ClearSign Technologies Corp

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 tothree 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 inone 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.

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. Ourtwo 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.

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

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 waszero.

Fixed Assets and Leases

Fixed assets are recorded at cost. Fixed assets are depreciated over three tofive 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.

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:

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 andzero 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.

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 tothree 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.

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:

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

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 fortwelve 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 ofzero 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:

Supplemental cash flow information related to operating leases is as follows:

Minimum future payments under the Company’s operating lease liabilities as of December 31, 2024 are as follows:

Note 4 – Patents and Other Intangible Assets

Patents and other intangible assets are summarized as follows:

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:

The amortization life for patents ranges between three tofive years, with trademark lives set atten 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 ofthree 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 andsixty 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.

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 forthree 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:

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:

There wasno 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:

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, 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 wasno 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.

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 oftwo-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 leasttwo-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 offive 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 determining the fair values of the Public Warrants and Underwriter Warrants, we used a Black-Scholes option pricing model with the following assumptions:

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 exercisablesix 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 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:

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 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:

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.

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:

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.

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:

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 areten 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 inthree equal installments, withone 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 inthree equal installments, withone 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).

A summary of the Company’s inducement option activity and changes is as follows:

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:

A summary of the Company’s RSU compensation expense is as follows:

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.

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:

The Consultant Plan compensation expense is summarized as follows:

Note 9 – Net Loss per Common Share

The Company calculates net loss per common share in accordance with ASC 260Earnings 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).

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:

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 atwo-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.

Note 13 – Quarterly Results (unaudited)

Quarterly results for the years ended December 31, 2024 and 2023 are as follows:

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.

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.