UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 20172019

OR

For the transition period from ______________ to _______________

Commission file number 001-35521

CLEARSIGN COMBUSTIONTECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

12870 Interurban Avenue South

Seattle, Washington 98168

(Address of principal executive offices)

(Zip Code)

(206) 673-4848

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨Nox

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨Nox

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yesx No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx No¨.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes¨ Nox

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

As of June 30, 2017,2019, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the last sale price of the common equity was $57,000,000.$22,000,000.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

As of March 27, 2018,30, 2020, the registrant has 21,358,85326,707,261 shares of common stock, par value $.0001, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statementproxy statement for the 20182020 Annual Meeting of Shareholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31, 2017.2019. 

Combustion

Technologies Corporation

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

CONTAINED IN THIS REPORT

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may,” “will” or other similar expressions in this report. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of any products; anticipated expenses; and future financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to:

Forward-looking statements may appear throughout this report, including without limitation, the following sections: Item 1“Business,” Item 1A “Risk Factors,” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report. You should not place undue reliance on these forward-looking statements.

Unless otherwise stated or the context otherwise requires, the terms “ClearSign,” “we,” “us,” “our” and the “Company” refer to ClearSign Combustion Corporation.Technologies Corporation and its subsidiary, ClearSign Asia Limited.

PART I

ITEM 1: BUSINESS

Introduction

We design and develop technologies for the purpose of improvingthat have been shown to significantly improve key performance characteristics of combustion systems, including emission and operational performance, energy efficiency, safety and overall cost-effectiveness. We believe that our patented Duplex™ClearSign Core™ technology is capable of enhancingcan enhance the performance of combustion systems in a broad range of markets, including the energy (upstream oil production and down-stream refining), commercial/institutional, commercial and industrial boiler, chemical, petrochemical, and powerpetrochemical industries. Our DuplexClearSign Core technology, which is our primary technology, uses a porous ceramic tile abovestructure held at a standarddistance from the injection planes of a burner to significantly reduce flame length and achieve very low emissions without the need for external flue gas recirculation, selective catalytic reduction, or excess air systems. To date, our operations have been funded primarily through sales of our equity securities.We have earned nominal revenue since inception in 2008.

While we have recently begun commercializingOur combustion technology has been successfully installed in commercial projects across four different combustion applications. These applications include our Duplexprocess burner technology Duplex has had limited testingwhich is currently being optimized to suit high intensity multiple burner industrial applications, and verification by independent third parties and, based on the results of our laboratory and field testing as well as our initial commercialized installationsboiler burner technology which is being configured to achieve performance certification for commercialization in different applications, we believe that this proprietary technology is capable of improving emissions control performance and operational performance for many types of industrial and commercial combustion systems. As a result, we also believe that Duplex may reduce costs associated with the construction (including refurbishment and upgrade), operation and maintenance of these combustion systems as compared to combustion systems that use no or alternative technology to enhance combustion and control emissions.

China. Based on the results of our testing and initial field installations, we believe that Duplex compares favorably withcombustion equipment utilizing ClearSign Core technology is more effective and cost-efficient than current industry-standard air pollution control technologies, such as selective catalytic reduction devices, low- and ultra-low NOx burners (which address nitrogen oxides or NOx), excess airexternal flue gas recirculation systems and other similar technologies. Such air pollution control systems are widely used in places within our current target market segments ofmarkets such as in petroleum refining and petrochemical process heaters, large-scale once through steam generators (OTSGs), enclosed ground flares, institutional commercial and packaged boilers.industrial boilers and other similar equipment. We believe that our ClearSign Core technology can provide value to our prospective customers not only by helping them meet current and possible future legislative mandates to reduce pollutant emissions, but by also increasing operating efficiency and reducing capital expenditures while remaining compliant with operating permit emissions requirements.

Based on the limited operating data we have obtained from installations, burners utilizing ClearSign Core ceramic technology provide increased heat transfer efficiency compared to standard burner designs. This is consistent with the physics of heat transfer and the mechanisms by which the ceramic technology functions. The increased heat transfer efficiency as reported potentially results in cost savings in the low to mid-single digit range, which would produce an extremely attractive pay-back period for an investment in ClearSign Core technology-based burners. In addition, since the flames in a ClearSign Core system are established within the confines of a ceramic structure and form with minimal “bulking up” from dilutive inert flue gasses, the flame volumes are small, thus virtually eliminating flame impingement and enabling the burners to function better in tightly spaced heaters compared to the flames of traditional low NOx burners. As a result, heaters utilizing ClearSign Core technology appear to require less maintenance, operate at a lower cost, enable increased productivity when heater operation would otherwise be a combination of enlarged traditional low NOx flames and the constraint of limited internal furnace volumes, and, more importantly, may decrease process downtime.

Although less developed at this time, we are developing and commercializing a range of sensing products. The markets for these products are wide ranging. These products are being developed to provide superior performance in the flame sensing market and we anticipate that the customers for these products will be similar to our ClearSign Core technology customers, with the addition that the technology is applicable to all installed burners and is not focused on regions in which reducing emissions is a high priority. The second target market is outside of the typical combustion industry and includes transportation industries. While this fundamental technology is proven, the development and refinement for individual applications, obtaining the certifications required for commercial deployment and establishing an efficient manufacturing source and channels to market will take some time and we cannot assure that these goals will be achieved. We believe our sensing technologies provide a valuable diversification for our future business. We believe that the burner sensing technology has a global application, as compared to our burner technology which is focused on regions requiring emissions reduction. Like the burner technology, the burner sensing technology is being developed to provide convenient replacement and retrofit solutions in existing equipment in addition to inclusion in newly built equipment. We believe that the opportunities for applications of our sensor technology in the transportation market are global and of great value, but will also take longer to commercialize for the reasons stated above. We anticipate that this will allow for the continued expansion and growth of our business beyond the maturation of our combustion related businesses.

Corporate History

We were incorporated in Washington on January 23, 2008. The address of our corporate headquarters is 12870 Interurban Avenue South, Seattle, Washington 98168 and our telephone number is (206) 673-4848. Our website can be accessed atwww.clearsign.com. The information contained on or that may be obtained from our website is not a part of this report.

Recent Developments

On July 28, 2017 we formed ClearSign Asia Limited, a Hong Kong corporation. On November 20, 2017, we announced that we received a Letter of Intent from TG CITIC Environment Investment Group (TG CITIC), which is a joint venture between Tangshan Iron and Steel Group Company Limited and CITIC Group Corporation Ltd. The Letter of Intent from TG CITIC indicates their interest in investing in ClearSign Asia Limited as well as assisting in accelerating the marketing and promotion of our products for the Chinese market. We expect to reach a definitive agreement TG CITIC in 2018, however no assurance can be given that any definitive agreement will be entered into. Based in Hong Kong, ClearSign Asia Limited will have exclusive rights in greater China and key marketscurrently operate in the Asia Pacific region to certainUnited States and through a subsidiary in the People’s Republic of our intellectual property.China.

Our Industry

The combustion and emissions control markets are significant, both in the wide array of industries in which the systems are used and in the amount of money spent in installing and upgrading systems. TheseCombustion systems are used to provide heat for all manner of industrial processes, including boilers, furnaces, kilns and gas turbines. In order to maximize energy efficiency while keeping pace with regulatory guidelines for air pollution emissions, operators of thesecombustion systems are continually installing, maintaining and upgrading a variety of costly process control, air pollution control and monitoring systems. Although we believe that there are many potential markets for our DuplexClearSign Core technology, to date we have limited the introduction of Duplexthis technology to certain segments including petroleum refining process heaters, steam generation, boiler burners, and enclosed ground flares.

Our initial target markets center on the energy sector, including upstream crude oil production through the use of OTSGs and wellhead enclosed flares and downstream oil refineries through the use of process heaters and boilers. In recent years, the energy sector has been significantly affected by the volatile market price of crude oil and marginal economic growth. Crude oil prices have stabilized during 2016 and 2017 and enjoyed appreciation with the general post-election upswing in certain commodities and improved economic outlook. According to the U.S. Energy Information Administration, the spot price of West Texas intermediate crude oil in the last five years has ranged from approximately $110$77 per barrel to approximately $25$26 per barrel, with 20172019 prices ranging from $42$46 to $64 per barrel and February 2018 prices approximating $62$66 per barrel. Regardless of the effect of crude oil price volatility, based upon our experience and feedback from current and prospective customers, we believe that the value of our DuplexClearSign Core burner technology to the energy sector continues to be validated because of the technology’s ability to cost-effectively lower emissions and drive certain operational efficiencies.

OperatorsWe believe operators in all of our domestic target markets are under intense pressure to meet current and proposed federal, state and local pollution emissions standards. The standards applicable to our target markets have been developed over the past 50 years with broad political input. Due to the localized effects of poor air quality, we expect these standards to continue to become more stringent regardless of political leadership. We believe this to be the case in the U.S. and worldwide in most major developed and developing countries. As an illustration, air pollution emission standards are most stringent in the states of California and Texas, two states which, historically politically leaning in opposite directions.have leadership from different political parties. As a result, these standards are a significant driver infor our development and sales efforts. We believe that our DuplexClearSign Core technology can provide a unique, cost-effective pollution control solution for operators in comparison to all known competing products.

