What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-04-01 · 94 added, 74 removed, 71 unchanged (70% of the section changed)

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.

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.

Our actual 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.

We design and develop technologies for the purpose of decarbonization and improving key performance characteristics of industrial and commercial combustion systems, including emission and operational performance, energy efficiency and overall cost-effectiveness.

Our ClearSign Core™ technology has been proven in full scale industrial test furnaces and boilers and first customer installations are currently operating in normal commercial applications.

We have generated nominal revenues from operations to date to meet operating expenses.

Our revenues to date have not been sufficient enough to meet operating expenses.

We have incurred losses since inception totaling $99.0 million 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 $91.0 million in gross proceeds through the sale of our equity securities.

As of December 31, 2024, we have raised approximately $105.3 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 may negatively affect our ability to raise this additional capital.

2 unchanged sentences

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 .

With respect to our China operations, we have a satellite office located in Beijing, China to support our commercialization efforts.

At this time, these operations in China are immaterial compared to total company operations.

As of December 31, 2023, our China asset balance totaled $334 thousand, or approximately 4%, compared to our total asset balance of $7,620 thousand.

During the years ended December 31, 2023, and 2022, our China operations reported zero revenues.

Our costs include employee salaries and benefits, compensation paid to consultants, materials and supplies for prototype development and manufacture, 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.

6 unchanged sentences

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 be assured that we will be able to raise money as and when we need it to continue our operations.

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

Recent Developments

Letter of Intent for Four ClearSign Core TM (Rogue) Boilers

On February 21, 2024, we announced that our collaborative partner California Boiler, received a letter of intent for four boilers to be fitted with the ClearSign Core™ (Rogue) burners as well as the purchase order for the first boiler burner of the series, and has in turn placed their order with ClearSign for the first burner.

This purchase order relates to an end customer that is a fruit and vegetable multi-juice processing company located in California’s Central Valley.

The additional burner orders will be issued concurrent with the construction of additional planned fruit processing lines of the customer.

ATM Suspension

On March 18, 2024, we filed a prospectus supplement suspending the sales of common stock under our At-the-Market (“ATM”) program pursuant to that certain Sales Agreement between us and Virtu Americas LLC, as sales agent, dated December 23, 2020 (the “Sales Agreement”).

We will not make any sales of our shares of common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the SEC;

however, the Sales Agreement remains in full force and effect.

Public Offering and Concurrent Private Placement

On April 23, 2024, we completed an underwritten public offering, whereby we sold 4,620,760 shares of common stock and 5-year redeemable warrants to purchase up to 4,620,760 shares of common stock (the “Public Warrants”) (plus a 45-day option to purchase up to an additional 693,114 shares of common stock and Public Warrants to purchase up to 693,114 shares of common stock, or up to 693,114 shares of common stock only) at a price of $0.92 per set of one share of common stock and one Public Warrant.

Concurrently, we completed a private placement, whereby we sold 2,249,763 shares of common stock, pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 3,155,642 shares of common stock and redeemable warrants (the “Private Warrants”) to purchase up to 8,108,106 shares of common stock.

The offering prices in the private placement were $0.91 per share and $0.01 per Private Warrant, or $0.9099 per Pre-Funded Warrant and $0.01 per Private Warrant, as applicable.

The redeemable warrants issued in both offerings have an exercise price equal to $1.05 per share.

In connection with this offering, we issued Public Ventures, LLC (“Public Ventures”) 5-year warrants to purchase up to 369,660 shares of common stock at an exercise price of $1.1375 per share as part of their underwriter compensation, which underwriter warrants became exercisable on October 16, 2024 (the “Underwriter Warrants”).

We also issued Public Ventures 5-year warrants to purchase up to 432,432 shares of common stock at an exercise price of $1.1375 per share as part of their placement agent compensation in connection with the private placement, which warrants became exercisable on October 16, 2024 (the “Placement Agent Warrants,” and together with the Public Warrants, Private Warrants, Pre-Funded Warrants and Underwriter Warrants, the “Warrants,” and the shares issuable upon exercise of the Warrants, the “Warrant Shares”).

