and ability to hold these securities to maturity.

As of December 31, 2022, the Company has not experienced any other-than-temporary impairment of its short-term investments.

A decline in the market value of any held-to-maturity security below cost that is deemed other than temporary results in a reduction in carrying amount to fair value.

The impairment is charged to earnings and a new cost basis for the security is established.

The company evaluates whether the decline in fair value of its investments is other-than temporary at each quarter-end.

The cost basis for our short-term investments totaled approximately $ 2,606 thousand and zero for the periods December 31, 2022, and 2021, respectively.

The unrealized holding gains for our short-term investments totaled approximately $ 4 thousand and zero for the periods December 31, 2022, and 2021, respectively.

We have not experienced any continuous unrealized holding losses on these investments.

The fair value for our short-term investments totaled approximately $ 2,610 thousand and zero for the periods December 31, 2022, and 2021, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivables are recorded at the contractual invoiced amount.

An allowance for doubtful accounts is established, as necessary, based on past experience and management’s judgment.

The determination of the collectability of amounts due from customers require the Company to make judgments regarding future events and trends.

Allowances for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis.

This process consists of a review of historical collection experience, current aging status of the customer accounts, and the financial condition of the Company’s customers.

Based on a review of these factors, the Company may establish or adjust the allowance for specific customers and the accounts receivable portfolio as a whole.

Fixed Assets and Leases

Fixed assets are recorded at cost.

Leases are recorded in accordance with FASB ASC 842, Leases .

For those leases with a term greater than one year, the Company recognizes a right-of-use asset, which is included in fixed assets, net on the consolidated balance sheets, and a lease liability measured at the present value of the lease payments at the time of the lease inception or modification.

Lease costs are recognized in the consolidated statement of operations over the lease term on a straight-line basis.

Leases with a term of 1 year or less are considered short term leases with rent expense recognized over the lease term.

Depreciation is computed using the straight-line method over the estimated useful lives of the respective lease assets.

Leasehold improvements are depreciated over the life of the lease or their useful life, whichever is shorter.

All other fixed assets are depreciated over three to four years .

Maintenance and repairs are expensed as incurred.

Patents and Trademarks

Third-party expenses related to patents and trademarks are recorded at cost, less accumulated amortization.

Amortization is computed using the straight-line method over the estimated useful lives of the assets once they are awarded.

Patent application costs are deferred pending the outcome of patent and trademark applications.

Costs associated with unsuccessful patent applications and abandoned intellectual property are expensed when determined to have no continuing value in current business activity.

The Company evaluates the recoverability of the carrying values of intangible assets each reporting period.

Impairment of Long-Lived Assets

The Company tests long-lived assets, consisting of fixed assets, patents, trademarks, and other intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected from the use and eventual disposition of the assets.

In the event an asset is not fully recoverable a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets.

Fair value is determined based on the present value of estimated expected cash flows using a discount rate commensurate with the risks involved, quoted market prices, or appraised values depending upon the nature of the assets.

Losses on long-lived assets to be disposed are determined in a similar manner, except those fair values are reduced for the cost of disposal.

Fair 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 three levels of inputs used to establish fair value are the following:

● Level 1 – Quoted prices in active markets for identical assets or liabilities.

● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;

● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial instruments primarily consist of cash equivalents, short-term investments, accounts receivable, accounts payable, and accrued expenses.

As of the balance sheet dates, 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 attributable to the short-term nature of these instruments.

The Company did not identify any other recurring or non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value.

Research and Development

The cost of research and development is expensed as incurred.

Research and development costs consist of salaries, benefits, share based compensation, consumables, and consulting fees, including costs to develop and test prototype equipment and parts.

Research and Development costs have been offset by funds received, if any, from strategic partners in cost sharing, collaborative projects.

During the year ended December 31, 2022, the Company did not receive funds from these arrangements.

During December 31, 2021, the Company received $ 44 thousand from these arrangements.