Emissions standards largely emanate from the Clean Air Act, which is administered by the Environmental Protection Agency (EPA) and regulates six common criteria air pollutants, including ground-level ozone. These regulations are enforced by state and local air quality districts as part of their compliance plans. As a precursor to ground-level ozone, NOx is a regulated emissionpollutant by local air quality districts in order to achieve the EPA limits. The 8-hour ground-level ozone regulations have been reduced from 84 parts per billion (ppb) in 1997, to 75 ppb in 2008, and 70 ppb in 2015, with the requirement of realizing these levels approximately 25 years following the year of legislation. The areas of non-attainment related to this 1997 limit of 84 ppb are depicted below in the map on the left and the projected areas of non-attainment related to the 2015 limit of 70 ppb are depicted below in the map on the right.

Non-attainment areas under the 1997 limit of 84 ppb		Projected non-attainment areas under the 2015 limit of 70 ppb
Source: EPA, August 2016		Source: URS, August 2015

We have noted that local air quality districts in EPA designated “severe non-attainment zones” in California are uncertain as to how they will achieve the 2015 standard and other future EPA requirements. Because of this uncertainty, we believe that local regulators are in search of additional means beyond those included in the current regulations to comply with the impending standards. Although NOx emissions from refineries and other oil production and processing operations are highly regulated since they are historically a significant source of stationary NOx emissions, enclosed flares have not historically been viewed as a source requiring the same level of regulation. We believe that our ClearSign Core technology is uniquely able to address the emissions challenges being faced by oil producers and other industries as those challenges relate to both current and reasonably predictable future local air emission standards.

Additionally, we believe that current emissions standards in Europe, Chinathe Middle East, parts of Asia and Canada will continue to trend towards stricter air emission standards as these jurisdictions seek to achieve cleaner air. Existing and new emissions standards in such jurisdictions may create additional market opportunities for us.

We have noted that local air quality districtsClearSign Core Burner Technology

The name “ClearSign Core” was adopted to describe the inclusion of ClearSign’s burner technology in EPA designated “severe non-attainment zones” in California are uncertain asthe products of original equipment burner manufacturers, providing those manufacturers with a new product range with the unique capability of the ClearSign technology. This will allow ClearSign to how they will achieve the 2015 standard. As such,leverage our technology and allow our prospective OEM partners to combine their global manufacturing, order fulfillment and service capabilities with what we believe is a distinctively differentiated product performance. Our ClearSign Core burner technology consists of an industrial burner body and a downstream porous ceramic structure. When the unreacted mix of gaseous fuel and air is directed at the ceramic structure, the mixture ignites and stabilizes within the structure itself. Because the fuel and air have more time to mix, the homogeneous mixture mitigates NOx-forming hot spots and chemistry that local regulators are in search of additional means beyond those includedtypically produced. The mixing and combustion in the current regulations to comply withceramic structure results in a dramatically shorter flame, and modification of the impending standards. For example, although NOx emissions from refineries and other oil production and processing operations are highly regulated since they are historicallystructure enables a significant source of stationary NOx emissions, enclosed ground flares have not historically been viewed as a source requiring the samehigh level of regulation.control over the shape of the flame allowing it to be optimized for a wide range of different applications. NOx, a regulated greenhouse gas pollutant comprised largely of nitrogen oxide and nitrogen dioxide, can be greatly reduced to levels of 5 ppm or below, depending on the specific application, without any external fans or associated power, thereby minimizing harmful emissions while improving system efficiency. A shorter flame can often allow for operation of the furnace at a higher capacity. We believe that our Duplex technology is uniquely able to addressClearSign Core’s radiant heat transfer from the emissions challenges being faced by oil producersceramic structure enhances thermal efficiency, minimizes the possibility of flame impingement and other industries as those challenges relate to both current and reasonably predictable future local air emission standards.reduces the likelihood of carbon deposits forming on the inside surfaces of the process tubes (coking) or failure of process tubes, thereby extending the length of time a heater can remain in operation before the need for maintenance.

ClearSign Core Plug & Play

Our Technologies

In the process of attempting to develop our ECC technology beyond laboratory scale for a potential process heater design in 2013, we developed Duplex, which is a simplified application for gaseous fuel. While we continue to pursue development of our ECC technology through laboratory testing, in 2014 we began to pursue field development and conditional sales of our Duplex technology. We engaged in a number of field development projects in which we successfully demonstrated the technology operating with thermal output of up to 62 million BTU/hr in an OTSG and pursued business development and marketing activities with established entities that use steam generators, process heaters, enclosed flares, boilers, and other combustion systems as well as original equipment manufacturers (OEMs).

We have completed several field test projects in three of our five target markets using our Duplex technology: one related to wellhead enclosed flares, four related to process heaters in the oil refining industry, and three related to OTSGs in the enhanced oil recovery industry. We believe that the successful completion of these field development projects, which resulted from years of research and development work, is fundamental to the commercialization of our Duplex product. We reported our first meaningful product sales of $621,000 during the second half of 2016 from the installation of our Duplex technology through retrofits of a wellhead enclosed flare for a major California oil producer, an enhanced oil recovery OTSG, and two refinery process heater projects. Furthermore, we entered into an agreement to supply the oil producer customer with 5 additional wellhead enclosed flare retrofits for $900,000 and in 2017 we delivered three units generating sales revenue of $540,000. The remaining two units were completed and installed in the first quarter of 2018. Our laboratory research currently focuses on enhancing our Duplex products and includes the development of a packaged boiler application that enhances operational performance by eliminating flue gas recirculation.

Product Applications of Duplex

We have to date applied our Duplex technology through retrofits of existing burners. These often involve engineering around an existing burner architecture that can complicate the Duplex installation. Because of this, we believe that the retrofit market is best suited for larger projects and larger applications of Duplex.

Process Heaters in the Oil Refining Industry

We have completed laboratory testing and our first field test at a Texas oil refinery of a new burner product for refinery and industrial process heater applications. To date we have successfully retrofitted two process heaters with the standard Duplex and one with the Duplex Plug & Play™ design. We have two additional installations in process. The DuplexClearSign Core Plug & Play designproduct provides a more simplified, pre-engineered and standardized direct burner replacement for traditional refinery process heaters. We believe that this product will reduceminimize the customized engineering associated with typical retrofits and lend itself to mass production. The product derives its name from the fact that it is designed to allow quick and easy installation into a multi-burner heater or furnace and possibly allow the heater to continue operating during installation rather than be shut down. If field testing continuesWe believe that the simplicity of the actions required to confirm this design attribute,retrofit refinery process heaters with the ClearSign Core Plug & Play, and the potential ability to install the DuplexClearSign Core Plug & Play while the remaining burner system is operational, will allow customerslead to limit down timeincreased demand for, and shorten theultimately sales cycle often prolonged by annual or semi-annual scheduled maintenance. We plan to continue field testing of, additional configurations and burner sizes to further enhance the performance and dependability of the product. If successful, we believe that this product, our first complete burner product, will be suitable for licensing and potential manufacturing arrangements with original equipment manufacturers (OEMs) with established manufacturing and distribution capabilities.ClearSign Core burners.

Wellhead Enclosed Ground FlaresClearSign Core Boiler Burner Technology

A major California oil producer approached usOur ClearSign Core boiler burner technology is, in early 2016essence, the same as the process burner technology. The details of the components are different due to addressthe different orientation of the boiler application, the different internal chamber dimensions and the fact that a unique emission compliance need relating to wellhead enclosed ground flares. We developedboiler operates with a Duplex application, completed the wellhead enclosed ground flare retrofitrelatively high combustion air pressure, and received payment in the third quartercase of 2016, thereby recognizing $260,000a small fire tube boiler, a lower fuel gas pressure. The concept of revenue.incorporating the ClearSign Core technology into a typical OEM burner remains the same.

ClearSign Core Flaring Burners

Our ClearSign Core flaring technology incorporates the same principles as our burner technology, namely directing the fuel gas, in this case typically waste gas, into an air stream with that air and gas mixture forming a flame stabilized on a downstream ceramic structure. This wastechnology has been configured into standard modular designs that can be incorporated into a flame manufacturer’s flare body to provide a flare product with the extremely low emissions production enabled by our ClearSign technology. The pods are designed with standard firing capacities, and these are combined in varying quantities to enable flares to be produced with different firing rates.

ClearSign Eye™ Flame Sensor

The ClearSign Eye™ flame sensor is an important milestone because itelectrical flame sensor for industrial applications. Unlike flame rods, sensing electrodes do not have to make contact with the flame. We are continuing to pursue opportunities for this patented sensing technology through both laboratory research, where we have demonstrated certain favorable attributes of this proprietary technology operating at lab scales, and full scale prototype testing for technology related to burner applications. We have multiple options open to us as channels to market, including manufacturing the broad applicationsensors as a ClearSign original equipment manufacturer, or OEM, product that we sell either directly or through partners and intermediaries to prospective customers. The value of our Duplex technology. Assensing technology is that it provides a result,very reliable alternative or replacement technology for critical safety equipment that is typically very unreliable and requires frequent maintenance on industrial burners. There are additional favorable opportunities for flame sensors on other combustion equipment such as flares, thermal oxidizer burners and boiler burners.

