The accompanying notes are an integral
part of these condensed financial statements.
The accompanying notes are an integral
part of these condensed financial statements.
The accompanying notes are an integral
part of these condensed financial statements.
During the nine months ended September 30, 2016, the Company
issued 60,883 shares of common stock through net settlement cashless exercises of warrants to purchase 118,959 shares at $2.20
per share when the closing prices on the date of exercises were a weighted average of $4.51 per share.
During the nine months ended September 30, 2015, the Company
issued 210 shares of common stock through a net settlement cashless exercise of stock options to purchase 10,500 shares at $4.88
per share in May 2015 when the closing price was $4.98 per share.
The accompanying notes are an integral part of these condensed
financial statements.
Notes to Unaudited Condensed Financial
Statements
Note 1 – Organization and Description of Business
ClearSign Combustion Corporation (ClearSign or the Company)
designs and develops technologies for the purpose of improving key performance characteristics of combustion systems, including
emission and operational performance, energy efficiency and overall cost-effectiveness. The Company’s primary technologies
include its Duplex™ technology, which achieves very low emissions without the need of external flue gas recirculation, selective
catalytic reduction, or higher excess air operation, and its Electrodynamic Combustion Control™ or ECC™ technology,
which introduces a computer-controlled electric field into the combustion region which may better control gas-phase chemical reactions
and improve system performance and cost-effectiveness. The Company is headquartered in Seattle, Washington and was incorporated
in the state of Washington in 2008.
The Company’s Duplex technology has been in field development
and, in certain market verticals, has generated initial revenues from operations to date through paid field validations. In order
to generate meaningful revenues, the technology must continue to be developed in more vertical markets, gain market recognition
and acceptance, and reach a meaningful level of successful sales and product installations. The Company has historically financed
its operations primarily through issuances of equity. The Company has incurred losses since its inception totaling $38,024,000
and expects to experience operating losses and negative cash flow 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 research and development
efforts, protect intellectual property, form relationships with strategic partners, and provide for working capital and general
corporate purposes. There can be no assurance that the Company will be successful in achieving its plans, or that such plans,
if consummated, will enable the Company to achieve profitable operations or continue as a going concern.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have
been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for Form 10-Q. Accordingly,
certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed balance sheet at December
31, 2015 has been derived from the Company’s audited financial statements.
In the opinion of management, these financial statements reflect
all normal recurring and other adjustments necessary for a fair presentation. These financial statements should be read in conjunction
with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. Operating
results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future
periods.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition and Cost of Sales
Revenues from design and installation of the Company’s
products are recognized on the completed contract method. Revenues from contracts and related costs of goods sold are recognized
once the contract is completed or substantially completed. Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor, supplies, and depreciation costs. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are determined.
Cash and Cash Equivalents
Highly liquid investments purchased with an original maturity
of three months or less are considered cash equivalents. Cash is maintained with a commercial bank where accounts are generally
guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company’s deposits may at times exceed this
limit. The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Fixed Assets
Fixed assets are recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated
over the life of the lease or their useful life, whichever is shorter. All other fixed assets are depreciated over two to four
years. Maintenance and repairs are expensed as incurred.
Patents and Trademarks
Patents and trademarks are recorded at cost. Amortization is
computed using the straight-line method over the estimated useful lives of the assets once they are awarded.
Impairment of Long-Lived Assets
The Company tests long-lived 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 to result from the use and eventual disposition of the assets. In that event, 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. Loss on long-lived assets to be disposed of is determined
in a similar manner, except that 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 Company's financial instruments primarily consist of cash
and cash equivalents, accounts payable and accrued expenses. As of the balance sheet dates, the estimated fair values of the financial
instruments were not materially different from their carrying values as presented on the balance sheets. This is primarily attributable
to the short term maturities of these instruments. The Company did not identify any other non-recurring assets and liabilities
that are required to be presented in the balance sheets at fair value.
Research and Development
The cost of research and development is expensed as incurred.
