Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal accounting and financial officer, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal accounting and financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024, the end of the period covered by this Annual Report on Form 10-K. Based upon the evaluation of our disclosure controls and procedures as of December 31, 2024, our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal accounting and financial officer) concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
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Management’s Report on Internal Control over Financial Reporting
Our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal accounting and financial officer) are responsible for establishing and maintaining internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
●
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
●
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and
●
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (“2013 Framework”). Based on this assessment, our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal accounting and financial officer), has concluded that, as of December 31, 2024, our internal control over financial reporting was effective based on those criteria.
Changes in 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.
ITEM 9B. OTHER INFORMATION.
None of the Company’s directors or officers adopted , modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended December 31, 2024, as such terms are defined under Item 408(a) of Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth the names and ages of the directors and executive officers serving as of the date hereof. Our officers are appointed by, and serve at the pleasure of, the Board.
Name
Age
Position
Colin James Deller
57
Chief Executive Officer and Director
Brent Hinds
46
Chief Financial Officer
Judith S. Schrecker
72
Director and Lead Independent Director
Catharine M. de Lacy
67
Director
David M. Maley
64
Director
G. Todd Silva
60
Director
Our business, property and affairs are managed by, or under the direction of, our Board, in accordance with the DGCL and our bylaws. Members of the Board are kept informed of our business through discussions with the Chief Executive Officer, Chief Financial Officer and other key members of management, by reviewing materials provided to them by management, and by participating in meetings of the Board and its committees.
Stockholders may communicate with the members of the Board, either individually or collectively, or with any independent directors, individually or as a group, by writing to the Board at 8023 East 63 rd Place, Suite 101, Tulsa, Oklahoma 74133. These communications will be reviewed by the Company’s Secretary who, depending on the subject matter, will (i) forward the communication to the director or directors to whom it is addressed or who is responsible for the topic matter, (ii) attempt to address the inquiry directly (for example, where it is a request for publicly available information or a stock related matter that does not require the attention of a director), or (iii) not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. At each meeting of the Nominating and Corporate Governance Committee (the “Governance Committee”), the Company’s Secretary presents a summary of communications received, if any, and will make those communications available to any director upon request.
Executive Officers
Colin James Deller, Chief Executive Officer and Director
Dr. Deller joined us as our President in February 2019, transitioned to the office of Chief Executive Officer on April 1, 2019 and was appointed as a director on February 13, 2020. Dr. Deller began his career at Hamworthy Combustion while also completing his Ph.D. In 1996, Dr. Deller joined Callidus, where he was employed in Project Engineering and Sales, and over the course of ten years advanced to serve as Chief Combustion Engineer and Manager of Burner Order Execution before being promoted to oversee Callidus’ entire burner business. From 2010 until he left Callidus, following the acquisition of Callidus by Honeywell, Dr. Deller served as General Manager with full profit and loss accountability for the Honeywell UOP Callidus burner business worldwide. During that time, he led his team in developing new international markets, including developing a leading market position in China. From May 2018 until he joined the Company, Dr. Deller served as the interim Global Operations Director for the entire Honeywell International UOP Callidus business, which includes flares and thermal oxidizers in addition to burners. Dr. Deller has a Bachelor of Engineering in mechanical engineering from Portsmouth Polytechnic, U.K., a doctorate in flame chemistry from the University of Portsmouth, U.K., and an MBA from The University of London.
Brent Hinds, Chief Financial Officer
Mr. Hinds was appointed as our Vice President of Finance, Controller, Treasurer, principal financial officer, and principal accounting officer on October 18, 2021. Mr. Hinds was promoted to Chief Financial Officer effective August 8, 2023. Prior to joining the Company, from July 2014 to September 2021, Mr. Hinds was employed by Enovation Controls, Inc. (“Enovation Controls”). Enovation Controls is a stand-alone subsidiary of Helios Technologies (NASDAQ: HLIO), focused on global sales, manufacturing, and application engineering operations, working directly with original equipment manufacturers. Mr. Hinds successively held the positions of Assistant Controller, Controller and Vice President of Finance. In his capacity, Mr. Hinds was responsible for overseeing accounting and finance department activities to ensure accuracy and timely dissemination of reports, including income statement, balance sheet, and cash flow. Prior to joining Enovation Controls, Mr. Hinds worked for Stinnett & Associates, LLC, a professional
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advisory firm for public and private companies, where he established risk-based audit programs to determine the adequacy and effectiveness internal control environments. Additionally, Mr. Hinds served as a compliance analyst at Baker Hughes Company. Mr. Hinds earned his Bachelor of Science in Accounting from Oklahoma State University and is a certified public accountant.
Non-Employee Directors of the Board
We believe that the finance and investment experience that Mr. Maley and Mr. Silva bring to our Board includes experience in analyzing the operations of businesses, and particularly smaller capitalized companies, to determine the likelihood of success. Ms. Schrecker has significant financial, business, operational and industrial experience. Ms. de Lacy and Mr. Maley have significant experience in the areas of corporate governance and risk management. In addition, Ms. de Lacy has experience in the areas of environmental policy and cybersecurity. We believe that their experience, together with the expertise brought to our operations by Dr. Deller, will help us achieve our goals of proving commercial viability of our products, generating interest from end users and original equipment manufacturers and licensing our technology. For these reasons, we concluded that each of these individuals below should serve as a director.
Judith S. Schrecker, Director and Lead Independent Director
Ms. Schrecker became a director in February 2021. Ms. Schrecker brings more than 40 years of financial and operating leadership and board participation with broad international experience. From May 2016 until June 2020, Ms. Schrecker was VP of Finance of Flat Rolled Products at ATI, Inc . , a global manufacturer of technically advanced specialty materials and complex components, overseeing revenues of over $1 billion. Prior to that, Ms . Schrecker was Chief Financial Officer of Alcoa’s Global Rolled Products business and a member of the executive council of the company. Under her leadership, the Global Rolled Products business achieved historically high profitability. Ms. Schrecker previously served on the board of directors of Finacity Corporation and Dress for Success Worldwide. She attended the University of Pittsburg Graduate School of Public and International Affairs along with a B.A. in History, Economics, and Latin American Studies from Temple University. Additionally, Ms. Schrecker is a 2020 Exceptional Women Awardees Foundation (EWA) recipient.
Catharine M. de Lacy, Director
Ms. de Lacy became a director in February 2023. She is a widely recognized expert in ESG/Sustainability initiatives, public affairs, corporate governance, and risk management. Ms. de Lacy has worked for both public and privately held companies including Albemarle Corporation, the Clorox Corp., Sun Products, Cabot Corp, AlliedSignal, and Occidental Petroleum Corp. Ms. de Lacy is the co-founder and Managing Director of Riar Associates, LLC, a management consultancy where she continues to work as a business advisor and subject matter expert on climate, sustainability, business strategy, public policy and advocacy, communications, and risk management matters for public and private companies. She is a former board member of TORC Oil & Gas, Ltd. (TSX:TOG), the Environmental Law Institute’s Leadership Council and the Executive Advisory Council of the Responsible Battery Coalition. She also currently serves as a board member of privately-held NTES LLC, which provides strategic, financial, and operations management expertise in evolving energy markets and real estate investment, and the U.S.A. Bobsled/Skeleton Foundation, and she has been a member of the advisory board for Lithium Technologies, a private company focused on developing innovative technologies to extract lithium from waste rock since June 2024. Ms. de Lacy holds a Board Certificate in ESG from UC Berkeley's Law School, is a Certified Director through the Harvard Business School , and is a Qualified Risk Director® and holds a certificate in Cyber Risk Governance®. Ms. de Lacy received a B.A. from Merrimack College , and an M.S. from Tufts University .
David M. Maley, Director
Mr. Maley became a director in April 2024. Mr. Maley brings forty years of broad investment experience with more than half of that period focused on micro-cap equity research and portfolio management. Mr. Maley currently serves as the Chief Investment Officer and Chief Compliance Officer of 1102 Partners, LLC, a family office, and investment advisory firm founded by Mr. Maley in 2021. Prior to his current role, Mr. Maley served as a Senior Vice President at Ariel Investments, where he was Lead Portfolio Manager for the Ariel Micro-Cap Value Product fund and the Ariel Small-Cap Deep Value Product fund. During that time, he was named a “Micro-Cap Superstar” in a 2014 Red Chip Review publication. Mr. Maley also took on management of the domestic trading team at Ariel Investments and chaired the Trade Oversight Committee during his tenure at Ariel Investments. Prior to Ariel Investments, Mr. Maley founded and ran Maple Hill Capital Management and served as a Vice President and Senior Portfolio Manager for ultra-high net worth clients at Harris Bank. Mr. Maley began his career in institutional equity sales at Goldman Sachs. He received an M.B.A from the University Of Chicago Booth School of Business and a B.B.A in finance from the University Of Notre Dame.
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G. Todd Silva, Director
Mr. Silva became a director in August 2024. Mr. Silva brings over 30 years of leadership and finance experience in industries spanning industrials, financial services, technology, media, health care and others. Mr. Silva is the Chief Financial Officer of Radiance Therapeutics, Inc., an ophthalmic medical device company. Prior to his current role, Mr. Silva served as the Chief Financial Officer of Point Pickup Technologies, Inc., a logistics platform service where he worked to consummate and integrate acquisitions, raise capital through various private transactions and assist with corporate governance tasks for their board of directors. Additionally, Mr. Silva was the founder and director of Silva Partnership & Co., a firm providing corporate advisory services to early-stage technology businesses. Prior to Silva Partnership & Co., Mr. Silva was the executive director of corporate advisory services at Las Olas Capital Partners, a registered investment advisor firm where he advised a variety of companies on mergers and acquisitions, capital raises, recapitalizations and the launch of special purpose vehicles to invest in corporate and real estate transactions. Mr. Silva spent the earlier part of his career as a founder, portfolio manager, and research analyst in the institutional investment management industry in New York. Mr. Silva holds an MBA from Columbia University and a BS in economics and finance from Lehigh University.
Independence of Directors
In determining the independence of our directors, we apply the definition of “independent director” provided under the listing rules of The Nasdaq Stock Market LLC (“Nasdaq”). On an annual basis, the Board reviews the independence of all directors under guidelines established by Nasdaq and in light of each director’s background, employment and affiliations with the Company and members of management, as well as significant holdings of Company securities. This review considers all known relevant facts and circumstances in making an independence determination. The Board concluded its annual review of director independence in March 2025. After considering all relevant facts and circumstances, the Board affirmatively determined that all of the directors serving on the Board, including those nominated for election at the Annual Meeting, are independent within the meaning of Nasdaq Listing Rule 5605(a)(2) and Rule 10A-3(b) promulgated under the Exchange Act, with the exception of Colin James Deller.
Board of Directors and Committees
The Board has three standing committees: the Audit Committee, human capital and compensation committee (the “Compensation committee”) and the nominating and governance committee (collectively, the “Board Committees”). All member of the Board Committees are non-employee directors who are deemed independent.
None of our directors or executive officers have been involved in a legal proceeding that requires disclosure pursuant to Item 401(f) of Regulation S-K promulgated under the Exchange Act. None of our directors or executive officers were selected as a result of an arrangement or understanding between him/her and any other person, except for Mr. Silva, who was appointed as a director to our Board in connection with that certain Voting Agreement, dated July 12, 2018, between us and the SPV, which has been terminated as of February 19, 2025 (see “Recent Developments – Termination of clirSPV LLC Agreement” above for more information).
Audit and Risk Committee
As of the date hereof, the Audit Committee was comprised of Judith S. Schrecker (Chairperson), Catharine M. de Lacy, and David M. Maley. Each member of the Audit Committee is financially literate and our Board has determined that Judith S. Schrecker qualifies as an “audit committee financial expert,” as defined in applicable SEC rules. The role of the Audit Committee includes, but is not limited to, the following:
● overseeing management’s preparation of our financial statements and management’s conduct of the accounting and financial reporting processes;
● appointing, compensating, retaining, and overseeing the work of the independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;
● overseeing management’s maintenance of internal controls and procedures for financial reporting at least annually;
● overseeing risks related to cybersecurity, including the security of corporate information and the steps management takes to monitor and control cybersecurity risks;
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● overseeing our compliance with applicable legal and regulatory requirements, including without limitation, those requirements relating to financial controls and reporting;
● overseeing the independent registered public accounting firm’s qualifications and independence;
● preparing the report required by the rules of the Securities and Exchange Commission to be included in our proxy statement; and
● discharging such duties and responsibilities as may be required of the Audit Committee by the provisions of applicable laws, rules or regulations.
The Audit Committee is authorized (without seeking Board approval) to retain or terminate special legal, accounting or other advisors and may request any officer or employee of the Company or the Company’s outside counsel or independent registered public accounting firm to meet with any members of, or advisors to, the Audit Committee.
A copy of the charter of the Audit Committee is available on our website at www.clearsign.com (under “Investors - Corporate Governance”).