Our sensing technology detects the capacitance of a flame, enabling the sensors to function while being physically outside of the flame envelope. This allows the entire sensor probe to be positioned in a cool region, enabling the use of materials and manufacturing processes that provide an extremely long functional life. The electrodes are optimized in shape to provide the most robust signal while being easy to retrofit into existing burner equipment.

Development and Deployment of Our Technology

To date, we entered into an agreement to supply this oil producer with five additional wellhead enclosed flarehave deployed our ClearSign Core technology through retrofits for $900,000, with threeand replacements of existing burners and complete replacement units completed during 2017. The remaining two units were completed in the first quartercase of 2018. We previously received 40%our Plug & Play products. Retrofits often involve engineering around an existing burner architecture that can complicate the ClearSign Core burner installation, whereas replacements are more straightforward and more amenable to being sold and installed by third parties, enabling more expansive channels to market. This is especially the case after the introduction of our Plug & Play technology in February 2017 and the contract amount as an initial payment on these units, which is standard for the industry forsimplified control and operation of this stage of completion. These funds, netted against costs through the 2017 year end, are included in contract assets on our balance sheet as of December 31, 2017. These sales were recognized in the first quarter of 2018 as each of the remaining two units were installed and acceptedtechnology enabled by the customerinclusion of a new start up and flame initiation system in April 2019. Because of this, we have focused the performance obligations were completed.

Based upon discussions with local regulators and examinationdevelopment of regulatory reports,our technology to provide designs that can be included into our prospective customers’ equipment as self-contained modules or assemblies rather than projects involving the re-engineering of existing burner systems. In this form, we believe that the ClearSign Core burner technology is ideally suited for installation into new heaters and burner replacements, including heater and furnace types requiring large quantities of burners. We have also developed the ClearSign Core flare emissionsand are optimizing our boiler burner technology into a potential target for increased regulation,similar repeatable form to aid its inclusion in part becausestandard industry equipment on a commercial scale.

For simplification and marketing, we have adopted the successterm “ClearSign Core” to refer to the inclusion of our installationsstandardized proprietary combustion technology into a variety of combustion equipment types including, but not limited to, date has shown regulators that establishing emissions standardsprocess heater burners, boiler burners, burners for ground flaresthermal oxidizers and flares. Earlier heater retrofits in which a continuous ceramic “wall” was suspended above the existing burners also still operate and continue to be referred to as “Duplex” technology. The combustion controlling principles of both the “ClearSign Core” and “Duplex” technologies are the same, however the difference is possible. In anticipation of this, we are pursuing potential customers with target ground flare applications that would benefit from our proven installations.

OTSGs in Enhanced Oil Recovery Industry

We have successfully installed our Duplex technology in two OTSG projects in the enhanced oil recovery industry in Southern California. In March 2017, we entered into an agreementease of use, channel to complete a third installation for this customer fueled by oil field waste gas insteadmarket and standardization of natural gas. This installation was completed in the first quarter of 2018. We believe that our successful installations in the OTSG market to date are gaining regulator acceptance by the Southern California regulatory authorities and, as a result, market acceptance.

Duplex’s Emission Results and Licensingtechnology.

We have now achieved emission results which exceededin multiple applications that were superior to current local Best Available Control Technology (BACT) levels in multiple installations in California related to three of our five target industries. We intend to continue to demonstrate DuplexClearSign Core capabilities through (i) working with local air quality officials to demonstrate the effectiveness of the technology, (ii) operating in-place units, (iii) engineering and testing with new customers, and applications, (iv) pursuing additional lab research and development ofdeveloping new applications (e.g. packagedinstitutional commercial and industrial boilers) and next generation improvements to DuplexClearSign Core design and standardization, including the pursuit of more complete systems similar to the DuplexClearSign Core Plug & Play for application in other vertical markets, and (iv)(v) assisting our customers in making emission results available for designation as BACT by local regulatory bodies.

Our business plan contemplates licensingClearSign Core Technology Product Applications

To date, we have deployed our ClearSign Core technology through retrofits and replacements of existing burners. Retrofits often involved engineering around an existing burner architecture that can complicate the installation. This was the case with the old “Duplex” technology, which we no longer install other than for the servicing of existing units. Replacements are more straightforward, especially after we prove commercial viability and generate interest from OEMs. We believe licensing would significantly change the makeupintroduction of our sales mix, sales cycles,Plug & Play technology in February 2017, now developed into our ClearSign Core. By developing our ClearSign Core technology to enable a replacement product, we are able to standardize our designs, simplify inventory and, margins. Licensingby removing the need to individually engineer every application, we are able to collaborate with other commercial equipment suppliers to incorporate our ClearSign Core technology withininto their standard product lines, greatly increasing our potential market reach and the resources we are able to make available to our prospective customers.

Process Heaters in the Oil Refining Industry

To date, we have successfully retrofitted two ClearSign Core installations, two process heaters with the standard Duplex design and one or an array of selected vertical markets (e.g. burnersdemonstration unit with the Duplex Plug & Play design. The ClearSign Core “Plug & Play” design provides a more simplified, pre-engineered and standardized direct burner replacement for traditional refinery process heaters or packaged boilers) could dramatically accelerate the global sales and market adoption rate of our technology. In order to create channel flexibility and meet end user demand however, we intend to continue to pursue end user customers through direct sales, sub-contractors, or channel partners. While we are currently pursuing various licensing arrangements, we have no agreements at this time and do not anticipate entering into any such agreements prior to completing the field development projects discussed above and completing a meaningful number of installations and sales.heaters. We believe that this product will reduce the continuing development of Duplex,customized engineering associated with typical retrofits and lend itself to mass production. This is our most developed burner product, able to operate the completion of salessame way as a standard burner and an increase in end-users will enhance our ability to license our technology.fit into a heater and control systems. We believe that this product is suitable for licensing and potential manufacturing arrangements with OEMs having established manufacturing and distribution capabilities.

We plan to continue extending the range of ClearSign Core Plug & Play devices to allow the replacement of other burner shapes and configurations, as well as alternate process applications, to further enhance the market available for this product.

DevelopmentWellhead Enclosed Flares

A major California oil producer approached us in early 2016 to address a unique emission compliance need relating to wellhead enclosed flares. This was an important milestone because it demonstrated the broad application of ECCour Duplex technology. A total of six units using the Duplex technology have been installed for enclosed flares to date. The standardized ClearSign Core technology was developed from the Duplex technology, which it has now replaced. One installation of the ClearSign Core technology in a wellhead enclosed flare is installed and awaiting customer testing.

Based upon discussions with local regulators and examination of regulatory reports, we believe that enclosed flare emissions are a potential target for increased regulation, in part because the success of our installations to date has shown regulators and the EPA that it is possible to establish NOx emissions standards for enclosed flares. In anticipation of this, we are pursuing potential customers with target enclosed flare applications that would benefit from our technology. In 2019, with the development of our standardized ClearSign Core flare technology, we formed a collaborative alliance with the flare OEM, ASHCOR, to enhance our potential sales reach and production capabilities while providing ASHCOR with unique product capability.

OTSGs for the Enhanced Oil Recovery Industry

We have successfully installed our Duplex technology in three OTSG projects in the enhanced oil recovery industry in California. We believe that these successful installations are continuing to pursue developmentgaining regulator acceptance by the Southern California regulatory authorities and, as a result, market acceptance. Field data reported by our customer indicates significant efficiency improvements resulting from the installation of our patented ECC technology through laboratory research where we have demonstrated certain favorable attributesthe ClearSign technology.

Industrial Commercial Boilers

There are a large number of this proprietary technology operatingboiler manufacturers producing many styles of boiler equipment for many different applications. Boilers are used in many industrial applications, as well as in commercial and residential applications at labmuch smaller scales. We are also developing certain derivativecurrently actively working on commercial boiler applications for two distinct types of industry standard commercial boilers – fire tube and water tube boilers. For fire tube products, we have recently developed our own prototype burner replacement product expressions, some unrelatedsimilar in concept to industrial combustion products, thatour ClearSign Core Plug and Play device for process heaters. This product has achieved excellent results after testing in a typical commercial fire tube boiler produced by one of the industry’s largest suppliers. Water tube boilers are larger and more varied in their designs. These field projects are being testedundertaken in China and validated bothare ongoing. We anticipate significant progress during 2020 in testing this equipment although progress has been delayed by the Companyeffects of the SARS-COV-2 virus (coronavirus or COVID-19) spread that began in China and by independent third parties.now has spread to the United States and most of the world. If the testing is successful, our goal will be to partner with established Western OEMs in the water tube and fire tube boiler industry for wider deployment of our ClearSign Core boiler burner technology in the West, and also to sell the boiler burner technology into the very large Chinese market through our Chinese subsidiary in collaboration with strategic partners in China.