Research and development costs consist of salaries, benefits, share based compensation, consulting fees, rent, utilities, depreciation,
and consumables used in laboratory and field testing.
Deferred Rent
Operating lease agreements which contain provisions for future
rent increases or periods in which rent payments are reduced or abated are recorded in monthly rent expense in the amount of the
total payments over the lease term divided by the number of months of the lease term. The difference between rent expense recorded
and the amount paid is credited or charged to deferred rent which is reflected on the accompanying balance sheets.
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 these items will either
expire before the Company is able to realize their benefits, or that future deductibility is uncertain. Tax benefits from an uncertain
tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a
position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate
resolution.
Stock-Based Compensation
The costs of all employee stock options, as well as other equity-based
compensation arrangements, are reflected in the financial statements based on the estimated fair value of the awards on the grant
date. That cost is recognized over the period during which an employee is required to provide service in exchange for the award.
Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair
value of equity instruments issued, whichever is more reliably measured.
Net Loss per Common Share
Basic loss per share is computed by dividing loss available
to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of
stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included
because their effect would be anti-dilutive. At September 30, 2016 and 2015, potentially dilutive shares outstanding amounted
to 1,335,363 and 1,365,647, respectively.
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board
issued Accounting Standards Update No. 2016-02 regarding leases. The new standard requires lessee recognition on the balance sheet
of a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. It further requires
recognition in the income statement of a single lease cost, calculated so that the cost of the lease is allocated over the lease
term on a generally straight-line basis. Finally, it requires classification of all cash payments within operating activities
in the statement of cash flows. It is effective for fiscal years commencing after December 15, 2018 and early adoption is permitted.
Management does not believe that this standard or any other recently issued, but not yet effective standards, if adopted, will
have a material effect on the financial statements.
Emerging Growth Company
The Company is an emerging growth company as defined under
the Jumpstart Our Business Startups Act of 2012 (JOBS Act)
.
An
emerging growth company may delay the adoption of certain accounting standards until those standards would otherwise apply to
private companies. The Company will remain an emerging growth company until December 31, 2017, although it will lose that status
sooner if its revenues exceed $1 billion, if it issues more than $1 billion in non-convertible debt in a three-year period, or
if the market value of its common stock that is held by non-affiliates exceeds $700 million as of any June 30. At June 30, 2016,
the market value of the Company’s common stock held by non-affiliates totaled $62 million.
Note 3 – Fixed Assets
Fixed assets are summarized as follows:
|
|
September 30
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(unaudited)
|
|
|
|
|
Machinery and equipment
|
|
$
|
646,000
|
|
|
$
|
639,000
|
|
Office furniture and equipment
|
|
|
141,000
|
|
|
|
115,000
|
|
Leasehold improvements
|
|
|
134,000
|
|
|
|
130,000
|
|
Accumulated depreciation and amortization
|
|
|
(853,000
|
)
|
|
|
(761,000
|
)
|
|
|
|
68,000
|
|
|
|
123,000
|
|
Construction in progress
|
|
|
139,000
|
|
|
|
-
|
|
|
|
$
|
207,000
|
|
|
$
|
123,000
|
|
Note 4 – Patents and Other Intangible Assets
Patents and other intangible assets are summarized as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Patents
|
|
|
|
|
|
|
|
|
Patents pending
|
|
$
|
1,216,000
|
|
|
$
|
2,730,000
|
|
Issued patents
|
|
|
490,000
|
|
|
|
115,000
|
|
|
|
|
1,706,000
|
|
|
|
2,845,000
|
|
Trademarks
|
|
|
|
|
|
|
|
|
Trademarks pending
|
|
|
20,000
|
|
|
|
18,000
|
|
Registered trademarks
|
|
|
23,000
|
|
|
|
23,000
|
|
|
|
|
43,000
|
|
|
|
41,000
|
|
Other
|
|
|
8,000
|
|
|
|
8,000
|
|
|
|
|
1,757,000
|
|
|
|
2,894,000
|
|
Accumulated amortization
|
|
|
(60,000
|
)
|
|
|
(13,000
|
)
|
|
|
$
|
1,697,000
|
|
|
$
|
2,881,000
|
|
The Company reassessed its patent portfolio in order to ensure
that both the cost-effectiveness and the value created through the intellectual property portfolio were maximized and to focus
resources on its most promising patents. Those patents considered to be the most beneficial were retained and those pending patents
projected to be unnecessarily costly that could be disposed of without meaningfully degrading the quality of the remaining intellectual
property portfolio were abandoned. Further, an impairment loss was recorded for certain other patents pending which are believed
to be of diminished value, but in the judgment of management remain worthwhile to continue to pursue until the product attributes
and related reasonable patent protection can be better determined. As a result, during the three and nine months ended September
30, 2016 and 2015, the Company recorded impairment losses of $1,739,000, $1,971,000, $0 and $5,000, respectively, of capitalized
patents pending.
