Filed pursuant to Rule 424(b)(2)

Registration No. 333-232402

  

PROSPECTUS SUPPLEMENT

(To the Prospectus Dated July 12, 2019)

 

 

2,250,000 Shares of Common Stock

 

We are offering shares of our common stock, par value $0.0001 per share, pursuant to this prospectus supplement and accompanying prospectus.

 

Our common stock is listed on the NASDAQ Capital Market under the symbol “CLIR.”

 

On August 19, 2020, the last completed trading day prior to the date of this prospectus supplement, the last reported sale price of our common stock on the NASDAQ Capital Market was $2.32 per share. The aggregate market value of our outstanding voting common stock held by non-affiliates, based on the closing price of our common stock on August 19, 2020 of $2.32 per share was $48,267,658. Except for the shares of common stock offered pursuant to this prospectus supplement and accompanying prospectus, we have not offered any securities during the 12 calendar month period that ends on, and includes, the date of this prospectus supplement.

 

  Per Share Total (2)
     
Public offering price $2.00 $4,500,000
Underwriting discount and commission (1) $0.12 $270,000
Proceeds to us, before expenses $1.88 $4,230,000

  

(1) The underwriter will be reimbursed $35,000 for certain expenses incurred in this offering. See “Underwriting” for details.

(2) Assumes no exercise of the underwriter’s over-allotment option described below.

 

An investment in our common stock involves a high degree of risk. See “Risk Factors” beginning on page S-7 of this prospectus supplement, and the risk factors incorporated by reference into this prospectus supplement and the accompanying prospectus, for more information on these risks.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.

 

We have granted the underwriter an option for a period of 20 days to purchase up to 337,500 additional shares of our common stock at the public offering price, less the underwriting discount, to cover over-allotments, if any. If the underwriter exercises the option in full, the total underwriting discount will be $310,500, and the total proceeds to us, before expenses, will be $4,864,500.

 

We anticipate delivery of the shares will be made on or about August 24, 2020, subject to customary closing conditions.

 

National Securities Corporation

 

The date of this prospectus supplement is August 20, 2020.

 

 

 

  

TABLE OF CONTENTS  
   
  Page
 
Prospectus Supplement
   
ABOUT THIS PROSPECTUS SUPPLEMENT S-1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS S-2
PROSPECTUS SUPPLEMENT SUMMARY S-3
RISK FACTORS S-7
USE OF PROCEEDS S-9
DIVIDEND POLICY S-9
DILUTION S-9
UNDERWRITING S-11
LEGAL MATTERS S-15
EXPERTS S-15
WHERE YOU CAN FIND MORE INFORMATION S-15
INFORMATION INCORPORATED BY REFERENCE S-15

 

  Page
   
Prospectus  
   
ABOUT THIS PROSPECTUS 1
MARKET, INDUSTRY AND OTHER DATA 1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS 2
OUR BUSINESS 3
RISK FACTORS 7
USE OF PROCEEDS 7
DILUTION 7
DESCRIPTION OF SECURITIES THAT MAY BE OFFERED 8
Description of Debt Securities 8
Description of Common Stock 15
Description of Preferred Stock 18
Description of Warrants 18
Description of Units 19
Description of Subscription Rights 20
PLAN OF DISTRIBUTION 21
LEGAL MATTERS 23
EXPERTS 23
WHERE YOU CAN FIND MORE INFORMATION 23
INFORMATION INCORPORATED BY REFERENCE 24

 

 

 

 

ABOUT THIS PROSPECTUS SUPPLEMENT

 

This document is in two parts. The first part is the prospectus supplement, including the documents incorporated by reference, which describes the specific terms of this offering. The second part, the accompanying prospectus, including the documents incorporated by reference, provides more general information. Generally, when we refer to this prospectus, we are referring to both parts of this document combined. We urge you to carefully read this prospectus supplement and the accompanying prospectus, and the documents incorporated by reference herein and therein, before buying any of the securities being offered under this prospectus supplement. This prospectus supplement may add, update or change information contained in the accompanying prospectus. To the extent that any statement that we make in this prospectus supplement is inconsistent with statements made in the accompanying prospectus or any documents incorporated by reference therein filed prior to the date of this prospectus supplement, the statements made in this prospectus supplement will be deemed to modify or supersede those made in the accompanying prospectus and such documents incorporated by reference therein.