Technical Components of our Duplex and ECC TechnologiesClearSign Core Technology

Our DuplexClearSign Core burner technology consists of a traditionalan industrial burner with our ClearSign Core technology added in place of the traditional burner gas tips, flame stabilization device and refractory tile. The ClearSign Core comsists of a series of gas tips arranged inside the combustion air stream at the point it passes the boundary into a heater. Some distance downstream is a primary or ignition device followed by the porous ceramic structure. Between the injection point of the fuel gas and the primary or ignition device is a support structure and a porousmixing tube or tubes that optimize the flow of the fuel and air mixture onto the primary or ignition device and the ceramic tile.structure. When the uncombustedunreacted mix of gaseous fuel and air is directed at the tile, hot gas combustsceramic structure, the mixture ignites and burns within the tilestructure itself. Because the fuel and air have more time to mix, the homogeneous mixture greatly reduces NOx- forming hot spots that are typically produced with existing technology. The mixing and combustion in an open flame are greatly eliminated andthe ceramic structure results in a dramatically shorter flame is produced.flame. NOx, a regulated pollutant comprised largely of nitrogen oxide and nitrogen dioxide, is greatly reduced to levels of 5ppm or below, depending on the specific application, without any external fans or associated power, thereby minimizing harmful emissions while improving system efficiency. A shorter flame allows for consistent operation of the furnace at a higher capacity. WeAs noted above, we believe Duplex’sClearSign burner technologies’ radiant heat transfer from the ceramic structure enhances thermal efficiency, as it eliminatesreduces the possibilityprobability of flame impingement and reduces the likelihood of cokingcarbon deposits forming on the inside surfaces of the process tubes (coking) or failure of process tubes, thereby increasing operational run time and productivity and reducing heater maintenance costs.

ClearSign Core Performance

We have now achieved emission results in a combustion chamber.multiple applications that exceeded current local BACT levels, including in multiple installations in California related to three of our five target industries. As indicated above, we intend to continue to demonstrate ClearSign Core capabilities through (i) working with local air quality officials to demonstrate the effectiveness of the technology, (ii) operating in-place units, (iii) engineering and testing with new customers and applications, (iv) pursuing additional lab research and development of new applications and next generation improvements to ClearSign Core design and standardization, including the pursuit of more complete systems similar to the process burner ClearSign Core Plug & Play for applications in other vertical markets, and (v) assisting our customers in making emission results available for designation as BACT by local regulatory bodies.

Our Target Markets

Our ECC technology consists, in its simplest form, of four major components: (a) a computer, (b) standard software delivering proprietary algorithms to (c) a power amplifier (resident outside the combustion chamber) and (d) electrodes inside or proximate to the combustion chamber. ECC introduces a high voltage electric field into the combustion process to control the resulting flames electrically through the naturally forming ions. The electrodes are optimized in material and shape to best suit the specific geometry of a given installation. We have also demonstrated a technique to apply ECC to a combustion system without requiring an electrode to have physical contact with the flame.

The basic components of both systems are either available “off the shelf” or require manufacturing techniques that are well within the current capabilities of existing technologies. Thus, ourClearSign Core products are readily available and scalable for high volume demand.

The Combustion Markets

Overview

We compete in the combustion and emissions control markets. According to the U.S. Department of Energy, in 2011, two-thirds of the energy used in U.S manufacturing is converted via boilers, furnaces, and process heaters, our core market focus.  Based on the June 2016 Frost & Sullivan Market Assessment Report, we estimate that our addressable target market over the next ten years in the United States is up to $3.6 billion, comprised of up to $1.7 billion from the industrial/commercial/institutional boiler segment, up to $0.8 billion from the refinery segment, up to $0.8 billion from the large industrial segment, up to $0.2 billion from the flare segment, and up to $100 million from the enhanced oil recovery (EOR) segment.

These are highly competitive industries that are currently dominated by companies that have both established products as well as substantially greater infrastructure, customer support networks, and financial resources than we do and established products.do. Based on the testing and the field installations completed to date, however, we believe that our DuplexClearSign Core technology offersprovides a unique and powerful ability to improve emissionsenergy efficiency and operational performance, energy efficiencywhile at the same time significantly reducing emissions, leading to an overall cost-effective installation. Further, we believe that our technology is well suited to create substantial synergistic value through its incorporation into the mainstream commercial offerings of the market incumbents as a “ClearSign Core”, thus leveraging the ClearSign technology and overall cost-effectiveness. the established breadth and capabilities of collaborating companies.

We are targeting the following segments of the combustion market:market for our ClearSign Core technology:

In each segment, we are marketing solutions with our DuplexClearSign Core technology that we believe could simultaneously improve bothproductivity, operational efficiency and pollution control and operational efficiency characteristics through (a)(i) cost-effective retrofitting of our DuplexClearSign Core technology ontointo existing standard system designs, and (b)(ii) new system designs.

Market EntryOur target markets are greatly affected by air emission regulations and economic conditions. Accordingly, our target market segments are also prioritized geographically based on the needs of the local industries and current and anticipated future demands of local environmental legislature. Details of the localized effect of these influences in the United States are described in the section of this report titled “Our Industry.” In general our immediate regional opportunities are the West Coast and Gulf Coast of the United States, and the regions of Northern China with high populations and cooler environments where district heating is a large source of fossil fuel consumption and where reducing atmospheric pollution is a high priority of the national and local governments.

We believe that our Duplex technology can be appliedCompetition, Barriers to a wide range of systems in which there is a flame. While this implies many potential market opportunities, it also requires that we exercise a disciplined approach in comparatively evaluating those opportunities in orderEntry and Go to select and prioritize those applications that are cost effective and afford the best mix of time and cost required for development relative to revenue potential. We also aim to select applications in which our technologies either offer immediate, clear, meaningful, and measurable advantages relative to competing technologies or address unmet market needs. 

We have pursued retrofitting existing systems with our Duplex technology to improve their performance as we believe that provides us the quickest path to market. This is because (1) the installed base of existing combustion systems is far greater than the annual number of newly built systems, (2) integrating our technology into a retrofit is less complex than integrating our technology into a new combustion system designed by an OEM, (3) the design cycle of a retrofit application is far shorter, and (4) we believe that with the previously challenging economic and energy industry market conditions, less costly retrofits are more attractive to many segments of the energy market than new capital equipment and infrastructure builds to comply with environmental regulations and derive cost efficiencies.

Since we have completed initial retrofit projects in three vertical market installations, we believe that pursuit of new, stand-alone products, such as the Duplex Plug & Play, will enable us to substantially increase our sales to a meaningful level through licensing or other business arrangements with OEMs. Upon broader adoption of the Duplex Plug & Play, we will pursue OEMs or other means to license the product in order to take advantage of the manufacturing and distribution capabilities of more established market participants. We are planning to develop a stand-alone product for application in the packaged boiler market and intend to investigate the value of developing additional stand-alone products.Market Strategy

The successindustry in which we have experiencedoperate is global in scope and is populated by large, established suppliers of burners and post-combustion air pollution control systems, most of which possess substantially greater resources than we do. Worldwide, suppliers of burners and air pollution control equipment include but are not limited to companies such as UOP, Callidus, Eclipse and Maxon (all four are subsidiaries of Honeywell), John Zink Hamworthy Combustion (a subsidiary of Koch Industries and including Coen), General Electric, Haldor Topsøe, Hitachi, Linde, Zeeco and Fives Group, among others. 

These systems include low and ultra-low NO_X burners, selective and non-selective catalytic reduction systems and other pollution control technologies. The companies that provide these systems are well established and their combustion and emissions control technologies are mostly based on mature, well-understood technologies that are proven in the wellhead enclosed flare, oil refiningmarket. We believe the further development of their technologies, however, will be limited largely to marginal performance improvements. As a consequence of the relatively slow pace of adopting innovation, we believe current technology offerings from the large competitors have become largely commoditized, and enhanced oil recovery sectors has allowed usdifferentiation between suppliers is very often based largely on price. This provides both an opportunity and a barrier to capitalize on these recent product development results by refocusing our personnelmore nimble, disruptive companies.

From a customer's perspective, legacy air pollution control technologies are viewed as a cost of doing business, and resources toward enhancingas a means to operate within current and productizing our Duplex technology in orderanticipated future regulatory requirements and to generate revenue. The success in these initial areas has also allowed us to work on developing the potential for installing our Duplex technology in both firetube and watertube boilers. A demonstration project on boilers is currently underway with a Chinese partner and research on this application continues in our laboratory.avoid fines.

Sales and Marketing Plan

Partnership Strategy and Field Development.Unlike most other kinds of capital equipment that provide an economic return through enhanced productivity or efficiency, we believe customers of traditional emissions control equipment do not expect any positive return on emissions control investments other than the right to continue operations or avoidance of fines. We believe thatthe ClearSign Core suite of products offers prospective customers the unique opportunity to greatly reduce capital investment and to realize a return on investment through increased efficiency and/or increased productivity, thereby further differentiating the Company’s technologies from the competition.

