Summary of Significant Accounting Policies	3 Months Ended
Mar. 31, 2024
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet at December 31, 2023 has been derived from the Company’s audited financial statements as of that date. In the opinion of management, these condensed consolidated financial statements reflect all normal recurring and other adjustments necessary for a fair presentation. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods. The accompanying unaudited condensed consolidated financial statements include the accounts of ClearSign and its subsidiary. Intercompany balances and transactions have been eliminated in consolidation. Liquidity The Annual Report on Form 10-K filed with the SEC on April 1, 2024, contained a “going concern” note within the annual audit report, which raised substantial doubt about our ability to continue operations. We believe that we have alleviated the substantial doubt raised by our independent auditor by selling equity securities on April 23, 2024, and subsequently on May 15, 2024, which resulted in aggregate gross proceeds of $9.9 million and net proceeds of $8.7 million, after broker discounts and related fees. Refer to “Note 10 – Subsequent Events” for further details about the offerings effectuated on April 23, 2024. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Short-Term Investments The cost basis for our short-term investments totaled approximately zero as of March 31, 2024 and December 31, 2023, respectively. The unrealized holding gains for our short-term investments totaled approximately zero as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, the Company has not experienced any other-than-temporary impairment of its short-term investments. The fair value for our short-term investments totaled approximately zero as of March 31, 2024 and December 31, 2023, respectively. Research and Development The cost of research and development is expensed as incurred. Research and development costs consist of salaries, benefits, share based compensation, consumables, and consulting fees, including costs to develop and test prototype equipment and parts. Research and Development costs have been offset by funds received, if any, from strategic partners in cost sharing, collaborative projects. During the three months ended March 31, 2024, the Company received $107 thousand from these arrangements. During the three months ended March 31, 2023, the Company did not receive funds from these arrangements. Foreign Operations The accompanying unaudited condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 include assets amounting to approximately $279 thousand and $334 thousand, respectively, relating to operations of ClearSign Asia Limited. The Beijing registered capital requirement is $350 thousand, which is required to be paid by 2027, and of which $161 thousand has been paid as of March 31, 2024. It is always possible that unanticipated events in foreign countries could disrupt the Company’s operations, and since the first quarter of 2020, this has been the case with the effects of the COVID-19 pandemic. Net Loss per Common Share Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included because their effect would be anti-dilutive. At March 31, 2024 and March 31, 2023, potentially dilutive shares outstanding amounted to 4.1 million and 3.7 million, respectively. 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. Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires expanded disclosures about reportable segments including additional information on segment expenses, expanded interim period disclosures, and an explanation of how the chief operating decision maker utilizes segment information in evaluating segment performance. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. ASU 2023-07 only currently impacts the disclosures in our annual consolidated financial statements, which will be included in our 2024 Annual Report on Form 10-K. We are currently assessing the impact that the adoption of ASU 2023-07 will have on the disclosures in our consolidated financial statements. In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). The FASB issued ASU 2023-09 to enhance the transparency and decision-making usefulness of income tax disclosures by requiring additional information on an entity's tax rate reconciliation, as well as income taxes paid. ASU 2023-09 is effective for our reporting period beginning January 1, 2025. We are currently assessing the impact that the adoption of ASU 2023-09 will have on the disclosures in our consolidated financial statements.

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet at December 31, 2023 has been derived from the Company’s audited financial statements as of that date.

In the opinion of management, these condensed consolidated financial statements reflect all normal recurring and other adjustments necessary for a fair presentation. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods.

The accompanying unaudited condensed consolidated financial statements include the accounts of ClearSign and its subsidiary. Intercompany balances and transactions have been eliminated in consolidation.

Liquidity

The Annual Report on Form 10-K filed with the SEC on April 1, 2024, contained a “going concern” note within the annual audit report, which raised substantial doubt about our ability to continue operations. We believe that we have alleviated the substantial doubt raised by our independent auditor by selling equity securities on April 23, 2024, and subsequently on May 15, 2024, which resulted in aggregate gross proceeds of $9.9 million and net proceeds of $8.7 million, after broker discounts and related fees. Refer to “Note 10 – Subsequent Events” for further details about the offerings effectuated on April 23, 2024.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Short-Term Investments

The cost basis for our short-term investments totaled approximately zero as of March 31, 2024 and December 31, 2023, respectively. The unrealized holding gains for our short-term investments totaled approximately zero as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, the Company has not experienced any other-than-temporary impairment of its short-term investments. The fair value for our short-term investments totaled approximately zero as of March 31, 2024 and December 31, 2023, respectively.

Research and Development

The cost of research and development is expensed as incurred. Research and development costs consist of salaries, benefits, share based compensation, consumables, and consulting fees, including costs to develop and test prototype equipment and parts. Research and Development costs have been offset by funds received, if any, from strategic partners in cost sharing, collaborative projects. During the three months ended March 31, 2024, the Company received $107 thousand from these arrangements. During the three months ended March 31, 2023, the Company did not receive funds from these arrangements.

Foreign Operations

The accompanying unaudited condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 include assets amounting to approximately $279 thousand and $334 thousand, respectively, relating to operations of ClearSign Asia Limited. The Beijing registered capital requirement is $350 thousand, which is required to be paid by 2027, and of which $161 thousand has been paid as of March 31, 2024. It is always possible that unanticipated events in foreign countries could disrupt the Company’s operations, and since the first quarter of 2020, this has been the case with the effects of the COVID-19 pandemic.

Net Loss per Common Share

Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included because their effect would be anti-dilutive. At March 31, 2024 and March 31, 2023, potentially dilutive shares outstanding amounted to 4.1 million and 3.7 million, respectively.

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.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires expanded disclosures about reportable segments including additional information on segment expenses, expanded interim period disclosures, and an explanation of how the chief operating decision maker utilizes

segment information in evaluating segment performance. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. ASU 2023-07 only currently impacts the disclosures in our annual consolidated financial statements, which will be included in our 2024 Annual Report on Form 10-K. We are currently assessing the impact that the adoption of ASU 2023-07 will have on the disclosures in our consolidated financial statements.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). The FASB issued ASU 2023-09 to enhance the transparency and decision-making usefulness of income tax disclosures by requiring additional information on an entity's tax rate reconciliation, as well as income taxes paid. ASU 2023-09 is effective for our reporting period beginning January 1, 2025. We are currently assessing the impact that the adoption of ASU 2023-09 will have on the disclosures in our consolidated financial statements.