 

You should rely only on the information contained or incorporated herein by reference in this prospectus supplement and contained or incorporated therein by reference in the accompanying prospectus. We have not authorized anyone to provide you with different or additional information. If anyone provides you with different, additional or inconsistent information, you should not rely on it.

 

We are offering to sell the securities only in jurisdictions where such offers and sales are permitted. The distribution of this prospectus supplement and the accompanying prospectus and the offering of the securities in certain jurisdictions or to certain persons within such jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectus must inform themselves about and observe any restrictions relating to the offering of the securities and the distribution of this prospectus supplement and the accompanying prospectus outside the United States. This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any securities offered by this prospectus supplement and the accompanying prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.

 

You should assume that the information in this prospectus supplement and the accompanying prospectus is accurate only as of the date on the front of the applicable document and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus supplement or the accompanying prospectus, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates. You should read this prospectus supplement, the accompanying prospectus and the documents incorporated by reference in this prospectus supplement and the accompanying prospectus when making your investment decision. You should also read and consider the information in the documents we have referred you to in the sections of this prospectus supplement and the accompanying prospectus titled “Where You Can Find More Information” and “Information Incorporated by Reference.”

 

The representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference herein or in the accompanying prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

 

This prospectus supplement, the accompanying prospectus, and the information incorporated herein and therein by reference includes trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included or incorporated by reference into this prospectus supplement or the accompanying prospectus are the property of their respective owners.

 

In this prospectus supplement, unless otherwise stated or the context otherwise requires, the terms “ClearSign,” “ClearSign Technologies,” “we,” “us,” “our,” and the “Company” refer collectively to ClearSign Technologies Corporation and its subsidiary, ClearSign Asia Limited.

 

S-1

 

 

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus supplement, the accompanying prospectus and the documents incorporated by reference into this prospectus supplement and the accompanying prospectus contain forward-looking statements within the meaning of applicable securities laws. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may,” “will” or other similar expressions in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein. These statements may be found under the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and “Risk Factors” included or incorporated by reference into this prospectus supplement or the accompanying prospectus, as well as in this prospectus supplement generally. In particular, these include statements relating to future actions; prospective products, applications, customers and technologies; future performance or results of anticipated products; anticipated expenses; and future financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

 

  ·           our history of losses;

 

  ·           our ability to successfully develop and implement our technology and achieve profitability;

 

  ·           our limited operating history;

 

  ·           emerging competition and rapidly advancing technology in our industry that may outpace our technology;
     
  ·           changes in government regulations that could substantially reduce, or even eliminate, the need for our technology;
     
  ·           our ability to protect our intellectual property;
     
  ·           the impact of a cybersecurity incident or other technology disruption;
     
  ·           customer demand for the products and services we develop;

 

  ·           the impact of competitive or alternative products, technologies and pricing;

 

  ·           our ability to manufacture any products we design;

 

  ·           our ability to hire and retain personnel with the experience and talent to develop our products and business;

 

  ·           general economic conditions and events and the impact they may have on us and our potential customers;
     
  ·           our doing business in China and related risks with respect to intellectual property protection, currency exchange, contract enforcement and rules on foreign investment;
     
  ·           the financial and operational impacts of the coronavirus pandemic on our business and results of operations, including impacts on our day-to-day operations, collaborative arrangements, revenue and marketing efforts and suppliers;
     
  ·           our ability to obtain adequate financing in the future;

 

  ·           our ability to continue as a going concern;

 

  ·           our success at managing the risks involved in the foregoing items; and

 

  ·           other factors discussed in this prospectus supplement or the documents incorporated by reference herein.

 

The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this prospectus supplement. We undertake no obligation to publicly update or revise any forward-looking statements included in or incorporated by reference into this prospectus supplement or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, except to the extent required by federal securities laws. Actual future results may vary materially as a result of various factors, including, without limitation, the risks outlined under the section of this prospectus supplement and the accompanying prospectus entitled “Risk Factors” and matters described in this prospectus generally. In light of these risks and uncertainties, we cannot assure you that the forward-looking statements contained in this prospectus will in fact occur. You should not place undue reliance on these forward-looking statements.

 

Third-Party Data

 

We obtained statistical data, market data and other industry data and forecasts used throughout this prospectus from publicly available information. While we believe that the statistical data, market data and other industry data and forecasts are reliable and we are responsible for all of the disclosure in this prospectus supplement, we have not independently verified the data.

