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Equity
 3 Months Ended
Mar. 31, 2024
Equity  
Equity

Note 7 – 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 “Board”). The Company has not issued any shares of preferred stock.

In July 2018, in connection with a private placement of the Company’s common stock pursuant to a Stock Purchase Agreement, the Company granted clirSPV LLC (“clirSPV”) a right to purchase certain new equity securities that the Company sells for purpose of raising capital on terms and conditions no different from those offered to other purchasers (the “Participation Right”), so that clirSPV could maintain a 19.99% percentage ownership of the Company’s outstanding common stock. 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, in connection with a waiver of the Participation Right’s notice requirements and other related closing mechanics for such Participation Right (the “Waiver”) the Company and clirSPV, agreed that the Participation Right may be extended from December 31, 2023, to such date that the holders of two-thirds of the outstanding units of clirSPV agree to extend each such holder’s existing agreement that he/she/it will have no right to force a redemption of his/her/its interests in clirSPV (the “Redemption Right”); provided, however, that the Participation Right could not be extended to a date later than June 30, 2027. On December 30, 2023, the Company received notice from clirSPV that the holders of at least two-thirds of the outstanding units of clirSPV agreed to extend the waiver of the Redemption Right until December 31, 2024. Accordingly, the Participation Right will now expire on December 31, 2024.

​

The Company has an At-The-Market (“ATM”) program pursuant to a Sales Agreement with Virtu Americas LLC, as sales agent, dated December 23, 2020 (the “Sales Agreement”), pursuant to which the Company may sell shares of common stock with an aggregate offering price of up to $8.7 million. On March 18, 2024, the Company filed a prospectus supplement suspending the ATM program. The Company will not make any sales of its common stock pursuant to the Sales Agreement unless and until a new prospectus supplement is filed with the SEC; however, the Sales Agreement remains in full force and effect. During the three months ended March 31, 2024, the Company issued zero shares of its common stock from the ATM program. As of March 31, 2024, the Company has cumulatively 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, the ATM program or other securities offerings.

​

On April 23, 2024, we issued common stock, redeemable warrants to purchase common stock and pre-funded warrants to purchase common stock in connection with a public offering and concurrent private placement. As a result of these offerings, investors experienced immediate dilution and an increase to potentially dilutive shares outstanding. Refer to “Note 10 – Subsequent Events” below for more details.

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 Board’s Human Capital & Compensation Committee (the “Compensation Committee”) 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. In 2024, the Board did not exercise their right to limit the automatic increase. Accordingly, the 2021 Plan share reserve increased by 66 thousand shares.

​

Ending balances for the 2021 Plan is as follows:

​

​

​

​

​

​

​

​

March 31, 

​

December 31, 

(in thousands)

    

2024

    

2023

Outstanding options and restricted stock units

 

3,617

 

3,430

Reserved but unissued shares under the Plan

​

1,829

​

2,302

Total authorized shares under the Plan

 

5,446

 

5,732

​

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.

​

Equity Incentive Plan Options

​

Compensation expense associated with stock option awards for the three months ended March 31, 2024 and 2023 totaled $22 thousand and $44 thousand, respectively.

​

​

A summary of the Company’s 2011 Equity Incentive Plan and the 2021 Plan stock option activity and changes is as follows:

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​

​

​

​

​

​

​

​

​

​

March 31, 

​

​

2024

(in thousands, except per share data)

​

Options to Purchase Common Stock

​

Weighted Average Exercise Price

​

Weighted Average Remaining Contractual Life (in years)

Outstanding at beginning of period

 

2,759

​

$

2.07

 

5.38

Granted

 

—

​

$

—

 

—

Exercised

 

—

​

$

—

 

—

Forfeited/Expired

 

—

​

$

—

 

—

Outstanding at end of period

 

2,759

​

$

2.07

 

5.13

Exercisable at end of period

 

2,049

​

$

1.70

 

4.66

​

The estimated aggregate pretax intrinsic value of the Company’s outstanding vested stock options at March 31, 2024 is $61 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 March 31, 2024, there was $1.0 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.

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Inducement Options

​

During the year ended December 31, 2023, the Company granted non-qualified stock options to its Chief Technology Officer to purchase an aggregate of 150 thousand shares of common stock with an exercise price of $0.91 as a material inducement to accept employment with the Company. These inducement options vest in three equal installments, with one third of the option vesting on the grant date, and each remaining third vesting on the second and third anniversaries of the grant date, subject to continued employment with the Company. The fair value of these options were estimated on the grant date using the Black Scholes valuation model, which resulted in $112 thousand. The compensation expense recognized for these awards for the three months ended March 31, 2024 and 2023 was $9 thousand and zero, respectively.

​

These inducement options were granted outside of the 2021 Plan and in accordance with the employment inducement

exemption provided under Nasdaq Listing Rule 5635(c)(4).

​

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 2021 Plan. Employee vesting criteria is time based, and compensation expense is recognized ratably across the timeframe. The Company pays payroll withholding taxes on behalf of the employee at vesting, and withholds shares from the employee’s award to cover the taxes payable. The Company’s accrued reserve for RSU share-based compensation is $16 thousand and $3 thousand for the three months ended March 31, 2024 and 2023, respectively.

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 ASC, Topic 718, Compensation-Stock Compensation, (ASC 718). Unrecognized compensation expense for director services as of March 31, 2024 and 2023 was $65 thousand and $68 thousand, respectively. Director compensation is earned on a quarterly basis with the target value of compensation set at $84 thousand per quarter, assuming four directors; one chairman; one lead independent director; one chair for each committee; and two committee members for each of the three committees.

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

​

​

​

​

​

​

​

​

​

March 31, 

​

​

2024

(in thousands, except per share data)

​

Number of Shares

​

Weighted Average Grant Date Fair Value

Nonvested at beginning of period

 

671

​

$

1.05

Granted

 

253

​

$

1.07

Vested

 

(67)

​

$

0.79

Forfeited

​

—

​

$

—

Nonvested at end of period

 

857

​

$

1.07

​

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

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

March 31, 

(in thousands, except per share data)

​

2024

    

2023

Compensation Expense

​

$

36

$

199

​

Weighted Average Value Per Share

​

$

0.93

$

1.25

​

​

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 2021 Plan.

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

March 31, 

(in thousands, except per share data)

    

2024

    

2023

Fair value

​

$

326

​

$

234

Weighted Average Value Per Share

​

$

1.06

​

$

0.79

​

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 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 shall determine.

​

The Consultant Plan activity and change is as follows:

​

​

​

​

​

​

​

March 31, 

(in thousands)

    

2024

Reserved but unissued shares at beginning of period

​

​

188

Increases in the number of authorized shares

​

​

4

Grants

​

​

(4)

Reserved but unissued shares at end of period

​

 

188

​

​

The Consultant Plan compensation expense is summarized as follows:

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

March 31, 

(in thousands, except per share data)

    

2024

    

2023

Compensation Expense

​

$

3

​

$

3

Weighted Average Value Per Share

​

$

0.81

​

$

0.66

​