CLIR 10-K & 10-Q changes, risk factors and insider trading

The risks described below are not the only risks we face. If any of the events described in the following risk factors actually occurs, or if additional risks and uncertainties later materialize that are not presently known to us or that we currently deem immaterial, then our business, prospects, results of operations and financial condition could be materially adversely affected. In that event, the trading price of our common stock could decline, and you may lose all or part of your investment in our shares. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

Changes to environmental regulations or future legislation could make our technology less desirable.

Our annual revenue has been highly concentrated, with a few customers accounting for a significant percentage of our total revenue. For the years ended December 31, 20242025 and 2023,2024, our twothree largest customers represented approximately 86%81% and 87%86% of total revenue, respectively. We expect that a relatively small number of customers will continue to account for a substantial portion of our revenue for the foreseeable future.

We are exposed to risks relating to our presence and prior business activities in China. As a result, the economic, political, legal and social conditions in China could have a material adverse effect on our business. In addition, the legal system in China has inherent uncertainties that may limit the legal protections available in the event of any claims or disputes that we may have with third parties, including our ability to protect the intellectual property we may use in China. As China’s legal system is still evolving, the interpretation of many laws, regulations and rules is not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit the remedies available in the event of any claims or disputes with third parties. Some of the other risks we may be exposed to include, but is not limited to:

Further, the materials that our subcontractors may import from time to time are generally at prices that support our current operating margins. These imports may be subject to custom requirements, tariffs, and quotas set by governments through mutual agreements or unilateral actions. The U.S. tariffs on steel and other imported goods may increase the costs of our foreign sourced materials, and any escalation in the tariffs may increase the impact, including without limitation recent tariffs against goods imported from China, Mexico, and Canada recently enacted by the current administration, as modified from time to time, and any retaliatory tariffs issued in response thereto. In case our operating costs increase materially as a result of any implemented tariffs, in order to sustain current operating margins, we may increase the costs of our products to customers and end users, or find alternative, similarly priced sources that are not subject to tariffs, which may delay our operations. If we are unable to effectively implement countermeasures to any proposed, or implemented, tariffs, our operating margins will be impacted.

Geopolitical issues around the world can impact macroeconomic conditions and could have a material adverse impact on our financial results. For example, the ultimate impact of the conflict in Ukraine, IsraelIsrael, Venezuela, Iran and Strait of Hormuz on fuel prices, inflation, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect global economic growth, disrupting discretionary spending habits and generally decreasing demand for our products and services. While we do not purchase any of significant raw materials directly from these regions, they have significant global reach on commodity prices. Disruptions in the markets for those inputs could negatively impact the world and domestic economy. Also, these conflicts have exacerbated geopolitical tensions globally. While the demand of our services in the U.S. have not yet been affected by these conflicts, we cannot predict the impact that the conflicts may have on future financial results. For example, domestic customers for some of our product lines may choose to reduce discretionary spending on goods and services such as ours until this volatility subsides.

We completed the initial public offering of our common stock in April 2012. Since that time, our common stock (NASDAQNasdaq: CLIR) has traded as low as $3.50 per share (or $0.35 per share on a pre-reverse stock split basis) and as high as $117.50 per share (or $11.75 per share on a pre-reverse stock split basis) based upon daily closing prices, and day-to-day trading has been volatile at times. This volatility may continue or increase in the future. The market price for the securities may be significantly affected by factors such as progress in the development of our technology, agreements with research facilities or co-development partners, commercialization of our technology, variations in quarterly and yearly operating results, general trends in the alternative energy industry or clean technology industry, and changes in state or federal regulations affecting us and our industry. Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies, such as the market reactions to internet marketed ‘short squeezes’. Such broad market fluctuations may adversely affect the market price of our securities.

Sales of a substantial number of shares of our common stock in the public market or the perception that such sales might occur could materially adversely affect the market price of the shares of our common stock. For instance, the securities issued in our recent equity offerings (see “Note 89 – Equity” for additional information), as well as the Warrantshares Shares,of common stock underlying our outstanding warrants, have been registered for resale and are freely tradable without restriction or further registration under the Securities Act. As a result, a substantial number of shares of common stock may be sold in the public market, subject to certain beneficial ownership restrictions. We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those shares for sale will have on the market price of our common stock.

We will have broad discretion as to the proceeds that we receive from the cash exercise by any holder of our Warrants,outstanding warrants, and we may not use the proceeds effectively.

You may experience future dilution as a result of issuance of the Warrantshares Shares,of common stock underlying our outstanding warrants, future equity offerings by us and other issuances of our common stock or other securities. In addition, the issuance of the Warrantshares Shares,of common stock underlying our outstanding warrants, to the extent theour Warrantsoutstanding warrants are exercisable, and future equity offerings and other issuances of our common stock or other securities may adversely affect our common stock price.