Human Capital and Compensation Committee
As of the date hereof, the Compensation Committee was comprised of Judith S. Schrecker (Chairperson), Catharine M. de Lacy, and David M. Maley. The role of the Compensation Committee is to:
● review, approve, and recommend to the Board our compensation and benefit s policies generally and the annual compensation (base salary, bonus and other benefits) for all of our executives, including our Chief Executive Officer;
● administer the 2021 Plan, the 2013 Consultant Plan and the ClearSign Technologies Corporation 2011 Equity Incentive Plan (the “2011 Plan,” and collectively, the “Equity Incentive Plans”); and
● annually review and make recommendations to the Board with respect to the compensation of non-executive directors , including any incentive plan compensation.
A copy of the charter of the Compensation Committee is available on our website at www.clearsign.com (under “Investors – Corporate Governance”).
The Compensation Committee may engage outside advisers, including outside auditors, attorneys, and consultants, as it deems necessary to discharge its responsibilities. The Compensation Committee has sole authority to retain and terminate any compensation expert or consultant used to provide advice on compensation levels or assist in the evaluation of director, Chief Executive Officer or senior executive compensation, including sole authority to approve the fees of any expert or consultant and other retention terms. In addition, the Compensation Committee considers, but is not bound by, the recommendations of our Chief Executive Officer with respect to the compensation packages of our other executive officers.
Pursuant to the terms of the 2021 Plan, the Compensation Committee may delegate to one or more officers of the Company the authority to grant awards under the 2021 Plan to participants who are not insiders of the Company.
Nominating and Corporate Governance Committee
As of the date hereof, the Governance Committee was comprised of Catharine M. de Lacy (Chairperson), Judith S. Schrecker, and David M. Maley. The role of the Governance Committee is to:
● evaluate from time to time the appropriate size (number of members) of the Board and recommend any increase or decrease;
● determine the desired skills and attributes of members of the Board, taking into account the needs of the business and listing standards;
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● establish criteria for prospective members, conduct candidate searches, interview prospective candidates, and oversee programs to introduce the candidate to us, our management, and operations;
● review planning for succession to the position of Chief Executive Officer and other senior management positions;
● annually recommend to the Board persons to be nominated for election as directors;
● annually recommend to the Board the members and leadership of all standing committees, as well as leadership of the Board and to fill vacancies as needed;
● adopt or develop for Board consideration corporate governance principles and policies; and
● periodically review and report to the Board on the effectiveness of corporate governance procedures and the Board as a governing body, including conducting an annual self-assessment of the Board and its standing committees.
A copy of the charter of the Governance Committee is available on our website at www.clearsign.com (under “Investors - Corporate Governance”).
Director Qualifications and Diversity
The Board seeks independent directors who represent a diversity of backgrounds, ages and experiences that will enhance the quality of the Board’s deliberations and decisions. Candidates should preferably have board experience with one or more companies or should have achieved a high level of distinction in their chosen fields. The Board is particularly interested in maintaining a mix that includes individuals who are active or retired executive officers and senior executives, particularly those with experience in combustion, technology, air pollution control and air emission regulation, intellectual property, start-up companies, research and development, strategic planning, business development, upstream, midstream and downstream oil and gas, energy, finance, accounting and banking, as well as impact investing and environmental, social and governance investing, reporting and/or compliance.
In evaluating nominations to the Board, the Governance Committee also looks for certain personal attributes, such as integrity, ability and willingness to apply sound and independent business judgment, comprehensive understanding of a director’s role as a fiduciary to stockholders and with respect to corporate governance, availability for meetings and consultation on Company matters, and the willingness to assume and carry out such fiduciary responsibilities.
Risk Oversight by the Board of Directors
It is the management’s responsibility to assess and manage the various risks we face. It is the Board’s responsibility to oversee management in this effort, in order to ensure that risks and uncertainties that may relate to our ongoing operations and to our plans for the future are considered and sought to be managed appropriately. In exercising its oversight, the Board has allocated some areas of focus to the Board Committees and has retained areas of focus for itself, as more fully described below.
Full Board. Risks and exposures focused on by the full Board include risk management as a whole as well as strategic, financial and execution risks including safety risks, risks associated with intellectual property, and other current matters that may present material risk to our operations, plans, prospects or reputation. Throughout the year, the Chief Executive Officer discusses these risks with the Board during meetings that focus on a particular function or aspect of our business.
Audit Committee. Risks and exposures focused on by the Audit Committee are those associated with financial matters, particularly financial reporting, tax, accounting, disclosure, internal control over financial reporting, cyber, the Foreign Corrupt Practices Act, financial policies, investment guidelines, and credit and liquidity matters.
Governance Committee. Risks and exposures focused on by the Governance Committee are those relating to corporate governance and management and director succession planning.
Compensation Committee. Risks and exposures focused on by the Compensation Committee are those associated with leadership assessment and compensation programs and arrangements, including incentive plans, to ensure that compensation incentives are aligned with our risk management objectives.
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Board Leadership Structure
Pursuant to our bylaws, the chairman of each Board and stockholder meeting is the Chairman of the Board (the “Chairman of the Board”). In the absence of a Chairman of the Board, or upon his/her inability or refusal to act as the chairman of a meeting, the Chief Executive Officer serves as the chairman of the meeting, or upon his/her inability or refusal to act as such, the President serves as chairman of the meeting. Additionally, pursuant to our lead independent director charter, in the absence of a Chairman of the Board, Chief Executive Officer and President, or upon their inability or refusal to act as chairman of a meeting, the lead independent director acts as chairman of a meeting. The lead independent director charter also provides that the lead independent director acts as chairman of any meeting of the independent and/or non-employee directors of the Board, as applicable. Ms. Schrecker is currently serving as our lead independent director.
The responsibilities of our lead independent director set forth in the lead independent director charter include:
● to act as a liaison between the independent and non-independent directors;
● to develop, maintain and revise the annual Board calendar;
● to review and approve Board meeting agendas;
● to preside and act as chairman of all meetings of the independent and/or non-employee directors of the Board, as applicable;
● to preside and act as chairman of all Board meetings at which the Chairman of the Board, if any, Chief Executive Officer and President are not present; and
● other duties as may be assigned to the lead independent director by the Board.
The lead independent director charter provides that the lead independent director must be a member of the Board and be considered independent. Further, the lead independent director may be elected annually by at least a majority of the independent directors of the Board.
Compensation Committee Interlocks and Insider Participation
None of our prior or current executive officers serves as a member of the Board or Compensation Committee of any entity that has one or more executive officers serving as a member of our Board or the Compensation Committee.
Code of Business Conduct and Ethics
We adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to our principal executive officer and principal financial and accounting officer and any persons performing similar functions, as well as to our employees, officers, directors, agents and representatives. The Code of Ethics requires, among other things, that all of the foregoing people avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner, and otherwise act with integrity and in our best interests. The Code of Ethics is posted on our website at www.clearsign.com. We will promptly disclose any amendment to, or a waiver from, a provision of our Code of Ethics that applies to members of our board of directors, our principal executive officer, principal financial officer, or persons performing similar functions by posting the information on our website, www.clearsign.com. We also have a written committee charter for each of our Board Committees that are also posted on our website.
Insider Trading Policy
We maintain an insider trading policy that governs the purchase, sale and/or other dispositions of our securities by our directors, officers and employees, which we believe is reasonably designed to promote compliance with insider trading laws, rules, regulations and any applicable listing standards. Our insider trading policy also prohibits all directors, officers and employees from engaging in any short sales of our securities, hold our securities in a margin account, or pledge our securities as collateral for a loan.
Family Relationships
There are no family relationships among any of our executive officers of directors.
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Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires that our directors, executive officers, and greater than 10% stockholders to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. To our knowledge, all Section 16(a) filing requirements applicable to its officers, directors, and greater than 10% stockholders for the years ended December 31, 2024 and 2023, were complied with, except for the following inadvertent delinquent reports:
Dr. Deller inadvertently failed to timely disclose one transaction in a Form 4, and Mr. Hinds inadvertently failed to timely disclose two transactions in a Form 4, both of which were related to their one-time bonus grant from February 2, 2023, in the form of shares of common stock and restricted stock units, as applicable, which was disclosed on a Form 4 filed for each of Dr. Deller and Mr. Hinds on February 14, 2023.
Each of Dr. Deller and Mr. Hinds inadvertently failed to timely disclose one transaction relating to the tax withholding disposition in connection with their one-time bonus grants from February 2, 2023. These transactions were disclosed on an amendment to each of their respective Form 4 filed on February 14, 2023, which amendments were filed on February 26, 2024.
ITEM 11. EXECUTIVE COMPENSATION.
Executive Officers Compensation
The table below summarizes the total compensation paid to or earned by our Chief Executive Officer and Chief Financial Officer in the years ended December 31, 2024 and 2023, in accordance with Item 402(m)(2) of Regulation S-K. These officers are referred to herein as the “named executive officers.” The amounts represented in the “Bonus” and “Restricted Stock Awards” column reflects the stock compensation expense recorded by the Company pursuant to ASC 718, “ Compensation-Stock Compensation ” (“ASC 718”), and does not necessarily equate to the income that will ultimately be realized by the named executive officers for such awards.
Summary Compensation Table
Restricted Stock
All Other
Name and Principal
Salary
Bonus
Awards (1)
Compensation (2)
Total
Position
Year
($)
($)
($)
($)
($)
Colin J. Deller
2024
350,000
86,821
(3)
—
38,435
475,256
Chief Executive Officer
2023
350,000
138,989
(4)
—
38,320
527,309
Brent Hinds
2024
200,000
44,124
(3)
26,915
(5)
33,758
304,797
Chief Financial Officer
2023
200,000
47,780
(4)
24,000
(5)
33,637
305,417
(1) The amounts included in this column are the aggregate dollar amounts of compensation expense recognized by us for financial statement reporting purposes in accordance with ASC 718, and includes amounts from restricted stock awards granted. For information on the valuation assumptions used in calculating these dollar amounts, see “Note 2 – Summary of Significant Accounting Policies,” and “Note 8 – Equity” to our consolidated financial statements included in this report. These amounts reflect our accounting expense for these awards and do not reflect the actual economic value that may be realized by the individuals upon vesting of such awards.
(2) Relates to healthcare benefits and employer matching in a defined contribution retirement plan available to all employees.
(3) Bonuses for the year ended December 31, 2024, were accrued in the fiscal year ended December 31, 2024. The bonuses for the fiscal year ended December 31, 2024, were approved by the Compensation Committee on February 20, 2025, and were paid in shares of common stock during the first quarter of 2025. Share amounts are calculated by dividing the fixed monetary accrual amount by the closing price of our stock on the day the Compensation Committee approves the bonus payout.
(4) Bonuses for the year ended December 31, 2023, were accrued in the fiscal year ended December 31, 2023. The bonuses for the fiscal year ended December 31, 2023, were approved by the Compensation Committee on February 22, 2024, and were paid in shares of common stock during the first quarter of 2024. Share amounts are calculated by dividing the fixed monetary accrual amount by the closing price of our stock on the day the Compensation Committee approves the bonus payout.
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(5) Relates to time-based restricted stock awards from our 2021 Plan granted to Mr. Hinds in the years ended December 31, 2024 and 2023. These are expensed over the service period when the service conditions associated with the restricted stock award are satisfied in accordance with ASC 718.
Outstanding Equity Awards
The following table sets forth information concerning outstanding equity awards held by our named executive officers at December 31, 2024.
Equity Incentive
Equity Incentive
Plan Awards:
Plan Awards:
Equity Incentive
Number of Securities
Number of Securities
Plan Awards:
Underlying Unexercised
Underlying Unexercised
Number of Restricted
Options
Unearned Options
Stock Units
(#)
(#)
Option Exercise
Option Expiration
(#)
Name
Exercisable
Unexercisable
Price ($)
Date
Unvested
Colin J. Deller
178,161
(1)
—
$
0.94
2/14/30
—
200,000
(1)
—
$
2.25
1/28/29
—
400,000
(1)
—
$
1.16
1/28/29
—
200,000
(2)
390,000
(2)
$
3.37
2/11/31
—
Brent Hinds
100,000
(1)
—
$
1.83
10/18/31
42,895
(3)
12,788
(1)
—
$
1.44
1/6/32
—
(1) As of December 31, 2024, these options have fully vested.
(2) Unearned options vest upon completion of performance milestones as outlined in the option award agreement. The Compensation Committee regularly monitors performance milestones to determine option vesting eligibility.
(3) Restricted stock units vest upon completion of time-based requirements.
