Note 10 – Subsequent Events

In March 2014, the Company completed a registered direct offering of common stock whereby 812,500 shares were issued at $8.00 per share. Gross proceeds from the offering totaled $6.5 million and net cash proceeds approximated $5.7 million. Expenses of the offering approximated $0.8 million, including placement agent fees of $0.5 million along with a warrant to purchase 20,313 shares of ClearSign’s common stock at $10.00 per share exercisable until March 2019, placement agent legal fees of $75,000, and other costs of $175,000.

In February 2014, the Company granted 14,625 shares of common stock under the Equity Incentive Plan to its three independent directors in accordance with board agreements for service in 2014. The Company also granted 7,000 shares of common stock under the Consultant Stock Plan to a consultant for service in 2014. The fair value of the stock at the time of grant was $10.26 per share for a total value of $222,000 which the Company will recognize in general and administrative expense on a pro-rated quarterly basis in 2014.

In February 2014, the Company granted 122,880 stock options under the Equity Incentive Plan to certain employees. The stock options have an exercise price of $9.90 per share, the grant date fair value, and a contractual life of 10 years. The fair value of stock options granted in February 2014 estimated on the date of grant using the Black-Scholes option valuation model was $369,000.

After taking into effect the February 2014 stock option grant, the total unrecognized compensation cost related to non-vested stock option-based compensation arrangements granted under the Equity Incentive Plan that is expected to be recognized in future years as follows:

2014	$	208,000
2015		189,000
2016		169,000
2017		93,000
	$	659,000

Activity under the Equity Incentive Plan through February 2014 is as follows:

Reserved but unissued shares under the Equity Incentive Plan, January 1, 2014		249,736
Increases in the number of authorized shares under the Equity Incentive Plan		1,818
Grants of stock options		(122,880)
Stock grants		(14,625)
Reserved but unissued shares under the Equity Incentive Plan, February 28, 2014		114,049