Government Assistance

We have adopted Accounting Standards Update (“ASU”) 2021-10, Government Assistance (Topic 832) Disclosures by Business Entities about Government Assistance, which requires footnote disclosure of assistance received from government entities.

We record gross monies received from government entities in other income, and associated expenses such as salaries and supplies are recorded in Research and Development or General and Administration, depending on the nature of expenditure.

We accrue for reimbursement requests submitted to government entities in accounts receivable.

The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years.

Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

A valuation allowance is provided for deferred tax assets if it is more likely than not the Company would not be able to realize their benefits, or that future deductibility is uncertain.

Tax benefits are recognized only if it is more likely than not that the tax benefits will be utilized in the foreseeable future.

Share-Based 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, or in the case of performance options, expense is recognized upon completion of a milestone as defined in the grant agreement.

Share-based compensation for stock grants 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.

Foreign Operations

The accompanying consolidated balance sheets as of December 31, 2022 and 2021 include assets amounting to approximately $ 172 thousand and $ 274 thousand, respectively, relating to operations of ClearSign Asia Limited.

The Beijing registered capital requirement is $ 350 thousand, which is required to be paid by 2027, and of which the Company has not paid any as of December 31, 2022.

It is always possible that unanticipated events in foreign countries could disrupt the Company’s operations, and since the first quarter of 2020 this has been and currently continues to be the case with the effects of the COVID-19 pandemic.

Foreign Currency

Assets and liabilities of ClearSign Asia Limited with non-U.S.

Dollar functional currency are translated to U.S.

Dollars using exchange rates in effect at the end of the period.

Revenue and expenses are translated to U.S.

Dollars using rates that approximate those in effect during the period.

The resulting translation adjustments are included in the Company’s consolidated balance sheets in the stockholders’ equity section as a component of accumulated other comprehensive income (loss).

Noncontrolling Interest

The subsidiary of the Company has a minority shareholder agreement representing an ownership interest of 1.00 % of ClearSign Asia Limited.

The Company accounts for this noncontrolling interest pursuant to FASB Topic ASC 810, Consolidation, whereby gains and losses in a subsidiary with a noncontrolling interest are allocated to the noncontrolling interest based on the ownership percentage of the noncontrolling interest, even if that allocation results in a deficit noncontrolling interest balance.

As of December 31, 2022, the noncontrolling interest balance was de minimus.

Net Loss per Common Share

Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding.

Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included because their effect would be anti-dilutive.

At December 31, 2022 and 2021, potentially dilutive shares outstanding amounted to 3.5 million and 3.1 million, respectively.

Recently Issued Accounting Pronouncements

In June 2017, the FASB issued an Accounting Standards Update (“ASU”) ASU 2016-13, Financial Instruments (Topic 326) Measurement of Credit Losses on Financial Instruments , which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

The standard replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses.

ASU 2016-13, and related amendments, are effective for fiscal years beginning after December 15, 2022.

The Company does not expect the adoption of this standard to have a material impact on its accounts receivable or short-term investment balances.

Note 3 – Fixed Assets

Fixed assets are summarized as follows:

(in thousands)

Machinery and equipment

Office furniture and equipment

Leasehold improvements

Accumulated depreciation and amortization

Operating lease ROU assets, net

Depreciation and amortization expense for the years ended 2022 and 2021 totaled $ 24 thousand and $ 38 thousand, respectively.

The Company leases office space in Seattle, Washington, Tulsa, Oklahoma and Beijing, China.

During June 2022, the Company entered into a new lease agreement for its Beijing office space for a period of one year with monthly rent at approximately $ 2

We classified this lease as an operating lease since it is more likely than not the lease will be renewed at the end of its term.

Prior to entering into this new lease agreement, the monthly rent for the old Beijing office space was approximately $ 5 thousand, equating to an annual total short term lease expense of $ 23 thousand prior to termination in June 2022.

The Seattle, Tulsa, and Beijing leases are classified as operating leases, with remaining terms ranging from five months to six years ;

contractual language requires renewal negotiations to occur at or near termination.

