ClearSign Technologies Corp: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated condensed financial statements and related notes included elsewhere in this Form 10-Q as well as our audited consolidated financial statements and related notes included in our most recent Annual Report on Form 10-K. In addition to historical information, this discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including but not limited to, the risks described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Overview

We design and develop technologies for the purpose of decarbonization and improving key performance characteristics of combustion systems, including emission and operational performance, energy efficiency and overall cost-effectiveness. Our ClearSign Core™ technology has been proven in full scale industrial test furnaces and boilers and first customer installations are currently operating in normal commercial applications. We have generated nominal revenues from operations to date to meet operating expenses.

We have incurred losses since inception totaling $104.2 million and we expect to experience operating losses and negative cash flow for the foreseeable future. We have historically financed our operations primarily through issuances of equity securities. As of September 30, 2025, we have raised approximately $105.3 million in gross proceeds through the sale of our equity securities. We may need to raise additional capital in the future, however, the significant volatility in the capital markets may negatively affect our ability to raise this additional capital.

In order to generate meaningful revenues, our technologies must gain market recognition and acceptance to develop sufficient recurring sales. In addition, management believes that the successful growth and operation of our business is dependent upon our ability to obtain adequate sources of funding through co-development agreements, strategic partnering agreements, or equity or debt financing to support commercialization of our research and development efforts, protect intellectual property, form relationships with strategic partners and provide for working capital and general corporate purposes. There can be no assurance that we will be successful in achieving our long term plans, or that such plans, if consummated, will result in profitable operations or enable us to continue in the long term as a going concern.

Our costs include employee salaries and benefits, compensation paid to consultants, materials and supplies for prototype development and manufacture, costs associated with development activities including materials, sub-contractors, travel and administration, legal and accounting expenses, sales and marketing costs, general and administrative expenses, and other costs associated with an early stage, publicly traded technology company. We currently have 16 full-time employees. Because using third party expertise and resources is more efficient than maintaining full time resources, we also expect to incur ongoing consulting expenses related to technology development and some administrative, sales and legal functions commensurate with our current level of activities.

The amount that we spend for any specific purpose may vary significantly, and could depend on a number of factors including, but not limited to, the pace of progress of our commercialization and development efforts, actual needs with respect to product testing, development and research, market conditions, and changes in or revisions to our sales and marketing strategies.

Research, development, and commercial acceptance of new technologies are, by their nature, unpredictable. Although we undertake development and commercialization efforts with reasonable diligence, there can be no assurance that the net proceeds from our securities offerings will be sufficient to enable us to develop our technology to the extent needed to create sufficient future sales to sustain operations. If the net proceeds from these offerings are insufficient for this purpose, we will consider other options to continue our path to commercialization, including, but not limited to, additional financing through follow-on equity offerings, debt financing, co-development agreements, sale or licensing of developed intellectual or other property, or other alternatives.

We cannot assure that our technologies will be accepted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. Furthermore, we have no committed source of financing, and we cannot assure that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to scale back our development by reducing expenditures for employees, consultants, business development and marketing efforts or to otherwise severely curtail, or even to cease, our operations.

Recent Developments

Special Committee and Cooperation Agreements

On February 10, 2025, the Company’s board of directors (the “Board”) formed a special committee of all of its then-serving independent directors (the “Special Committee”) to review and analyze purported director nominations by certain of our stockholders, and non-stockholders, in connection with the Company’s 2025 annual meeting of stockholders (the “2025 Annual Meeting”), and to manage communications and to negotiate and agree settlements with such purported nominating individuals. As a result of such review and analysis, the Special Committee entered into that certain Cooperation Agreement, dated May 22, 2025 (the “DiGiandomenico Cooperation Agreement”), between us and Anthony DiGiandomenico (collectively with his affiliates and associates, the “DiGiandomenico Parties”), and that certain Cooperation Agreement, dated May 22, 2025 (the “Clarkson Cooperation Agreement,” and together with the DiGiandomenico Cooperation Agreement, the “Cooperation Agreements”), between us and Richard Clarkson (collectively with his affiliates and associates, the “Clarkson Parties”), which agreements required, among other things, the appointment of Mr. DiGiandomenico and Louis J. Basenese to the Board. Accordingly, the Board increased its size from five to seven directors, appointed Messrs. DiGiandomenico and Basenese to the Board, and nominated each such director as a candidate for election to the Board at the 2025 Annual Meeting. Following the 2025 Annual Meeting, the Special Committee was dissolved.