 

S-2

 

 

PROSPECTUS SUPPLEMENT SUMMARY

 

This is only a summary and may not contain all the information that is important to you. You should carefully read both this prospectus supplement and the accompanying prospectus and any other offering materials, together with the additional information described under the heading “Where You Can Find More Information.”

 

Our Business

 

ClearSign Technologies designs and develops industry-leading technologies that have been shown to significantly improve key performance characteristics of combustion systems, including emission and operational performance, energy efficiency, safety, and overall cost-effectiveness. We believe that our patented technology can enhance the performance of combustion systems in a broad range of markets, including the energy (upstream oil production and down-stream refining), institutional, commercial and industrial boiler, chemical, and petrochemical industries.

 

To date, our operations have been funded primarily through sales of our equity securities. We have earned limited revenue since inception. We were incorporated on January 23, 2008 in the state of Washington under the name ClearSign Combustion Corporation and, on November 12, 2019, we changed our name to ClearSign Technologies Corporation. Our principal executive offices are located at 12870 Interurban Avenue South, Seattle, Washington 98168 and we have an office in Tulsa, Oklahoma. Our telephone number is (206) 673-4848. Our website can be accessed at www.clearsign.com. The information contained on or that may be obtained from our website is not a part of this prospectus supplement. Substantially all of our operations are located in the United States, though we are developing sales relationships outside of the United States, particularly in China.

 

Based on the results of customer feedback and our testing, we believe our technologies compare favorably with current industry-standard air pollution control technologies, such as selective catalytic reduction devices, low- and ultra-low NOx burners (which address nitrogen oxides or NOx), excess air systems and other similar technologies. Such systems are used in our current target market segments of petroleum refining and petrochemical process heaters, large-scale once through steam generators (“OTSGs”), enclosed ground flares, and packaged boilers.

 

Our Industry

 

The combustion and emissions control markets are significant, both in the wide array of industries in which the systems are used and in the amount of money spent in installing and upgrading systems. These are used to provide heat for all manner of industrial processes, including boilers, furnaces, kilns and turbines. In order to maximize energy efficiency while keeping pace with regulatory guidelines for air pollution emissions, operators of these systems are continually installing, maintaining and upgrading a variety of costly process control, air pollution control and monitoring systems. Although we believe that there are many potential markets for our technologies, to date we have limited the introduction of our technologies to market segments that include petroleum refining process heaters, industrial and commercial boilers, enclosed ground flares, and OTSGs.

 

Our Proprietary Technology

 

The name “ClearSign Core” was adopted to describe the inclusion of ClearSign’s burner technology in the products of original equipment burner manufacturers, providing those manufacturers with a new product range with the unique capability of the ClearSign technology. This will allow ClearSign to leverage our technology and allow our prospective original equipment manufacturer (“OEM”) partners to combine their global manufacturing, order fulfillment and service capabilities with what we believe is a distinctively differentiated product performance. Our ClearSign Core burner technology consists of an industrial burner body and a downstream porous ceramic structure. When the unreacted mix of gaseous fuel and air is directed at the ceramic structure, the mixture ignites and stabilizes within the structure itself. Because the fuel and air have more time to mix, the homogeneous mixture mitigates NOx-forming hot spots and chemistry that are typically produced. The mixing and combustion in the ceramic structure results in a dramatically shorter flame, and modification of the structure enables a high level of control over the shape of the flame allowing it to be optimized for a wide range of different applications. NOx, a regulated greenhouse gas pollutant comprised largely of nitrogen oxide and nitrogen dioxide, can be greatly reduced to levels of 5 ppm or below, depending on the specific application, without any external fans or associated power, thereby minimizing harmful emissions while improving system efficiency.

 

S-3

 

 

ClearSign Core Plug & Play™

 

Our ClearSign Core Plug & Play product provides a simplified, pre-engineered and standardized direct burner replacement for traditional refinery process heaters. We believe that this product will minimize the customized engineering associated with retrofits and lend itself to mass production. The product is designed to allow quick and easy installation into a multi-burner heater or furnace. We believe that the simplicity of the actions required to retrofit refinery process heaters with the ClearSign Core Plug & Play will lead to increased demand for, and ultimately sales of, our ClearSign Core burners.