Both sets of warrants may be exercised on a cashless basis based on a formula set forth in the respective warrants.

Subsequently, on May 15, 2024, Public Ventures exercised its option in full to purchase an additional 693,114 shares of common stock and Public Warrants to purchase up to 693,114 shares of common stock at a price of $0.92 per set of one share of common stock and one Public Warrant, in connection with which we issued Public Ventures additional Underwriter Warrants to purchase up to 55,449 shares of common stock.

The public offering and the concurrent private placement resulted in combined gross proceeds of approximately $9,300 thousand, and net proceeds of approximately $8,100 thousand.

The exercise of Public Ventures’ option to purchase additional shares of common stock and Public Warrants resulted in additional gross proceeds of approximately $638 thousand.

Participation Right Exercise

On June 24, 2024, following clirSPV LLC’s (the “SPV”) notice to exercise its participation right in connection with the underwritten public offering and concurrent private placement discussed above (see “Note 8 – Equity” for additional information), we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with the SPV whereby we issued an aggregate of (i) 3,907,000 shares of common stock, (ii) Pre-Funded Warrants to purchase up to 786,000 shares of common stock, and (iii) Private Warrants to purchase up to 7,039,500 shares of common stock.

Subsequently, on June 26, 2024, the SPV and we entered into an Amendment to the Securities Purchase Agreement (the “Amendment”) to provide for a revised allocation of the SPV’s subscription between shares of common stock and Pre-Funded Warrants in lieu thereof.

Pursuant to the Amendment, the SPV subscribed for:

(i) 3,350,000 shares of common stock, (ii) Pre-Funded Warrants to purchase up to 1,343,000 shares of common stock and (iii) Private Warrants to purchase up to 7,039,500 shares of common stock, for aggregate gross proceeds of approximately $4.3 million.

Amendment to Certificate of Incorporation

On June 25, 2024, we held our 2024 annual meeting of stockholders, at which our stockholders approved, among other items, an increase in the number of authorized shares of common stock available for issuance under our certificate of incorporation to 87,500,000 shares from 62,500,000 shares previously authorized.

Accordingly, on June 25, 2024, we filed an amendment to our certificate of incorporation with the Secretary of State of the State of Delaware, reflecting the increase of our authorized shares of common stock to 87,500,000 shares, which became effective upon filing.

Suspension of Activities in China

On October 1, 2024, we informed our employees that we were suspending our operations in China as a result of delayed progress in the commercialization of our products in that geographic market and as part of our efforts to align strategic priorities and to reduce operating costs.

The suspension of our operations in China involved declaring our Beijing, China wholly-owned subsidiary dormant, a legal entity status available under current China law, which became effective on March 12, 2025.

Under this legal entity status, operational activities will cease for a time period not to exceed three years.

By pursuing this entity status, we initiated a project to suspend current operational activities.

Suspension activities include disposal and shipment of certain equipment in China, the termination of 2 employees and related benefit costs, and legal entity filing fees.

In connection with this action, we estimated that we would incur certain one-time costs, primarily consisting of employee termination payments, as well as equipment disposal and shipment and legal filing fees.

See “Note 2 – Summary of Significant Accounting Policies – Foreign Operations” below for additional information .

Termination of clirSPV LLC Agreement

Effective as of February 19, 2025, that certain Stock Purchase Agreement, dated as of July 12, 2018, between us and the SPV (the “SPV Purchase Agreement”) was terminated as a result of the SPV’s beneficial ownership percentage declining to less than 10% of our issued and outstanding shares of common stock, as reported on a SPV filing with the SEC dated February 19, 2025.

As a result of the termination of the SPV Purchase Agreement, the related Voting Agreement entered into with the SPV, pursuant to which the SPV had a right to nominate one director to our Board at each of our annual meeting of stockholders, or any other meeting of stockholders at which members of our Board were to be elected, was also terminated, effective immediately.

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.

The following discussion and analysis of financial condition and results of operations is based upon our consolidated 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.