These leases are normal and customary for office space, in that, contractual guarantees exist requiring the lessee to return the premises to its original functional state.

The Company accrued an estimated cost of $ 55 thousand and $ 32 thousand in 2022 and 2021, respectively, for a total of approximately $ 87 thousand, to prepare for the restoration of the Seattle office.

The Company plans to exit the Seattle lease on or before contract termination as part of our headquarters move from Seattle to Tulsa.

In preparation for this move, the Company entered into the Tulsa operating lease agreement in April 2021.

The Seattle and Tulsa leases contain fixed annual lease payments that increase annually by factors that range between 2 % to 3 %.

The Seattle, Tulsa, and Beijing total monthly minimum rent is approximately $ 22 thousand.

Operating lease costs for the years ended December 31, 2022 and 2021 were $ 186 thousand and $ 257 thousand, respectively.

Supplemental balance sheet information related to operating leases is as follows:

(in thousands)

Operating lease ROU assets, net

Lease Liabilities:

Current lease liabilities

Long term lease liabilities

Total lease liabilities

Weighted average remaining lease term (in years):

Weighted average discount rate:

Supplemental cash flow information related to leases is as follows:

For the Year Ended

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used in operating leases

Non-cash impact of new leases and lease modifications

New operating lease liabilities

Impairment of operating lease ROU assets

Minimum future payments under the Company’s lease liabilities as of December 31, 2022 are as follows:

(in thousands)

At December 31, 2022, $ 37 thousand of our future minimum lease payments represents interest.

Note 4 – Patents and Other Intangible Assets

Patents and other intangible assets are summarized as follows:

(in thousands)

Patents pending

Issued patents

Trademarks pending

Registered trademarks

Accumulated amortization

Future amortization expense associated with issued patents and registered trademarks as of December 31, 2022 is as follows:

(in thousands)

The amortization life for patents ranges between three to five years , with trademark lives set at ten years .

The Company does not amortize patents or trademarks classified as pending.

During the years ended December 31, 2022, and 2021, the Company assessed its patent and trademark assets.

The Company also evaluated its strategic approach to the pursuit and protection of its intellectual property.

It is the intent of the Company to continue to pursue intellectual property protection.

If the Company identifies certain assets where the intellectual property does not directly align with its core technology, the Company will impair the intangible asset and write-off the asset as an expense.

During the years ended December 31, 2022 and 2021, the Company impaired $ 5 thousand and $ 385 thousand, respectively, of assets classified as pending patent costs.

During the years ended December 31, 2022 and 2021, the Company impaired $ 14 thousand and zero , respectively, of assets classified as issued patents.

During the years ended December 31, 2022 and 2021, the Company impaired zero and $ 36 thousand, respectively, of assets previously classified as pending trademark costs.

These non-cash expenses for patents and trademarks are reflected in the operating results as Research and Development and General and Administrative expenses, respectively.

During the year ended December 31, 2021, for certain issued patents where the protected intellectual property was not directly aligned with current products, the Company accelerated the amortization by $ 50 thousand to reduce the financial net carrying value of capitalized patent costs and an additional $ 40 thousand in accelerated amortization to align trademark net capitalized costs with trademark registration dates.

Note 5 – Revenue, Contract Assets and Contract Liabilities

The Company recognized $ 374 thousand of revenues and $ 258 thousand of cost of goods sold during the year ended December 31, 2022.

The revenue and cost of goods sold are mostly in connection with the completion of a technology validation project.

Cost of goods sold also includes $ 41 thousand in anticipated contract losses upon completion of a contract.

The Company recognized $ 607 thousand of revenues and $ 1,059 thousand of cost of goods sold during the year ended December 31, 2021.

Revenues were generated from the completion and delivery of our process burner products to a global supermajor oil company and domestic infrastructure company.

Cost of goods sold consisted of $ 433 thousand recorded upon completion of process burner contracts and $ 712 thousand in anticipated contract losses upon completion of related contracts.

