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Equity

12 Months Ended

Dec. 31, 2022

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 (“clirSPV”) which permits participation in future capital raising transactions (the “Participation Right”) on the same terms as other investors participating in such transactions. In no event may the Participation Right be exercised to the extent it would cause clirSPV or any of its affiliates to beneficially own 20% or more of the Company’s then outstanding common stock. In May 2022, the Company signed an agreement with clirSPV, that provides for an election right to extend the Participation Right beyond the original expiration date of December 31, 2023, but to no later than June 30, 2027. This election is pursuant to specific terms and conditions and expires on December 31, 2023.

​

On June 1, 2022, the Company completed a firm commitment underwritten public offering pursuant to an underwriting agreement, dated May 27, 2022, by and between the Company and Newbridge Securities Corporation by issuing 4,186 thousand shares of common stock at a price to the public of $1.11 per share, resulting in gross proceeds of approximately $4.6 million and net cash proceeds of approximately $4.2 million. During July 2022, the Company issued approximately 1,592 thousand shares to clirSPV pursuant to the Participation Right, at a price per share of $1.11, resulting in net cash proceeds to the Company of approximately $1.7 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 currently sell shares of common stock with an aggregate offering price of up to $8.7 million (ATM). During the year ended December 31, 2022, the Company issued approximately 501 thousand shares of its common stock at an average price of $1.24 per share for gross proceeds of approximately $624 thousand and net cash proceeds of approximately $587 thousand. During the year ended 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 proceeds was approximately $5.3 million. As of December 31, 2022, the Company has issued approximately 1.6 million shares of common stock under the ATM program, at an average price of $3.84 per share. Gross proceeds totaled approximately $6.1 million and net cash proceeds was approximately $5.9 million.

The Company is currently subject to the SEC’s “baby shelf rules,” which prohibit companies with a public float of less than $75 million from issuing securities under a shelf registration statement in excess of one-third of such company’s public float in a 12-month period. These rules may limit future issuances of shares by the Company under our shelf registration statement on Form S-3, our ATM Offering Sales Agreement or other common stock offerings.

Equity Incentive Plan

On June 17, 2021, the Company's shareholders approved and the Company adopted the ClearSign Technologies Corporation 2021 Equity Incentive Plan (the “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 lesser 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 were added to the 2021 Plan. In 2022, the board of directors approved an increase of 150,423 shares available for issuance pursuant to future awards in accordance with the terms of the 2021 Plan.

​

Ending balances for the 2021 Plan is as follows:

​

​	​	​	​	​
​	​	December 31,	​	December 31,
(in thousands)		2022		2021
Outstanding options and restricted stock units		3,202		3,076
Reserved but unissued shares under the Plans	​	2,777	​	2,901
Total authorized shares under the Plans		5,979		5,977

​

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 SEC Staff Accounting Bulletin (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.

​

During the year ended December 31, 2022, the following weighted-average assumptions were utilized in the calculation of the fair value of stock options:

​

​	​	​	​	​	​	​
​	​	December 31,				​
​	​	2022	​	​	2021	​
Expected life		5.71 years		​	6.01 years	​
Weighted average volatility	​	77.64	%	​	91.89	%
Weighted average risk-free interest rate	​	1.39	%	​	0.59	%
Expected dividend rate	​	0	%	​	0	%

​

Compensation expense associated with stock option awards for the years ended December 31, 2022 and 2021 totaled $118 thousand and $425 thousand, respectively.