A reconciliation of patent activity for the quarter ended September
30, 2016 is summarized as follows:
|
|
Duplex
|
|
|
ECC
|
|
|
Total
|
|
Balance at July 1, 2016
|
|
$
|
1,433,000
|
|
|
$
|
1,831,000
|
|
|
$
|
3,264,000
|
|
Current Costs
|
|
|
112,000
|
|
|
|
69,000
|
|
|
|
181,000
|
|
Abandonments and Impairments
|
|
|
(682,000
|
)
|
|
|
(1,057,000
|
)
|
|
|
(1,739,000
|
)
|
Balance at September 30, 2016
|
|
$
|
863,000
|
|
|
$
|
843,000
|
|
|
$
|
1,706,000
|
|
Future amortization expense associated with issued patents
and registered trademarks as of September 30, 2016 is estimated as follows:
2016
|
|
$
|
25,000
|
|
2017
|
|
|
93,000
|
|
2018
|
|
|
93,000
|
|
2019
|
|
|
93,000
|
|
2020
|
|
|
91,000
|
|
Thereafter
|
|
|
58,000
|
|
|
|
$
|
453,000
|
|
Note 5 – Sales, Billings, and
Costs on Uncompleted Contracts
In the quarter ended March 31, 2016, the
Company entered into a contract with a third party contractor to supply its Duplex technology to a major California oil
producer to retrofit its enclosed wellhead ground flare. Payment for this installation was conditioned upon successful completion
and acceptance of the unit by the oil producer customer. This unit was accepted and payment of the $260,000 contract amount was
received in the quarter ended September 30, 2016. Since payment was conditional, all costs of this project through June 30, 2016,
which totaled $144,000, were expensed as research and development costs. Costs incurred in the quarter ended September 30, 2016,
which totaled $47,000, are reflected as cost of goods sold in the statement of operations resulting in a gross profit of $213,000.
The gross profit would have totaled $69,000 if this contract was not conditional.
Following the acceptance of the first
unit in the quarter ended September 30, 2016, the Company entered into a multi-flare contract with the same customer to supply
additional Duplex units. This contract is valued at approximately $900,000 and is expected to be completed over the next 3 to
9 months depending on the oil producer customer's schedule. In accordance with the completed contract method of accounting, billings
to date of $360,000 at September 30, 2016 exceeded costs by $318,000 and are reflected on the balance sheet as billings on uncompleted
contracts in excess of costs.
Prior to the quarter ended September 30,
2016, the Company had entered into contracts to supply its Duplex technology with customer payments to be received upon completion.
These units were accepted subsequent to the quarter ended September 30, 2016. Since payments were conditional, all costs of these
projects through June 30, 2016, which totaled $566,000, were expensed as research and development costs. Costs incurred in the
quarter ended September 30, 2016, which totaled $144,000, are reflected on the balance sheet as costs on uncompleted contracts
in excess of billings. Billings totaling $361,000 were issued subsequent to September 30, 2016 and will be reflected with additional
costs in the statement of operations in the quarter ended December 31, 2016.