4 unchanged sentences

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

See “Note 2 – Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this report for a more complete description of our significant accounting policies.

Revenue Recognition and Cost of Goods Sold.

The Company recognizes revenue and related cost of goods sold in accordance with FASB ASC 606 Revenue from Contracts with Customers (ASC 606).

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

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.

5 unchanged sentences

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

The Company records cost of goods sold based on allocated costs assigned to performance obligations.

Allocations can occur based on overall estimated contract profit or readily identifiable cost assignments.

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

6 unchanged sentences

The Company warrants all installed products against defects in materials and workmanship, and shortcomings in performance compared to contractual guarantees for a period specified in each contract.

Accruals for product warranties are based on expected warranty experience and current product performance trends which are recorded as a component of cost of sales at the time revenue is recognized.

Accruals for product warranties are based on expected warranty experience and current product performance trends which are recorded as a component of cost of goods sold at the time revenue is recognized.

The warranty liabilities are reduced by material and labor costs during the warranty period in the periods in which the costs are incurred.

The Company periodically assesses the adequacy of our recorded warranty liabilities and adjusts the amounts as necessary, and such adjustments could be material if estimates differ significantly from actual warranty expense.

The warranty liabilities are included in accounts payable and accrued liabilities in the audited condensed consolidated balance sheets.

The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary, and such adjustments could be material if estimates differ significantly from actual warranty expense.

The warranty liabilities are included in accounts payable and accrued liabilities in the consolidated balance sheets.

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

Research and development costs are offset by any funds received from strategic partners in cost sharing, collaborative projects.

During the year

ended December 31, 2023, the Company received $60 thousand from such arrangements.

During the year ended December 31, 2022, the Company received no monies from strategic partners.

Stock-Based Compensation

During the years ended December 31, 2024 and 2023, the Company received $145 thousand and $60 thousand, respectively, from such arrangements.

Share-Based Compensation

The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the audited, condensed 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.

Stock-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.

Fair Value of Financial Instruments

The Company's financial instruments primarily consist of 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 consolidated balance sheets.

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

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.

Results of Operations

7 unchanged sentences

Operating Expenses

Other income, net

Basic and diluted net income per common share

Revenues and Gross Profit

Consolidated revenues for the year ended December 31, 2023 totaled $2,403 thousand, compared to $374 thousand for the same period in 2022.

During the three months ended December 31, 2023, we recognized $1,274 thousand of revenues for a shipment of process burners to a California refinery customer.

This shipment supplied burners for one of the two heaters associated with such customer order.

Revenues for the year ended December 31, 2023 were generated from orders related to both our product lines, process burners and boiler burners, with the predominate amount of revenues generated from our process burner product line.

Revenues for the year ended December 31, 2022 were generated predominantly from the closeout of our ExxonMobil technology validation project.

Gross profit for the year ended December 31, 2023, increased by $701 thousand compared to gross profit reported for the year ended December 31, 2022.

For the year ended December 31, 2023, gross profit was approximately 34.0% of revenues, resulting in an increase in gross profit margin of approximately 2.9% compared to the same period in 2022.

The gross profit increase in 2023 was due to increased product shipments and burner performance tests for our customers in California, whereas in 2022 our gross profit was predominately generated by a technology validation project.

The change in gross profit margin is a result of the lower margin profile for the technology validation project compared to a typical production order due to cost overruns.

Consolidated revenues for the years ended December 31, 2024 and 2023 were $3,596 thousand and $2,403 thousand, respectively.

Revenues increased by $1,193 thousand, or 49.6%, during the year ended December 31, 2024 as compared to the same period in 2023.

Revenues for the years ended December 31, 2024 and 2023 were generated from orders related to both our product lines, process burners and boiler burners, with the predominate amount of revenues generated from our process burner product line.

Typically, our process burner contracts include three different performance obligations by which we can recognize revenue, which include design engineering, customer witness tests and burner shipment.

We allocate process burner contractual revenue to each of these performance obligations with weighting allocations assigned in the following order of importance:

burner shipment, customer witness test and engineering design.