Employment Contracts and Change-in-Control Arrangements
Employment Agreement with Colin James Deller
On January 28, 2019 (the “Effective Date”), the Company and Colin James Deller entered into an employment agreement pursuant to which the Company employed Dr. Deller as its President until April 1, 2019, at which time Dr. Deller became the Company’s Chief Executive Officer. Pursuant to the agreement, the Company pays Dr. Deller an annual salary of $350,000. As an inducement to accept employment with the Company, Dr. Deller was also granted an option to purchase 400,000 shares of the Company’s common stock at an exercise price of $1.16 per share and an option to purchase 200,000 shares of the Company’s common stock at an exercise price of $2.25 per share. Each option has a term of 10 years and has vested as follows: one-third of the options vested on the Effective Date; one-third of the options vested on the first anniversary of the Effective Date; and one-third of the options vested on the second anniversary of the Effective Date. Dr. Deller is also eligible to participate in such healthcare and other benefit programs made available to employees of the Company. Dr. Deller was eligible for annual bonuses with a value of up to 60% of his annual salary during the year ended December 31, 2024, which percentage was subsequently modified by the Compensation Committee on November 13, 2024, to 80% of his annual base salary, effective as of January 1, 2025.
Dr. Deller and the Compensation Committee meet annually to establish (i) performance standards and goals (“Standards and Goals”) to be met by him and (ii) bonus targets based on the Standards and Goals that are achieved. Any bonuses will be paid at the Compensation Committee’s discretion in cash and/or via equity awards made under our 2021 Plan, or any successor plan thereto, of the type of equity award as authorized by the Compensation Committee, which may include options to purchase Company’s common stock to be valued using the Black-Scholes option valuation model, and/or common stock, restricted stock, restricted stock units,
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performance stock or performance stock units. If Dr. Deller is terminated without cause, if he resigns for any reason, dies, or becomes disabled, he is entitled to certain severance benefits. Dr. Deller may voluntarily resign for any reason by providing us with 30 days’ prior notice. If the Company terminates Dr. Deller without cause or he is terminated within 12 months of a change in control, then Dr. Deller will be entitled to severance benefits, including 12 months of his annual salary.
Offer Letter with Brent Hinds
Brent Hinds received an offer letter from the Company, dated as of September 30, 2021 and effective as of October 18, 2021 (the “Offer Letter”), setting forth the terms of his employment and compensation arrangement, which he accepted. Pursuant to the Offer Letter, Mr. Hinds is paid an annual base salary of $200,000 in addition to equity compensation and other benefits set forth in the Offer Letter. On November 13, 2024, the Compensation Committee approved a raise to Mr. Hinds’ annual base salary from $200,000 to $220,000, effective as of January 1, 2025. Mr. Hinds is eligible for annual bonuses with a value up to 40% of his annual salary, and comprised of long- and short-term incentives awards.
Mr. Hinds is also eligible to participate in such healthcare and other benefit programs made available to employees of the Company. His employment has no specified term and is on an at-will basis.
On August 8, 2023, we promoted Mr. Hinds to Chief Financial Officer of the Company. In connection with the promotion, the Company amended the Offer Letter to provide for severance payments in certain instances (the “Amendment”). Specifically, the Amendment provides for severance payments in an amount equal to one (1) year salary plus any accrued but unpaid salary, vacation, and bonus amounts upon termination of Mr. Hinds’ employment without “Cause” or upon a “Change in Control,” as such terms are defined in the Amendment. Additionally, if Mr. Hinds’ employment is terminated for Cause, he will not be eligible for any severance payments. No other changes were made to the Offer Letter.
Change of Control Arrangements
All of the option awards and stock awards granted to the Company’s executive officers pursuant to our 2021 Plan include change-in-control arrangements whereby, in the event that a successor corporation does not assume or substitute the outstanding executive officers’ awards, any unvested award will be fully vested, including awards contingent on performance-based goals. Upon a change-in-control, these vested awards will be exercisable for a period of time determined by the administrator of the 2021 Plan, and any award that becomes fully vested as a result of a change-in-control will terminate upon expiration of such period.
Compensation Discussion
Overview
The Compensation Committee administers our executive compensation and benefit programs. The Compensation Committee is comprised exclusively of independent directors and oversees all compensation and benefit programs and actions that affect our executive officers.
Compensation Process and Role of Management
The Compensation Committee is responsible for determining and approving all compensation for our executive officers. Pursuant to its charter, the Compensation Committee reviews and approves, subject to applicable Board ratification, the salary, annual incentive compensation or bonus, long-term incentive compensation in the form of stock options, restricted stock units, or stock grants, all other employment, severance and change-in-control agreements and any other compensation applicable to executive officers. As discussed below, our Chief Executive Officer assists the Compensation Committee in its deliberations with respect to the compensation payable to our other executive officers.
At the end of or immediately following each fiscal year, our Chief Executive Officer evaluates executive officer performance for the prior fiscal year, other than his own performance, and discusses the results of such evaluations with the Compensation Committee. The Chief Executive Officer assesses each executive officer’s performance during the year based upon subjective factors concerning such officer’s individual business goals and objectives, and the contributions made by the executive officer to our overall results. The Chief Executive Officer then makes specific recommendations to the Compensation Committee for adjustments to base salary and the grant of a target bonus and/or equity award, if appropriate, as part of the compensation package for each executive officer, other than himself, for the next fiscal year.
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The Compensation Committee reviews the performance of the Chief Executive Officer and determines all compensation for the Chief Executive Officer. The Chief Executive Officer is not present at the time the Compensation Committee reviews his performance and discusses his compensation.
Evaluation of Compensation Practices
In developing our director compensation program and as basis for establishing such compensation, the Compensation Committee gathers and reviews data from the National Association of Corporate Directors as well as for various publicly traded companies that the Compensation Committee believes to be similar to the Company in some respect, taking into consideration market capitalization, number of employees, amount of revenue, net cash used or generated in operations and the industries in which such companies operate. The goal is to attract qualified candidates and motivate director behavior by adequately compensating for the time, effort, and commitment required. Establishing a transparent process that includes industry standards and comparisons, while factoring in the unique circumstances of the Company, is critical. Compensation may be in the form of cash, options, restricted stock units, or stock with consideration given to the Company’s overall resources during any given period when making a determination regarding the appropriate mix of each component of director compensation. As a result of such review, starting in 2023, our non-executive director’s annual compensation has been paid in restricted stock units. Equity compensation for directors is designed to build an ownership stake in the Company while conveying incentives relative to the returns recognized by our stockholders.
Corporate Incentive Program
In order to enable us to attract, retain and reward our employees for their superior work, and to motivate such employees to achieve our specific corporate and individual objectives, the Compensation Committee provide incentives based upon or exceeding specified targets that are challenging but achievable.
At the beginning of each fiscal year, the Compensation Committee reviews and recommends to the Board the Corporate Incentive Plan (the “CIP”) and the performance target metric and internal milestones thereunder, which provides bonus awards to certain employees, including our named executive officers, subject to the review and approval by the Compensation Committee of the achieved metrics under the CIP. The annual CIP is broken into three target categories: company based goals, employee specific goals and time-based goals. Bonuses are calculated based on the Compensation Committee’s determination of target achievement and category apportionment percentages. The Compensation Committee may, from time to time, recommend changing target categories and apportionment percentages based on their annual review of the CIP.
Grants under the CIP are generally made in the form of equity, including common stock and restricted stock units.
Director Compensation Plan
Our non-executive directors are entitled to an annual compensation of $60,000, plus reimbursement for ordinary and reasonable expenses incurred in exercising their responsibilities in accordance with our expense reimbursement procedure applicable to all of our employees. Our lead independent director is also entitled to receive additional annual compensation of $15,000.
Our non-executive directors received the following additional annual compensation for service on the committees of the Board, as applicable, during the year ended December 31, 2024:
Committee
Chair
Member
Audit and Risk Committee
$
19,000
$
7,500
Human Capital and Compensation Committee
$
7,500
$
3,000
Nominating and Corporate Governance Committee
$
6,500
$
3,000
In the year ended December 31, 2024, each non-executive director’s annual compensation was paid in restricted stock units. This component of our director compensation program is designed to build an ownership stake in the Company while providing an incentive to directors that corresponds with the returns recognized by our stockholders. Restricted stock unit awards to non-executive directors are anticipated to continue in future years as a means to increase alignment of directors with the Company’s stockholders. Other than the 2021 Plan, the independent directors are not eligible to participate in our employee benefit plans, including the retirement plan.
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Director Compensation
The following table sets forth information concerning compensation for services rendered by our non-executive directors for the year ended December 31, 2024. The amounts represented in the “Restricted Stock Units” column reflects the grant date fair value of the restricted stock units computed in accordance with ASC 718 and do not necessarily equate to the income that will ultimately be realized by the director for such awards.
Fees
Nonqualified
Earned
Restricted
Non-Equity
Deferred
or Paid in
Stock
Option
Incentive Plan
Compensation
All Other
Name
Cash
Units
Awards
Compensation
Earnings
Compensation
Total
Robert T. Hoffman, Sr.
(1)
$
—
$
39,999
$
—
$
—
$
—
$
—
$
39,999
Judith S. Schrecker
(2)
—
104,498
—
—
—
—
104,498
Catharine de Lacy
(3)
—
76,997
—
—
—
—
76,997
David Maley
(4)
—
49,042
—
—
—
—
49,042
G. Todd Silva
(5)
—
24,767
—
—
—
—
24,767
$
—
$
295,303
$
—
$
—
$
—
$
—
$
295,303
(1) Since his appointment as a director and as of December 31, 2024, Mr. Hoffman received grants of 13,153 shares of common stock, 224,311 shares of restricted stock units, and options for the purchase of 186,500 shares of common stock for his services. Mr. Hoffman resigned as a director, effective as of June 16, 2024, and, as a result, the amounts for Mr. Hoffman represent the pro-rated amounts for the period in which he served on the Board during the year ended December 31, 2024.
(2) Since her appointment as a director and as of December 31, 2024, Ms. Schrecker has received 333,132 shares of restricted stock units, and options for the purchase of 17,000 shares of common stock for her services.
(3) Since her appointment as a director and as of December 31, 2024, Ms. de Lacy has received 148,077 shares of restricted stock units as compensation for her services.
(4) Since his appointment as a director and as of December 31, 2024, Mr. Maley has received 59,044 shares of restricted stock units as compensation for his services.
(5) Since his appointment as a director and as of December 31, 2024, Mr. Silva has received 30,841 shares of restricted stock units as compensation for his services.
Clawback Policy
We have adopted a compensation recovery policy designed to comply with the mandatory compensation “clawback” requirements under Nasdaq rules (the “Clawback Policy”). Under the Clawback Policy, in the event of certain accounting restatements, we will be required to recover erroneously received incentive-based compensation from our executive officers representing the excess of the amount actually received over the amount that would have been received had the financial statements been correct in the first instance. The Compensation Committee has discretion to make certain exceptions to the clawback requirements (when permitted by Nasdaq rules) and ultimately determine whether any adjustment will be made under the Clawback Policy.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.
The following table shows information known to us about beneficial ownership of our common stock by:
● each of our directors;
● each individual identified as a named executive officer in the section of this report titled “Executive Compensation”;
● all of our directors and executive officers as a group; and
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● each stockholder known by us to beneficially own 5% or more of our common stock.
Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC. Under these rules, beneficial ownership generally includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes any shares that an individual or entity has the right to acquire ownership of on or before May 25, 2025, which is 60 days from March 26, 2025, through the exercise of any option, warrant, conversion privilege or similar right. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of our common stock that could be issued upon the exercise of outstanding options, restricted stock units, and warrants that are exercisable on or before May 25, 2025 are considered to be outstanding. These shares, however, are not considered outstanding as of March 26, 2025 when computing the percentage ownership of each other person.
To our knowledge, except as indicated in the footnotes to the following table and subject to state community property laws where applicable, all beneficial owners named in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Applicable percentage of ownership is based on 52,418,782 shares of our common stock outstanding as of March 26, 2025.
Amount of
Beneficial
Ownership
Percent
Name and Address of Beneficial Owner (1)
(2)
of Class
Directors and Officers:
Colin James Deller
1,150,014
(3)
2.1
%
Brent Hinds
230,628
(4)
*
%
Judith S. Schrecker
17,000
(5)
*
%
Catharine M. de Lacy
—
(6)
-
%
David M. Maley
—
(7)
-
%
G. Todd Silva
—
(8)
-
%
All Directors and Executive Officers as a Group (6 persons)
1,397,642
2.6
%
5% Stockholders:
Otter Capital LLC
10,991,774
(9)
19.99
%
* Less than one percent
(1) Except as set forth below, the address of each executive officer and director is 8023 East 63rd Place, Suite 101, Tulsa, Oklahoma 74133.
(2) Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act, and is generally assigned to the person holding voting power and/or investment power with respect to securities. With the exception of the securities beneficially owned by our officers and directors and their affiliates, the ownership of the shares of common stock listed above were determined using public records. These amounts are based upon information available to us as of the date of this filing.
(3) Includes 171,853 shares of common stock, and options to purchase 978,161 shares of common stock that may be exercised on or before May 25, 2025. Excludes options to purchase 390,000 shares of common stock, none of which will vest on or before May 25, 2025.
(4) Includes 117,840 shares of common stock, and options to purchase 112,788 shares of common stock that may be exercised on or before May 25, 2025. Excludes 53,167 shares of restricted stock units, none of which will vest on or before May 25, 2025.
(5) Includes options to purchase 17,000 shares of common stock that may be exercised on or before May 25, 2025. Excludes 351,926 shares of restricted stock units, none of which are expected to vest on or before May 25, 2025.