At The Market Agreement with H.C. Wainwright

On July 17, 2025, we entered into an ATM Offering Agreement (the “ATM Agreement”) with Wainwright. In accordance with the terms of the ATM Agreement, we may offer and sell from time to time through Wainwright, acting as sales agent, shares of our common stock having an aggregate offering price of up to $10,390,000 (the “Placement Shares”). The Placement Shares will be issued pursuant to our “shelf” registration statement on Form S-3 (File No. 333-288736) filed with the SEC on July 17, 2025 (the “Registration Statement”) and the prospectus relating to the offer and sale of the Placement Shares that forms a part of the Registration Statement, which was declared effective on July 28, 2025.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard

On April 1, 2025, we received a letter (the “Notice”) from Nasdaq’s Listing Qualifications Staff (the “Staff”) indicating that, based upon the closing bid price of our common stock for the 30 consecutive business days beginning on February 18, 2025, and ending on March 31, 2025, we no longer meet the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).

On September 30, 2025, we received a second letter from Nasdaq granting our request for a 180-day extension to regain compliance with the Bid Price Rule. We now have until March 30, 2026, to meet the requirement. As part of our request for the 180-day extension, we notified Nasdaq that we intend to regain compliance with the Bid Price Rule by effecting a reverse stock split, if necessary. If at any time prior to March 30, 2026, the bid price of our common stock closes at $1 per share or more for a minimum of 10 consecutive business days, we will regain compliance with the Bid Price Rule.

If the Company does not regain compliance with the Bid Price Rule during the additional 180-day extension, Nasdaq will provide written notification to us that our common stock will be delisted. At that time, we may appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if we appeal the delisting determination by Nasdaq to the hearings panel, that such appeal would be successful.

We will continue to monitor the closing bid price of our common stock and evaluate its available options to regain compliance with the Bid Price Rule. Nasdaq’s extension notice has no immediate effect on the listing or trading of our common stock, which continues to trade on Nasdaq under the ticker symbol “CLIR.”

Critical Accounting Policies

The following discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations. These policies and estimates require the application of significant judgment by management. These estimates can be materially affected by changes from period to period as economic factors and conditions outside of our control change. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. We believe the current assumptions and other considerations used to estimate amounts reflected in the condensed consolidated financial statements included in this Form 10-Q are appropriate.

This Form 10-Q and our most recent Annual Report on Form 10-K include discussions of our accounting policies, as well as methods and estimates used in the preparation of our audited consolidated financial statements. For further information on our critical accounting policies and estimates, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K, the notes to our audited consolidated financial statements included in our most recent Annual Report on Form 10-K and “Note 2 – Summary of Significant Accounting Policies” of our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q. Since our most recent Annual Report on Form 10-K, we have not experienced a material change to our critical accounting policies or the methods and applications used to develop our accounting estimates.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

Highlights of our quarter financial performance are as follows:

(in thousands, except per share data)

(in thousands, except per share data)

Revenues and Gross Profit

Consolidated revenues for the three months ended September 30, 2025 were $1,029 thousand compared to $1,859 thousand for the same period in 2024, which were predominantly generated by delivering spare parts to multiple customers, delivering a flare order, delivering a mid-stream order, completing a customer witness test, finalizing a CFD analysis, and providing engineering services. Revenues for the three months ended September 30, 2024 were predominantly generated by shipping multiple burners to a California refinery customer.

Consolidated revenues for the nine months ended September 30, 2025 were $1,563 thousand compared to $3,006 thousand for the same period in 2024, which were predominantly generated by delivering spare parts orders to multiple customers, delivering a flare order, delivering mid-stream orders, and completing engineering services and a CFD analysis. Revenues for the nine months ended September 30, 2024 were predominantly generated from by delivering multiple burners, performing engineering feasibility studies, and delivering multiple spare parts orders.

