ClearSign Combustion Corporation (NASDAQ:CLIR) Q2 2019 Results Earnings Conference Call August 14, 2019 5:00 PM ET Company Participants Matthew Selinger - IR Rob Hoffman - Chairman of the Board Jim Deller - CEO Brian Fike - CFO Conference Call Participants Robert Kecseg - Las Colinas Capital Operator Good afternoon, and welcome to the ClearSign Corporation Second Quarter 2019 Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instru ...

[PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended June 30, 2019 [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) The unaudited condensed consolidated financial statements for Q2 2019 show decreased assets and equity, no sales, an increased net loss, and highlight liquidity risks and a patent impairment [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $14.24 million from $18.64 million, and stockholders' equity declined to $12.70 million by June 30, 2019, primarily due to reduced short-term investments and accumulated deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2019 ($) | December 31, 2018 ($) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 9,657,000 | 8,949,000 | | Short-term investments | 1,988,000 | 6,923,000 | | Total current assets | 12,316,000 | 16,411,000 | | Total Assets | 14,240,000 | 18,637,000 | | **Liabilities & Equity** | | | | Total current liabilities | 1,457,000 | 1,637,000 | | Total Liabilities | 1,536,000 | 1,728,000 | | Total stockholders' equity | 12,704,000 | 16,909,000 | | Total Liabilities and Stockholders' Equity | 14,240,000 | 18,637,000 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported no sales for the six months ended June 30, 2019, resulting in a net loss of $4.76 million, a slight increase from the prior year, though loss per share improved Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2019 ($) | Three Months Ended June 30, 2018 ($) | Six Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2018 ($) | | :--- | :--- | :--- | :--- | :--- | | Sales | - | - | - | 530,000 | | Gross profit (loss) | - | (20,000) | (1,000) | 115,000 | | Total operating expenses | 2,447,000 | 2,370,000 | 4,823,000 | 4,783,000 | | Loss from operations | (2,447,000) | (2,390,000) | (4,824,000) | (4,668,000) | | Net loss | (2,426,000) | (2,389,000) | (4,755,000) | (4,667,000) | | Net loss per share | (0.09) | (0.11) | (0.18) | (0.24) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from $16.91 million to $12.70 million by June 30, 2019, primarily due to the $4.76 million net loss for the period - Total stockholders' equity decreased by approximately **$4.2 million** in the first six months of 2019, from **$16,909,000** to **$12,704,000**[15](index=15&type=chunk) - The primary driver of the decrease in equity was the **net loss of $4,755,000** for the six months ended June 30, 2019[12](index=12&type=chunk)[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $3.97 million, offset by $4.68 million provided by investing activities, leading to a $0.71 million increase in cash and cash equivalents by June 30, 2019 Cash Flow Summary for the Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (3,967,000) | (4,581,000) | | Net cash provided by (used in) investing activities | 4,675,000 | (230,000) | | Net cash provided by financing activities | - | 11,923,000 | | Net increase in cash and cash equivalents | 708,000 | 7,112,000 | | Cash and cash equivalents, end of period | 9,657,000 | 8,359,000 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's combustion technology business, highlight significant liquidity risks, outline accounting policies, report a $396,000 patent impairment, and describe CEO compensation arrangements - The company's technologies are in field development and have generated nominal revenues to date. Management acknowledges dependence on obtaining additional funding to continue as a going concern[23](index=23&type=chunk) - Revenue is recognized upon project completion when performance obligations related to air emissions and operational performance are satisfied and successfully tested[28](index=28&type=chunk) - An impairment charge of **$396,000** was recorded during the quarter ended June 30, 2019, related to the company's patent portfolio[61](index=61&type=chunk) - The company entered into an employment agreement with a new President and CEO, which includes a **$350,000 annual salary**, inducement stock options, and relocation expense reimbursements[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the shift to a B2B licensing model for Duplex™ technology, reporting no revenue, decreased R&D, increased G&A due to patent impairment, and asserts sufficient liquidity for the next twelve months [Overview and Business Model](index=19&type=section&id=Overview%20and%20Business%20Model) The company develops Duplex™ combustion technology to improve emissions and efficiency, shifting to a B2B licensing model for its "ClearSign Core™" to major equipment vendors - The company's primary technology, Duplex™, uses a porous ceramic matrix to reduce flame length and achieve very low emissions without requiring external flue gas recirculation or selective catalytic reduction[85](index=85&type=chunk) - The business strategy is to sell its technology business-to-business, similar to a license, to alliance companies that manufacture and deliver the final equipment to customers[97](index=97&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) No revenue was reported for the six months ended June 30, 2019, with operating expenses increasing 1% to $4.82 million due to a $396,000 patent impairment, leading to a 2% higher net loss of $4.76 million Comparison of Operations for the Six Months Ended June 30 | Metric | 2019 ($) | 2018 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | - | 530,000 | -100% | | R&D Expenses | 1,766,000 | 2,153,000 | -18% | | G&A Expenses | 3,057,000 | 2,630,000 | +16% | | Total Operating Expenses | 4,823,000 | 4,783,000 | +1% | | Net Loss | 4,755,000 | 4,667,000 | +2% | - The increase in G&A expenses was mainly due to a review of the patent portfolio which resulted in impairment charges of **$396,000**[120](index=120&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents totaled $9.66 million as of June 30, 2019, deemed sufficient for twelve months of operations, despite a decrease in working capital to $10.86 million due to cash