 

ClearSign Core Boiler Burner Technology

 

Our ClearSign Core boiler burner technology is, in essence, the same as the process burner technology. The details of the components are different due to the different orientation of the boiler application, the different internal chamber dimensions and the fact that a boiler operates with a relatively high combustion air pressure, and in the case of a small fire tube boiler, a lower fuel gas pressure. The concept of incorporating the ClearSign Core technology into a typical OEM burner remains the same.

 

ClearSign Core Flaring Burners

 

Our ClearSign Core flare technology incorporates the same principles as our burner technology, namely directing the fuel gas, in this case typically waste gas, into an air stream with that mixture forming a flame stabilized on a downstream ceramic structure. This technology has been configured into standard modular designs that can be incorporated into a flame manufacturer’s flare body to provide a flare product with the extremely low emissions production enabled by our ClearSign technology. The pods are designed with standard firing capacities, and these are combined in varying quantities to enable flares to be produced with different firing rates.

 

We have achieved emission results in multiple applications that exceeded applicable local Best Available Control Technology (“BACT”) levels, including in multiple installations in California related to three of our five target industries. We intend to continue to demonstrate ClearSign Core capabilities through (i) working with local air quality officials to demonstrate the effectiveness of the technology, (ii) operating in-place units, (iii) engineering and testing with new customers and applications, (iv) pursuing additional research and development of new applications including applications in other vertical markets, and (v) assisting our customers in making emission results available for designation as BACT by local regulatory bodies.

 

On June 15, 2020, we announced that we had received a purchase order from ExxonMobil to fabricate and install the Company’s ClearSign Core process burners at its Baytown, Texas refinery. As part of the contract, ClearSign will fabricate and install burners equipped with its ClearSign Core technology in a multiburner process heater to validate the technology’s effectiveness and utility for ExxonMobil. On August 12, 2020, we announced a formal business development and equipment supply alliance with Zeeco Inc, a world leader in the combustion equipment business. This relationship is expected to enable an expansion of our product range into new verticals and to provide a well-established channel to market for ClearSign Core enabled burners globally. The agreement is contingent on the successful completion of a product performance demonstration to be conducted at Zeeco’s Oklahoma test facility.

 

ClearSign Eye™ Flame Sensor

 

The ClearSign Eye flame sensor is an electrical flame sensor for industrial applications. Unlike the traditional and widely used technology, the ClearSign sensing electrodes do not have to make contact with the flame. The value of our sensing technology is that it provides a very reliable alternative or replacement technology for critical safety equipment and existing refinery burners. The current technology is typically very unreliable and requires frequent maintenance on industrial burners. ClearSign Eye sensing technology has a universal application and is well suited to low emission and standard burner technologies alike and so has a potential global market.

 

S-4

 

 

Our Target Markets

 

We compete in the combustion and emissions control markets. These are highly competitive industries that are currently dominated by companies that have substantially greater financial resources than we do and established products. However, we believe, based on the testing and the field installations completed to date, that our technologies offer a unique and powerful ability to improve emissions and operational performance, energy efficiency, and overall cost-effectiveness, all of which are critical to our target markets. We are targeting the following segments of the combustion market:

 

·process heaters for petroleum refining,
   
·heating systems in packaged boilers,
   
·enclosed ground flares, and
   
·larger-scale steam generation systems and power boilers.

 

In each segment, we are marketing solutions with our ClearSign technology that we believe could simultaneously improve both pollution control and operational efficiency characteristics through (i) cost-effective retrofitting of our ClearSign Core technology onto existing standard system designs, and (ii) new system designs.

 

Our target markets are greatly affected by air emission regulations and economic conditions, including the price and profitability related to crude oil and its processing. We believe that operators in all of our target markets are under intense pressure to meet current and proposed federal, state and local emissions standards. The standards applicable to our target markets have been developed over the past 50 years with broad political input. Due to the localized effects of poor air quality, we anticipate these standards to continue regardless of geopolitics.

 

Emissions standards largely emanate from the Clean Air Act, which is administered by the Environmental Protection Agency (“EPA”) and regulates six common criteria air pollutants, including ground-level ozone. These regulations are enforced by state and local air quality districts as part of their compliance plans. As regulations continue to restrict industrial emissions, we anticipate markets will continually adopt new technology allowing them to remain compliant.