Gross profit decreased by $183 thousand, or 33.2%, and by $411 thousand, or 39.9%, for the three and nine months ended September 30, 2025, respectively, compared to the same time periods in 2024. The unfavorable decrease in gross profit for the three months ended September 30, 2025 was predominantly due to lower revenues during the three months ended September 30, 2025. This decrease was partially offset by a $63 thousand increase in profit margin, which was predominantly due to the higher profit margin related to our spare parts orders during three months ended September 30, 2025 compared to the profit margin for the products and services that generated revenues during the same period in 2024. The unfavorable decrease in gross profit for the nine months ended September 30, 2025 was predominantly due to lower revenues during the nine months ended September 30, 2025. This decrease was partially offset by a $83 thousand increase in profit margin, which was predominantly due to the higher profit margin related to our spare parts orders during nine months ended September 30, 2025 compared to the profit margin for the products and services that generated revenues during the same period in 2024.

Operating Expenses

Operating expenses consist of research and development (“R&D”) and general and administrative (“G&A”) expenses. These are addressed separately below.

Research and Development

R&D expenses remained relatively consistent year-over-year for both the three and nine months ended September 30, 2025 respectively, compared to the same time periods in 2024.

General and Administrative

G&A expenses increased $153 thousand, or 9.3%, for the three months ended September 30, 2025, compared to the same time period in 2024. We experienced an increase of approximately $729 thousand in non-cash expenses for the vesting of RSUs in connection with the departure of three directors from the Board. Legal and audit expenses also increased by approximately $205 thousand related to services provided for the filing of our “shelf” registration statement on Form S-3 and ATM Agreement with Wainwright. Increases in G&A expenses were partially offset by a year-over-year savings of $394 thousand as a result of a decrease in costs accrued related to the suspension of our China activities that occurred during the three months ended September 30, 2024, which did not occur during the same period in 2025. We also decreased our Special Committee legal cost accrual by $315 thousand after negotiating discounts with law firms engaged by the Special Committee (see “Recent Developments – Special Committee and Cooperation Agreements” above for additional information). G&A expense increases were further partially offset by year-over-year labor and overhead cost decreases of $127 thousand related to customer contract work performed during the three months ended September 30, 2025.

G&A expenses for the nine months ended September 30, 2025 increased by $620 thousand, or 12.8%, compared to the same period in 2024. This unfavorable increase in G&A expenses was primarily due to an increase of approximately $588 thousand in legal fees, including (i) approximately $131 thousand in legal fees pertaining to work performed in connection with a regulatory inquiry by the SEC into the trading of our securities in 2020; (ii) an accrual of approximately $435 thousand in legal fees pertaining to work performed for the Special Committee; and (iii) an accrual of $22 thousand for the reimbursement of certain legal fees incurred by the Clarkson Parties and DiGiandomenico Parties in connection with the Cooperation Agreements they entered into with us (see “Recent Developments – Special Committee and Cooperation Agreements” above for additional information). We also incurred an increase in legal and audit costs of approximately $205 thousand related to services provided for the preparation and filing of our “shelf” registration statement on Form S-3 and work performed in connection with our ATM Agreement with Wainwright. In addition, non-cash expenses increased approximately $469 thousand year-over-year related to the vesting of RSUs in connection with the departure of three directors from the Board. Increases in G&A expenses for the nine months ended September 30, 2025 were partially offset by an expense decrease of approximately $394 thousand related to our China exit cost accrual that occurred during the three months ended September 30, 2024, which did not occur during the same period in 2025. G&A expense increases were further partially offset by year-over-year labor and overhead cost decreases of $232 thousand related to customer contract work performed during the nine months ended September 30, 2025.

Other Income, Net

Other income, net remained relatively consistent year-over-year for both the three and nine months ended September 30, 2025 respectively, compared to the same time periods in 2024.