These amounts were offset by adjustments totaling $ 86 thousand related to the reversals of accruals for product warranties that expired.

The Company had contract assets of $ 20 thousand and $ 39 thousand and contract liabilities of $ 247 thousand and $ 84 thousand at December 31, 2022 and 2021, respectively.

Note 6 – Product Warranties

A summary of the Company’s warranty liability activity, which is included in accrued liabilities in the accompanying balance sheets as of December 31, 2022 and 2021, is as follows:

(in thousands)

Warranty liability, beginning of year

Adjustments and other

Warranty liability, end of year

Note 7 - Income Taxes

For the years ended December 31, 2022 and 2021, the Company's loss before provision for income taxes were as follows:

For the Year Ended

( in thousands )

Loss before provision for income taxes

There was no provision for income taxes for the years ended December 31, 2022 and 2021 due to the Company's taxable losses.

Income tax benefit attributable to loss from continuing operations differed from the amounts computed by applying the statutory U.S federal income tax rate of 21 % to pretax loss from continuing operations as a result of the following:

For the Year Ended

( in thousands )

Tax Benefit at Federal statutory rate

Tax Benefit at State rate

Meals and Entertainment

Prior Year Deferred Tax True Ups

Change in Valuation Allowance

The significant components of the Company's deferred tax assets and liabilities as of December 31, 2022 and 2021 were as follows:

For the Year Ended

( in thousands )

Deferred Tax Assets:

Accrued Expenses

Stock-Based Compensation

Prepaid Expenses

Accrued Vacation

ASC 842 Lease Standard

Net Operating Loss carryforwards

Gross Deferred Tax Assets

Valuation Allowance

Total deferred tax assets, net of valuation allowance

Deferred Tax Liabilities

Net Deferred Tax Assets

For the year ended December 31, 2022, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was not more likely than not that the net deferred tax assets were fully realizable as of December 31, 2022.

Accordingly, the Company established a full valuation allowance against its deferred tax assets.

As of December 31, 2022, the Company had $ 82.1 million of federal and $ 45.9 million of state net operating loss carryforwards available to reduce future taxable income, of which federal net operating loss carryforwards of $ 35.3 million have an indefinite life.

The remaining federal net operating losses begin to expire in 2028, while state net operating losses begin to expire in 2025.

The Company experienced an “ownership change” within the meaning of Section 382 of the Internal Revenue Code in April 2012, subjecting net operating loss carryforwards (incurred prior to the ownership change) to an annual limitation, which may restrict the ability to use these losses to offset taxable income in periods following the ownership change.

The Company determined the amount of the annual limitation to be $ 686 thousand annually.

The net operating loss carryforwards generated before 2018 may be used to reduce taxable income through the years 2028 to 2037.

Federal net operating loss carryforwards generated for year 2018 and thereafter do not expire.

The Company files income tax returns in the U.S.

federal, state and foreign jurisdictions.

All tax years generally remain subject to examination by the IRS and various state taxing authorities, although the Company is not currently under examination in any jurisdiction.

The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense.

As of December 31, 2022 and 2021, there was no accrued interest or penalties related to uncertain tax positions.

Note 8 – Equity

Common Stock and Preferred Stock

The Company is authorized to issue 62.5 million shares of common stock and 2.0 million shares of preferred stock.

Preferences, limitations, voting powers and relative rights of any preferred stock to be issued may be determined by the Company’s Board of Directors.

The Company has not issued any shares of preferred stock.

In July 2018, the Company completed a private equity offering and executed a Stock Purchase Agreement with clirSPV LLC (“clirSPV”) which permits participation in future capital raising transactions (the “Participation Right”) on the same terms as other investors participating in such transactions.

In no event may the Participation Right be exercised to the extent it would cause clirSPV or any of its affiliates to beneficially own 20 % or more of the Company’s then outstanding common stock.

In May 2022, the Company signed an agreement with clirSPV, that provides for an election right to extend the Participation Right beyond the original expiration date of December 31, 2023, but to no later than June 30, 2027.

