ClearSign Technologies Corp. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing also reports fourth-quarter results; this is an annual report, not a standalone quarterly filing. ClearSign develops industrial combustion and emissions-control technology, principally ClearSign Core burners and ClearSign Eye flame sensors. Commercial activity and revenue remained limited.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $607,000 | $0 |
| Gross loss | $452,000 | $279,000 |
| Operating expenses | $7.693 million | $6.653 million |
| Net loss | $7.892 million | $6.886 million |
| Net loss per share | $0.25 | $0.25 |
| Cash used in operating activities | $6.707 million | $5.964 million |
- FY2021 revenue included $499,000 from burner and installation contracts and $108,000 from prior-year projects for which collectability constraints were resolved. Gross loss reflected $762,000 of contract losses, principally related to the ExxonMobil project, partly offset by $86,000 of expired warranty accruals.
- R&D expense rose 32.1% to $2.680 million; G&A rose 8.4% to $5.013 million. Net loss increased 14.6% year over year.
- Cash and cash equivalents were $7.607 million at year-end, versus $8.824 million a year earlier. Working capital was $7.293 million. Total assets were $9.363 million and total liabilities $1.081 million. Lease liabilities totaled $555,000; the $251,000 PPP loan was forgiven in 2021. No material conventional debt balance is reported at year-end.
- Financing included $5.309 million net proceeds from ATM share sales and $385,000 from option and warrant exercises. Cash declined by $1.217 million during the year.
- Fourth-quarter 2021 revenue was $54,000, gross profit was $3,000, operating expenses were $1.228 million, and net loss attributed to common stockholders was $1.227 million, or $0.04 per share.
Material developments and outlook
- Revenue began to emerge from customer deliveries, but ClearSign says meaningful revenue depends on broader product acceptance, repeat sales, and successful commercialization. It has incurred losses since inception, with an accumulated deficit of $82.8 million.
- ExxonMobil placed testing for the Baytown, Texas refinery project on hold in September 2021, citing insufficient time to meet its targeted 2022 refinery turnaround. ClearSign said discussions regarding contractual obligations were continuing. Project-related testing and engineering costs contributed to losses.
- The company reported operating ClearSign Core products in multiple boilers, heaters, and flares, including California installations, and described new process-burner orders and boiler development. Selling and marketing process burners under the Zeeco collaboration remains contingent on successful comprehensive product performance and validation testing.
- Management expected available funds to support operations at then-current levels for at least 12 months from the March 31, 2022 filing date, but anticipated needing additional capital thereafter. It expects operating losses and negative cash flows for the foreseeable future and identified equity or debt financing, partnerships, and licensing or sale of intellectual property as potential funding sources. No specific revenue or profitability guidance was provided.
- COVID-19 restrictions and travel limits delayed Chinese boiler demonstrations and partner work. Other significant risks include slow customer adoption, competition, dependence on financing and strategic partners, regulatory changes, China-related risks, product safety and liability, and protection of intellectual property.
- ClearSign recorded $421,000 of patent and trademark impairment charges and accelerated amortization of certain intangible assets. The audit identified intangible-asset impairment assessment as a critical audit matter. Management reported that a material weakness in financial reporting controls identified earlier in 2021 was remediated during the fourth quarter; disclosure controls and internal control over financial reporting were assessed as effective at year-end.
Key investor verification points
- Review subsequent revenue, gross margins, order conversion, and whether the reported customer installations produce repeat or scaled commercial sales.
- Confirm the status, costs, and contractual resolution of the paused ExxonMobil Baytown project and the required Zeeco product-validation test.
- Track cash burn, financing needs, dilution, and the use of the ATM program; after year-end, the company raised another $602,000 net through March 29, 2022 by issuing 496,000 shares.
- Assess progress on Chinese boiler testing and commercialization, and the continuing effects of pandemic-related delays.
- Monitor whether intellectual-property impairment, warranty reversals, and contract-loss estimates signal further changes in expected project economics.