You may experience future dilution as a result of the issuance of the Warrantshares Sharesof common stock underlying our outstanding warrants and other issuances of our common stock or other securities. In order to raise additional capital, if needed, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per share as prior issuances of common stock. We may not be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share previously paid by investors, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our common stock or securities convertible into common stock in future transactions may be higher or lower than the prices per share for previous issuances of common stock or securities convertible into common stock paid by certain investors. In addition, the exercise price of theour Warrantsoutstanding warrants may be equal to or greater than the price per share previously paid by certain investors. You will incur dilution upon exercise of any outstanding stock options, warrants or upon the issuance of shares of common stock under our equity incentive programs.

As of December 31, 2024,2025, we had outstanding options for the purchase of 2,943approximately 287 thousand shares of common stock and(or 8642,871 thousand shares ofon a pre-reverse stock split basis) and 53 thousand shares underlying outstanding restricted stock units (“RSUs”) (or 526 thousand shares on a pre-reverse stock split basis). Under the ClearSign Technologies Corporation 2021 Equity Incentive Plan (as it may be amended from time to time, the “2021 Plan”) and the ClearSign Technologies Corporation 2013 Consultant Stock Plan (the “2013 Consultant Plan,” and collectively, the “Plans”), we have the ability to grant awards of shares, RSU’s or options to purchase shares of our common stock to employees, officers, directors, independent contractors and agents. Furthermore, the Plan provides for increases in the number of shares available for awards based on the terms outlined in such Plan. Certain holders may sell these shares in the public markets from time to time, without limitations on the timing, amount or method of sale. If our stock price rises, the holders may exercise their options and RSUs and sell a large number of shares. This could cause the market price of our common stock to decline.

We are authorized to issue 2 million shares of “blank check” preferred stock, with such rights, preferences and privileges as may be determined from time-to-time by our board of directors (the “Board”).Board. The Board is empowered, without stockholder approval, to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights, and other rights, preferences and privileges for the preferred stock. No shares of preferred stock are presently issued and outstanding and we have no immediate plans to issue shares of preferred stock. The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could adversely reduce the voting rights and powers of the common stock and the portion of our assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution in the book value per share of our common stock. The preferred stock could also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing a change in control of the Company, to the detriment of our stockholders. We cannot assure you that we will not, under certain circumstances, issue shares of our preferred stock.

As a public company reporting to the Securities and Exchange Commission (the “SEC”),SEC, we incur significant legal, accounting, investor relations, printing, board compensation, and other expenses that we did not incur as a private company. These costs totaled $1.6$3.0 million in 2024.2025. We are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (with the exception of the requirement of auditor attestation of internal control over financial reporting from which we are currently excluded as a non-accelerated filer company), as well as rules subsequently implemented by the SEC that impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. In addition, there are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Wall Street Reform and Protection Act that as we grow could increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our personnel, systems and resources. Our management and other personnel continually devote a substantial amount of time to these compliance initiatives. Furthermore, these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our Board, our Board committees or as executive officers.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis here and throughout this Form 10-Kreport 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.”

The Company’s contracts generally include progress payments from customers upon completion of defined milestones. As these payments are received, they are offset against accumulated project costs and recorded as eithera contract assets or contract liabilities.liability. Upon completion of the performance obligations and collectability is determined, revenue can be recorded. 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 in connection with which the Company is expected to incur costs in excess of the contactcontract price, the Company accrues the estimated loss in full in the period such determination is made.

The cost of research and development is expensed as incurred. Research and development costs consist of salaries, benefits, share-based compensation, consumables, computer modeling costs and consulting fees, including costs to develop and test prototype equipment and parts. Research and development costs are offset by any funds received from strategic partners in cost sharing, collaborative projects. During the years ended December 31, 20242025 and 2023,2024, the Company received $145 thousandzero and $60$145 thousand, respectively, from such arrangements.

The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the audited, condensed 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 inover the grantremaining agreement.service period when the Company has determined it is probable that the performance condition will be achieved. 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.