 

Additionally, we believe that current emissions standards in Europe, China and Canada will continue to trend towards stricter air emission standards as these jurisdictions seek to achieve cleaner air. Existing and new emissions standards in such jurisdictions may create additional market opportunities for us.

 

Additional Information

 

For a description of our business, financial condition, results of operations and other important information regarding us, we refer you to our filings with the Securities and Exchange Commission (“SEC”) incorporated by reference into this prospectus supplement. For instructions on how to find copies of these documents, see “Where You Can Find More Information.”

 

 

S-5

 

 

The Offering

 

Common stock offered by us pursuant to

this prospectus supplement

2,250,000 shares of common stock.

   
Common Stock outstanding before this offering 26,731,261 shares of common stock.
   

Common stock outstanding immediately

after this offering

28,981,261(1)(2)
Price per share $2.00     
   
Over-allotment option We have granted the underwriter an option to purchase from us, for a period of 20 days after the date of this prospectus supplement, up to an additional 337,500 shares of common stock to cover over-allotments, if any.
   
Use of proceeds We currently intend to use the net proceeds from this offering for working capital, research and development, marketing and sales, and general corporate purposes.
   
NASDAQ Capital Market symbol CLIR
   
Risk factors See “Risk Factors” beginning on page S-7 of this prospectus supplement, as well as the other information included in or incorporated by reference in this prospectus supplement and the accompanying prospectus, for a discussion of risks you should carefully consider before investing in our securities.
   
Participation by Officers and Directors Certain of our directors and officers have expressed an interest in participating in this offering.  For further information relating to their participation, please see the section of this prospectus supplement titled “Underwriting – Purchases by Affiliates” at page S-12.

 

(1) The number of shares of our common stock to be outstanding immediately after this offering is based on 26,731,261 shares of common stock outstanding as of June 30, 2020 and excludes, as of that date:

 

·2,675,744 shares of our common stock issuable upon exercise of stock options under our 2011 Equity Incentive Plan at a weighted average exercise price of  $2.14 per share;

 

·341,382 shares of our common stock issuable upon exercise of stock options granted outside of our 2011 Equity Incentive Plan at a weighted average exercise price of $1.80 per share;

 

·80,000 shares of our common stock reserved for issuance under outstanding warrant agreements, at an exercise price of  $1.80 per share;

 

·738,091 shares of our common stock reserved for future issuance under our 2011 Equity Incentive Plan; and

 

·185,192 shares of our common stock reserved for future issuance under our 2013 Consultant Stock Plan.

 

(2) In connection with a private placement of our common stock in July 2018, we granted to CLIRSPV LLC a right to purchase certain new equity securities that we sell for the purpose of raising capital, as described further under the section of this prospectus supplement titled “Underwriting‒Purchases by Affiliates.” The number of shares of our common stock to be outstanding immediately after this offering excludes the up to approximately 654,000 shares of common stock that may be purchased by CLIRSPV LLC pursuant to this purchase right.

  

Unless otherwise specifically stated, information throughout this prospectus supplement assumes that none of our outstanding options or warrants to purchase shares of our common stock are exercised and none of the over-allotment option granted to the underwriter is exercised.

 

S-6

 

 

RISK FACTORS

 

Investing in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risks described below, together with all of the other information included in this prospectus supplement, the accompanying prospectus, and the information incorporated by reference herein and therein.

 

For a discussion of additional risks associated with our business, our intellectual property, government regulation, our industry and an investment in our securities, see the section titled “Risk Factors” in our most recent Annual Report on Form 10-K, as filed with the SEC on March 30, 2020, and any other subsequently filed document that is also incorporated or deemed to be incorporated by reference in this prospectus supplement.

 

If any of the risks described below, or those incorporated by reference into this prospectus supplement actually occur, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock may decline and you may lose all or part of your investment. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, financial condition and results of operations. Certain statements below are forward-looking statements. See the information included under the heading “Disclosure Regarding Forward-Looking Statements.”

 

Risks Related to this Offering

 

In making your investment decision, you should rely only on statements made in this prospectus in determining whether to purchase our securities.

 

You should carefully evaluate all of the information in this prospectus supplement. We have in the past received, and may continue in the future to receive, media coverage, including coverage that is not directly attributable to statements made by our officers and employees, that incorrectly reports on statements made by our officers or employees or that is misleading as a result of omitting to state information provided by us or our officers or employees. You should rely only on the information contained in this prospectus supplement and the accompanying prospectus in determining whether to purchase our securities.