(6) Excludes 161,925 shares of restricted stock units, none of which are expected to vest on or before May 25, 2025.
(7) Excludes 72,263 shares of restricted stock units, none of which are expected to vest on or before May 25, 2025.
(8) Excludes 41,632 shares of restricted stock units, none of which are expected to vest on or before May 25, 2025.
(9) Consists of (i) 8,434,774 shares of common stock, and (ii) 2,557,000 shares of common stock issuable upon the exercise of the Private Warrants (as defined above), which were assigned by the SPV (as defined above) to Otter Capital LLC on February 27,
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2025, and are exercisable until June 16, 2029. The number of shares beneficially owned by Otter Capital LLC excludes (i) 4,076,315 shares of our common stock issuable upon the exercise of the Private Warrants because such Private Warrants include a beneficial ownership limitation of 19.99%, which provides that Otter Capital LLC will not have the right to exercise any portion of its Private Warrants if it, together with its affiliates, would beneficially own in excess of 19.99%, or 4.99% or 9.99% if subsequently elected by the holder in accordance and subject to the conditions of the Private Warrants, as applicable, of the number of shares of common stock outstanding immediately after giving effect to such exercise. The business address of Otter Capital LLC is PO Box 620067, Woodside, CA 94062.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2024, regarding the equity compensation plans approved by our stockholders and inducement option awards granted to certain employees at the time of their hiring pursuant to individual compensation arrangements that were granted without stockholder approval in accordance with Nasdaq Listing Rule 5635(c)(4). Our equity compensation plans include the 2021 Plan and the 2013 Consultant Plan, which are currently active, and the 2011 Plan, which is currently inactive but has awards outstanding thereunder (as defined above, the “Equity Incentive Plans”). As of December 31, 2024, we had no awards outstanding under equity compensation plans that have not been approved by our stockholders, except for the aforementioned inducement option awards.
Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights
Weighted average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(a)
(b) (1)
(c)
Equity compensation plans approved by stockholders (2)(3)(4)
3,317,871
(5)
$
1.77
1,855,722
Equity compensation plan not approved by stockholders (6)
491,382
$
1.53
-
(7)
Total
3,809,253
$
1.74
1,855,722
(1) T he weighted average exercise price does not take into account outstanding restricted stock units, which have no exercise price.
(2) Consists of shares of common stock available for issuance under the Equity Incentive Plans.
(3) The Board has adopted, and our stockholders approved, the 2021 Plan. The 2021 Plan provides that the number of shares issuable under the plan increase annually by an amount equal the lesser of: (i) 10% of the aggregate number of shares of common stock issued in the prior fiscal year or (ii) such number of shares of common stock as determined by the administrator of the 2021 Plan no later than the last day of the immediately preceding fiscal year; provided, that, in no event will the total cumulative increase in the number of shares available for issuance under the 2021 Plan exceed 400,000 shares of common stock in any given year. Effective as of January 1, 2025, the number of shares available for issuance under the 2021 Plan automatically increased by 400,000 shares pursuant to this feature.
(4) The Board has adopted, and our stockholders approved, the 2013 Consultant Plan. The 2013 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 us during the quarter immediately prior to the adjustment date or such lesser amount as the Board and Compensation Committee shall determine.
(5) Represents the number of shares of common stock underlying outstanding restricted stock units under the 2021 Plan, and the shares of common stock underlying the stock options under the 2011 Plan.
(6) Consists of (i) an inducement option to acquire 150,000 shares of common stock at an exercise price of $0.91 per share, (ii) an inducement option to acquire 141,382 shares of common stock at an exercise price of $1.16 per share, and (iii) an inducement option to acquire 200,000 shares of common stock at an exercise price of $2.25 per share.
(7) We may from time-to-time issue additional inducement option awards to prospective employees as a material inducement to such prospective employee’s entering into employment with us in accordance with Nasdaq Listing Rule 5635(c)(4).
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Except as disclosed herein, no director, executive officer, stockholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since January 1, 2022, in which the amount involved in the transaction exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at the year-end for the last two completed fiscal years.
Review, Approval or Ratification of Transactions with Related Persons
The Board reviews issues involving potential conflicts of interest, and reviews and approves all related party transactions, including those required to be disclosed as a “related party” transaction under applicable federal securities laws. The Board has not adopted any specific procedures for conducting reviews of potential conflicts of interest and considers each transaction in light of the specific facts and circumstances presented. However, to the extent a potential related party transaction is presented to the Board, the Company expects that the Board would become fully informed regarding the potential transaction and the interests of the related party, and would have the opportunity to deliberate outside of the presence of the related party. The Company expects that the Board would only approve a related party transaction that was in the best interests of, and fair to, the Company and our stockholders, and further would seek to ensure that any completed related party transaction was on terms no less favorable to the Company than could be obtained in a transaction with an unaffiliated third party.
Investments by clirSPV LLC
In connection with a private placement of shares of our common stock pursuant to the SPV Purchase Agreement, we granted the SPV a right to purchase certain new equity securities that we sold for the purpose of raising capital on terms and conditions no different from those offered to other purchasers (the “Participation Right”) so that it could maintain a 19.99% percentage ownership (the Percentage Ownership“) of our outstanding common stock. The Participation Right expired on December 31, 2024. Further, in conjunction with this investment made by the SPV, we entered into a Voting Agreement with the SPV pursuant to which Robert T. Hoffman, Sr. was originally appointed to the Board as the director designee of the SPV in connection with the Voting Agreement. Following Mr. Hoffman’s resignation from the Board on June 16, 2024, Mr. Silva was appointed to the Board as the SPV’s director designee on August 1, 2024.
The purpose of the Participation Right was to allow the SPV to keep its Percentage Ownership. The Participation Right could not be exercised to the extent it would cause the SPV to own 20% or more of our then outstanding shares of common stock or hold shares with 20% or more of our voting power. Additionally, because certain elements of the Participation Right, such as the notice provisions and closing period, were not compatible with raising capital in a public offering, on May 26, 2022 (the “Waiver Date”), the SPV agreed to waive the notice requirements and other related closing mechanics for such Participation Right (the “Waiver”). In exchange for such Waiver, we and the SPV agreed that, following the Waiver Date, the SPV may purchase from us, at the price sold to the investors in an offering, unregistered shares of our common stock in a number that will allow it to maintain the Percentage Ownership our outstanding common stock, provided that the SPV notifies us that it will exercise such right within 30 days following the final closing of such offering (the “Offering Response Date”) and the completion of such purchase must occur within six (6) business days of the Offering Response Date.
Following the completion of an underwritten offering in June 2022, on July 8, 2022, the SPV exercised its Participation Right and purchased 1,591,594 shares of common stock at $1.11 per share.
In addition, the SPV agreed that effective upon the Investor Holder Consent (as defined below), the Participation Right, subject to the Waiver and modification contained therein, would be extended from December 31, 2023 to such date that the holders of two-thirds of the outstanding units of the SPV agree (the “Investor Holder Consent”) to extend such holder’s existing agreement that he/she/it will have no right to force a redemption of his/her/its interests in the SPV (the “Redemption Right”); provided, however, that the SPV provided written notice to us of the Investor Holder Consent prior to December 31, 2023 and the Participation Right would in no event extend beyond June 30, 2027. On December 30, 2023, we received notice from the SPV that the holders of at least two-thirds of the outstanding units of the SPV agreed to extend the waiver of the Redemption Right until December 31, 2024. Accordingly, the Participation Right expired on December 31, 2024.
In June 2024, following the completion of our underwritten offering and concurrent private placement in April 2024 and the SPV’s notice to exercise its Participation Right in connection with such equity offerings discussed above (See “Note 8 – Equity” for additional information), we entered into the Securities Purchase Agreement with the SPV whereby we issued an aggregate of (i)
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3,907,000 shares of common stock at $0.91 per share, (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 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 at $0.91 per share, (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. For more details on these equity offerings and subsequent Participation Right exercise, see “Recent Developments” above.
Effective as of February 19, 2025, 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.
Independence of Directors
In determining the independence of our directors, we apply the definition of “independent director” provided under the Nasdaq listing rules. On an annual basis, the Board reviews the independence of all directors under guidelines established by Nasdaq and in light of each director’s background, employment and affiliations with the Company and members of management, as well as significant holdings of our securities. This review considers all known relevant facts and circumstances in making an independence determination. The Board concluded its annual review of director independence in March 2025. After considering all relevant facts and circumstances, the Board affirmatively determined that all of the directors serving on the Board, including those nominated for election at the Annual Meeting, are independent within the meaning of Nasdaq Listing Rule 5605(a)(2) and Rule 10A-3(b) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the exception of Colin James Deller.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table presents aggregate fees for professional audit services rendered BPM CPA LLP (“BPM”) for the audit of our consolidated financial statements for the years ended December 31, 2024 and 2023, respectively, and fees billed for other services rendered by BPM during those periods.
2024
2023
Audit Fees
$
88,725
$
84,500
All Other Fees
$
24,536
$
40,665
Total
$
113,261
$
125,165
Audit Fees. “Audit Fees” are the aggregate fees of BPM attributable to professional services rendered in 2024 and 2023 for the audit of our annual consolidated financial statements and for review of condensed consolidated financial statements included in our quarterly reports on Form 10-Q, and for services that are normally provided by BPM in connection with statutory and regulatory filings or engagements for those fiscal years.
All Other Fees. “All Other Fees” are attributable to customary agreed upon professional services in connection with our public offering and concurrent private placement in April 2024, “at the market” offering sales agreement executed in December 2020, filing our shelf registration statement on Form S-3 in August 2023, and review of our annual proxy statement.
Pre-approval Policies and Procedures
The Audit Committee is required to review and approve in advance the retention of the independent registered public accounting firm for the performance of all audit and lawfully permitted non-audit services and the fees for such services. The required pre-approval policies and procedures were complied with during the years ended December 31, 2024 and 2023.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(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 on page 53 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.
(a) (2) Financial Statement Schedules
Not applicable.
(a) (3) Exhibits
The exhibits filed as part of this Annual Report on Form 10-K are listed in the Exhibit Table below. 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 Form 10-K:
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Exhibit
No.
Description of Document
2.1**
Plan of Conversion, dated June 14, 2023 (incorporated by reference to Exhibit 2.1 to the Company ’ s Form 8-K filed with the Securities and Exchange Commission on June 15, 2023).
3.1**
Certificate of Incorporation of ClearSign Technologies Corporation, a Delaware corporation (incorporated by reference to Exhibit 3.3 to the Company ’ s Form 8-K filed with the Securities and Exchange Commission on June 15, 2023).
3.2**
Certificate of Amendment, as filed with the Secretary of the State of Delaware on June 26, 2024 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed with the Securities and Exchange Commission on June 26, 2024).
3.3**
Bylaws of ClearSign Technologies Corporation, a Delaware corporation (incorporated by reference to Exhibit 3.4 to the Company’s Form 8-K filed with the Securities and Exchange Commission on June 15, 2023).
3.4**
Certificate of Conversion, as filed with the Secretary of State of the State of Delaware on June 14, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on June 15, 2023).
3.5**
Articles of Conversion, as filed with the Secretary of State of the State of Washington on June 14, 2023 (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on June 15, 2023).
4.1*
Description of Securities of the Company.
4.2**
Form of Common Warrant (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K filed with the Securities and Exchange Commission on April 19, 2024).
4.3**
Form of Underwriter’s Warrant (incorporated by reference to Exhibit 4.2 of the Company’s Form 8-K filed with the Securities and Exchange Commission on April 19, 2024).
4.4**
Form of Private Warrant (incorporated by reference to Exhibit 4.3 of the Company’s Form 8-K filed with the Securities and Exchange Commission on April 19, 2024).
4.5**
Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K filed with the Securities and Exchange Commission on April 23, 2024).
4.6**
Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.4 of the Company’s Form 8-K filed with the Securities and Exchange Commission on April 19, 2024).
10.1+**
Form of Confidentiality and Proprietary Rights Agreement (incorporated by reference to Exhibit 10.6 to the Company ’ s Form 10-K filed with the Securities and Exchange Commission on February 26, 2015).
10.2**
Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Company ’ s Form 10-Q filed with the Securities and Exchange Commission on August 14, 2023) .
10.3**
ClearSign Combustion Corporation 2013 Consultant Stock Plan (incorporated by reference to Exhibit 10.1 to the Company ’ s Form 10-Q filed with the Securities and Exchange Commission on May 6, 2013) .
10.4+**
Employment Agreement dated January 28, 2019 between the registrant and Colin James Deller (incorporated by reference to Exhibit 10.1 to the Company ’ s Form 8-K filed with the Securities and Exchange Commission on January 30, 2019).
10.5**
Stock Purchase Agreement dated July 12, 2018 between the registrant and clirSPV LLC (incorporated by reference to Exhibit 10.1 to the Company ’ s Form 8-K filed with the Securities and Exchange Commission on July 17, 2018).