Consolidated revenues for the years ended December 31, 20242025 and 20232024 were $3,596$5,234 thousand and $2,403$3,596 thousand, respectively. Revenues increased by $1,193$1,638 thousand, or 49.6%,45.6%, during the year ended December 31, 2024 as2025, compared to the same period in 2023.2024. Revenues for the yearsyear ended December 31, 2024 and 20232025 were generated from orders related to bothour process burners, midstream burners, flares, engineering services and spare part offerings. During the year ended 2025, our productrevenues lines,were process burners and boiler burners, with the predominate amount of revenuespredominantly generated from our process burner product line.offerings. Typically, our process burner contracts include three to four different performance obligations by which we can recognize revenue, which include design engineering, customer witness tests and burner shipment.shipment, with a CFD study as an optional fourth performance obligation. We allocate process burner contractual revenue to each of these performance obligations with weighting allocations assigned in the following order of importance: burner shipment, customer witness testtest, CFD study and engineering design. The difference in revenuerevenues from the year ended December 31, 2024,2025, to the same period in 2023,2024, is mainlyprimarily due to thean higherincrease numberin ofperformance processobligations burnersrelated shipped.to CFD studies, customer witness tests, flare shipments and spare part deliveries, which was slightly offset by a decrease in boiler burner deliveries. During the year ended December 31, 2024, weour shippedrevenues twenty-fivewere predominantly generated from orders related to our process burnersburner, toboiler two separate California refineries operated by two different customers, compared to eight process burners to a California refineryburner, and threespare separatepart customer witness tests during the same period in 2023.offerings.

At December 31, 2024,2025, our cash and cash equivalents balance totaled $14,035$9,178 thousand compared to $5,684$14,035 thousand at December 31, 2023,2024, ana increasedecrease of $8,351$4,857 thousand. The increasedecrease in cash and cash equivalents is primarily attributable to our publicnet offeringloss of $5,496 thousand and thean concurrentincrease privatein placementour andaccounts the related SPV’s exercisereceivables of its$1,195 participation right during 2024 (see “Note 8 – Equity” for additional information),thousand, which was partially offset by our netnon-cash lossexpenses of $5,299$1,238 thousand.

At December 31, 2024,2025, our current assets were in excess of current liabilities resulting in working capital of $12,809$8,642 thousand as compared to $4,253$12,809 thousand at December 31, 2023.2024. 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 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 December 31, 2024,2025, approximately 2.1 million shares (or 21.3 million shareson a pre-reverse stock split basis) of our common stock are issuable upon exercise of our outstanding warrants, which number excludes the shares of common stock issuable upon exercise of theour Pre-Fundedoutstanding Warrants,pre-funded warrants, and we may receive up to $22.5$22.4 million in aggregate gross proceeds from the cash exercises thereof, subject to certain beneficial ownership limitations set forth therein. TheOur Warrantsoutstanding warrants require the warrant holder to tender cash upon exercise, with the exception of the Underwriteroutstanding Warrantsunderwriter’s (aswarrants definedand above)placement agent warrants, which allowallows the holder of such warrants 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 year ended December 31, 20232025, resulted in cash outflows of $3,233$4,736 thousand, primarily due to the net loss for the period of $5,194$5,496 thousand,thousand and an increase in our accounts receivables of $1,195 thousand during such period, which was partially offset withby net non-cash expenses of $1,045$1,238 thousand,thousand. The increase in accounts receivables was predominately driven by a shipment of twenty-six process burners and an increasecompletion of $869multiple thousandCFD studies during the month of contractDecember liabilities, which represents payments from customers in advance of future project costs.2025.

InvestingFinancing activities for the year ended December 31, 20232025, resulted in cash inflowsoutflows of $2,490$21 thousand, which is primarily attributable to the redemption $4,847$45 thousand of short-termdisbursements held-to-maturityrelated U.S.to treasuries,taxes paid for the vesting of certain employee RSUs and stock awards, partially offset by $2,162$24 thousand ofin purchasesnet forproceeds received from the same typeexercise of investments.our outstanding warrants.

Financing activities for the year ended December 31, 2024, resulted in cash inflows of $12,946 thousand, which is primarily attributable to the net proceeds received of $12,967 thousand from the issuance of securities in connection with the recentour equity offerings (seeduring “Note 8 – Equity” for additional information).2024.

We have incurred losses since inception totaling $106.7$108.0 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 MarchJune 31,30, 2026, we have raised approximately $105.3$109.2 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.

Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

Consolidated revenues for the three months ended MarchJune 31,30, 2026 were $191$560 thousand compared to $401$133 thousand for the same period in 2025,2025. whichDuring the three months ended June 30, 2026 revenues were predominantly generated by delivering a portion of our flare system equipment order, fulfilling multiple spare parts orders related to mid-stream and boilerfinalizing process burner productCFD offerings.studies. Revenues for the three months ended MarchJune 31,30, 2025 were predominantly generated fromby delivering spare parts orders to multiple customers and engineeringa servicesboiler offerings.burner order.