 

Management will have broad discretion as to the use of proceeds from this offering and we may use the net proceeds in ways with which you may disagree.

 

We currently intend to use the net proceeds of this offering for working capital, research and development, marketing and sales, and general corporate purposes. We have not allocated specific amounts of the net proceeds from this offering for any of the foregoing purposes. Our management will have broad discretion and flexibility in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock or other securities. Accordingly, you will be relying on the judgment of our management on the use of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Our failure to apply these funds effectively could have a material adverse effect on our business, delay the development of our products and cause the price of our common stock or other securities to decline.

 

There may be future sales or other dilution of our equity securities, which may adversely affect the market price of our common stock.

 

We are generally not restricted from issuing additional shares of common stock, including securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. After this offering, the market price of our common stock could decline as a result of sales of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. We may, in the future, seek additional capital through a combination of public and private offerings of common stock, or other securities convertible into or exchangeable for, or that represent a right to receive, common stock. We may also participate in debt financings. To the extent that we raise additional capital through the sale of common stock, or securities that are convertible into or exchangeable for, or that represent a right to receive, common stock, your ownership interest will be diluted, and the market price of our common stock could be adversely affected. The incurrence of indebtedness, if obtained, would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt and other operating restrictions that could adversely impact our ability to conduct our business. Moreover, we will issue additional shares of our common stock upon the exercise of currently outstanding options and warrants. Such issuances may involve a significant number of our common shares at prices less than the offering price in this offering.

 

S-7

 

 

Investors in this offering will experience immediate and substantial dilution in the net tangible book value per share of the common stock they purchase.

 

The price at which our common stock is being offered is substantially higher than the net tangible book value per share of our common stock outstanding prior to this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate substantial dilution of $1.68 in net tangible book value per share from the price you paid, based on our financial statements as of June 30, 2020. If outstanding options or warrants to purchase our common stock are exercised, you will experience additional dilution. For a further description of the dilution that you will experience immediately after this offering, see “Dilution.”

 

Furthermore, following this offering CLIRSPV LLC, our largest shareholder, has the right to purchase restricted common stock from us on terms and conditions no different from those offered to the investors in this offering, so long as any such purchase does not cause CLIRSPV LLC to own 20% or more of our then outstanding shares of common stock or hold shares with 20% or more of the voting power. See the section of this prospectus supplement titled “Underwriting – Purchases by Affiliates” at page S-12.

 

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

 

We plan to reinvest all of our earnings, to the extent we have earnings, in order to continue to develop our products, to market our products, to cover operating costs and to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will depend on applicable law and then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. See “Dividend Policy.” As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

 

There is a substantial doubt about our ability to continue as a going concern.

 

Our financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred net losses of $8,482,000 for the year ended December 31, 2019, and $3,354,000 for the six months ended June 30, 2020. Our technologies are currently in field development and have generated nominal revenues from operations to date to meet our operating expenses. In order to generate meaningful revenues, the technologies must be fully developed, gain market recognition and acceptance, and develop a critical level of successful sales and product installations. We are currently dependent upon our ability to obtain financing from sales of our securities. These factors raise a substantial doubt about our ability to continue as a going concern.

 

We cannot assure that our technologies will be accepted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. Furthermore, we have no committed source of financing and we cannot assure that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to scale back our development plans or to otherwise severely curtail, or even to cease, our operations.

 

S-8

 

 

USE OF PROCEEDS

 

We estimate that the net proceeds from the sale of our common stock in this offering will be approximately $4,119,000, or approximately $4,753,500 if the underwriter exercises in full the option to purchase additional shares of common stock, in each case, after deducting underwriting discounts and commissions and our estimated expenses related to the offering. We currently intend to use the net proceeds from the sale of our common stock for working capital, research and development, marketing and sales, and general corporate purposes.

 

The amounts and timing of our actual expenditures will depend on numerous factors, including the factors described under “Risk Factors” in this prospectus supplement, the accompanying prospectus and in the documents incorporated by reference herein, as well as the amount of cash used in our operations. We may find it necessary or advisable to use the net proceeds for other purposes, and our management will have significant flexibility in applying the net proceeds of this offering.