Note 6 – Termination of Employment
Agreement
The Company and its former Chief Executive Officer, Richard
F. Rutkowski, entered into an agreement in December 2014 terminating a prior employment agreement. Under this agreement, Mr. Rutkowski
will be paid his annual salary of $359,000 through December 2016, was paid a bonus of $60,000 in 2015, received employee benefits
through December 2015, and received accelerated vesting on 15,625 stock options with an exercise price of $4.88 per share and
14,219 stock options with an exercise price of $9.90 per share. The options were not exercised prior to March 2015, therefore,
pursuant to the terms of the option agreements and the ClearSign Combustion Company 2011 Equity Incentive Plan, the right to exercise
the options terminated.
The liability incurred under this agreement totaled $943,000
which was recognized in general and administrative expense in 2014 and included a fair value of $50,000 attributable to the stock
option provisions. At September 30, 2016, the remaining liability totaled $91,000 and is due through December 2016.
Note 7 – Stockholders’ Equity
Common Stock and Preferred Stock
The Company is authorized to issue 62,500,000 shares of common
stock and 2,000,000 shares of preferred stock. Preferences, limitations, voting powers and relative rights of any preferred stock
to be issued may be determined by the Company’s Board of Directors. The Company has not issued any shares of preferred stock.
In February 2015, the Company completed an underwritten public
offering of common stock whereby 2,990,000 shares were issued at $5.85 per share. Gross proceeds from the offering totaled $17.5
million and net cash proceeds approximated $16.3 million. Expenses of the offering approximated $1.2 million, including underwriting
fees of $1,049,000, underwriter legal fees and other costs of $55,000, and other costs of $108,000.
Equity Incentive Plan
The Company has an Equity Incentive Plan (the Plan) which provides
for the granting of options to purchase shares of common stock, stock awards to purchase shares at no less than 85% of the value
of the shares, and stock bonuses to officers, employees, board members, consultants, and advisors. The Compensation Committee
of the Board of Directors is authorized to administer the Plan and establish the grant terms, including the grant price, vesting
period and exercise date. As of September 30, 2016, the number of shares reserved for issuance under the Plan totaled 1,399,828
shares. The Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 10% of any
new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board
of Directors shall determine.
In the nine months ended September 30, 2016, the Company granted
171,900 stock options under the Plan to employees. The stock options have exercise prices at the grant date fair value of $4.21
- $4.85 per share with a weighted-average of $4.22 per share, contractual lives of 10 years, and vest over 4 years. The fair value
of stock options granted estimated on the date of grant using the Black-Scholes option valuation model was $419,000. The recognized
compensation expense associated with these grants for the nine months ended September 30, 2016 was $52,000. The following weighted-average
assumptions were utilized in the calculation of the fair value of the stock options:
Expected life
|
|
|
6.25 years
|
|
Weighted average volatility
|
|
|
73
|
%
|
Forfeiture rate
|
|
|
12
|
%
|
Weighted average risk-free interest rate
|
|
|
1.56
|
%
|
Expected dividend rate
|
|
|
0
|
%
|
In March 2016, the Company authorized 44,112 shares of common
stock to be issued under the Plan to its three independent directors in accordance with board agreements and which will be earned
quarterly for service in 2016. The fair value of the stock at the time of grant was $3.40 per share for a total value of $150,000.
The Company recognized $37,000 and $112,000 in general and administrative expense for the three and nine months ended September
30, 2016 and will recognize the remaining $38,000 in the remainder of 2016.
In accordance with the Plan, options for the purchase of 7,504
shares of common stock were exercised in 2014 prior to vesting and the shares of common stock purchased were issued with a declining
repurchase right in favor of the Company at the exercise price of $4.88 per share. The Company may repurchase shares if, prior
to December 31, 2016, the employee terminates employment or certain other designated events occur. At September 30, 2016, 1,668
shares remained subject to this repurchase right.