used in operations - The company's cash and cash equivalent balance was **$9,657,000** at June 30, 2019[125](index=125&type=chunk) - Management believes the current cash balance is sufficient to fund operations for at least **twelve months** from the filing date of the report[125](index=125&type=chunk) - Working capital decreased from **$14,774,000** at December 31, 2018, to **$10,859,000** at June 30, 2019, due to funds used in operations and investments[126](index=126&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk[133](index=133&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2019, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[134](index=134&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2019[135](index=135&type=chunk) [PART II OTHER INFORMATION](index=28&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides information on legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings that would adversely affect its business, financial condition, or operating results - The company is not aware of any legal proceedings or claims that would have a material adverse effect on its business[139](index=139&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) This section incorporates prior risk factors and introduces a new one concerning potential negative impacts from cybersecurity incidents or technology disruptions on trade secrets and sensitive information - A new risk factor was added regarding cybersecurity incidents, which could lead to business disruption, brand damage, and potential liability from the theft or release of confidential information[141](index=141&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued 2,500 shares of common stock to its investor relations firm on June 30, 2019, for services rendered, valued at $1.44 per share - The company issued **2,500 shares** of common stock to its investor relations firm for services rendered in Q2 2019[142](index=142&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including CEO/CFO certifications, XBRL data, and incorporates previously filed documents by reference

PART I - FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) ClearSign Combustion Corporation reported no sales and a **$2.33 million net loss** in Q1 2019, with total assets decreasing to **$16.49 million** [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$16.49 million** by March 31, 2019, from **$18.64 million** at year-end 2018, driven by a reduction in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2019 (USD) | December 31, 2018 (USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $6,771,000 | $8,949,000 | | Total current assets | $14,232,000 | $16,411,000 | | Total Assets | $16,489,000 | $18,637,000 | | Total current liabilities | $1,532,000 | $1,637,000 | | Total Liabilities | $1,573,000 | $1,728,000 | | Total stockholders' equity | $14,916,000 | $16,909,000 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2019 saw no sales and a **$2.33 million net loss**, compared to **$530,000 in sales** and a **$2.28 million net loss** in Q1 2018 Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended March 31, 2019 (USD) | Three Months Ended March 31, 2018 (USD) | | :--- | :--- | :--- | | Sales | $ - | $530,000 | | Gross profit (loss) | $(1,000) | $135,000 | | Total operating expenses | $2,376,000 | $2,413,000 | | Loss from operations | $(2,377,000) | $(2,278,000) | | Net loss | $(2,329,000) | $(2,278,000) | | Net loss per share | $(0.09) | $(0.13) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$2.02 million** in Q1 2019, with no financing activities, leading to a **$2.18 million decrease** in cash Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2019 (USD) | Three Months Ended March 31, 2018 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,022,000) | $(1,860,000) | | Net cash used in investing activities | $(156,000) | $(108,000) | | Net cash provided by financing activities | $ - | $11,923,000 | | Net increase (decrease) in cash | $(2,178,000) | $9,955,000 | | Cash and cash equivalents, end of period | $6,771,000 | $11,202,000 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail combustion technologies, **$61.84 million accumulated losses**, liquidity risks, revenue recognition policies, and a Nasdaq non-compliance notice - The company's primary technologies are Duplex™ and Electrodynamic Combustion Control™ (ECC™), designed to improve combustion system performance and reduce emissions[21](index=21&type=chunk) - The company has incurred losses since inception totaling **$61.84 million** and expects continued operating losses, with growth dependent on obtaining additional funding through various means like equity financing or strategic partnerships[22](index=22&type=chunk) - Revenue is recognized upon project completion when performance obligations related to air emissions and operational performance are satisfied and successfully tested[28](index=28&type=chunk) - On April 17, 2019, the company received a notice from Nasdaq for failing to meet the minimum bid price requirement of **$1.00 per share**, with a deadline of October 14, 2019, to regain compliance[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Duplex™ technology commercialization, **no Q1 2019 revenue**, a **$2.33 million net loss**, and sufficient liquidity for the next twelve months - The company's primary technology, Duplex™, is being commercialized in markets such as petroleum refining, steam generation (OTSGs), and enclosed flares[81](index=81&type=chunk)[85](index=85&type=chunk) - The business plan includes licensing technology and forming collaborative supply agreements with established OEMs to accelerate market adoption, while also pursuing direct sales[100](index=100&type=chunk) - Management believes current cash and cash equivalents of **$6.77 million** will be sufficient to fund ongoing business activities for at least twelve months from the filing date[119](index=119&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q1 2019 reported no sales and a **$2.33 million net loss**, with operating expenses at **$2.38 million**, driven by reduced R&D and increased G&A Comparison of Operations for the Three Months Ended March 31 | Metric | 2019 (USD) | 2018 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | Sales | $ - | $530,000 | $(530,000) | | Gross Profit (Loss) | $(1,000) | $135,000 | $(136,000) | | R&D Expenses | $902,000 | $1,134,000 | $(232,000) | | G&A Expenses | $1,474,000 | $1,279,000 | $195,000 | | Loss from Operations | $(2,377,000) | $(2,278,000) | $(99,000) | | Net Loss | $(2,329,000) | $(2,278,000) | $(51,000) | [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased to **$6.77 million** by March 31, 2019, with **$2.02 million** used in operations, but liquidity is deemed sufficient for twelve months - Cash and cash equivalents totaled **$6.77 million** at March 31, 2019, a decrease from **$8.95 million** at December 31, 2018[119](index=119&type=chunk) - Working capital was **$12.7 million** at the end of Q1 2019, down from **$14.77 million** at the end of 2018, primarily due to funds used in operations[120](index=120&type=chunk) - Net cash used in operating activities was **$2.02 million** for the three months ended March 31, 2019[122](index=122&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, ClearSign is exempt from providing quantitative and qualitative market risk disclosures - As a smaller reporting company, ClearSign is not required to provide quantitative and qualitative disclosures about market risk[126](index=126&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control - Management concluded that as of March 31, 2019, the company's disclosure controls and procedures are effective[127](index=127&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2019[128](index=128&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any legal proceedings expected to materially adversely affect its business or financial condition - The company is not aware of any legal proceedings or claims that would have a material adverse effect on its business[132](index=132&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor highlights potential Nasdaq delisting due to non-compliance with the **$1.00 minimum bid price** requirement by October 14, 2019 - A new risk factor was added regarding the potential delisting from The Nasdaq Capital Market for failing to meet the minimum closing bid price requirement of **$1.00 per share**[134](index=134&type=chunk) - The company was notified of non-compliance on April 17, 2019, and has a 180-day period, until October 14, 2019, to regain compliance[134](index=134&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On March 31, 2019, **2,500 common shares** were issued to an investor relations firm for services, valued at **$1.44 per share** - On March 31, 2019, the company issued **2,500 shares of common stock** to its investor relations firm for services provided in Q1 2019[136](index=136&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including certifications and XBRL data, and incorporates previously filed documents by reference

ClearSign Combustion Corporation (NASDAQ:CLIR) Q1 2019 Earnings Conference Call May 8, 2019 5:00 PM ET Company Participants Matthew Selinger - Investor Relations Rob Hoffman - Chairman of the Board Jim Deller - Chief Executive Officer Brian Fike - Chief Financial Officer Conference Call Participants Robert Kecseg - Las Colinas Capital Management. Operator Good afternoon, and welcome to the ClearSign Combustion First Quarter 2019 Conference Call. All participants will be in listen-only mode. [Operator Instru ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to _______________ Commission file number 001-35521 CLEARSIGN COMBUSTION CORPORATION (Exact name of registrant as specified in its charter) WASHINGT ...

Financial Data and Key Metrics Changes - For the full year 2018, revenue was $530,000, a slight decrease from $540,000 in 2017, while the net loss improved to $9.5 million from $9.7 million in the previous year [7] - Cash resources at the end of 2018 were approximately $15.8 million, indicating sufficient working capital to sustain operations through 2020 even without revenue [7] Business Line Data and Key Metrics Changes - The company has made operational progress but has not yet translated these efforts into sales, indicating a gap between technological advancements and revenue generation [11][27] - Successful installations in the OTSG and flare segments were reported, with a focus on Southern California for future Duplex adoption pending regulatory clarifications [27] Market Data and Key Metrics Changes - The company reached a key R&D milestone with a pre-engineered firetube boiler burner achieving NOx emissions of five parts per million, which is significant for the firetube boiler market [29] - The first installation site for a super major client, Exxon, has been chosen, although the lengthy evaluation process is acknowledged as a challenge [29] Company Strategy and Development Direction - The company is focused on reviewing its strategic plan to better target market verticals and is optimistic about future growth opportunities [12][35] - The new management team, led by Jim Deller, aims to leverage his extensive experience in the combustion industry to drive commercialization and strategic development [21][24] Management's Comments on Operating Environment and Future Outlook - Management expressed frustration over the lack of revenue despite operational progress but remains optimistic about future growth, especially with a refreshed board and experienced leadership [11][35] - The company anticipates that regulatory changes in California will benefit the adoption of its technology, and there is a commitment to maximizing shareholder value [34][35] Other Important Information - The company underwent significant leadership changes in 2018, with a new board and management team in place to drive future success [10][15] - A partnership with World Oil for a project demonstrating ClearSign technology has been established, which is expected to showcase the company's capabilities in achieving ultra-low emissions [30] Q&A Session Summary Question: Update on the 75 commercial opportunities in the pipeline - Management indicated that while they have a list of 75 opportunities, they want to give the new CEO time to understand these inquiries before providing detailed updates [37] Question: General feedback on the commercial opportunities - The new CEO, Jim Deller, emphasized the importance of understanding customer needs and feedback before discussing competitive strategies, indicating a focus on building relationships with potential partners [38]