 

Pending their use, we intend to invest the net proceeds of this offering in direct and guaranteed obligations of the United States, interest-bearing, investment-grade instruments or certificates of deposit.

 

DIVIDEND POLICY

 

We have never declared or paid any cash dividends on our shares of common stock and do not anticipate paying any cash dividends on our shares of common stock in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on applicable law and then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

 

DILUTION

 

Our net tangible book value as of June 30, 2020 was approximately $5.0 million, or $0.19 per share of our common stock. Our net tangible book value per share represents our total tangible assets less total liabilities divided by the number of shares of our common stock outstanding on June 30, 2020. After giving effect to the issuance and sale by us of 2,250,000 shares of common stock in this offering at an offering price of  $2.00 per share, and after deducting the underwriting discount and commission and estimated offering expenses payable by us, our pro forma net tangible book value as of June 30, 2020 would have been approximately $9.1 million, or $0.32 per share of our common stock. This represents an immediate increase in net tangible book value of  $0.13 per share to our existing shareholders and an immediate dilution in net tangible book value of  $1.68 per share to new investors purchasing shares of our common stock in this offering.

 

We determine dilution by subtracting the pro forma net tangible book value per share after this offering from the offering price per share of our common stock. The following table illustrates the dilution in net tangible book value per share to new investors:

 

 

Public offering price per share       $

2.00

 
Net tangible book value per share as of June 30, 2020  $0.19      
Increase per share attributable to new investors in this offering   

0.13

      
Pro forma net tangible book value per share after this offering        

0.32

 
Dilution in net tangible book value per share to new investors       $

1.68

 

 

The table above assumes that the underwriter’s over-allotment option is not exercised and does not take into account further dilution to new investors that could occur upon the exercise of outstanding options and warrants having a per share exercise price less than the public offering price per share in this offering. Additionally, the table above does not take into account up to approximately 654,000 shares of common stock that may be purchased by CLIRSPV LLC pursuant to the purchase right described under the section of this prospectus supplement titled “Underwriting‒Purchases by Affiliates.”

 

S-9

 

 

The number of shares of our outstanding common stock reflected in the discussion and table above is based on 26,731,261 shares of common stock outstanding as of June 30, 2020, and excludes as of that date:

 

·2,675,744 shares of our common stock issuable upon exercise of stock options under our 2011 Equity Incentive Plan at a weighted average exercise price of  $2.14 per share;

 

·341,382 shares of our common stock issuable upon exercise of stock options granted outside of our 2011 Equity Incentive Plan at a weighted average exercise price of $1.80 per share;

 

·80,000 shares of our common stock reserved for issuance under outstanding warrant agreements, at an exercise price of  $1.80 per share;

 

·738,091 shares of our common stock reserved for future issuance under our 2011 Equity Incentive Plan; and

 

·185,192 shares of our common stock reserved for future issuance under our 2013 Consultant Stock Plan.

 

To the extent that the outstanding options or warrants are exercised and CLIRSPV LLC exercises its purchase right, you will experience further dilution. To the extent that the above issued options and warrants are exercised and the purchase right is exercised in full, the pro forma net tangible book value per share of our common stock after giving effect to this offering would be $0.51 per share, and the dilution in net tangible book value per share to purchasers in this offering would be $1.49 per share. In addition, we may choose to raise additional capital due to market conditions or strategic considerations. To the extent that additional capital is raised through the sale of securities, the issuance of those securities could result in further dilution to our shareholders.

 

S-10

 

 

UNDERWRITING

 

We have entered into an underwriting agreement with the underwriter named below with respect to the shares of common stock subject to this offering. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter, and the underwriter has agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus supplement, the number of shares of our common stock set forth opposite its name below.

 

Underwriter    

Number of

Shares

 
National Securities Corporation     2,250,000  
         
Total     2,250,000  

 

The underwriter is committed to purchase all the shares of common stock offered by us, other than those covered by the option to purchase additional shares described below, if it purchases any shares. The underwriting agreement will provide that the underwriter’s obligation to purchase shares of our common stock is subject to conditions contained in the underwriting agreement, including the approval of certain legal matters by its counsel and the receipt of officers’ certificates and legal opinions. A copy of the underwriting agreement will be filed as an exhibit to a Current Report on Form 8-K, and will be incorporated by reference into the registration statement of which this prospectus is a part.