Outstanding stock option grants at September 30, 2016 and December
31, 2015 totaled 890,050 shares and 723,400 shares with the right to purchase 522,120 shares and 257,391 shares being vested and
exercisable at September 30, 2016 and December 31, 2015, respectively. Stock grants made to date through September 30, 2016 and
December 31, 2015 totaled 246,542 shares and 213,458 shares, respectively. The recognized compensation expense associated with
these grants for the three and nine months ended September 30, 2016 and 2015 totaled $199,000, $604,000, $259,000 and $676,000,
respectively. At September 30, 2016, the number of shares reserved under the Plan but unissued totaled 263,236. At September 30,
2016, there was $849,000 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted
under the Plan. That cost is expected to be recognized over a weighted average period of 2.3 years.
Consultant Stock Plan
The Company has a 2013 Consultant Stock Plan (the Consultant
Plan) which provides for the granting of shares of common stock to consultants who provide services related to capital raising,
investor relations, and making a market in or promoting the Company’s securities. The Company’s officers, employees,
and board members are not entitled to receive grants from the Consultant Plan. The Compensation Committee of the Board of Directors
is authorized to administer the Consultant Plan and establish the grant terms. The number of shares reserved for issuance under
the Consultant Plan on September 30, 2016 totaled 116,139 with 85,389 of those shares unissued. The Consultant Plan provides for
quarterly increases in the available number of authorized shares equal to the lesser of 1% of any new shares issued by the Company
during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine.
In August 2016, the Company granted 10,000 shares of common stock under the Consultant Stock Plan to a consultant for services
from June 2016 to May 2017 and subject to completion of service each quarter. The fair value of the stock at the time of grant
was $4.85 per share for a total value of $49,000 which the Company will recognize in general and administrative expense on a pro-rated
quarterly basis. The Consultant Plan expense for the three and nine months ended September 30, 2016 and 2015 was $12,000, $32,000,
$10,000, and $10,000, respectively.
Warrants
The Company has the following warrants outstanding at September
30, 2016:
|
|
|
Total Outstanding Warrants
|
|
Exercise Price
|
|
|
Warrants
|
|
|
Weighted Average
Exercise Price
|
|
|
Life
(in years)
|
|
$
|
1.80
|
|
|
|
80,000
|
|
|
$
|
1.80
|
|
|
|
4.38
|
|
$
|
5.00
|
|
|
|
345,000
|
|
|
$
|
5.00
|
|
|
|
0.57
|
|
$
|
10.00
|
|
|
|
20,313
|
|
|
$
|
10.00
|
|
|
|
2.43
|
|
|
|
|
|
|
445,313
|
|
|
$
|
4.65
|
|
|
|
|
|
During the nine months ended September 30, 2016, the Company
issued 60,883 shares of common stock through net settlement cashless exercises of warrants to purchase 118,959 shares at $2.20
per share when the closing prices on the date of exercises were a weighted average of $4.51 per share.
Note 8 – Related Party Transactions
In connection with the February 2015 underwritten public offering
described in Note 7, the Company paid the underwriter, MDB Capital Group, LLC (MDB), underwriting fees of $1,049,000 and underwriter
legal fees and other costs of $55,000. As of their last public filing in May 2016, MDB and its chief executive officer beneficially
own, in the aggregate, approximately 7.5% of the Company's common stock.
Note 9 – Commitments
On February 3, 2015, the Company and its Chief Executive Officer,
Stephen E. Pirnat, entered into an employment agreement (the Agreement) which terminates on December 31, 2017, unless earlier
terminated. Compensation under the Agreement includes an annual salary of $350,000 with annual cost-of-living adjustments, a grant
of stock options to purchase 300,000 shares of the Company’s common stock, annual cash bonuses that may equal up to 60%
of his annual salary and equity bonuses based on performance standards established by the Compensation Committee of the Board
of Directors, medical and dental benefits for Mr. Pirnat and his family, other employee benefits offered to employees generally
and relocation expenses up to approximately $100,000. The Agreement may be terminated by the Company without cause under certain
circumstances, as defined in the Agreement, whereby a severance payment would be due in the amount of compensation that would
have been due had employment not been terminated or one year of the current annual compensation, whichever is greater. In the
event of a change in control, Mr. Pirnat would receive one year’s compensation and all previously granted stock options
would vest in full.