10.6**
At-the-Market Sales Agreement, dated December 23, 2020, by and between ClearSign Technologies Corporation and Virtu Americas LLC (incorporated by reference to Exhibit 1.1 to the Company ’ s Form 8-K filed with the Securities and Exchange Commission on December 23, 2020).
10.7+**
ClearSign Technologies Corporation 2021 Equity Incentive Plan (incorporated by reference to Appendix A from the Company ’ s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on May 7, 2021).
10.8**
2021 Equity Incentive Plan Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.13 to the Company ’ s Form 10-K filed with the Securities and Exchange Commission on March 31, 2022).
10.9**
2021 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.14 to the Company ’ s Form 10-K filed with the Securities and Exchange Commission on March 31, 2022).
10.10**
2021 Equity Incentive Plan Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.15 to the Company ’ s Form 10-K filed with the Securities and Exchange Commission on March 31, 2022).
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Table of Contents
10.11+**
Offer Letter dated October 18, 2021 by and between the Company and Brent Hinds (incorporated by reference to Exhibit 10.1 to the Company ’ s Form 10-Q filed with the Securities and Exchange Commission on November 12, 2021).
10.12**
Lease Agreement, entered into as of June 20, 2016, between Paradigm Realty Advisors, L.L.C. and ClearSign Technologies Corporation (incorporated by reference to Exhibit 10.18 to the Company ’ s Form 10-K filed with the Securities and Exchange Commission on March 31, 2022).
10.13**
First Amendment to Lease, entered into as of July 29, 2019, between Tulsa Portfolio Oklahoma Realty LP and ClearSign Technologies Corporation (incorporated by reference to Exhibit 10.19 to the Company ’ s Form 10-K filed with the Securities and Exchange Commission on March 31, 2022).
10.14**
Second Amendment to Lease, entered into as of January 14, 2020, between Tulsa Portfolio Oklahoma Realty LP and ClearSign Technologies Corporation (incorporated by reference to Exhibit 10.20 to the Company ’ s Form 10-K filed with the Securities and Exchange Commission on March 31, 2022).
10.15**
Purchase Right Waiver of clirSPV LLC (incorporated by reference to Exhibit 10.1 to the Company ’ s Form 8-K filed with the Securities and Exchange Commission on May 31, 2022).
10.16+**
Amendment to Employment Agreement between the Company and Colin James Deller (incorporated by reference to Exhibit 10.1 to the Company ’ s Form 10-Q filed with the Securities and Exchange Commission on August 15, 2022).
10.17**
Catharine de Lacy ’ s Offer Letter, dated February 20, 2023 (incorporated by reference to Exhibit 10.1 to the Company ’ s Form 8-K filed with the Securities and Exchange Commission on February 24, 2023).
10.18+**
Amendment to Offer Letter between the Company and Brent Hinds, dated August 8, 2023 (incorporated by reference to the Company’s Form 10-Q filed with the Securities and Exchange Commission on August 14, 2023).
10.19**
Form of Warrant Agency Agreement, by and between ClearSign Technologies Corporation and VStock Transfer, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the Securities and Exchange Commission on April 19, 2024).
10.20**
Securities Purchase Agreement, dated as of April 19, 2024 (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 19, 2024).
10.21**
Amendment to Securities Purchase Agreement, dated as of April 22, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 23, 2024).
10.22+**
David M. Maley’s Offer Letter, dated April 23, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 24, 2024).
10.23**
Amendment to Warrant Agency Agreement, dated as of May 15, 2024, by and between ClearSign Technologies Corporation and VStock Transfer, LLC (incorporated by reference to Exhibit 10.25 of the Company’s Form S-1 filed with the Securities and Exchange Commission on May 20, 2024).
10.24**
Securities Purchase Agreement, dated June 24, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the Securities and Exchange Commission on June 26, 2024).
10.25**
Amendment to Securities Purchase Agreement, dated June 26, 2024 (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed with the Securities and Exchange Commission on June 26, 2024).
10.26+**
G. Todd Silva’s Offer Letter, effective as of August 1, 2024 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with the Securities and Exchange Commission on August 6, 2024).
19*
Insider Trading Policy
21**
Subsidiaries of the registrant (incorporated by reference to Exhibit 21 to the Company ’ s Form 10-K filed with the Securities and Exchange Commission on March 31, 2022).
23.1*
Consent of BPM CPA LLP, Independent Registered Public Accounting Firm
24.1*
Power of Attorney (included on the signature page of this report)
31.1*
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1***
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97**
Clawback Policy (incorporated by reference to Exhibit 97 to the Company’s Form 10-K filed with the Securities and Exchange Commission on April 1, 2024).
101INS*
Inline XBRL Instance Document
101.SCH*
Inline XBRL Taxonomy Extension Schema
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase
51
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101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase
104*
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*Filed herewith.
**Previously filed.
***Furnished herewith.
+Agreement with management or compensatory plan or arrangement
ITEM 16. FORM 10-K SUMMARY.
None.
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ClearSign Technologies Corporation
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
No.
ANNUAL FINANCIAL INFORMATION
Report of Independent Registered Public Accounting Firm (PCAOB: ID 207 )
F-1
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-3
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023
F-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024 and 2023
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023
F-6
Notes to Consolidated Financial Statements
F-7
53
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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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, 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 audits. 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 audits 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 audits 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 audits provide 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.
F-1
Table of Contents
Carrying Cost 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, 2024. 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
We have served as the Company's auditor since 2011.
San Jose, California
March 31, 2025
F-2
Table of Contents
ClearSign Technologies Corporation
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31,
2024
2023
ASSETS
Current Assets:
Cash and cash equivalents
$
14,035
$
5,684
Accounts receivable
165
287
Contract assets
194
188
Prepaid expenses and other assets
454
350
Total current assets
14,848
6,509
Fixed assets, net
238
275
Patents and other intangible assets, net
830
836
Total Assets
$
15,916
$
7,620
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities
$
1,220
$
366
Current portion of lease liabilities
75
71
Accrued compensation and related taxes
671
703
Contract liabilities
73
1,116
Total current liabilities
2,039
2,256
Long Term Liabilities:
Long term lease liabilities
113
172
Total liabilities
2,152
2,428
Commitments and contingencies (Note 11)
Stockholders’ Equity:
Preferred stock, $ 0.0001 par value, 2,000,000 shares authorized, no shares issued or outstanding
—
—
Common stock, $ 0.0001 par value, 87,500,000 shares authorized, 50,285,509 and 38,687,061 shares issued and outstanding
5
4
Additional paid-in capital
112,796
98,922
Accumulated other comprehensive loss
( 21 )
( 17 )
Accumulated deficit
( 99,016 )
( 93,717 )
Total stockholders' equity
13,764
5,192
Total Liabilities and Stockholders' Equity
$
15,916
$
7,620
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Table of Contents
ClearSign Technologies Corporation
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
For the Year Ended
December 31,
2024
2023
Revenues
$
3,596
$
2,403
Cost of goods sold
2,478
1,586
Gross profit
1,118
817
Operating expenses:
Research and development
1,471
739
General and administrative
6,135
6,059
Total operating expenses
7,606
6,798
Loss from operations
( 6,488 )
( 5,981 )
Other income, net:
Interest income
516
324
Government assistance
664
255
Other income, net
9
208
Total other income, net
1,189
787
Net loss
$
( 5,299 )
$
( 5,194 )
Net loss per share - basic and fully diluted
$
( 0.11 )
$
( 0.13 )
Weighted average number of shares outstanding - basic and fully diluted
48,935,988
38,500,933
Comprehensive loss:
Net loss
$
( 5,299 )
$
( 5,194 )
Foreign-exchange translation adjustments
( 4 )
( 9 )
Comprehensive loss
$
( 5,303 )
$
( 5,203 )
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
ClearSign Technologies Corporation
Consolidated Statement of Stockholders’ Equity
For the Year Ended December 31, 2024
Accumulated Other
Total
(in thousands, except per share data)
Common Stock
Additional
Comprehensive
Accumulated
Stockholders’
Shares
Amount
Paid-In Capital
Loss
Deficit
Equity
Balances at December 31, 2023
38,687
$
4
$
98,922
$
( 17 )
$
( 93,717 )
$
5,192
Share-based compensation
314
—
528
—
—
528
Fair value of stock issued in payment of accrued compensation
307
—
326
—
—
326
Shares issued for services
40
—
29
—
—
29
Issuance of common stock in public offering, net of expenses
5,314
1
2,390
—
—
2,391
Issuance of warrants in public offering, net of expenses
—
—
1,831
—
—
1,831
Issuance of common stock in private placement, net of expenses
2,250
—
865
—
—
865
Issuance of prefunded warrants in private placement, net of expenses
—
—
1,214
—
—
1,214
Issuance of warrants in private placement, net of expenses
—
—
2,389
—
—
2,389
Issuance of common stock for participation right exercise, net of expenses
3,350
—
1,447
—
—
1,447
Issuance of prefunded warrants for participation right exercise, net of expenses
—
—
580
—
—
580
Issuance of warrants for participation right exercise, net of expenses
—
—
2,250
—
—
2,250
Exercise of warrants
24
—
25
—
—
25
Foreign-exchange translation adjustment
—
—
—
( 4 )
—
( 4 )
Net loss
—
—
—
—
( 5,299 )
( 5,299 )
Balances at December 31, 2024
50,286
$
5
$
112,796
$
( 21 )
$
( 99,016 )
$
13,764
ClearSign Technologies Corporation
Consolidated Statement of Stockholders’ Equity
For the Year Ended December 31, 2023
Accumulated Other
Total
(in thousands, except per share data)
Common Stock
Additional
Comprehensive
Accumulated
Stockholders'
Shares
Amount
Paid-In Capital
Loss
Deficit
Equity
Balances at December 31, 2022
38,023
$
4
$
98,079
$
( 8 )
$
( 88,523 )
$
9,552
Share-based compensation
339
—
599
—
—
599
Fair value of stock issued in payment of accrued compensation
296
—
234
—
—
234
Shares issued for services ($ 0.66 per share)
12
—
7
—
—
7
Shares issued upon exercise of options ($ 0.54 per share)
12
—
—
—
—
—
Shares issued for services ($ 0.81 per share)
3
—
3
—
—
3
Shares issued upon exercise of options ($ 1.31 per share)
2
—
—
—
—
—
Foreign-exchange translation adjustment
—
—
—
( 9 )
—
( 9 )
Net loss
—
—
—
—
( 5,194 )
( 5,194 )
Balances at December 31, 2023
38,687
$
4
$
98,922
$
( 17 )
$
( 93,717 )
$
5,192
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
ClearSign Technologies Corporation
Consolidated Statements of Cash Flows
(in thousands)
For the Years Ended December 31,
2024
2023
Cash flows from operating activities:
Net loss
$
( 5,299 )
$
( 5,194 )
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock issued for services
29
10
Share-based compensation
528
614
Depreciation and amortization
186
299
Impairment of fixed assets
—
81
Impairment of intangible assets
20
14
Gain from sale of fixed assets
—
( 5 )
Right-of-use asset amortization
86
125
Realized gain from marketable securities
—
( 79 )
Lease amendments
( 3 )
( 14 )
Change in operating assets and liabilities:
Contract assets
( 5 )
( 168 )
Accounts receivable
122
( 208 )
Prepaid expenses and other assets
( 104 )
18
Other long term assets
—
10
Accounts payable, accrued liabilities, and lease liabilities
816
( 57 )
Accrued compensation and related taxes
294
452
Contract liabilities
( 1,043 )
869
Net cash used in operating activities
( 4,373 )
( 3,233 )
Cash flows from investing activities:
Acquisition of fixed assets
( 39 )
—
Disbursements for patents and other intangible assets
( 179 )
( 200 )
Proceeds from sale of fixed assets
—
5
Purchases of held-to-maturity short-term U.S. treasuries
—
( 2,162 )
Redemption of held-to-maturity short-term U.S. treasuries
—
4,847
Net cash provided by (used in) investing activities
( 218 )
2,490
Cash flows from financing activities:
Proceeds from issuance of common stock, net of offering costs
12,967
—
Proceeds from exercise of warrants
25
—
Taxes paid related to share-based compensation
( 46 )
( 15 )
Net cash provided by (used in) financing activities
12,946
( 15 )
Effect of exchange rate changes on cash and cash equivalents
( 4 )
( 9 )
Net change in cash and cash equivalents
8,351
( 767 )
Cash and cash equivalents, beginning of period
5,684
6,451
Cash and cash equivalents, end of period
$
14,035
$
5,684
Supplemental disclosure of cash flow information:
Officer and employee equity awards for prior year accrued compensation
$
326
$
234
Prepaid expenses repurposed to fixed assets as demonstration equipment
—
209
Non-cash impact of new lease
32
34
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
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 for the purpose of decarbonization and improving 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 original equipment manufacturers (“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 selective catalytic reduction.