​

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

​

​	​	​	​	​	​	​	​
​	​	December 31,
​	​	2022
(in thousands)	​	Options to Purchase Common Stock	​	Weighted Average Exercise Price		​	Weighted Average Remaining Contractual Life (in years)
Outstanding at beginning of year		2,964	​	$	2.06		6.89
Granted		88	​	$	1.26		9.01
Exercised		(43)	​	$	0.89		—
Forfeited/Expired		(230)	​	$	1.99		—
Outstanding at end of year		2,779	​	$	2.05		6.43
Exercisable at end of year		1,986	​	$	1.70		5.89

​

The estimated aggregate pretax intrinsic value of the Company’s outstanding vested stock options at December 31, 2022 is zero. 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, 2022, there was $1.1 million 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

The Company awards employees and directors restricted stock units (“RSUs”) in lieu of cash payment for compensation. These awards are granted from the Company’s Equity Incentive Plan. Employee vesting criteria is time based, and compensation expense is recognized ratably across the timeframe. Director vesting criteria is contingent upon the occurrence of one of four future events, which the Company cannot predict or control. Therefore, compensation expense for director RSUs is not recognized until one of these four future events occur, which is in accordance with FASB Accounting Standards Codification, Topic 718, Compensation-Stock Compensation, (ASC 718). Unrecognized compensation expense for director services amounted to $491 thousand and $255 thousand for the years ended December 31, 2022 and December 31, 2021, respectively. Director compensation is earned on a quarterly basis with the target value of compensation set at $85 thousand per quarter.

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

​

​	​	​	​	​	​	​	​	​	​	​
​	​	December 31,				​	December 31,
​	​	2022				​	2021
(in thousands)	​	Number of Shares	​	Weighted Average Grant Date Fair Value		​	Number of Shares	​	Weighted Average Grant Date Fair Value
Nonvested at beginning of year		112	​	$	2.28	​	—	​	$	—
Granted		376	​	$	1.30	​	112	​	$	2.28
Vested		(65)	​	$	1.77	​	-	​	$	—
Nonvested at end of year		423	​	$	1.49	​	112	​	$	2.28

​

A summary of the Company’s RSU compensation expense is as follows:

​

​	​	​	​	​	​
​	For the Year Ended
​	December 31,
​	2022			2021
Compensation Expense	$	252	$	-	​
Weighted Average Value Per Share	$	1.57	$	-	​

​

Stock Awards

The Company awards employees stock in lieu of cash payment for compensation, typically to satisfy accrued bonus compensation. The awards are granted from the Company’s Equity Incentive Plan.

​

​	​	​	​	​	​	​
​	​	For the Year Ended
​	​	December 31,
​		2022			2021
Fair value	​	$	98	​	$	217
Weighted Average Value Per Share	​	$	1.43	​	$	3.37

​

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 Consultant Plan activity and change is as follows:

​

​	​	​	​	​	​	​	​
​	​	​	December 31,
(in thousands)			2022			2021
Reserved but unissued shares at beginning of year	​	​	​	211	​	​	212
Increases in the number of authorized shares	​	​		—	​		14
Grants	​	​		(15)	​		(15)
Reserved but unissued shares at end of year	​	​		196	​		211

​

The Consultant Plan compensation expense is summarized as follows:

​

​	​	​	​	​	​	​
​	​	For the Year Ended
​	​	December 31,
​		2022			2021
Compensation Expense	​	$	26	​	$	33
Weighted Average Value Per Share	​	$	1.61	​	$	2.23

​

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, 2022 and 2021 was zero and $13 thousand.

Warrants

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

​

​	​	​	​	​	​	​	​	​	​	​
​	​	December 31,
​	​	2022				​	2021
​		​		Weighted			​		Weighted
​	​	​	​	Average		​	​	​	Average
​	​	​	​	Exercise		​	​	​	Exercise
(in thousands)	​	Warrants	​	Price		​	Warrants	​	Price
Outstanding at beginning of year	​	—	​	$	—		80	​	$	1.80
Granted	​	—	​		—		—	​	​	—
Exercised	​	—	​		—		(38)	​		1.80
Forfeited/Expired	​	—	​	​	—		(43)	​	​	1.80
Outstanding at end of year	​	—	​	$	—		—	​	$	—
​	​	​	​	​	​	​	​	​	​	​

​

There were no outstanding warrants at December 31, 2022 and 2021.

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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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