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Equity

12 Months Ended

Dec. 31, 2021

Equity

Equity

Note 8 – Equity

Common Stock and Preferred Stock

The Company is authorized to issue 62.5 million shares of common stock and 2.0 million shares of preferred stock. Preferences, limitations, voting powers and relative rights of any preferred stock to be issued may be determined by the Company’s Board of Directors. The Company has not issued any shares of preferred stock.

In July 2018, the Company completed a private equity offering and executed a Stock Purchase Agreement with clirSPV, LLC which permits participation in future capital raising transactions (Participation Right) on the same terms as other investors participating in such transactions. The Participation Right will expire on December 31, 2023. In no event may the Participation Right be exercised to the extent it would cause clirSPV, LLC or any of its affiliates to beneficially own 20% or more of the Company’s then outstanding common stock or hold shares with 20% or more of the voting power.

In August 2020, the Company completed an offering of common stock whereby approximately 2.6 million shares of common stock at a price of $2.00 per share were issued and sold for net cash proceeds of approximately $4.8 million.

In September 2020, the Company completed a sale of common stock to clirSPV, LLC under the 2018 Stock Purchase Agreement described above (Participation Right) whereby approximately 654 thousand shares of common stock at a price of $2.00 per share were issued and sold for net cash proceeds of approximately $1.3 million.

During the year ended December 31, 2021, the Company issued common stock pursuant to an At-The-Market Offering Sales Agreement, dated December 23, 2020, with Virtu Americas LLC, as sales agent pursuant to which it may sell shares of common stock with an aggregate offering price of up to $15.0 million (ATM). As of December 31, 2021, the Company issued approximately 1.1 million shares of common stock under the ATM program, at an average price of $5.03 per share. Gross proceeds totaled approximately $5.5 million and net cash proceed was approximately $5.3 million.

​

Issuance of Shares of Subsidiary to Noncontrolling Interest

In December 2019, the Company issued shares of its subsidiary representing a 1% ownership interest to an executive. The value assigned to this interest was $0 and $1 thousand as of December 31, 2021 and 2020, respectively.

Equity Incentive Plans

On June 17, 2021, (the Effective Date) the Company's shareholders approved and the Company adopted the ClearSign Technologies Corporation 2021 Equity Incentive Plan (2021 Plan) which permits the Company to grant Incentive Stock Options, Non-statutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, and Performance Shares, to eligible participants, which includes employees, directors and consultants. The Compensation Committee of the Board of Directors is authorized to administer the 2021 Plan.

​

The 2021 Plan provides for an annual increase in available shares equal to the lessor of (i) 10% of the aggregate number of shares of Common Stock issued by the Company in the prior fiscal year; or (ii) such number provided by the Compensation Committee; provided, however, that the total cumulative increase in the number of shares available for issuance pursuant to this automatic share increase shall not exceed 400 thousand shares of common stock. The prior incentive plan (2011 Plan) expired January 2021 and outstanding awards from this plan were assigned to the 2021 Plan. The total amount of carryover awards from the 2011 plan amounted to 3,381 thousand. Any forfeiture or expiration of carryover awards will be added to the 2021 Plan.

​

Ending balances of the Plans are as follows:

​

​	​	​	​	​
​	​	December 31,
(in thousands)		2021		2020
Outstanding options and restricted stock units		3,076		2,697
Reserved but unissued shares under the Plans	​	2,901	​	1,217
Total authorized shares under the Plans		5,977		3,914

​

Stock Options

Under the terms of the 2021 Plan, incentive stock options and nonstatutory stock options must have an exercise price at or above the fair market value on the date of the grant. At the time of grant, the Company will determine the period within which the option may be exercised and will specify any conditions that must be satisfied before the option vests and may be exercised. The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model.

​

As permitted by SAB 107, management utilized the simplified approach to estimate the expected term of the options, which represents the period of time that options granted are expected to be outstanding. Expected volatility has been determined through the Company’s historical stock price volatility. The Company has not made an estimate of forfeitures at the time of the grant, but rather accounts for forfeitures at the time they occur. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield in effect at the time of grant. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

​

The following weighted-average assumptions were utilized in the calculation of the fair value of stock options:

​

​	​	​	​	​	​
​	​	December 31,			​
​	​	2021	​	2020	​
Expected life		6.01 years		6.98 years	​
Weighted average volatility	​	91.89	%	76.50	%
Weighted average risk-free interest rate	​	0.59	%	1.26	%
Expected dividend rate	​	0	%	0	%

​

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

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31,

​

​

2021

​

2020

​

​

​

​

​

​

​

Weighted

​

​

​

​

​

​

Weighted

​

​

​

​

​

​

​

Average

​

​

​

​

​

​

Average

​

​

Options to

​

Weighted

​

Remaining

​

Options to

​

Weighted

​

Remaining

​

​

Purchase

​

Average

​

Contractual

​

Purchase

​

Average

​

Contractual

​

​

Common

​

Exercise

​

Life (in

​

Common

​

Exercise

​

Life (in

(in thousands)

Stock

Price

years)

Stock

Price

years)

Outstanding at January 1

2,697

​

$

2.18

7.53

2,131

​

$

2.53

7.99

Granted

1,065

​

$

3.15

8.40

743

​

$

1.07

9.23

Exercised

(327)

​

$

1.41

—

(117)

​

$

1.08

—

Forfeited/Expired/Exchanged

(471)

​

$

5.70

—

(60)

​

$

2.88

—

Outstanding at December 31

2,964

​

$

2.06

6.89

2,697

​

$

2.18

7.53

Exercisable at December 31

2,178

​

$

1.72

6.20

2,380

​

$

2.26

7.48

​

The estimated aggregate pretax intrinsic value of the Company’s outstanding vested stock options at December 31, 2021 is $513 thousand. The intrinsic value is the difference between the Company’s common stock price and the option exercise prices multiplied by the number of in-the-money options. This amount changes based on the fair value of the Company’s common stock.