The difference in revenue from the year ended December 31, 2024, to the same period in 2023, is mainly due to the higher number of process burners shipped.

During the year ended December 31, 2024, we shipped twenty-five process burners to two separate California refineries operated by two different customers, compared to eight process burners to a California refinery and three separate customer witness tests during the same period in 2023.

Gross profit increased by $301 thousand, or 36.8%, for the year ended December 31, 2024 compared to the same period in 2023.

The favorable increase in gross profit for the year ended December 31, 2024, was predominantly due to higher revenues.

Profit margin decreased by 2.9% from 34.0% for the year ended December 31, 2023, to 31.1% for the year ended December 31, 2024, which impacted our gross profit for such period by $104 thousand.

The unfavorable impact to profit margin was due to higher than expected start-up costs from our 1,200 HP boiler burner project during the fourth quarter of 2024, which caused us to incur an overall loss on the project.

Operating Expenses

2 unchanged sentences

Research and Development

R&D expenses for the year ended December 31, 2023 increased by $234 thousand, or 46.4%, when compared to the same period in 2022.

This year-over-year difference in R&D expenses is primarily due to expenses related to the hiring of our new Chief Technology Officer, which was comprised of a non-cash, non-recurring expense for the vesting of $43 thousand in inducement stock options, and $40 thousand human capital costs.

We also incurred $60 thousand burner development costs during the year ended December 31, 2023, primarily due to our hydrogen burner project.

The hydrogen burner development project costs are offset by government assistance monies (refer to the “Other Income” note below for further details).

R&D expenses increased $732 thousand, or 99.1%, for the year ended December 31, 2024, as compared to the same period in 2023.

This unfavorable year-over-year increase in R&D expenses was mainly driven by additional head count and related benefit costs of $269 thousand that did not exist in the same period in 2023.

In addition, we incurred an unfavorable additional year-over-year expense related to product development costs for our process burner product line for a total of $367 thousand for the year ended December 31, 2024.

During the year ended December 31, 2023, we experienced a year-over-year unfavorable increase of $234 thousand primarily attributable to $83 thousand related to the hiring of our new Chief Technology Officer, and $60 thousand related to our hydrogen burner project.

The hydrogen burner development project costs are offset by government assistance monies (see the “Other Income” discussion below for further details).

General and Administrative

During the year ended December 31, 2023, G&A expenses increased by $331 thousand, or 5.8%, when compared to the same period in 2022.

This year-over-year difference in G&A expenses is primarily due to an increase of $172 thousand for a non-cash, non-recurring expense for the vesting of restricted stock units triggered by the departure of a member of our board directors, and $81 thousand for the non-cash, non-recurring impairment of demonstration burners.

These demonstration burners were intended to showcase our burner catalog in operation to potential customers as part of a marketing campaign.

These specific burners showcased an older design that we have chosen to retire from our demonstration marketing campaign.

During the year ended December 31, 2023, other income increased by $428 thousand or 119.3%, compared to the same time period in 2022.

During the year ended December 31, 2023, interest income from our money market account and short-term investments increased by $241 thousand compared to same period in 2022 due to rising interest rates and timing of year-over-year cash balances.

During the year ended December 31, 2023, other income increased by $197 thousand compared to same period in 2022 predominately due to our Seattle office decommission project, which focused on selling used equipment and materials.

During the year ended December 31, 2023, asset sales decreased by $33 thousand compared to the same period in 2022 strictly due to timing and prioritization of asset sales during our Seattle office decommissioning project.

Net loss for the year ended December 31, 2023, was $5,194 thousand as compared to $5,758 thousand for the same period in 2022, or an approximate 9.8% decrease.

The $564 thousand decrease in net loss is primarily attributable to the $701 thousand increase in gross profit referenced in the above explanation.

G&A expenses increased $76 thousand, or 1.3%, for the year ended December 31, 2024, as compared to the same period in 2023.

This unfavorable increase in G&A expenses is primarily comprised of $394 thousand for a one-time non-recurring accrual estimate related to the decision to suspend our operations in China (see “Recent Developments – Suspension of Activities in China” above for more details).