As indicated above, we are seeking to develop our technologies havebusiness in the potential to transform industries that rely on combustion and emissions control market and to establish ourselves in a highly competitive industry among companies that our technologies are broadly applicablehave substantial financial resources, a well-developed infrastructure and established products. The business development strategy for ClearSign is planned and being implemented to enable the value of ClearSign technology to be recognized while minimalizing the challenges, discussed below, potentially provided by the strengths of the other participants and the nature of the customers in large, scalable, global markets.this market.

We intendMajor barriers to form strategic partnerships and/or license agreements with key incumbents who are currently participating in our targetedentry for a new equipment manufacturer into this market segments. We expect to maintain our existing capabilities to serve our end-user customers via our current channel partners and subcontractors.

Our targeted market segment territories include North America, Europe, and China and encompass:  are:

We currentlyThe “go to market” strategy for the ClearSign Core combustion business has been developed considering both the strengths and weaknesses of ClearSign. The most important weaknesses are pursuing field development programshighlighted by the barriers to entry identified above: we are a small company with limited financial resources, we do not have a company infrastructure to meet the requirements of our Duplexsophisticated target global customers, and while we have highly skilled and experienced employees we do not have the manpower to provide comprehensive service and customer support ourselves. These limitations could be overcome with a significant investment and increase in operational costs; however we believe it is in the best interests of the Company and our shareholders to develop our business with an asset light model to the extent this can enable a timely path to mainstream operations maximum profitability.

Our strengths include our technology, which has been developed to provide a standard set of “core” components that can be incorporated into any generic OEM burner products.body to provide unique emissions minimizing and flame size controlling performance. Our strengths also include the market opportunity potentially created by new and anticipated environmental emissions control regulations that require combustion performance that either exceeds the technology available from the incumbent equipment manufacturers, or requires retrofitting of existing equipment with a post combustion clean up apparatus that is a very expensive modification, especially for small to mid-sized heaters. We believe the incumbent burner OEM product development approaches to be incremental in nature, and are unlikely to pose a significant threat to the value provided by ClearSign Core technology in the foreseeable future.

Our business has been, and continues to be, developed with the goal of combining our technology with the infrastructure and resources of major OEM equipment manufacturers. Through such a collaborative arrangement, an OEM burner manufacturer can reap the benefits of adding a truly differentiated and unique product line to its offering, while for ClearSign the alliance will provide a means to overcome the barriers to market resulting from the need for a capital and operating expense-intensive infrastructure and a large specialist staff. In addition, we believe that having orders fulfilled by a well-known and trusted supplier will reduce the risk, as perceived by prospective customers, of dealing with a small company and will aid in the adoption of our technology.

Our business plan contemplates forming collaborative partnerships with major OEM equipment manufacturers. At this time our technology has been demonstrated to have commercial viability and has generated interest from end users and OEMs. We expect that the development of strategically chosen collaborative partnerships will result in the supply of ClearSign Core technology to major global customers in large quantities and with the engineering, quality control, customer support and project management services such sophisticated customers require. These programsrelationships will also enable our OEM partners to offer a unique product into the marketplace, providing a potentially significant commercial opportunity for both them and us. We believe forming such alliances willdramatically accelerate the global sales and market adoption rate of our technology. We already have one agreement at this time for our flare product with ASHCOR, which was announced in June 2019. We are aimed at our target industrial combustion markets.also pursuing various other licensing arrangements for other market verticals and ClearSign Core applications. 

Pricing Strategy. Our target markets are characterized by well-established competitors in mature businesses. As a result, competitive pricing rather than pricing based on broad product value is the standard for these markets. SinceHowever, we believe that our technology improves combustion equipment with unique capabilities and will provide greatersignificant economic value in comparisoncompared to the next best alternative solutions available to our competitors, we planprospective customers, thereby resulting in substantial value to price ourthem. This, in turn, should enable products containing ClearSign Core technology based uponto sell at prices reflecting the value they offer. Consequently, we believe that the value the ClearSign Core technology provides to the OEMs partnering with us will result in compensation to us based on that value.

Sensing Products. Our sensing products are not yet to the final commercialization phase of the development and product launch process. We have obtained clear and consistent customer feedback guiding the first application of this technology. The target market for this technology is potentially every burner in which flame sensors are deployed, providing a global and very high-volume opportunity. This market is not limited by emissions mandates or the type or manufacturer of the burners. The product is also of value in both retrofit application, where it is applied to existing burners, and to new burners, where it will be installed in the burners by the original burner manufacturer.

The technology is proven, final product design details are being completed for our target application and we are assessing various product business strategies. Unlike the ClearSign Core burner technology, we are assessing both the possibility that we believe it will provide in reduced air pollution control costs, including fines, and reduced maintenance and operating costs.

Channel Structure and Path to Market. Our path to market could involve any combinationmanufacture the sensing products along with the alternative of (1) licensing our technologies for either one-timepartnering with one or periodic licensing fees for a period of time within specific fields of use and/or territories, (2) selling our intellectual property rights within specific fields of use and/or territories, or (3) manufacturing the components required to enable our technologies and/or supplying a complete burner package through strategic subcontracting agreements. Since our solutions consist largely of off-the-shelf components, we do not anticipate that we will require a large manufacturing capacity. To the extent we will require production of specific hardware (electrodes, for example), we plan to rely on outside contract manufacturers, which we believe are widely available and for which a competitive market exists.more established OEM suppliers.

CompetitionThe fundamental technology for the sensors envisioned for transport applications is the same as for the flame sensors, but the application and Barriers to Entry

The industryform of the final product will be very different. We have received notable interest in which we operatethis product from a major global customer giving us the confidence that this is global in scopea market and technology worth future investment. This product is populated by large, established suppliers of burners and post-combustion air pollution control systems, all of which possess substantially greater resources than we do. Worldwide, suppliers of burners and air pollution control equipment include but are not limited to companies such as UOP, Callidus and Maxon (all three are subsidiaries of Honeywell), John Zink Hamworthy Combustion (a subsidiary of Koch Industries and including Coen), Babcock and Wilcox, Westinghouse, Eclipse, General Electric, Haldor Topsøe, Hitachi, Linde, and Fives North American, among others. 

These systems include low NO_X burners, electrostatic precipitators, bag houses, selective catalytic reduction systems and various types of scrubbers. The companies that provide these systems are well established and their combustion and emissions control technologies are based on mature, well-understood technologies that are proven in the market. We believevery early stages of development, and the further development of their technologies, however,application will be limited largelyhighly regulated and will require a thorough product development process. However, all indications to marginal performance improvements. Asdate suggest this is a consequencesubstantial opportunity for ClearSign and has the potential to be a significant source of this relatively slow pace of adopting innovation, we believe current technology offerings from the large competitors have become largely commoditized, and differentiation between suppliers is very often based on price. This provides both an opportunity and a barrier to more nimble, disruptive companies.

From a customer's perspective, legacy air pollution control technology is viewed as a cost of doing business and as a means to operate within regulatory requirements and avoid fines. Unlike most other kinds of capital equipment that provide an economic return through enhanced productivity or efficiency, we believe customers of traditional emissions control equipment do not otherwise expect any positive return on these investments. 

As indicated above we are seeking to enter the combustion and emissions control market and to establish ourselves in a highly competitive industry against companies that have both substantially greater financial resources than we do and established products. Because they have been available in the market for many years, our competitors’ product offerings may have several advantages.  Among these are:

We believe, however, that our Duplex technology would be an attractive alternative to the products and solutions offered by companies with which we seek to compete. In particular, we believe that our Duplex technology could offer a unique cost-effective means to reduce many pollutants at the source while improving operational efficiency. We believe our Duplex technology could be capable of reducing the requirement for costly legacy equipment, offering customers the prospect of a positive return on their investment in the form of enhanced efficiency and productivity while reducing emissions to the levels of existing air pollution control technologies. In particular, we believe our Duplex technology could offer the following advantages when compared with the next best alternatives. 

Emissions Reduction from Combustion Sources. Current technology reduces emissions by using mechanical mixing aids such as swirlers, staging combustion in two or more zones, or treating emissions such as NO_X after the fact using selective catalytic reduction. In contrast, we believe our Duplex technology can:  

Improving flame shape. The main goal of virtually all process combustion is to transfer heat to raise steam or enable a chemical reaction, and to do so as efficiently as possible. Conventional technology uses buoyancy (the natural tendency for a flame and heat to rise opposite to the force of gravity) and momentum (fuel mixed with air and forced through a nozzle, as in a torch) as the only tools to shape flames. Unfortunately, momentum effects die out over distance from their source and buoyancy always operates counter to the gravitational field. Moreover, momentum and buoyancy effects often drive wayward flames into process tubes where they cause overheating and potential failure. In contrast, we believe that our technology eliminates flame impingement by shortening the combustion flame.  