This election is pursuant to specific terms and conditions and expires on December 31, 2023.

On June 1, 2022, the Company completed a firm commitment underwritten public offering pursuant to an underwriting agreement, dated May 27, 2022, by and between the Company and Newbridge Securities Corporation by issuing 4,186 thousand shares of common stock at a price to the public of $ 1.11 per share, resulting in gross proceeds of approximately $ 4.6 million and net cash proceeds of approximately $ 4.2 million.

During July 2022, the Company issued approximately 1,592 thousand shares to clirSPV pursuant to the Participation Right, at a price per share of $ 1.11 , resulting in net cash proceeds to the Company of approximately $ 1.7 million.

During the year ended December 31, 2021, the Company issued common stock pursuant to an At-The-Market Offering Sales Agreement, dated December 23, 2020, with Virtu Americas LLC, as sales agent pursuant to which it may currently sell shares of common stock with an aggregate offering price of up to $ 8.7 million (ATM).

During the year ended December 31, 2022, the Company issued approximately 501 thousand shares of its common stock at an average price of $ 1.24 per share for gross proceeds of approximately $ 624 thousand and net cash proceeds of approximately $ 587 thousand.

During the year ended December 31, 2021, the Company issued approximately 1.1 million shares of common stock under the ATM program at an average price of $ 5.03 per share.

Gross proceeds totaled approximately $ 5.5 million and net cash proceeds was approximately $ 5.3 million.

As of December 31, 2022, the Company has issued approximately 1.6 million shares of common stock under the ATM program, at an average price of $ 3.84 per share.

Gross proceeds totaled approximately $ 6.1 million and net cash proceeds was approximately $ 5.9 million.

The Company is currently subject to the SEC’s “baby shelf rules,” which prohibit companies with a public float of less than $75 million from issuing securities under a shelf registration statement in excess of one-third of such company’s public float in a 12-month period.

These rules may limit future issuances of shares by the Company under our shelf registration statement on Form S-3, our ATM Offering Sales Agreement or other common stock offerings.

Equity Incentive Plan

On June 17, 2021, the Company's shareholders approved and the Company adopted the ClearSign Technologies Corporation 2021 Equity Incentive Plan (the “2021 Plan”) which permits the Company to grant Incentive Stock Options, Non-statutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, and Performance Shares, to eligible participants, which includes employees, directors and consultants.

The Compensation Committee of the Board of Directors is authorized to administer the 2021 Plan.

The 2021 Plan provides for an annual increase in available shares equal to the lesser of (i) 10 % of the aggregate number of shares of Common Stock issued by the Company in the prior fiscal year;

or (ii) such number provided by the Compensation Committee;

provided, however, that the total cumulative increase in the number of shares available for issuance pursuant to this automatic share increase shall not exceed 400 thousand shares of common stock.

The prior incentive plan (2011 Plan) expired January 2021 and outstanding awards from this plan were assigned to the 2021 Plan.

The total amount of carryover awards from the 2011 plan amounted to 3,381 thousand.

Any forfeiture or expiration of carryover awards were added to the 2021 Plan.

In 2022, the board of directors approved an increase of 150,423 shares available for issuance pursuant to future awards in accordance with the terms of the 2021 Plan.

Ending balances for the 2021 Plan is as follows:

( in thousands )

Outstanding options and restricted stock units

Reserved but unissued shares under the Plans

Total authorized shares under the Plans

Stock Options

Under the terms of the 2021 Plan, incentive stock options and nonstatutory stock options must have an exercise price at or above the fair market value on the date of the grant.

At the time of grant, the Company will determine the period within which the option may be exercised and will specify any conditions that must be satisfied before the option vests and may be exercised.

The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model.

As permitted by SEC Staff Accounting Bulletin (SAB) 107, management utilized the simplified approach to estimate the expected term of the options, which represents the period of time that options granted are expected to be outstanding.

Expected volatility has been determined through the Company’s historical stock price volatility.

The Company has not made an estimate of forfeitures at the time of the grant, but rather accounts for forfeitures at the time they occur.