The Company was originally incorporated in the State of Washington in 2008. During January 2022, the Company relocated its headquarters from Seattle, Washington to Tulsa, Oklahoma. Effective June 15, 2023, the Company changed its state of incorporation to Delaware. 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. On August 22, 2024, the Company’s Board of Directors (the “Board”) authorized management to move forward with filing for dormancy with Chinese regulators to suspend the Company’s Beijing, China operations. A dormancy filing allows the Company to keep its China legal entity in a suspended status for up to three years . The Company can revive its China operations at any time during those three years with minimal cost impact. The effective date of our dormancy filing was March 12, 2025.
Unless otherwise stated or the context otherwise requires, the terms “we,” “us,” “our,” “ClearSign” and the “Company” refer to ClearSign Technologies Corporation and its subsidiary, ClearSign Asia Limited.
Business Segments
The Company operates in one operating and reportable segment engaged in the design, development and sale of combustion technologies that improve the performance and cost-effectiveness of industrial combustion systems, referred to herein as the “Combustion” segment. The Company manages its business activities on a consolidated basis. Since the operations comprise a single reportable segment, amounts reported in the consolidated balance sheets, statements of operations and comprehensive loss, stockholders’ equity, and cash flows represent the activities of the Combustion segment.
The Combustion segment derives revenues by delivering products and technology solutions to OEM’s and end-users. Our products and solutions can be incorporated into a new or existing customer infrastructure or equipment. Customer contracts can include multiple billing milestones and performance obligations. The Company can typically satisfy its performance obligations within a twelve month period, but customer project delays, some of which can be beyond the Company’s control, can impact timing of performance and there is no assurance we will satisfy all performance obligations in such period of time.
The Company’s Chief Executive Officer, who is the chief operating decision maker (“CODM”), reviews quarterly financial information on a consolidated basis for making operating decisions, allocating resources and evaluating financial performance. The CODM consistently reviews the consolidated statements of operations and comprehensive loss to manage operations and monitor performance against management expectations. Factors considered by the CODM when assessing a reportable segment include factors such as, but not limited to, human capital, intellectual property, customer relationships and business model design.
F-7
Table of Contents
Substantially all the Company’s operating activities, including its long-lived assets, are located within the United States. Customers in the United States accounted for 100 % of revenues during the years ended December 31, 2024 and 2023. The Company disaggregates geographical revenues by selling location, since many of our target customers are global entities, and it would be more likely than not, that these customers would negotiate sales within our current territory in the United States. Our two California refinery customers accounted for 86 % and 87 % of our annual revenues for the years ended December 31, 2024 and 2023, respectively. No other customer represented greater than ten percent of annual revenues for the years ended December 31, 2024 and 2023.
For the Year Ended
December 31,
2024
2023
Customer A
59
%
28
%
Customer B
27
59
86
%
87
%
Liquidity
As of December 31, 2024, the Company’s cash and cash equivalents totaled $ 14,035 thousand, which is sufficient to fund current operating expenses beyond twelve months from the date of issuance of these consolidated financial statements. The Company’s technologies are currently deployed in fully operational commercial installations. In order to generate meaningful revenues and achieve cash flow break-even, we must continue to gain market recognition and acceptance and achieve 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 $ 105.3 million in gross proceeds through the sale of its equity securities. During the year ended December 31, 2024, the Company sold equity securities on April 23, 2024, May 15, 2024, and June 24, 2024, which resulted in aggregate gross proceeds of approximately $ 14.2 million and net proceeds of approximately $ 13.0 million, after broker discounts and related fees. Refer to “Note 8 – Equity” for further details about the offerings effectuated during the year ended December 31, 2024.
The Company has incurred losses since its inception totaling $ 99.0 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 consolidated 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 consolidated 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 (“ASC”) 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
F-8
Table of Contents
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 a schedule of performance obligations that are used to allocate transaction prices, as well as 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 collectibility is determined, revenue is recorded at a point in time. 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 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.
Advertising
The Company expenses selling and marketing expenses when incurred within the statements of operations and comprehensive loss in general and administrative expenses. The total amount charged to advertising expense for the years ended December 31, 2024 and 2023 was $ 114 thousand and $ 73 thousand, respectively.
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 accounts payable and accrued liabilities in the consolidated balance sheets. Although a warranty is a type of guarantee, assurance-type warranties are not subject to the general recognition provisions of ASC Topic 460, Guarantees , which requires recognizing guarantees at fair value.
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 and U.S. treasury bills with an original maturity of three months or less.
Accounts Receivable and Allowance for Credit Losses
Trade accounts receivable are stated at the cost less an allowance for expected credit losses. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers or interest on past due amounts. Management estimates the allowance for credit losses based on review and analysis of specific customer balances that may not be collectible and how recently payments have been received in addition to an expected credit loss model based on aging analysis as per the invoice date as re-imbursement risks could exist. Though an exception exists, the vast majority of the outstanding accounts receivable share the same expected credit risk due to the re-imbursement risk is same for the current customer pool. Accounts are considered for write-off when they become past due and when it is determined that the probability of collection is remote. The allowance for credit losses as of December 31, 2024 and 2023 was zero .
Fixed Assets and Leases
Fixed assets are recorded at cost. Fixed assets are depreciated over three to five years . Maintenance and repairs are expensed as incurred.
At contract inception, the Company determines whether the contract is, or contains, a lease and whether the lease should be classified as an operating or a financing lease and reassesses that conclusion if the contract is modified. Operating leases are recorded in operating lease right-of-use (“ROU”) assets, lease liability, current and lease liability, noncurrent on the consolidated balance sheets. The Company did not have any finance leases during the periods presented.
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The Company recognizes operating lease ROU assets and operating lease liabilities based on the present value of the future minimum lease payments over the lease term at commencement date. The lease ROU asset is reduced for tenant incentives, if any, and excludes any initial direct costs incurred, if any. The Company uses its incremental borrowing rate based on the information available at commencement date to determine the present value of future payments and the appropriate lease classification. In determining the inputs to the incremental borrowing rate calculation, the Company makes judgments about the value of the leased asset, its credit rating and the lease term including the probability of its exercising options to extend or terminate the underlying lease. The Company defines the initial lease term to include renewal options determined to be reasonably certain. If the Company determines the option to extend or terminate is reasonably certain, it is included in the determination of lease assets and liabilities. The Company reassesses the lease term if and when a significant event or change in circumstances occurs within the control of the Company, such as construction of significant leasehold improvements that are expected to have economic value when the option becomes exercisable. The Company recognizes a single lease cost on a straight-line basis over the term of the lease, and the Company classifies all cash payments within operating activities in the consolidated statements of cash flows.
The Company has lease agreements with lease and non-lease components, which it has elected to not combine for all asset classes. In addition, the Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less of all asset classes.
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; and
● 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, accounts receivable, accounts payable, and accrued expenses. The fair value of the Company’s cash equivalents was determined based on Level 1 inputs. Our cash equivalents consist of cash, money market and short-term U.S. treasuries. As of December 31, 2024 and 2023, we had $ 1,354 thousand and $ 4,228 thousand in our money market account, and $ 10,792 thousand and zero in short-term U.S. treasuries, respectively.
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 consolidated balance sheets. This is primarily attributable to the short-term nature of these instruments.
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The Company did not identify any other recurring or non-recurring assets and liabilities that are required to be presented in the consolidated balance sheets at fair value.
Research and Development, and Government Assistance
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 years ended December 31, 2024 and 2023, the Company received $ 145 thousand and $ 60 thousand, respectively, from these types of arrangements.
Additionally, from time to time, the Company may receive government grants to fund research and development projects. We record gross monies received from government entities within other income, net, and associated expenses such as salaries and supplies in research and development or general and administration expense, depending on the nature of expenditure. We accrue for reimbursement requests submitted to government entities in accounts receivable.
Income Taxes
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, 2024 and 2023 include assets amounting to approximately $ 145 thousand and $ 334 thousand, respectively, relating to the operations of ClearSign Asia Limited. The Beijing registered capital requirement is $ 350 thousand, which is required to be paid by June 30, 2032, and of which $ 211 thousand has been paid as of December 31, 2024. On August 22, 2024, the Board authorized management to move forward with filing for dormancy with Chinese regulators to suspend the Company’s Beijing, China operations. A dormancy filing allows the Company to keep its China legal entity in a suspended status for up to three years . The Company can revive its China operations at any time during those three years with minimal cost impact. The Company completed the dormancy filings as of March 12, 2025. We estimated that we will incur a total of $ 394 thousand in one-time non-recurring costs related to this project for severance and related benefit costs, equipment disposal and shipment costs, and legal filing fees, which was recorded in the third quarter of 2024. As of December 31, 2024, we had $ 239 thousand remaining in the accrual related to these costs, which is included in accounts payable and accrued liabilities on the consolidated balance sheets.
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 loss.
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Net Loss per Common Share
Basic net 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 net 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. As of December 31, 2024 and 2023, potentially dilutive shares outstanding amounted to 25.1 million and 3.9 million, respectively.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires expanded disclosures about reportable segments including additional information on segment expenses, expanded interim period disclosures, and an explanation of how the CODM utilizes segment information in evaluating segment performance. The Company adopted ASU 2023-07 as of December 31, 2024.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) to enhance the transparency and decision-making usefulness of income tax disclosures by requiring additional information on an entity's tax rate reconciliation, as well as income taxes paid. ASU 2023-09 is effective for our reporting period beginning January 1, 2025. We are currently assessing the impact that the adoption of ASU 2023-09 will have on the disclosures in our consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). ASU 2024-03 requires enhanced disclosures about types of expenses, including purchases of inventory, employee compensation, depreciation, and amortization, in commonly presented expense captions. The amendments are effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. Entities may apply the amendments prospectively or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact that this guidance will have on the disclosures within our consolidated financial statements. While ASU 2024-03 will impact only our disclosures and not our financial condition and results of operations, we are assessing when we will adopt the ASU 2024-03.
Note 3 – Fixed Assets, Net
Fixed Assets, Net
Fixed assets, net are summarized as follows:
December 31,
(in thousands)
2024
2023
Office furniture and equipment
$
99
$
60
Leasehold improvements
43
43
142
103
Accumulated depreciation and amortization
( 85 )
( 63 )
57
40
Operating lease ROU assets, net
181
235
Total
$
238
$
275
Depreciation expense for the years ended 2024 and 2023 totaled $ 21 thousand and $ 152 thousand, respectively. In the year ended December 31, 2023, we recorded an impairment of $ 81 thousand for machinery and equipment, specifically demonstration burners. These burners were capitalized at $ 209 thousand and, at the time of impairment, the associated accumulated depreciation amounted to $ 128 thousand. There were no similar impairments in the year ended December 31, 2024.
Leases
The Company leases office space in Tulsa, Oklahoma, Seattle, Washington and Beijing, China. During years ended December 31, 2024 and 2023, the Company renewed its Beijing, China lease for 13 months with monthly rent at approximately $ 3 thousand. As a
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result of these renewals, the Company increased the right of use (“ROU”) asset and lease liability by $ 32 thousand and $ 34 thousand during the years ended December 31, 2024 and 2023, respectively.
The Company exited our long term Seattle operating lease on September 30, 2023. During October 2023, the Company entered into a sub-lease agreement to rent office space in Seattle for approximately $ 2 thousand per month for twelve months . We renewed the twelve month Seattle sub-lease during October 2024 with substantially the same terms. The Seattle lease is considered a short-term lease, as the lease term is 12 months or less from the commencement date. The short-term lease expense was $ 22 thousand and $ 5 thousand for the years ended December 31, 2024 and 2023, respectively. The Tulsa and Beijing leases are classified as operating leases, with remaining terms ranging from less than twelve months to approximately three 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 return the premises to its original functional state. During the years ended December 31, 2024 and 2023, the Company incurred restoration expenses of zero and $ 33 thousand, respectively.
The Tulsa lease contains fixed annual lease payments that increase annually by 2 %. The Seattle, Tulsa, and Beijing total monthly minimum rent is approximately $ 10 thousand. Operating lease costs for the years ended December 31, 2024 and 2023 were $ 97 thousand and $ 141 thousand, respectively.
Supplemental balance sheet information related to operating leases is as follows:
December 31,
December 31,
(in thousands)
2024
2023
Operating lease ROU assets, net
$
181
$
235
Lease Liabilities:
Current lease liabilities
$
75
$
71
Long term lease liabilities
113
172
Total lease liabilities
$
188
$
243
Weighted average remaining lease term (in years):
2.6
2.4
Weighted average discount rate:
5.3
%
5.2
%
Supplemental cash flow information related to operating leases is as follows:
For the Year Ended
December 31,
(in thousands)
2024
2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases
$
98
$
158
Non-cash impact of new leases and lease modifications
Change in operating lease liabilities
$
29
$
25
Change in operating lease ROU assets
$
32
$
39
Minimum future payments under the Company’s operating lease liabilities as of December 31, 2024 are as follows:
Payments
due under
(in thousands)
lease
agreements
2025
$
82
2026
67
2027
52
Total future lease payments
201
Less: imputed interest
( 13 )
$
188
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Note 4 – Patents and Other Intangible Assets
Patents and other intangible assets are summarized as follows:
December 31,
(in thousands)
2024
2023
Patents
Patents pending
$
346
$
477
Issued patents
1,034
810
1,380
1,287
Trademarks
Trademarks pending
—
4
Registered trademarks
86
86
86
90
Other
8
8
1,474
1,385
Accumulated amortization
( 644 )
( 549 )
$
830
$
836
Amortization expense for the years ended December 31, 2024 and 2023 totaled $ 165 thousand and $ 147 thousand, respectively. Future amortization expense associated with issued patents and registered trademarks as of December 31, 2024 is as follows:
(in thousands)
2025
$
157
2026
125
2027
102
2028
66
2029
25
Thereafter
1
$
476
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, 2024 and 2023, the Company assessed its patent and trademark assets, and recorded impairments of $ 20 thousand and $ 14 thousand, respectively. These impairment costs are included within research and development in the consolidated statements of operations and comprehensive loss. 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.
