ClearSign Technologies (CLIR) - 2019 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements 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 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 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 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 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] - 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] - Revenue is recognized upon project completion when performance obligations related to air emissions and operational performance are satisfied and successfully tested[28] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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][85] - The business plan includes licensing technology and forming collaborative supply agreements with established OEMs to accelerate market adoption, while also pursuing direct sales[100] - 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] Results of Operations 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 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] - 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] - Net cash used in operating activities was $2.02 million for the three months ended March 31, 2019[122] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2019[128] PART II - OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] - 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including certifications and XBRL data, and incorporates previously filed documents by reference