The risk-free rate for periods within the expected life of the option is based on the U.S.

Treasury yield in effect at the time of grant.

The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

During the year ended December 31, 2022, the following weighted-average assumptions were utilized in the calculation of the fair value of stock options:

Expected life

Weighted average volatility

Weighted average risk-free interest rate

Expected dividend rate

Compensation expense associated with stock option awards for the years ended December 31, 2022 and 2021 totaled $ 118 thousand and $ 425 thousand, respectively.

A summary of the Company’s stock option activity and changes is as follows:

( in thousands )

Options to Purchase Common Stock

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (in years)

Outstanding at beginning of year

Forfeited/Expired

Outstanding at end of year

Exercisable at end of year

The estimated aggregate pretax intrinsic value of the Company’s outstanding vested stock options at December 31, 2022 is zero .

The intrinsic value is the difference between the Company’s common stock price and the option exercise prices multiplied by the number of in-the-money options.

This amount changes based on the fair value of the Company’s common stock.

At December 31, 2022, there was $ 1.1 million of total unrecognized compensation cost related to non-vested stock option-based compensation arrangements.

Vesting criteria ranges from time-based to performance-based.

The Company records costs for time-based arrangements ratably across the timeframe, whereas performance-based arrangements require management to continually evaluate predetermined goals against actual circumstances.

Restricted Stock Units

The Company awards employees and directors restricted stock units (“RSUs”) in lieu of cash payment for compensation.

These awards are granted from the Company’s Equity Incentive Plan.

Employee vesting criteria is time based, and compensation expense is recognized ratably across the timeframe.

Director vesting criteria is contingent upon the occurrence of one of four future events, which the Company cannot predict or control.

Therefore, compensation expense for director RSUs is not recognized until one of these four future events occur, which is in accordance with FASB Accounting Standards Codification , Topic 718 , Compensation-Stock Compensation, (ASC 718).

Unrecognized compensation expense for director services amounted to $ 491 thousand and $ 255 thousand for the years ended December 31, 2022 and December 31, 2021, respectively.

Director compensation is earned on a quarterly basis with the target value of compensation set at $ 85 thousand per quarter.

A summary of the Company’s RSUs activity and changes is as follows:

( in thousands )

Number of Shares

Weighted Average Grant Date Fair Value

Number of Shares

Weighted Average Grant Date Fair Value

Nonvested at beginning of year

Nonvested at end of year

A summary of the Company’s RSU compensation expense is as follows:

For the Year Ended

Compensation Expense

Weighted Average Value Per Share

The Company awards employees stock in lieu of cash payment for compensation, typically to satisfy accrued bonus compensation.

The awards are granted from the Company’s Equity Incentive Plan.

For the Year Ended

Weighted Average Value Per Share

Consultant Stock Plan

The 2013 Consultant Stock Plan (the “Consultant Plan”) provides for the granting of shares of common stock to consultants who provide services related to capital raising, investor relations, and making a market in or promoting the Company’s securities.

The Company’s officers, employees, and board members are not entitled to receive grants from the Consultant Plan.

The Compensation

Committee of the Board of Directors is authorized to administer the Consultant Plan and establish the grant terms.

The Consultant Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 1 % of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine.

The Consultant Plan activity and change is as follows:

( in thousands )

Reserved but unissued shares at beginning of year

Increases in the number of authorized shares

Reserved but unissued shares at end of year

The Consultant Plan compensation expense is summarized as follows:

For the Year Ended

Compensation Expense

Weighted Average Value Per Share

Inducement Stock Options

Pursuant to the rules of The Nasdaq Stock Market, and in compliance with those rules, the Company may issue equity awards, including stock options, as an inducement to an individual to accept employment with the Company.

Inducement awards need not be approved by the Company's shareholders.

During the year ended December 31, 2019, the Company granted 341 thousand non-qualified stock options to its Chief Executive Officer.