Enhancing heat-transfer and process efficiency. The main objective of industrial combustion in furnaces and boilers is to transfer heat to a process fluid. Conventional combustion techniques do their best to optimize flame shape to achieve this end, but we believe conventional combustion techniques have no additional means for enhancing heat transfer. In contrast, we believe that our technology could enhance heat transfer to the process tube with radiation from the solid Duplex tile, which is a more effective radiator than a conventional flame. 

Compared to the products and solutions of companies with which we seek to compete, we believe our technology could provide our potential customers with a lower total cost of ownership, offering the prospect of a positive economic return on investment to systems operators due to a reduction in their capital and operating expenses, and an increase in energy efficiency. 

Because our technology is not yet widely used, we do not currently represent a significant competitive presence in our industry.future.

Research and Development Program

Our research and development program includes pilot-scale research and participating customer site demonstrations. The experience and industry contacts of our management, board of directors, and consultants with potential customers in the petroleum, petrochemical, and industrial steam applications industries inform our research program. These are supported by field developmentevaluation agreements, research agreements, and memoranda of understanding with potential development partners, customers and research institutions. Our research and development activities make use of employees and consultants thatwho are experts in the areas of industrial combustion, statistical experimental design, gas turbines, fluid mechanics physicsand heat transfer.

With the maturation of particlesour ClearSign Core technology, our development process has transitioned from research to commercialization. This has included optimizing the technology to perform in a manner readily adoptable by our prospective customers and ions,easy to implement into the burner structures of our collaborative alliance partners. There are many influences on this later phase of development including customer feedback, product and electric fields. We spent $4,712,000component standardization, design for manufacture and $4,831,000 on research and developmentconsiderations to simplify inventory management, both for the years ended December 31, 2017manufacture and 2016, respectively. the lifetime support of our products.

We have tested our Duplex and ECC technologiesOur sensing technology for flame sensing applications is proven in our laboratory at capacities representative of industrial equipment. We have installed our Duplex technology on a retrofit basisbench scale and in numerous field test sites, including our Duplex Plug & Play product. Our research and development activities include the following: (1) scale up to commercially relevant sizes, (2) site demonstration at full scale (3) complete first installation, (4) complete further installationsearly prototype form. This product is transitioning to refinecommercialization. As discussed above, we also have another form of our sensing technology that we believe can indicate the potential flammability of a hydrocarbon gas and air mixture, which can have great and varied application in other industries such as transport. This product is in an earlier form and is currently undergoing validation and optimization of its installation, and its reliability, and (5) enhance our intellectual property portfolio.intended role in this very different application.

Intellectual Property Protection 

We are pursuinghave generated inventions that we believe to be patentable subject matter and for which we have been seeking protection through patent application filings. As of December 31, 2019, we have 103 active patent grants and another 61 patents pending with the U.S. Patent and Trademark Office. The earliest year in which any of our patents will expire is 2031. We have been granted 23 patents related to our ClearSign Core technology and 73 patents related to our ECC technology. We maintain an aggressiveactive review process to monitor relevant new inventions to expand our intellectual property strategy including: protection globally.

We cannot predict when our patent applications may result in issued patents, if at all. Further, we may modify a patent application in the future as we develop additional information. As a result, we may create additional patent applications from an existing application, consolidate existing patent applications, abandon applications, or otherwise modify applications based upon our judgment in order to protect our intellectual property in a reasonably cost beneficial manner.

Government Regulation 

Government approval is not required in order for us to sell the principal products or services that we are developing. Government regulation, particularly environmental regulation, however, is likely to play an important role in shaping our product mix and offerings. Our Duplex technology includes enhancement of the combustion process and reduction of certain emissions at a lower cost than current air pollution control devices. Field implementation of our technologies requires permits from various local, state and federal agencies that regulate mechanical and electrical infrastructure and fire and air pollution control. 

We believe that we offer major advances in emissions reductions and efficiency reductions.improvements. We also believe emissions regulations could enhance market demand for technology if such regulations require a reduction in criteria pollutants such as NO_X, SO_X, and CO, or others such as CO₂, or mercury.CO. In such cases, possible legislation on greenhouse gases, boiler MACTMaximum Available Control Technology (MACT) rules, or general reductions in required criteria pollutant levels globally, and especially in the U.S. and China, could serve our business objectives. Although the timing of such regulations is uncertain, the general trend over the last decades continues to be government-mandated reduction for all criteria pollutants and the addition of new emissions to those regulated.pollutants. Ultimately, it may be possible for our technology to achieve EPA BACT (Best Available Control Technology) designation. Although field development testing of our Duplex technology is ongoing, in September 2017 the South Coast Air Quality Management District governing the greater Los Angeles area approved a cooperative funding effort to work with a local refiner to implement a Duplex demonstration project in their regulatory area. The project scope, overall budget and detailed requirements are currently being finalized. We believe the availability of our technology, by itself, couldmay accelerate the government’s willingness to adopt more stringent environmental regulations. Further, we believe efficiency improvements, include enhanced mixing, lower excess air requirements, and improved heat transfer tocombined with the process. We believe such efficiency improvementselimination of flame impingement, could generate market demand regardless of the existing regulatory framework because they could result in increased productivity or savings tofor businesses that adopt our technology.

Although the current U.S. administration has indicated that it plans to pursue the reduction of environmental regulations in order to promote economic activity and to eliminate or reduce perceived needless environmental regulations, the statements and actions to date have primarily referenced elimination of regulations associated with greenhouse gas emissions, an area with secondary benefit to our technologies, and the approval of oil pipelines, a step that may benefit our business and that of our prospective customers in the energy sector. At this time, we are not aware of any current or proposed federal, state or local environmental compliance regulations that would have a material detrimental effect on our business objectives. We do not anticipate any major expenditures to be required in order for our technology to comply with any environmental protection statutes. Concurrently the Chinese government has enacted notable tightening of allowable emissions levels, particularly for NOx emissions, and we anticipate this trend will continue in the future.

Employees

As of March 27, 2018,30, 2020, we had 1715 full-time employees and 1 part-time employee.employees. Our employees are not covered by collective bargaining agreements, and we believe our relationship with our employees is good.

ITEM 1A: RISK FACTORS

We are subject to various risks that may materially harm our business, prospects, financial condition and results of operations. An investment in our common stock is speculative and involves a high degree of risk. In evaluating an investment in shares of our common stock, you should carefully consider the risks described below, together with the other information included in this report.

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.

Risks Related to Our Business

We are a company with a limited operating history and our future profitability is uncertain. We anticipate future losses and negative cash flowflows and we may never be profitable. 

We are a company with a limited operating history and limited revenues to date. We have incurred losses since our inception and expect to experience operating losses and negative cash flowflows for the foreseeable future. As of December 31, 2017,2019, we had a total accumulated deficit of approximately $50.0$68 million. We anticipate our losses will continue to increase from current levels because we expect to incur additional costs and expenses related to prototype development, consulting costs, laboratory development costs, marketing and other promotional activities, the addition of engineering and manufacturing personnel, and our continued efforts to form relationships with strategic partners. We may never generate significant revenue and we may never be profitable. 

If we do not receive additional financing when and as needed in the future, we may not be able to continue our research and development efforts or commercialization efforts and our business may fail. 

Our business is capital-intensive and requires capital investments in order for it to develop. Our cash on hand will likely not be sufficient to meet all of our future needs and because our target customers are, in general, slow to adopt new technologies, we anticipate that we will likely require substantial additional funds in excess of our current financial resources for research, development and commercialization of our technology, to obtain and maintain patents and other intellectual property rights in our technology, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. Until our technology generates revenues sufficient to support our operations, we plan to obtain the necessary working capital for operations through the sale of our securities, but we may not be able to obtain financing in amounts sufficient to fund our business plans. Furthermore, if our target customers are slow to adopt our technology, we may require additional investment capital in order to continue our operations. If we cannot obtain additional funding when and as needed, our business might fail. 

Market acceptance of our technology and business is difficult to predict. If our technology does not achieve market acceptance, our business could fail. 

We are continuing to develop our technology, which is being implemented and tested in the field by various customers andin various markets. If we are unable to effectively develop and timely promotedemonstrate our technology in a timely fashion, gain recognition in our market segments, and develop a critical level of successful sales and product installations, we may not be able to successfully achieve sales revenue and our results of operations and financial condition would then suffer. Our ability to achieve future revenue will depend significantly upon achieving a critical mass of market awareness and sales to potential customers of our products. While we plan to achieve this awareness over time, there can be no assurance that awareness of our company and technology will develop in a manner or pace that is necessary for us to achieve acceptance and profitability in the near term.

Further, we cannot predict the rate of adoption or acceptance of our technology by potential customers. While we may be able to effectively demonstrate the feasibility of our technology, this does not guarantee the industrial combustion and power generation market will accept it, nor can we control the rate at which such acceptance may be achieved. In certain of our market segments, there is a well-established channel with a limited number of companies engaged in reselling to our target customers. Failure to achieve productive relations with a sufficient number of these prospective partners may impede adoption of our technology. Additionally, some potential customers in our target industries are historically risk-averse and have been slow to adopt new technologies. If our technology is not acceptedwidely adopted in the industrial combustion and power generation market, we may not earn enough by selling or licensing our technology to support our operations, recover our research and development costs or become profitable and our business could fail. 