The Company has a triple net lease for office and laboratory
space in Seattle, Washington through March 2020. Under the terms of the lease, the Company paid no rent for the period November
2011 to February 2012 and for February 2014. Rent escalates annually by 3% through February 2017 and remains at a constant
rate thereafter. The Company records monthly rent expense equal to the total of the payments over the lease term divided
by the number of months of the lease term. For the nine months ended September 30, 2016 and 2015, the deferred rent was reduced
by $13,000 and $9,000, respectively. Under the terms of the lease, the Company also pays monthly triple net operating costs
which currently approximate $3,000 per month. The Company also has a triple net lease for office space in Tulsa, Oklahoma through
August 2019 with monthly rent of $2,000 per month plus triple net operating costs. Minimum future payments under the Company’s
leases at September 30, 2016 are as follows:
2016
|
|
$
|
42,000
|
|
2017
|
|
|
172,000
|
|
2018
|
|
|
173,000
|
|
2019
|
|
|
164,000
|
|
2020
|
|
|
37,000
|
|
|
|
$
|
588,000
|
|
For the three and nine months ended September 30, 2016 and
2015, rent expense amounted to $46,000, $142,000, $61,000, and $148,000, respectively.
The Company has a field test agreement with a customer that
was established to demonstrate and test the Duplex technology in a once through steam generator (OTSG) used to facilitate a thermally
enhanced oil recovery process. Under the terms of the agreement, the Company has retrofitted an OTSG unit in order to achieve
certain performance criteria. The agreement also includes time-sensitive pricing, delivery and installation terms, if elected,
that will apply to future purchases of this Duplex application by this customer.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER
INFORMATION CONTAINED IN THIS REPORT
This report contains forward-looking statements
within the meaning of the Private Securities Litigation
Reform Act of 1995 and the provisions of Section 27A of the
Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they
do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words
such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,”
“estimates,” “projects,” “intends,” “plans,” “would,” “should,”
“could,” “may,” or other similar expressions in this report. In particular, these include statements relating
to future actions; prospective products, applications, customers, or technologies; future performance or results of anticipated
products; anticipated expenses; and future financial results. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from our historical experience and our present expectations
or projections. Factors that could cause actual results to differ materially from those discussed in the forward-looking statements
include, but are not limited to:
|
·
|
our limited cash and our history of losses;
|
|
·
|
our ability to successfully develop and implement our technology and achieve profitability;
|
|
·
|
our limited operating history;
|
|
·
|
emerging competition and rapidly advancing technology in our industry that may outpace our technology;
|
|
·
|
customer demand for the products and services we develop;
|
|
·
|
the impact of competitive or alternative products, technologies and pricing;
|
|
·
|
our ability to manufacture any products we design;
|
|
·
|
general economic conditions and events and the impact they may have on us and our potential customers;
|
|
·
|
our ability to obtain adequate financing in the future;
|
|
·
|
our ability to continue as a going concern;
|
|
·
|
our success at managing the risks involved in the foregoing items; and
|
|
·
|
other factors discussed in this report.
|
Forward-looking statements may appear throughout
this report, including, without limitation, Item 2 “Management’s Discussion and Analysis of Financial Condition
and Results of Operations.” The forward-looking statements are based upon management’s beliefs and assumptions and
are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements
included in this report. You should not place undue reliance on these forward-looking statements.
Unless otherwise stated or the context
otherwise requires, the terms “ClearSign,” “we,” “us,” “our” and the “Company”
refer to ClearSign Combustion Corporation.