The fair value of the non-qualified stock options estimated on the date of grant using the Black-Scholes valuation model was $ 176 thousand.

The compensation expense recognized for these awards for the years ended December 31, 2022 and 2021 was zero and $ 13 thousand.

A summary of warrant activity and related information is as follows:

( in thousands )

Outstanding at beginning of year

Forfeited/Expired

Outstanding at end of year

There were no outstanding warrants at December 31, 2022 and 2021.

Note 9 – Retirement Plan

The Company has a defined contribution retirement plan covering all of its U.S.

employees whereby the Company matches employee contributions up to 3 % of their base salary.

The Company’s matching contribution expense totaled $ 54 thousand and $ 43 thousand in 2022 and 2021, respectively.

Note 10 – The Paycheck Protection Program (PPP) Loan

On May 8, 2020, the Company obtained a loan in the amount of $ 251 thousand (the “PPP loan”) from Bank of America (the “Lender”), pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economics Security Act (the “CARES Act”) that was signed into law in March 2020.

In accordance with the PPP, the Company was permitted to use the PPP loan proceeds to fund designated expenses, including certain payroll costs, rent, utilities, and other permitted expenses.

The PPP loan was evidenced by a promissory note, dated effective May 1, 2020, issued by the Company to the Lender.

The PPP loan was unsecured with a 2 -year term and bore interest at a rate of 1.00 % per annum.

The Company applied with the Small Business Administration, ("SBA") for loan forgiveness in January 2021.

Payments on this note were deferred by the Lender until the forgiveness status of the loan was ascertained.

In the second quarter of 2021, the Company received documentation from the SBA stating that this loan was forgiven in full.

As a result, the Company recorded a $ 251 thousand gain on forgiveness of debt and accrued interest during the year ended December 31, 2021.

Note 11 – Commitments and Contingencies

From time to time the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.

Litigation is subject to inherent uncertainties and an adverse result in any such matter may harm the Company’s business.

As of the date of this report, the Company is not a party to any material pending legal proceedings or claims that the Company believes will have a material adverse effect on the business, financial condition or operating results.

Indemnification Agreements

The Company maintains indemnification agreements with our directors and officers that may require the Company to indemnify these individuals against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by law.

Note 12 – Government Assistance

During 2022, the Company was awarded a research grant from the Department of Energy (“DOE”) for approximately $ 250 thousand with an estimated completion occurring in the first three months of 2023.

The purpose of the grant is to produce a research paper for a flexible fuel ultra-low NOx process burner capable of burning 100% hydrogen fuel.

The award allows the Company to request reimbursements for expenditures such as labor, material, and administrative costs.

During the year ended December 31, 2022, the Company recognized $ 181 thousand in reimbursements from DOE.

Beginning in 2021, the Company received funds relating to the Oklahoma 21 st Century Quality Jobs Act.

The estimated duration of the program is up to 10 years and is designed to attract growth industries to Oklahoma.

By reporting quarterly salary statistics and meeting agreed upon employment thresholds, the state remits benefit monies to the Company.

For the year ended December 31, 2022, the Company recognized $ 51 thousand in government assistance.

The Company did not recognize benefit monies for this program during the year ended December 31, 2021.

Note 12 – Quarterly Results (unaudited)

Quarterly results for the years ended December 31, 2022 and 2021 are as follows:

(in thousands, except per share data)

For the year ended December 31, 2022

Gross Profit (Loss)

Operating Expense

Net loss attributed to common stockholders

Net Loss per share - basic and fully diluted

For the year ended December 31, 2021

Gross Profit (Loss)

Operating Expense

Net loss attributed to common stockholders

Net Loss per share - basic and fully diluted

Note 13 – Subsequent Events

The Company has evaluated subsequent events as of the date of this report, and has none to report.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

20 unchanged sentences

March 31, 2023

/s/ Susanne L.

Meline, Director

/s/ Catharine Marie de Lacy

Catharine Marie de Lacy, Director

March 31, 2023

Pate, Director

DiElsi, Director

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 9A. Controls and Procedures