Our efforts may never demonstrate the feasibility of our product. 

Our research and development efforts remain subject to all of the risks associated with the development of new products based on emerging and innovative technologies, including without limitation unanticipated technical or other problems, our ability to scale our technology to large industrial applications, conditions in the field during installation and the possible insufficiency of funds for completing development of these products. Technical problems, including those specific to customer site implementation, may result in delays and cause us to incur additional expenses that would increase our losses. If we cannot complete, or if we experience significant delays in completing, research and development of our technology for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail. 

Changes to environmental regulations could make our technology less desirable. 

The negative environmental impacts of industrial activity have given rise to significant environmental regulation in industrialized countries. These regulations are important incentives in the adoption of technologies like ours. To the extent that environmental regulations in the United States and in other industrialized countries are modified in the future, or even relaxed, our technology may not produce the results required, or may even be unnecessary, to comply with the modified regulations. For example, although the current U.S. administration has indicated that it plans to pursue the reduction of environmental regulations in order to promote economic activity and to eliminateIf federal, state or reduce perceived needless environmental regulations, the administration’s statements to date have primarily referenced elimination of regulations associated with greenhouse gas emissions, an area unrelated to our technologies, and the approval of oil pipelines, a step that may benefit our business. However, if the Environmental Protection Agency relaxeslocal regulatory agencies relax the clean air regulations our technologies are designed to address, our business and results of operations could be materially adversely affected. 

We may fail to adequately protect our proprietary technology, which would allow our competitors to take advantage of our research and development efforts.

Our long-term success largely depends on our ability to market our technology. We rely on a combination of patents, trade secrets and other intellectual property laws, confidentiality and security procedures and contractual provisions to establish and protect our proprietary rights in our technology, products and processes. If we fail to obtain or maintain these protections, we may not be able to prevent third parties from using our proprietary technologies. Our pending or future patent applications may not result in issued patents. In addition, any patents issued to us, or that may be issued to us in the future, may not contain claims sufficiently broad to protect us against third parties with similar technologies or products or from third parties infringing such patents or misappropriating our trade secrets or provide us with any competitive advantage. In addition, effective patent and other intellectual property protection may be unenforceable or limited in foreign countries. If a third party initiates litigation regarding the validity of our patents and is successful, a court could revoke our patents or limit the scope of coverage for those patents.  

We also rely upon trade secrets, proprietary know-how and continuing technological innovation to remain competitive. We protect this information with reasonable security measures, including the use of confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with strategic customers and partners. It is possible that these agreements may not be sufficient or that these individuals or companies may breach these agreements and that any remedies for a breach will be insufficient to allow us to recover our costs and damages. Furthermore, our trade secrets, know-how and other technology may otherwise become known or be independently discovered by our competitors. 

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights. 

A third party may sue us for infringing its intellectual property rights. Likewise, we may need to resort to litigation to enforce our patent rights or to determine the scope and validity of third-party intellectual property rights. The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert our efforts from our business activities. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. If we do not prevail in this type of litigation, we may be required to pay monetary damages and/or expenses; stop commercial activities relating to our products; obtain one or more licenses in order to secure the rights to continue the manufacturing or marketing our products; or attempt to compete in the market with substantially similar products. Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue some of our operations. 

A cybersecurity incident or other technology disruptions could negatively impact our business and our relationships with customers.

 We use computers in substantially all aspects of our business operations. We also use mobile devices and other online activities to connect with our employees, suppliers and customers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft, the compromise of trade secrets and inadvertent release of information. Our business involves the storage and transmission of sensitive and/or confidential information and intellectual property, including customers’ and suppliers’ information, private information about employees and financial and strategic information about us. If we fail to assess and identify cybersecurity risks associated with our operations, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a material adverse effect on our business, financial condition or results of operations.

We cannot guarantee that any research and development partnership we enter into will be successful. 

We intend to form research and development arrangements to develop our technology within targeted segments. Collaborative arrangements involve risks that participating parties may disagree on business decisions and strategies. These disagreements could result in delays, additional costs, risks of litigation, and failure of the development of our technology within the combustion market segment. Success of any collaborative arrangements we enter into will depend, in part, on whether those with whom we collaborate fulfill their contractual obligations satisfactorily. If a party with whom we collaborate fails to perform its contractual obligations satisfactorily, we may be unable to make the additional investments or provide the added services that would be required to compensate for that failure. If we are unable to adequately address any such performance issues, our reputation may be materially adversely affected and we may be exposed to legal liability. Our inability to successfully maintain collaborative relationships, once we enter into them, or to enter into new collaborative arrangements, could have a material adverse effect on our results of operations. 

If we are unable to keep up with rapid technological changes, our products may become obsolete. 

The market for alternative environmental products is characterized by significant and rapid technological change and innovation. Although we intend to employ our technological capabilities to create innovative products and solutions that are practical and competitive in today’s marketplace, future research and discoveries by others may make our products and solutions less attractive or even obsolete compared to other alternatives that may emerge.

Our technology and itsfor some industrial applications havehas not yet been safety tested.tested yet. 

There is inherent danger in dealing with the combustion process. There is additional danger in modifying this process in ways that are new and as yet, untestedhave only been implemented on a limited basis at a commercial scale. Although we have not yet encountered any areas of risk in the development or testing of our products beyond those already inherent in the combustion process or those particular to an industrial site, we may be exposed to liabilities should an industrial accident occur during development, testing, or operation in our laboratory or during field implementation of our technology.  

We will depend on approval from various local, state and federal agencies to implement and operate our technology. There is no assurance that these agencies will approve our technology. 

Our technology includes enhancement of the combustion process inclusion of a computer-controlled electric field to selectively promote, suppress, retard or accelerate chemical reactions as desired, and to reduce certain emissions at a lower cost of ownership than current air pollution control devices. Field implementation of our technology will therefore require permits from various local, state and federal agencies that regulate mechanical and electrical infrastructure and fire and air pollution control. Our technology may be subject to heightened scrutiny since it will be new to these governing bodies. As such, there may be delays or rejections in applications of portions of or all of our technology in the individual jurisdictions involved.

Because our technology has not yet been fully developed or implemented, weWe are uncertain of our profit margins and whether such profit margins, if achieved, will be able to sustain our business.business, because our technology has not yet been fully developed or implemented.

We have not fully developed all of our products, cost of goods or pricing. As a result, we cannot reliably predict our profit margins. Our operating costs could increase significantly compared to those we currently anticipate due to unanticipated results from the development process, application of our technology to unique or difficult processes, regulatory requirements and particular field implementations. Further, we envision our pricing to be highly dependent on the benefits that our customers believe they will achieve using our products. Accordingly, we cannot predict whether or when we will achieve profitability, and if achieved, the amount of such profit margins.

Many of our potential competitors have greater resources, and it may be difficult to compete against them. 

The combustion industry is characterized by intense competition. Many of our potential competitors have better name recognition and substantially greater financial, technical, manufacturing, marketing, personnel and/or research capabilities than we do. Although at this time we do not believe that any of our potential competitors hashave technology similar to ours, if and when we complete the commercialization of products based on our technology,are aware certain potential competitors may respond by developing and producingare attempting to develop similar products. Many firms in the combustion industry have made and continue to make substantial investments in improving their technologies and manufacturing processes. In addition, they may be able to price their products below the marginal cost of production in an attempt to establish, retain or increase market share. Because of these circumstances, it may be difficult for us to compete successfully in the combustion market. 

The loss of the services of our key management and personnel or the failure to attract additional key personnel could adversely affect our ability to operate our business. 

A loss of one or more of our current officers or key employees could severely and negatively impact our operations. Of particular note, the loss of services of Stephen E. Pirnat, Chief Executive OfficerDr. Colin J. Deller, our President, Manuel C. Menendez III, President of ClearSign Asia, or Jeffrey Lewallen, our Business Leader – Refining and President, or Dr. Donald W. Kendrick, Chief Technology OfficerPetrochemical, could significantly harm our business. We have no present intention of obtainingto obtain key-man life insurance on any of our executive officers or management. Additionally, competition for highly skilled technical, managerial and other personnel is intense. As our business develops, we might not be able to attract, hire, train, retain and motivate the highly skilled executives and employees we need to be successful. If we fail to attract and retain the necessary technical and managerial personnel, our business will suffer and might fail. 

There are many risks we are exposed to by doing business in China.

We are exposed to risks of doing business 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 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 related to doing business in China include:

·         the Chinese government exerts substantial influence over the manner in which we must conduct our business activities;

·         restrictions on currency exchange may limit our ability to receive and use our cash effectively;

·         the Chinese government may favor local businesses and make it more difficult for foreign businesses to operate in China on an equal footing, or in general;

·         there are uncertainties related to the enforcement of contracts with certain parties; and

·         more restrictive rules on foreign investment could adversely affect our ability to expand our operations in China.