Note 5 – Revenue, Contract Assets and Contract Liabilities
The Company’s contracts with customers generally have performance obligations and a schedule of non-refundable cancellation obligations. Performance obligations typically fall into one of three categories, product shipment, burner performance tests and engineering design. Customer payment milestones are unique to individual contracts and may occur prior to completion of performance obligations. Customer payment terms typically range between thirty and sixty days from the date of billing. Our customer contracts typically have a duration of less than twelve months . Delays in contract performance, if any, typically occur as a result of customer onsite project delays outside of our control.
The Company recognized $ 3,596 thousand of revenues and $ 2,478 thousand of cost of goods sold during the year ended December 31, 2024. The revenue and cost of goods sold predominantly related to the Company’s process burner product line. The Company delivered multiple burners for different customers, successfully completed engineering studies including the computational fluid dynamic analysis, and fulfilled multiple spare parts orders. These products and services constitute performance obligations.
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The Company recognized $ 2,403 thousand of revenues and $ 1,586 thousand of cost of goods sold during the year ended December 31, 2023. Revenues and cost of goods sold relate predominantly to the Company’s process burner product line. During the year ended December 31, 2023, the Company delivered multiple burners in connection with a single customer order. Prior to delivery, we successfully completed multiple customer witness tests at a burner test facility for three separate customer orders. Both the witness tests and burner shipment constitute contractual performance obligations.
The Company had contract assets of $ 194 thousand and $ 188 thousand and contract liabilities of $ 73 thousand and $ 1,116 thousand at December 31, 2024 and 2023, respectively. Of the $ 1,116 thousand contract liability balance as of December 31, 2023, the Company recognized revenue of $ 1,116 thousand during the year ended December 31, 2024.
Note 6 – Product Warranties
A summary of the Company’s warranty liability activity, which is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets as of December 31, 2024 and 2023, is as follows:
December 31,
(in thousands)
2024
2023
Warranty liability at beginning of year
$
110
$
5
Accruals
478
105
Payments
( 114 )
—
Changes in accrual related to expirations
( 3 )
—
Warranty liability at end of period
$
471
$
110
Note 7 - Income Taxes
For the years ended December 31, 2024 and 2023 the Company's loss before provision for income taxes were as follows:
For the Year Ended
December 31,
( in thousands )
2024
2023
Domestic
$
( 5,072 )
$
( 5,144 )
Foreign
( 227 )
( 50 )
Loss before provision for income taxes
$
( 5,299 )
$
( 5,194 )
There was no provision for income taxes recorded for the years ended December 31, 2024 and 2023.
Income tax benefit attributable to losses 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
December 31,
( in thousands )
2024
2023
Tax benefit at federal statutory rate
$
( 1,113 )
$
( 1,091 )
Tax benefit at state rate
( 406 )
( 126 )
Other
( 149 )
( 70 )
Change in valuation allowance
1,668
1,287
$
—
$
—
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Table of Contents
The significant components of the Company's deferred tax assets and liabilities as of December 31, 2024 and 2023 were as follows:
For the Year Ended
December 31,
( in thousands )
2024
2023
Deferred tax assets:
Accrued expenses
$
197
$
86
Share-based compensation
540
388
Depreciation
405
177
Prepaid expenses
12
61
Accrued vacation
( 4 )
( 1 )
ASC 842 lease standard
11
( 51 )
Net operating loss carryforwards
22,128
21,020
Gross deferred tax assets
23,289
21,680
Valuation allowance
( 23,054 )
( 21,598 )
Total deferred tax assets, net of valuation allowance
235
82
Deferred tax liabilities
Other
( 235 )
( 82 )
Net deferred tax assets
$
—
$
—
For the year ended December 31, 2024, 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, 2024. Accordingly, the Company established a full valuation allowance against its deferred tax assets.
As of December 31, 2024, the Company had $ 89.1 million of federal and $ 52.4 million of state net operating loss carryforwards available to reduce future taxable income, of which federal net operating loss carryforwards of $ 42.2 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, 2024 and 2023, 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 87.5 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 Board. The Company has not issued any shares of preferred stock.
In July 2018, in connection with a private placement of the Company’s common stock pursuant to a Stock Purchase Agreement, the Company granted clirSPV LLC (“clirSPV”) a right to purchase certain new equity securities that the Company sells for purpose of raising capital on terms and conditions no different from those offered to other purchasers (the “Participation Right”), so that clirSPV could maintain a 19.99 % percentage ownership of the Company’s outstanding common stock. 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.
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In May 2022, in connection with a waiver of the Participation Right’s notice requirements and other related closing mechanics for such Participation Right (the “Waiver”) the Company and clirSPV, agreed that the Participation Right may be extended from December 31, 2023, to such date that the holders of two -thirds of the outstanding units of clirSPV agree to extend each such holder’s existing agreement that he/she/it will have no right to force a redemption of his/her/its interests in clirSPV (the “Redemption Right”); provided, however, that the Participation Right could not be extended to a date later than June 30, 2027. On December 30, 2023, the Company received notice from clirSPV that the holders of at least two -thirds of the outstanding units of clirSPV agreed to extend the waiver of the Redemption Right until December 31, 2024. Accordingly, the Participation Right has expired as of December 31, 2024.
The Company has an At-The-Market (“ATM”) program pursuant to a Sales Agreement with Virtu Americas LLC, as sales agent, dated December 23, 2020 (the “Sales Agreement”), pursuant to which the Company may sell shares of common stock with an aggregate offering price of up to $ 8.7 million. On March 18, 2024, the Company filed a prospectus supplement suspending the ATM program. The Company will not make any sales of its 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. During the year ended December 31, 2024, the Company issued zero shares of its common stock from the ATM program. As of December 31, 2024, the Company has cumulatively 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, the ATM program or other securities offerings.
Equity Offerings
Public Offering
On April 23, 2024, we completed an underwritten public offering (the “Public Offering”), pursuant to which we sold approximately 4,621 thousand shares of our common stock and 4,621 thousand redeemable warrants (the “Public Warrants”) at a price of $ 0.91 per share of common stock and $ 0.01 for the accompanying Public Warrant. On May 15, 2024, Public Ventures, LLC (“Public Ventures”), the underwriter of the Public Offering, exercised its over-allotment option in full to purchase an additional 693 thousand shares of common stock and 693 thousand Public Warrants. After deducting customary professional service fees, the net proceeds from the Public Offering amounted to approximately $ 4,222 thousand.
Each Public Warrant has an exercise price of $ 1.05 per share and is exercisable for a period of five years starting from the date of its issuance. Holders of the Public Warrants are not able to exercise their warrants on a cashless basis. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the Company’s common stock. We have the option, but not the obligation, to redeem the Public Warrants anytime between issuance and expiration, at a price of $ 0.01 per Public Warrant, provided that the closing price of the common stock reported equals or exceeds $ 2.275 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) per share for any 20 business days within a 30 consecutive business-day period.
In connection with the Public Offering, we also issued approximately 425 thousand warrants to Public Ventures (the “Underwriter Warrants”), as consideration for the services provided as underwriter for the Public Offering. The Underwriter’s Warrants are exercisable at a per share exercise price of $ 1.1375 commencing 180 days from April 19, 2024, and expire on their fifth year anniversary. The Underwriter’s Warrants can be exercised on a cashless basis based on a formula set forth therein and are non-redeemable.
The shares of common stock and Public Warrants issued in the Public Offering have been classified and recorded as part of stockholders’ equity. The amount allocated to such instruments were based on their relative fair value, resulting in an initial carrying value for each of those instruments to be as follows:
(in thousands)
Allocated Amount
Common Stock
$
2,391
Public Warrants
1,831
$
4,222
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In determining the fair values of the Public Warrants and Underwriter Warrants, we used a Black-Scholes option pricing model with the following assumptions:
Stock price
$
0.79
Expected volatility
108.01 %
Contractual/expected term (in years)
5.00
Risk-free interest rate
4.64 %
Expected dividend yield
0 %
The Underwriter Warrants issued in connection with the Public Offering have been accounted for as a direct cost of the Public Offering, resulting in no net effect to the overall stockholders’ equity.
The fair value of the shares of common stock issued in the Public Offering was determined using the closing price of our common stock immediately preceding the closing date of the Public Offering.
Private Placement
On April 23, 2024, we completed a private placement (the “Private Placement”) concurrent with the Public Offering noted above. As part of the Private Placement, we sold (i) approximately 2,250 thousand shares of common stock at a price of $ 0.91 per share of common stock; (ii) redeemable warrants to purchase up to approximately 8,108 thousand shares of our common stock (the “Private Warrants”) at a price of $ 0.01 per accompanying Private Warrant; and (iii) pre-funded warrants to purchase up to approximately 3,156 thousand shares of common stock (the “Private Pre-Funded Warrants”) at a price of $ 0.9099 per accompanying Private Pre-Funded Warrant. After deducting customary professional service fees, the net proceeds from the Private Placement amounted to approximately $ 4,468 thousand.
The Private Warrants have the same terms as the Public Warrants noted above, except that they are only exercisable six months after their issuance.
Each Private Pre-Funded Warrant has an exercise price of $ 0.0001 per share and expire when exercised in full. In accordance with the terms of the Private Pre-Funded Warrants, the Company is prohibited from effecting an exercise of any Private Pre-Funded Warrants to the extent that such exercise would result in the number of shares of common stock beneficially owned by the holder and its affiliates exceeding 4.99 % (or 9.99 % at election of the holder) of the total number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s election not to exceed 9.99 %.
In connection with the Private Placement, we issued approximately 432 thousand warrants to Public Ventures, as compensation for their services as our exclusive placement agent in the Private Placement (the “Placement Agent Warrants”). The terms of the Placement Agent Warrants are the same as the Underwriter Warrants noted above.
The shares of common stock, Private Pre-Funded Warrants and Private Warrants issued in the Private Placement have been classified and recorded as part of stockholders’ equity. The amount allocated to such instruments were based on their relative fair value, resulting in an initial carrying value for each of those instruments to be as follows:
(in thousands)
Allocated Amount
Common Stock
$
865
Private Pre-Funded Warrants
1,214
Private Warrants
2,389
$
4,468
In determining the fair values of the Private Warrants, Private Pre-Funded Warrants, and Placement Agent Warrants, we used a Black-Scholes option pricing model with the following assumptions:
Stock price
$
0.79
Expected volatility
108.01 %
Contractual/expected term (in years)
5.00
Risk-free interest rate
4.64 %
Expected dividend yield
0 %
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The Placement Agent Warrants issued in the Private Placement have been accounted for as a direct cost of the Private Placement resulting in no net effect to the overall stockholders’ equity.
The fair value of the shares of common stock issued in the Private Placement was determined using the closing price of our common stock immediately preceding the closing date of the Private Placement.
Participation Right Exercise
On June 24, 2024, in connection with the Public Offering and concurrent Private Placement noted above, clirSPV exercised its Participation Right (the “Participation Right Exercise”) and purchased (i) 3,350 thousand shares of our common stock at a price of $ 0.91 per share; (ii) redeemable warrants to purchase up to approximately 7,040 thousand shares of our common stock (the “Participation Right Warrants,” and together with the Public Warrants, Private Warrants, Underwriter Warrants, Placement Agent Warrants, the “Warrants”) at a price of $ 0.01 per accompanying Participation Right Warrant; and (iii) pre-funded warrants to purchase up to approximately 1,343 thousand shares of common stock (the “Participation Right Pre-Funded Warrants,” and together with the Private Pre-Funded Warrants, the “Pre-Funded Warrants”) at a price of $ 0.9099 per accompanying Participation Right Pre-Funded Warrant. After deducting customary professional service fees, the net proceeds from the Participation Right Exercise amounted to approximately $ 4,277 thousand.
The Participation Right Warrants have the same terms as the Private Warrants noted above.
The Participation Right Pre-Funded Warrants have the same terms as the Private Pre-Funded Warrants noted above, except that, in accordance with the terms of the Participation Right Pre-Funded Warrants, the Company is prohibited from effecting an exercise that would result in beneficial ownership exceeding 19.99 %.