This suspension involved declaring our Beijing, China wholly-owned subsidiary dormant, which is a legal entity status available under China law.

Under this legal entity status, operational activities cease for a period not to exceed three years.

The unfavorable increase in G&A expenses was partially offset by a decrease of $248 thousand in human capital costs primarily driven by the timing of employee departures and subsequent onboarding.

During the year ended December 31, 2023, we experienced a year-over-year unfavorable increase of $331 thousand primarily attributable to a $172 thousand difference for a non-cash, non-recurring expense related to the vesting of restricted stock units triggered by the departure of a director on our board, and a $81 thousand non-cash, non-recurring impairment of demonstration burners.

Other income increased by $402 thousand, or 51.1%, for the year ended December 31, 2024, as compared to the same period in 2023.

The favorable increase is primarily attributable to $442 thousand increase in government assistance from our DOE hydrogen burner development grant, and $192 thousand increase in interest income from a higher cash balance during 2024, as compared to the same period in 2023.

The favorable increase was partially offset by an unfavorable decrease of $197 thousand related to the decommissioning project of our Seattle office whereby we sold used equipment and materials during the year ended December 31, 2023.

During the year ended December 31, 2023, we experienced a favorable year-over-year increase of $428 thousand primarily attributable to an increase of $241 thousand in interest income and an increase of $197 thousand from our Seattle office decommissioning project.

Liquidity and Capital Resources

At December 31, 2023, our cash and cash equivalent balance totaled $5,684 thousand compared to $6,451 thousand at December 31, 2022, a decrease of $767 thousand.

The decrease in cash and cash equivalent balance is primarily attributable to our net loss of $5,194 thousand, which was offset by a decrease in short-term held-to-maturity investments of $2,606 thousand due to working capital needs and an increase in contract liabilities of $869 thousand, representing payments from customers in advance of future project costs.

At December 31, 2024, our cash and cash equivalents balance totaled $14,035 thousand compared to $5,684 thousand at December 31, 2023, an increase of $8,351 thousand.

The increase in cash and cash equivalents is primarily attributable to our public offering and the concurrent private placement and the related SPV’s exercise of its participation right during 2024 (see “Note 8 – Equity” for additional information), which was partially offset by our net loss of $5,299 thousand.

At December 31, 2024, our current assets were in excess of current liabilities resulting in working capital of $12,809 thousand as compared to $4,253 thousand at December 31, 2023.

We have no contractual debt obligations, and we have historically funded operations predominantly through equity offerings.

To the extent we require additional funds more than 12 months from the date hereof, and customer cash collections cannot fund our needs, we may need to utilize additional equity offerings to raise these funds.

As of the date of this report, we do not have sufficient working capital to fund our operating expenses for the next 12 months.

However, we are contemplating a capital raise through a public offering pursuant to our Form S-3 shelf registration statement in April 2024, and we expect that, to the extent this public offering is consummated, we will not need additional equity capital for a period of 12 months or more following this public offering.

During the year ended December 31, 2023, working capital was funded predominately through customer cash collections for payment milestones outlined in our customer contracts.

The Form S-3 shelf registration statement filed with the SEC on July 1, 2022 was declared effective on August 12, 2022.The registration statement on Form S-3 allows us to offer common stock, preferred stock, warrants, subscription rights, debt securities and units from time to time, as market conditions permit to fund, to the extent required beyond the 12 months from the date hereof, the ongoing operations of the Company.

Until the growth of revenue increases to a level that covers operating expenses, the Company intends to continue to fund operations in this manner, although the volatility in the capital markets may negatively affect our ability to do so.

We believe we have sufficient cash and expected cash collections to fund current operating expenses for over twelve months.

We have no contractual debt obligations and to the extent we may require additional funds beyond twelve months from the date hereof, and customer cash collections cannot fund our needs, we may utilize equity offerings.

Historically, we have funded operations predominantly through equity offerings.

Until the growth of revenue increases to a level that covers operating expenses, we intend to continue to fund operations in this manner, although the volatility in the capital markets may negatively affect our ability to do so.