Liquidity and Capital Resources

At September 30, 2025, our cash and cash equivalents balance totaled $10,488 thousand compared to $14,035 thousand at December 31, 2024, a decrease of $3,547 thousand. The decrease in cash and cash equivalent balance is primarily attributable to our net loss of $5,185 thousand which was partially offset by our non-cash expenses of $1,135 thousand and an increase in contract liabilities of $1,075 thousand.

At September 30, 2025, our current assets were in excess of current liabilities resulting in working capital of $8,168 thousand compared to $12,809 thousand at December 31, 2024. We believe we have sufficient cash and expected cash collections to fund current operating expenses for over twelve months. We have no contractual debt obligations and to the extent we may require additional funds beyond twelve months from the date hereof, and customer cash collections cannot fund our needs, we may utilize equity offerings. Historically, we have funded operations predominantly through equity offerings. Until the growth of revenue increases to a level that covers our operating expenses, we intend to continue to fund operations in this manner, although the volatility in the capital markets may negatively affect our ability to do so. As of September 30, 2025, approximately 21.3 million shares of our common stock are issuable upon exercise of our outstanding warrants, which number excludes the shares of common stock issuable upon exercise of our outstanding pre-funded warrants, and we may receive up to $22.5 million in aggregate gross proceeds from the cash exercises thereof, subject to certain beneficial ownership limitations set forth therein. These warrants require the warrant holder to tender cash upon exercise, with the exception of the warrants issued to Public Ventures LLC as compensation for their services in connection with our public offering and concurrent private placement in April 2024, which allow the holder to exercise cashless if they so desire. These equity financial instruments may from time-to-time fund future cash needs, but the volatility of our common stock price and the risk tolerance of warrant holders will determine the extent in which we will be able to raise funds in this manner.

Operating activities for the nine months ended September 30, 2025, resulted in cash outflows of $3,453 thousand, primarily due to the net loss of $5,185 thousand partially offset by non-cash expenses of $1,135 thousand and an increase in contract liabilities of $1,075 thousand during such period. The change in contract liabilities during the nine months ended September 30, 2025 was impacted by customer collections for orders we have yet to complete.

Operating activities for the nine months ended September 30, 2024, resulted in cash outflows of $3,958 thousand, primarily due to the net loss of $4,135 thousand during such period, which was partially offset by a non-cash expense of $688 thousand. The decision to suspend our China operations increased accounts payable and accrued liabilities by $394 thousand during the three months ended September 30, 2024, which represented a one-time accrual estimate for the costs to prepare and place our Beijing China entity into a dormant state.

Investing activities for the nine months ended September 30, 2025, resulted in cash outflows of $78 thousand, which is primarily attributable to disbursements for patents and other intangible assets.

Investing activities for the nine months ended September 30, 2024, resulted in cash outflows of $177 thousand, which is primarily attributable to $159 thousand of disbursements for patents and other intangible assets.

Financing activities for the nine months ended September 30, 2025, resulted in cash outflows of $17 thousand, which is primarily attributable to $41 thousand of disbursements related to taxes paid for the vesting of certain employee restricted stock units, partially offset by $24 thousand in net proceeds received from the exercise of our warrants.

Financing activities for the nine months ended September 30, 2024, resulted in cash inflows of $12,936 thousand, which is primarily attributable to the net proceeds received of $12,967 thousand from the issuance of securities in connection with our 2024 equity offerings.

Off-Balance Sheet Transactions

We do not have any off-balance sheet transactions.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal accounting and financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal accounting and financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2025, the end of the period covered by this Form 10-Q. Based upon the evaluation of our disclosure controls and procedures as of September 30, 2025, our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal accounting and financial officer) concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal accounting and financial officer), does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

We incorporate herein by reference the risk factors included under “Part I - Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024 which we filed with the SEC on March 31, 2025. There are no material changes from the risk factors set forth in such prior filing, except as set forth below.

Our ability to utilize our common stock to finance future capital needs, or for other purposes, is limited by the number of authorized shares of common stock currently available for issuance.

We have authority to issue a total of 87,500,000 shares of common stock, of which 53,273,405 shares of common stock have been issued and approximately 30,000,000 shares of common stock are reserved for issuance in connection with certain securities issued under our equity incentive plans and other outstanding securities, including stock options and warrants.