At December 31, 2021, there was $1,725 thousand of total unrecognized compensation cost related to non-vested stock option-based compensation arrangements. Vesting criteria ranges from time-based to performance-based, the Company records costs for time-based arrangements ratably across the timeframe, whereas performance-based arrangements require management to continually evaluate predetermined goals against actual circumstances.

​

Restricted Stock Units

On July 28, 2021, the Company approved compensation for board service to be paid to its independent directors in restricted stock units (“RSUs”) under the 2021 Plan. Such compensation was earned on a quarterly basis commencing with services performed in the second quarter of 2021 and continuing through the end of 2021. The target value of compensation was approved at $85 thousand per quarter. A RSU grant is to be awarded to each independent director in the beginning of the quarter in which services will be rendered, and the number of RSUs granted is to be based on the trading value of the Company's stock on the date of the award.

The vesting criteria of the RSU grants are contingent upon the occurrence of one of four future events which the Company cannot predict or control. Accordingly, stock based compensation has not been recognized for services performed during the year ended December 31, 2021 in accordance with FASB Accounting Standards Codification, Topic 718, Compensation-Stock Compensation (ASC 718). During the year ended December 31, 2021, the Company issued 112 thousand RSU's for services performed amounting to $255 thousand of unrecognized compensation.

Consultant Stock Plan

The 2013 Consultant Stock Plan (the Consultant Plan) provides for the granting of shares of common stock to consultants who provide services related to capital raising, investor relations, and making a market in or promoting the Company’s securities. The Company’s officers, employees, and board members are not entitled to receive grants from the Consultant Plan. The Compensation Committee of the Board of Directors is authorized to administer the Consultant Plan and establish the grant terms. The Consultant Plan provides for

quarterly increases in the available number of authorized shares equal to the lesser of 1% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine.

The Company granted 15 thousand shares of common stock under the Consultant Plan to a consultant for the period October 1, 2021 to September 30, 2022. The fair value of the stock at the time of grant was $1.93 per share for a total value of $29 thousand for which the Company has recognized expense of $7 thousand, for 3.7 thousand shares during the year ended December 31, 2021.

The Company granted 15 thousand shares of common stock under the Consultant Plan to the same consultant for the period September 1, 2020 through September 30, 2021. The fair value of the stock at the time of grant was $2.33 per share for a total value of $35 thousand, for which the Company has recognized expense of $26 thousand, for 11.3 thousand shares during the year ended December 31, 2021 and recognized expense of $9 thousand, for 3.7 thousand shares during the year ended December 31, 2020.

The Company granted 10 thousand shares of common stock under the Consultant Plan to the same consultant for the period September 1, 2019 through August 31, 2020. The fair value of the stock at the time of grant was $1.03 per share for a total value of $10 thousand, for which the Company recognized expense of $8 thousand, for 7.5 thousand shares during the year ended December 31, 2020.

The Consultant Plan expense, reflected as general and administrative expense, for the years ended December 31, 2021 and 2020 was $33 thousand and $17 thousand, respectively.

​

​	​	​	​	​
​	​	December 31,
(in thousands)		2021		2020
Reserved but unissued shares January 1	​	212	​	190
Increases in the number of authorized shares	​	14	​	33
Grants	​	(15)	​	(11)
Reserved but unissued shares December 31	​	211	​	212

​

Inducement Stock Options

Pursuant to the rules of The Nasdaq Stock Market, and in compliance with those rules, the Company may issue equity awards, including stock options, as an inducement to an individual to accept employment with the Company. Inducement awards need not be approved by the Company's shareholders. During the year ended December 31, 2019, the Company granted 341 thousand non-qualified stock options to its Chief Executive Officer. The fair value of the non-qualified stock options estimated on the date of grant using the Black-Scholes valuation model was $176 thousand. The compensation expense recognized for these awards for the years ended December 31, 2021 and 2020 was $13 thousand and $52 thousand. There is no remaining unrecognized compensation expense associated with these awards, and the intrinsic value was $31 thousand, at December 31, 2021.

​

Warrants

A summary of warrant activity and related information is as follows:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	December 31,
​	​	2021				​	2020
​		​		Weighted			​		Weighted
​	​	​	​	Average		​	​	​	Average
​	​	​	​	Exercise		​	​	​	Exercise
(in thousands)	​	Warrants	​	Price		​	Warrants	​	Price
Outstanding at January 1		80	​	$	1.80		80	​	$	1.80
Granted		—	​		—		—	​	​	—
Exercised		(38)	​		1.80		—	​		—
Forfeited/Expired		(43)	​	​	1.80		—	​	​	—
Outstanding at December 31		—	​	$	—		80	​	$	1.80

​

There were no outstanding warrants at December 31, 2021.

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- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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