As of December 31, 2024, approximately 21.3 million shares of our common stock are issuable upon exercise of our outstanding warrants, which number excludes the shares of common stock issuable upon exercise of the Pre-Funded Warrants, and we may receive up to $22.5 million in aggregate gross proceeds from the cash exercises thereof, subject to certain beneficial ownership limitations set forth therein.

The Warrants require the warrant holder to tender cash upon exercise, with the exception of the Underwriter Warrants (as defined above) which allow the holder to exercise cashless if they so desire.

These equity financial instruments may from time-to-time fund future cash needs, but the volatility of our common stock price and the risk tolerance of warrant holders will determine the extent in which we will be able to raise funds in this manner.

Operating activities for the year ended December 31, 2024, resulted in cash outflows of $4,373 thousand, primarily due to the net loss of $5,299 thousand and a decrease in contract liabilities of $1,043 thousand during such period, which was partially offset by net non-cash expenses of $846 thousand, and an increase in accounts payable, accrued liabilities and lease liabilities of $816 thousand.

The decision to suspend our China operations during the third quarter of 2024 continues to impact our accounts payable and accrued liabilities by an increase of $239 thousand during the year ended December 31, 2024.

During the third quarter of 2024, we recorded a one-time accrual estimate of $394 thousand for the costs to prepare and place our Beijing, China subsidiary into a dormant state.

As of December 31, 2024, we have incurred $155 thousand in cash outflows with the remaining $239 thousand in accrued liabilities predominantly related to severance costs.

Our warranty reserve naturally increased due to increased product shipments during the year ended December 31, 2024, which impacted accounts payable and accrued liabilities (see “Note 6 – Product Warranties” below for additional information).

The change in contract liabilities during the year ended December 31, 2024, was predominantly impacted by our shipment of process burners during the year ended December 31, 2024 (see “Note 5 – Revenue, Contract Assets and Contract Liabilities” below for additional information).

Operating activities for the year ended December 31, 2023 resulted in cash outflows of $3,233 thousand, primarily due to the loss for the period of $5,194 thousand, offset with non-cash expenses of $1,045 thousand, and an increase of $869 thousand of contract liabilities, which represents payments from customers in advance of future project costs.

Operating activities for the year ended December 31, 2022 resulted in cash outflows of $4,992 thousand, primarily due to the loss for the period of $5,758 thousand, offset with non-cash expenses of $627 thousand.

Investing activities for the year ended December 31, 2024, resulted in cash outflows of $218 thousand, which is primarily attributable to $179 thousand of disbursements for patents and other intangible assets.

Investing activities for the year ended December 31, 2023 resulted in cash inflows of $2,490 thousand, which is primarily attributable to the redemption $4,847 thousand of short-term held-to-maturity U.S.

treasuries, offset by $2,162 thousand of purchases for the same type of investments.

Investing activities for the year ended December 31, 2022 resulted in cash outflows of $2,686 thousand, which is primarily attributable to the redemption $3,337 thousand of short-term held-to-maturity U.S.

treasuries, offset by $5,898 thousand of purchases for the same type of investments.

treasuries, partially offset by $2,162 thousand of purchases for the same type of investments.

Financing activities for the year ended December 31, 2024, resulted in cash inflows of $12,946 thousand, which is primarily attributable to the net proceeds received of $12,967 thousand from the issuance of securities in connection with the recent equity offerings (see “Note 8 – Equity” for additional information).

Financing activities for the year ended December 31, 2023 included $15 thousand in disbursements for taxes paid related to vesting of employee restricted stock units.

Financing activities for the year ended December 31, 2022 included $6,539 thousand in net proceeds from the sale of 501 thousand shares of our common stock through our ATM program at an average price of $1.24 per share, sale of 4.2 million shares of our common stock through a public offering at an average price of $1.11 per share, and sales of 1.6 million shares of our common stock at a price of $1.11 per share pursuant to the Participant Right with clirSPV.

Off-Balance Sheet Transactions

1 unchanged sentence

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 7. Management’s Discussion and Analysis