We have historically financed our operations primarily through issuances of equity securities. With the limited shares of common stock presently available for issuance, our ability to secure additional financing through the sale of common stock, to the extent needed, is limited. Absent an increase in the shares of common stock authorized to be issued under our certificate of incorporation, we will be limited to other financing structures in the event additional financing is required. Such alternative structures may be less favorable or unavailable in which case we may be forced to forego opportunities or required to downsize operations due to lack of funding.

If we fail to comply with Nasdaq’s continued minimum closing bid requirements by March 30, 2026 or other requirements for continued listing, including stockholder equity requirements, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.

Our common stock is listed for trading on Nasdaq, therefore, we must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for 30 consecutive business days, which is referred to as the Bid Price Rule. On April 1, 2025, the Staff notified us that we did not comply with the Bid Price Rule, as set forth in Nasdaq Listing Rule 5550(a)(2), during the 30 consecutive business day period beginning on February 18, 2025, and ending March 31, 2025. We were granted 180 calendar days, or until September 29, 2025, to regain compliance with the Bid Price Rule.

On September 30, 2025, the Staff sent us a second letter granting our request for a 180-day extension, or until March 30, 2026, to regain compliance with the Bid Price Rule. To regain compliance with the Bid Price Rule and to qualify for continued listing on Nasdaq, the minimum bid price per share of our common stock must be at least $1.00 for at least ten consecutive business days during the 180-day extension. As part of our request for the 180-day extension, we notified Nasdaq that we intend to regain compliance with the Bid Price Rule by effecting a reverse stock split, if necessary. If we do not regain compliance with the Bid Price Rule during the 180-day extension, our common stock will be subject to delisting by Nasdaq. At that time, we may appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if the we do appeal the delisting determination by Nasdaq to the hearings panel, that such appeal would be successful.

There can be no assurance that we will be able to regain compliance with Nasdaq’s listing rules, including the Bid Price Rule. If we are unable to regain compliance with the Bid Price Rule or if we fail to meet any of the other continued listing requirements, including stockholder equity requirements, our securities may be delisted from Nasdaq, which could reduce the liquidity of our common stock materially and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and business development opportunities.

Adverse judgments or settlements in legal proceedings could materially harm our business, financial condition, operating results and cash flows.

We may be a party to claims that arise from time to time in the ordinary course of our business, which may include those related to, for example, our securities offerings, contracts, sub-contracts, protection of confidential information or trade secrets, adversary proceedings arising from customer bankruptcies, stockholder engagement, employment of our workforce and immigration requirements or compliance with any of a wide array of state and federal statutes, rules and regulations that pertain to different aspects of our business.

Regardless of the merits of any particular claim, responding to such actions could divert time, resources and management’s attention away from our business operations, and we may incur significant expenses in defending these lawsuits or other similar lawsuits. The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could have a material adverse effect on our financial condition, operating results and cash flows. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.

Furthermore, while we maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as deductibles and caps on amounts of coverage. Even if we believe a claim is covered by insurance, insurers may dispute our entitlement to coverage for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our available insurance coverage for a particular claim. Further, whether or not we are named as a party to a particular proceeding or threatened proceeding, we may be subject to indemnification and/or advancement obligations to our current directors and executive officers as well as other third parties, which may include former directors, that could subject us to liability for damages or other amounts payable as a result of any judgments or settlements, as well as for fees and expenses incurred in connection with any proceedings or threatened proceedings.

We may also be required to initiate expensive litigation or other proceedings to protect our business interests. There is a risk that we will not be successful or otherwise be able to satisfactorily resolve such claims or litigation. Litigation and other legal claims are subject to inherent uncertainties. Those uncertainties include, but are not limited to, litigation costs and attorneys’ fees, unpredictable judicial or jury decisions and the differing laws and judicial proclivities regarding damage awards among the states in which we operate. Unexpected outcomes in such legal proceedings, or changes in management’s evaluation or predictions of the likely outcomes of such proceedings, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our current financial status may increase our default and litigation risks and may make us more financially vulnerable in the face of threatened litigation.