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Item 1.01
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Entry into a Material Agreement.
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On December 7, 2016, ClearSign Combustion
Corporation (the “Company”) commenced a rights offering to its shareholders whereby they will have the opportunity
to purchase additional securities in the Company (“Rights Offering”). Pursuant to the Rights Offering, the Company
will distribute, at no charge to holders of record of the Company’s common stock as of December 19, 2016, non-transferable
subscription rights to purchase up to 2,594,082 units (“Units”), with each Unit consisting of one share of the Company’s
common stock and a two year warrant to purchase one share of the Company’s common stock (the “Rights Offering”),
at a purchase price of $4.00 per Unit, all as set forth in a prospectus supplement filed on December 7, 2016 with the Securities
and Exchange Commission (the “Prospectus Supplement”).
In connection with the rights offering,
the Company entered into a Dealer Manager and Placement Agent Agreement (the “Agreement”) with MDB Capital Group, LLC
(“MDB”).
Dealer Manager Services
Pursuant to the Agreement, the Company engaged
MDB as the exclusive dealer-manager in connection with the Company’s planned shareholder Rights Offering. Under the terms
and subject to the conditions contained in the Agreement, MDB will provide market assistance in connection with the conduct of
the Rights Offering, financial advice to the Company in connection with the Rights Offering, respond to requests for information
and materials relating to the Rights Offering in coordination with the information agent and, in accordance with customary practice,
solicit the exercise of the subscription rights and subscriptions for the Units. As compensation for its dealer manager services,
the Company will either (i) pay a cash fee equal to 6.0% of the gross proceeds from the sale of Units to the Company’s shareholders
in the Rights Offering or (ii) with the agreement of MDB, issue to MDB and its designees that number of Units equal to 6.0% of
the number of Units sold to the Company’s shareholders in the Rights Offering.
Placement Agent Services
Under the terms and subject to the conditions
contained in the Agreement, MDB has agreed to arrange for the Company to sell, on a best efforts, no minimum basis, those Units
(“Offered Units”) not subscribed for by the Company’s shareholders in the Rights Offering. The Offered Units
will be identical to the Units offered in the Rights Offering. The offering of the Offered Units will be made through MDB on behalf
of the Company to both retail and institutional investors. The offering of the Offered Units will be completed no later than January
31, 2017. As compensation for MDB’s placement agent services, the Company will either (i) pay a cash fee equal to 6.0% of
the gross proceeds from the sale of Offered Units or (ii) with the agreement of MDB, issue to MDB and its designees that number
of Units equal to 6.0% of the number of Offered Units sold by MDB as placement agent.
The sale by the Company of the Offered Units
and the Agreement in general is subject to customary closing conditions, including the absence of any material adverse effect on
the business, general affairs, management, financial position, stockholders’ equity or results of operations of the Company.
Pursuant to the Agreement, the Company has
also agreed to indemnify MDB and its affiliates against certain liabilities arising under the Securities Act of 1933, as amended.
MDB will not underwrite and is not otherwise obligated to purchase any of the securities to be issued in the Rights Offering or
any of the Offered Units and does not make any recommendation with respect to such securities.
If all of the Units and the Offered Units
are sold, the Company expects the net proceeds from the offering to be approximately $9.6 million, after deducting dealer manager
and placement agent cash commissions, fees and estimated offering expenses. The Company intends to use the net proceeds from this
offering for general corporate and working capital purposes.
A copy of the Agreement is attached as Exhibit
10.1 hereto and incorporated herein by reference. The foregoing description of the Agreement is not complete and is qualified in
its entirety by reference to Exhibit 10.1.