Gross profit decreased by $589$416 thousand, or 300.5%,thousand for the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025. Gross profit decreased primarily due to lower revenues and a $410 thousand increase in cost of goods sold expenses for a warranty accrual estimate adjusted during the three months ended March 31, 2026. The adjusted warranty accrual estimate related to process burners installed during the third quarter of 2025. These burners are operational and have met applicable emissions requirements up to 80% of the specified normal firing rates. However, a temporary adjustment to these burners was required to enable operational performance up to the maximum specified firing rate, which in turn affected burner compliance with our emission guarantees. To establish our technology and customer service reputation within the market, we have established a warranty accrual estimate, that we believe, will provide for us to meet both our product guarantees and maintain our good standing with thisour affected customer. Furthermore, gross profit also decreased by a change in product mix year-over-year driven by a decrease in spare parts revenue.

R&D expenses decreasedincreased $198$201 thousand, or 44.3%,81.4%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. The decreaseincrease was predominantly due to receipt of $115$100 thousand in moniessubcontractor forcosts cost-sharingrelated expensesto associatedour with a collaborative R&DDOE project. TheseAs noted in “Note 11 – Government Assistance,” above, monies were received in accordance withfrom the termsDOE ofgrant aare collaborativerecorded R&Das agreementother thatincome weunder enteredgovernment into during the fourth quarter of 2025, pursuant to which we agreed to test our boiler burner product using hydrogen fuel for the purpose of assessing its emissions and efficiency.assistance.

G&A expenses decreased $369$368 thousand, or 18.4%,22.4%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. The decrease was predominantly due to $450$300 thousand in accrued legal fees during the prior period that were not present during the current period, which legal fees related to work performed by the former Special Committee to respond, manage and otherwise address attempts by several stockholders to submit director nomination notices in connection with our 2025 annual meeting of stockholders. The decrease in year-over-year legal fees was partially offset by an increase of $139 thousand in legal fees associated with an advancement claim by the Former Directors (refer to “Recent Developments – Advancement Claim” above for further details).

At MarchJune 31,30, 2026, our cash and cash equivalents balance totaled $7,736$9,889 thousand compared to $9,178 thousand at December 31, 2025, aan decreaseincrease of $1,442$711 thousand. The decreaseincrease in the cash and cash equivalents balance is primarily attributable to our$3,413 thousand in net lossproceeds from the issuance of $2,190common stock in connection with the Public Offering (see “Recent Developments – Public Offering” for more information), an increase of $315 thousand in contract liabilities driven by customer receipts and non-cash expenses of $327 thousand, which was partially offset primarily by anet decreasecash used in accountsoperations. receivablesFurther, ofsubsequent $1,189to thousand.June 30, 2026, we received an additional $1,749 thousand in net proceeds in connection with the Private Sale, which was consummated on July 22, 2026 (see “Recent Developments – Private Placement – Stock Purchase Agreement” for more information).

At MarchJune 31,30, 2026, our current assets were in excess of current liabilities resulting in working capital of $6,609$8,846 thousand compared to $8,642 thousand at December 31, 2025. 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 MarchJune 31,30, 2026, approximately 2.1 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 $22.4 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 to which we will be able to raise funds in this manner.

Operating activities for the threesix months ended MarchJune 31,30, 2026, resulted in cash outflows of $1,348$2,584 thousand, primarily due to the net loss of $2,190$3,497 thousand, which was partially offset by an increase in accounts receivable of $986 thousand anddriven aby decreasecustomer billings, an increase in other currentcontract liabilities of $180$315 thousand partially offset primarilydriven by acustomer decreasecash incollections accountsand receivablesnon-cash expenses of $1,189$327 thousand during such period.

Operating activities for the threesix months ended MarchJune 31,30, 2025, resulted in cash outflows of $1,111$1,622 thousand, primarily due to the net loss of $2,076$3,756 thousand and a decrease of $967 thousand in deferred costs, which was partially offset primarily by non-cash expenseexpenses of $118$245 thousand and an increase in contract liabilities of $814$2,495 thousand during such period. The change in contract liabilities during the three months ended March 31, 2025, was impacted by customer collections for uncompleted orders as of March 31, 2025.

Investing activities for the threesix months ended MarchJune 31,30, 2026, resulted in cash outflows of $64$89 thousand, which is primarily attributable to disbursements for patents and other intangible assets.

Investing activities for the threesix months ended MarchJune 31,30, 2025, resulted in cash outflows of $41$57 thousand, which is primarily attributable to $37 thousand of disbursements for patents and other intangible assets.

Financing activities for the threesix months ended MarchJune 31,30, 2026, resulted in cash outflowsinflows of $32$3,381 thousand, which is primarily attributable to$3,413 disbursementsthousand relatedin tonet taxesproceeds paid forfrom the vestingissuance of certain employee restrictedcommon stock units.in connection with the Public Offering.

Financing activities for the threesix months ended MarchJune 31,30, 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 certain warrants.