The shares of common stock, Participation Right Pre-Funded Warrants, and Participation Right Warrants issued in the Participation Right have been classified and recorded as part of stockholders’ equity. The amount allocated to such instruments were based on their relative fair value, resulting in an initial carrying value for each of those instruments to be as follows:
(in thousands)
Allocated Amount
Common Stock
$
1,447
Participation Right Pre-Funded Warrants
580
Participation Right Private Warrants
2,250
$
4,277
In determining the fair values of the Participation Right Warrants and Participation Right Pre-Funded Warrants, the Company used a Black-Scholes option pricing model with the following assumptions:
Stock price
$
0.65
Expected volatility
108.01 %
Contractual/expected term (in years)
5.00
Risk-free interest rate
4.25 %
Expected dividend yield
0 %
The fair value of the shares of common stock issued in connection with the Participation Right Exercise was determined using the closing price of the Company’s common stock immediately preceding the closing date of the Participation Right Exercise.
Warrants and Pre-Funded Warrants
The following table summarizes the Warrants (as defined above) and Pre-Funded Warrants (as defined above) activity and outstanding balance as of December 31, 2024, along with the associated weighted average exercise price and weighted average remaining life.
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Warrants
Pre-Funded Warrants (1)
( in thousands, except per share data )
Number
Wtd. Avg. Exercise Price
Wtd. Avg. Remaining Life (in years)
Number
Wtd. Avg. Exercise Price
Beginning Balance
—
—
—
—
—
Granted
21,319
$
1.0535
4,499
$
0.0001
Exercised
( 24 )
1.0500
—
—
Forfeited/Expired
—
—
—
—
Outstanding at Period End
21,295
$
1.0535
4.74
4,499
$
0.0001
(1) Pre-Funded warrants have no expiration date and only expire when exercised in full.
Equity Incentive Plan
On June 17, 2021, the Company's stockholders 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 Board’s Human Capital and Compensation Committee (the “Compensation Committee”) 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. In 2024, the Board did not exercise their right to limit the automatic increase. Accordingly, the 2021 Plan share reserve increased by 66 thousand shares.
Ending balances for the 2021 Plan is as follows:
December 31,
December 31,
( in thousands )
2024
2023
Outstanding options and restricted stock units
3,316
3,430
Reserved but unissued shares under the Plan
1,858
2,302
Reserved but unissued shares at end of period
5,174
5,732
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.
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Equity Incentive Plan Options
Compensation expense associated with stock option awards for the years ended December 31, 2024 and 2023 totaled $ 113 thousand and $ 174 thousand, respectively.
A summary of the Company’s 2011 Equity Incentive Plan and the 2021 Plan stock option activity and changes is as follows:
December 31,
December 31,
2024
2023
( in thousands, except per share data )
Options to Purchase Common Stock
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life (in years)
Aggregate Intrinsic Value
Options to Purchase Common Stock
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life (in years)
Aggregate Intrinsic Value
Outstanding at beginning of year
2,759
$
2.07
5.38
180
2,779
$
2.05
6.43
—
Granted
—
$
—
—
—
$
—
—
Exercised
—
$
—
—
( 20 )
$
0.54
20
Forfeited/Expired
( 307 )
$
2.25
18
—
$
—
—
Outstanding at end of period
2,452
$
2.04
4.92
496
2,759
$
2.07
5.38
180
Exercisable at end of period
1,872
$
1.70
4.55
485
2,024
$
1.71
4.87
171
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, 2024, there was $ 286 thousand 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. The maximum contractual term for these options are ten years from the grant date.
Inducement Options
During the year ended December 31, 2023, the Company granted non-qualified stock options to its Chief Technology Officer to purchase an aggregate of 150 thousand shares of common stock with an exercise price of $ 0.91 as a material inducement to accept employment with the Company. These inducement options vest in three equal installments, with one third of the option vesting on the grant date, and each remaining third vesting on the second and third anniversaries of the grant date, subject to continued employment with the Company. The fair value of these options were estimated on the grant date using the Black Scholes valuation model, which resulted in $ 112 thousand. The compensation expense recognized for these awards for the years ended December 31, 2024 and 2023 was $ 37 thousand and $ 43 thousand, respectively. Total unrecognized compensation expense for these inducement options as of December 31, 2024 was $ 32 thousand.
During the year ended December 31, 2023, the Company granted non-qualified stock options to its Director of Customer Relationships and Business Development to purchase an aggregate of 150 thousand shares of common stock with an exercise price of $ 1.31 as a material inducement to accept employment with the Company. These inducement options vest in three equal installments, with one third of the option vesting on the grant date, and each remaining third vesting on the second and third anniversaries of the grant date, subject to continued employment with the Company. The fair value of these options were estimated on the grant date using the Black Scholes valuation model, which resulted in $ 160 thousand. The compensation expense recognized for these awards for the year ended December 31, 2023 was $ 74 thousand. Two -thirds of these inducement options were forfeited in 2023 upon the departure of the Director of Customer Relationships and Business Development.
These inducement options were granted outside of the 2021 Plan and in accordance with the employment inducement
exemption provided under Nasdaq Listing Rule 5635(c)(4).
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A summary of the Company’s inducement option activity and changes is as follows:
December 31,
December 31,
2024
2023
( in thousands, except per share data )
Options to Purchase Common Stock
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life (in years)
Aggregate Intrinsic Value
Options to Purchase Common Stock
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life (in years)
Aggregate Intrinsic Value
Outstanding at beginning of year
491
$
1.53
4.04
$
30
341
$
1.80
6.01
$
—
Granted
—
$
—
300
$
1.11
Exercised
—
$
—
( 50 )
$
1.31
Forfeited/Expired
—
$
—
( 100 )
$
1.31
Outstanding at end of period
491
$
1.53
3.04
$
119
491
$
1.53
4.04
$
30
Exercisable at end of period
441
$
1.60
3.29
$
93
391
$
1.69
4.61
$
10
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 2021 Plan. Employee vesting criteria is time-based, and compensation expense is recognized ratably across the timeframe. The Company pays payroll withholding taxes on behalf of the employee at vesting, and withholds shares from the employee’s award to cover the taxes payable. The Company accrued taxes for RSU share-based compensation of $ 32 thousand and $ 16 thousand for the years ended December 31, 2024 and 2023, respectively. Total unrecognized compensation expense for employee restricted stock units as of December 31, 2024 was $ 179 thousand.
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 ASC Topic 718 , “ Compensation – Stock Compensation .” Total unrecognized compensation expense for director services as of December 31, 2024 was $ 579 thousand. Director compensation is earned on a quarterly basis with the target value of compensation set at $ 79 thousand per quarter, assuming four directors, one lead independent director, one chairperson for each committee and two committee members for each of the three committees.
A summary of the Company’s RSUs activity is as follows:
December 31,
December 31,
2024
2023
( in thousands, except per share data )
Number of Shares
Weighted Average Grant Date Fair Value
Weighted Average Contractual Life (in years) (1)
Number of Shares
Weighted Average Grant Date Fair Value
Weighted Average Remaining Contractual Life (in years) (1)
Nonvested at beginning of period
671
$
1.05
1.08
423
$
1.49
0.02
Granted
517
$
0.97
617
$
0.82
Vested
( 323 )
$
1.08
( 361 )
$
1.18
Forfeited
—
$
—
( 8 )
$
0.79
Nonvested at end of period
865
$
0.99
0.88
671
$
1.05
1.08
1) Weighted Average Contractual Life calculation excludes the number of director RSUs that vest upon one of four performance events (refer to discussion above for details).
A summary of the Company’s RSU compensation expense is as follows:
For the Year Ended
December 31,
( in thousands, except per share data )
2024
2023
Share-based compensation expense
$
397
$
337
Weighted average value per share
$
1.27
$
0.83
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Stock Awards
The Company awards employees stock in lieu of cash payment for compensation, typically to satisfy accrued bonus compensation. The awards are granted from the 2021 Plan.
2024
2023
( in thousands, except per share data )
Number of Shares
Fair Value
Weighted Average per Share
Number of Shares
Fair Value
Weighted Average per Share
Share-based compensation
24
$
27
$
1.15
—
$
—
$
—
Fair value of stock payments in accrued compensation
307
$
326
$
1.06
296
$
234
$
0.79
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 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 shall determine.
The Consultant Plan activity is as follows:
December 31,
( in thousands )
2024
2023
Reserved but unissued shares at beginning of period
188
196
Increases in the number of authorized shares
116
7
Grants
( 40 )
( 15 )
Reserved but unissued shares at end of period
264
188
The Consultant Plan compensation expense is summarized as follows:
For the Year Ended
December 31,
( in thousands, except per share data )
2024
2023
Share-based compensation expense
$
29
$
10
Weighted average value per share
$
0.75
$
0.69
Note 9 – Net Loss per Common Share
The Company calculates net loss per common share in accordance with ASC 260 Earnings Per Share (“ASC 260”). Basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Under ASC 260, shares issuable for little or no cash consideration are considered outstanding common shares and included in the computation of basic net loss per share. As such, for the years ended December 31, 2024 and 2023, the Company included the Pre-Funded Warrants in its computation of net loss per share. The Pre-Funded Warrants were issued in April and June 2024 with an exercise price of $ 0.0001 per Pre-Funded Warrant (See “Note 8 – Equity” for additional information).
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The following potentially dilutive securities have not been included in the computation of diluted net loss per share for the years ended December 31, 2024 and 2023, as the result would be anti-dilutive:
December 31,
December 31,
( in thousands )
2024
2023
Stock Options
2,943
3,250
Restricted Stock Units
864
671
Warrants
21,295
—
Total shares excluded from calculation
25,102
3,921
Note 10 – 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 $ 68 thousand and $ 64 thousand during the years ended December 31, 2024 and 2023, respectively.
Note 11 – Commitments and Contingencies
Litigation
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 the completion of such grant occurring in March 2023. The purpose of the grant was to produce a research paper for a flexible fuel ultra-low NOx process burner capable of burning 100% hydrogen fuel. During 2023, the Company was awarded a Phase 2 grant from the DOE to continue developing this ultra-low NOx hydrogen burner. The Phase 2 grant amount totaled approximately $ 1.6 million over a two-year period. These awards allow the Company to request reimbursements for expenditures such as labor, material, and administrative costs. During the years ended December 31, 2024 and 2023, the Company recognized $ 633 thousand and $ 191 thousand in reimbursements from the DOE, respectively.
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. During the years ended December 31, 2024 and 2023, the Company recognized $ 31 thousand and $ 64 thousand in government assistance from this program, respectively.
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Note 13 – Quarterly Results (unaudited)
Quarterly results for the years ended December 31, 2024 and 2023 are as follows:
(in thousands, except per share data)
First
Second
Third
Fourth
For the year ended December 31, 2024
Quarter
Quarter
Quarter
Quarter
Revenue
$
1,102
$
45
$
1,859
$
590
Gross profit
$
437
$
42
$
551
$
88
Operating expense
$
1,689
$
2,179
$
1,984
$
1,754
Net loss
$
( 1,108 )
$
( 1,872 )
$
( 1,155 )
$
( 1,164 )
Net loss per share - basic and fully diluted
$
( 0.03 )
$
( 0.04 )
$
( 0.02 )
$
( 0.02 )
For the year ended December 31, 2023
Revenue
$
894
$
150
$
85
$
1,274
Gross profit
$
106
$
129
$
24
$
558
Operating expense
$
1,810
$
1,758
$
1,521
$
1,709
Net loss
$
( 1,429 )
$
( 1,478 )
$
( 1,332 )
$
( 955 )
Net loss per share - basic and fully diluted
$
( 0.04 )
$
( 0.04 )
$
( 0.03 )
$
( 0.02 )
Note 14 – Subsequent Events
On February 6, 2025, clirSPV exercised 1,343,000 of the Participation Right Pre-Funded Warrants at an exercise price of $ 0.0001 , resulting in the issuance of 1,343,000 shares of common stock. On March 21, 2025, the accredited investor from our Private Placement exercised 360,247 of his Private Pre-Funded Warrants at an exercise price of $ 0.0001 , which exercise price per share was paid upon issuance of the Private Pre-Funded Warrants, resulting in the issuance of 360,247 shares of common stock.
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SIGNATURES
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.
CLEARSIGN TECHNOLOGIES CORPORATION
Date: March 31, 2025
By:
/s/ Colin J. Deller
Colin J. Deller
Chief Executive Officer
Date: March 31, 2025
By:
/s/ Brent Hinds
Brent Hinds
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Colin James Deller and Brent Hinds as their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in- fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 31, 2025
/s/ Colin J. Deller
Colin J. Deller
Chief Executive Officer and Director
(Principal Executive Officer)
Date: March 31, 2025
/s/ Brent Hinds
Brent Hinds
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 31, 2025
/s/ Judith S. Schrecker.
Judith S. Schrecker, Lead Independent Director
Date: March 31, 2025
/s/ Catharine Marie de Lacy
Catharine Marie de Lacy, Director
Date: March 31, 2025
/s/ David Maley
David Maley, Director
Date: March 31, 2025
/s/ G. Todd Silva
G. Todd Silva, Director
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.