As a result of our anticipated growing operations in China, these risks could have a material adverse effect on our business, results of operations and financial condition.

Furthermore, our operations in China have been impacted by the recent outbreak of a strain of the coronavirus, which has resulted in the limitation of flights in and out of China, quarantines, and travel restrictions on the local work force and personnel from our U.S. offices. As a result, the Company has experienced ongoing delays in the completion of these two boiler demonstration projects in China. The disruptions resulting from the coronavirus outbreak could have a negative impact on our financial condition, results of operations and business relationships.

Finally, the U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence foreign government officials for the purpose of obtaining or retaining business or obtaining an unfair advantage. While we make every attempt to comply with these laws, our operations outside the United States may increase the risk of violating such laws. Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business and result in a material adverse effect on our reputation, business and results of operations or financial condition.

Our business and operations have been and may continue to be adversely affected by the recent coronavirus outbreak.

In order to attempt to mitigate the coronavirus pandemic in the State of Washington, where our headquarters are located, on March 23, 2020 Governor Jay Inslee issued a “Stay Home, Stay Healthy” order which, among other things, (i) directs all individuals living in Washington to shelter at their places of residence (subject to limited exceptions), (ii) closes all businesses except “essential businesses,” and (iii) prohibits all gatherings for social, spiritual and recreational purposes. The order will last for two weeks and could be extended. Our business is not considered an “essential business” and therefore employees are not currently working from our facility in Seattle. As a result, employees currently engaged in optimizing the fire tube boiler for demonstration in China are unable to do so. Our operations in China have also been impacted by the severity of the pandemic, and this has and may continue to delay the completion of the water tube and fire tube demonstration projects. While a similar shelter in place order has been imposed in Oklahoma, where we have a secondary office, due to the nature of our operations in that location our employees can continue working remotely.

It is not possible at this time to estimate the full impact that the coronavirus pandemic will have on our business or on our potential customers, suppliers or other business partners. However, the continued spread of the coronavirus, the measures taken by the governments of affected countries, actions taken to protect employees, the limitations placed on travel and border crossings, and the impact of the pandemic on various business activities in affected countries could adversely impact our operational results and financial condition. We currently anticipate that the establishment of the fire tube boiler burner product could be delayed by one to three months. Developments to the water tube boiler burner product in China have already been delayed until the next heating season. These delays could significantly delay any revenue stream that would be associated with the sale of those products in the Chinese market.

If the capital markets continue to experience volatility in response to the coronavirus pandemic, we may not be able to raise capital.

The capital markets have experienced significant volatility due to the ongoing spread of the coronavirus, which may negatively affect our ability to raise capital.

The recent decrease in the price of oil could adversely affect our business and financial results.

The business, operations and financial results of our potential customers in the energy sector, specifically refining operations, may experience adverse effects resulting from the recent decline in oil prices.  This event may put pressure on their capital spending budgets, which could make them less likely to invest time and money in new technologies, such as the ClearSign Core, or make them cancel or delay existing projects in our pipeline.  Any of these outcomes could adversely affect our business and financial results.

Risks Related to Owning Our Securities

The public market for our securities is volatile. This may affect not only the ability of our investors to sell their securities, but the price at which they can sell their securities. 

We completed the initial public offering of our common stock in April 2012. Since that time, our common stock (CLIR: NASDAQ) has traded as low as $1.75$0.35 per share and as high as $11.75 per share based upon daily closing prices, and day-to-day trading has been volatile at times. Further, in conjunction with a shareholder rights offering we completed on January 25, 2017, we sold warrants (CLIRW: NASDAQ), the day-to-day trading of which has also been volatile to date. 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, 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.companies, such as the market reaction to the coronavirus outbreak. Such broad market fluctuations may adversely affect the market price of our securities. 

We have the right to issue shares of preferred stock. If we were to issue preferred stock, it is likely to have rights, preferences and privileges that may adversely affect our common stock or other securities. 

We are authorized to issue 2,000,000 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. Our board of directors is empowered, without shareholder 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 stock holders 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,Company, to the detriment of our shareholders. We cannot assure you that we will not, under certain circumstances, issue shares of our preferred stock. 

We may be required to raise additional financing by issuing new securities, which may have terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock and our business. 

We will require additional financing to fund research, development and commercialization of our technology, to obtain and maintain patents and other intellectual property rights in our technology, and for working capital and other purposes. We may not be able to obtain financing on favorable terms, if at all. Additionally, COVID-19 has caused significant disruptions to the global financial markets which could impact our ability to raise additional capital. If we raise additional funds by issuing equity securities, the percentage ownership of our then-current shareholders will be reduced. Further, we may have to offer new investors in our equity securities rights that are superior to the holders of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us which could have a materially adverse effect on our business and results of operations. 

We have not paid dividends in the past and have no immediate plans to pay dividends. 

We plan to reinvest all of our earnings, to the extent we have earnings, in order to continue to develop our products, to market our products, to cover operating costs and to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend.  

We have a significant number of options and a small number of warrants outstanding and we may issue additional options in the future to employees, officers, directors, independent contractors and agents. Sales of the underlying shares of common stock could adversely affect the market price of our common stock. 

As of December 31, 2017,March 30, 2020, we had outstanding options and warrants for the purchase of 993,8602,916,601 and 2,495,78480,000 shares of common stock, respectively. Under the ClearSign CombustionTechnologies Corporation 2011 Equity Incentive Plan and the ClearSign Combustion Corporation 2013 Consultant Stock Plan (collectively, the “Plans”), we have the ability to grant awards of shares or options to employees, officers, directors, independent contractors and agents. Furthermore, as of December 31, 2017,2019, we have reserved an additional 290,8151,282,027 shares of common stock for such awards and the Plans provide that this number may increase quarterly by a collective amount of up to 11%16% of the number of shares issued by us each quarter. 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 warrants and options and sell a large number of shares. This could cause the market price of our common stock to decline.

We have incurred and will incur significant costs as a result of being a public company that reports to the Securities and Exchange Commission and our management is required to devote substantial time to meet compliance obligations. 

As a public company reporting to the Securities and Exchange Commission, 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 $1,239,000$1,061,000 in 2017.2019. We are subject to the reporting requirements of the Securities Exchange Act of 1934 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 smaller reportingnon-accelerated filer company), as well as rules subsequently implemented by the Commission 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. In addition,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 of directors, our board committees or as executive officers.

Our charter documents and Washington law may inhibit a takeover that shareholders consider favorable.

Provisions of our Articlesarticles of Incorporation and bylaws and applicable provisions of Washington law may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which shareholders might otherwise receive a premium for their shares, or transactions that our shareholders might otherwise deem to be in their best interests. The provisions in our Articlesarticles of Incorporationincorporation and bylaws: 

In addition, Chapter 23B.19 of the Washington Revised Code generally limits our ability to engage in any business combination with a person who beneficially owns 10% or more of our outstanding voting stock unless certain conditions are satisfied. This restriction lasts for a period of five years following the share acquisition. These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock or other securities.

If we fail to comply with the continued minimum closing bid requirements of The Nasdaq Capital Market LLC (“Nasdaq”) by July 13, 2020 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. On January 15, 2020, the Nasdaq staff notified us that we did not comply with the minimum $1.00 per share bid price requirement for continued listing, as set forth in Nasdaq Listing Rule 5550(a)(2). We have been granted 180 calendar days, through July 13, 2020, to regain compliance. In the event that we do not regain compliance within this 180 day period, we may be eligible to seek an additional compliance period of 180 calendar days if we meet certain requirements.

There can be no assurance that we will be able to regain compliance with Nasdaq’s listing rules. If we are unable to regain compliance with the minimum closing bid price requirement 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.

ITEM 1B: UNRESOLVED STAFF COMMENTS.

None.

ITEM 2: PROPERTIES.

Our principal office is located at 12870 Interurban Avenue South, Seattle, Washington with a satellite officeoffices located in Tulsa, Oklahoma.Oklahoma and Beijing, China. At our principal office in Seattle, we currently lease approximately 9,425 square feet of office and laboratory space, which is suitable and adequate for our current operations, under a triple net lease which expires in March 2020.May 2023. Monthly minimum rent is $12,268.approximately $14,000. The Company also has a triple net operating leaseleases for office space located in Tulsa, Oklahoma with aand Beijing, China. The term thatof the lease for the Tulsa location began in September 2016 and will expire in August 2019.2022. The monthly minimum rent for our Tulsa location is $2,147.approximately $2,200. The term of the lease for the Beijing location began in November 2018 and will expire in November 2020. The monthly minimum rent for our Beijing location is approximately $6,000 (37,000RMB).

ITEM 3: LEGAL PROCEEDINGS.

From time to time we 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 these or other matters may arise from time to time thatany such matter may harm our business. WeAs of the date of this report, we are currently not aware ofa party to any suchmaterial pending legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.proceedings.

ITEM 4: MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is listed on the NASDAQNasdaq Capital Market under the symbol “CLIR”. The range of high and low closing sales prices of our common stock are presented below.