 

We have been advised by the underwriter that the underwriter proposes initially to offer the shares of our common stock directly to the public at the public offering price set forth on the cover page of this prospectus supplement and to brokers and dealers at a price less a concession not in excess of $0.06 per share. After the public offering of the shares, the offering price and other selling terms may be changed by the underwriter.

 

None of our securities included in this offering may be offered or sold, directly or indirectly, nor may this prospectus supplement and any other offering material or advertisements in connection with the offer and sales of any of our common stock be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who receive this prospectus supplement are advised to inform themselves about and to observe any restrictions relating to this offering of our common stock and the distribution of this prospectus supplement. This prospectus supplement is neither an offer to sell nor a solicitation of any offer to buy any of our common stock included in this offering in any jurisdiction where that would not be permitted or legal.

 

Underwriting Discount and Expenses

 

The following table summarizes the underwriting discount and commission to be paid to the underwriter by us.

 

  Per Share Total Without over-allotment Total With over-allotment
       
Public offering price $2.00  $4,500,000  $5,175,000 
Underwriting discounts and commissions  $0.12 $270,000  $310,500 
Non-accountable expense allowance    $35,000  $35,000
Net proceeds before other expenses    $4,195,000 $4,829,500 

  

We estimate the total expenses payable by us for this offering to be $381,000, which amount includes (i) the underwriting discount of $270,000 ($310,500 if the underwriter’s over-allotment option is exercised in full), (ii) a non-accountable expense allowance of $35,000, and (iii) other estimated expenses of the Company of approximately $76,000, which includes legal, accounting, printing costs and various fees associated with the registration and listing of the shares being sold.

 

S-11

 

 

Over-allotment Option

 

We have granted to the underwriter an option, exercisable not later than 20 days after the date of this prospectus supplement, to purchase up to an additional 337,500 shares of our common stock at the public offering price, less the underwriting discount, set forth on the cover page of this prospectus supplement. The underwriter may exercise the option solely to cover over-allotments, if any, made in connection with this offering. If any additional shares of our common stock are purchased pursuant to the over-allotment option, the underwriter will offer these additional shares of our common stock on the same terms as those on which the other shares of common stock are being offered hereby.

 

Purchases by Affiliates

 

Purchases by Directors and Officers

 

The underwriter has received indications of interest for the purchase of shares of common stock sold in this offering from Bruce Pate and Susanne Meline, two of our directors, at the public offering price set forth on the cover page of this prospectus supplement. Because indications of interest are not binding agreements or commitments to purchase, the underwriter may sell more, less or no shares in this offering to these persons, or these persons may determine to purchase more, less or no shares in this offering. The underwriter will receive the same underwriting discounts and commissions on any shares purchased by these persons as it will on any other shares sold to the public in this offering.

 

CLIRSPV LLC Purchase Right

 

In connection with a private placement of our common stock, pursuant to a Stock Purchase Agreement dated July 12, 2018, we granted to CLIRSPV LLC a right to purchase certain new equity securities that we sell for the purpose of raising capital on terms and conditions no different from those offered to other purchasers. In no event, however, may this purchase right be exercised to the extent it would cause CLIRSPV LLC to own 20% or more of the Company’s then outstanding shares of common stock or hold shares with 20% or more of the voting power of the Company. In connection with this purchase right, we will grant to CLIRSPV LLC the right to purchase up to approximately 570,000  unregistered shares of our common stock (or a total of approximately 654,000 shares if the underwriter’s over-allotment option is exercised in full) at the public offering price per share in the offering, provided that such right must be exercised by September 30, 2020 or 37 days following the closing of the underwriter’s over-allotment option, as applicable.

 

Robert T. Hoffman Sr., a member of our board of directors, is the managing member of GPCLIRSPV LLC, which is the managing member of CLIRSPV LLC.

 

Lock-Up Agreements

 

Our officers, directors and our largest shareholder have agreed that, for a period of 90 days from the date of this prospectus supplement, they will not, subject to certain exceptions, offer, announce the intention to sell, sell, assign, transfer, pledge, contract to sell, sell any option or contract to purchase, make any short sale or otherwise transfer or dispose of any shares of our common stock or securities convertible into or exercisable for our common stock, or enter into any swap, hedge or similar agreement or arrangement that transfers the economic consequences of ownership of such securities, without the prior written consent of the underwriter.

 

The Company has agreed that, for a period of 90 days from the date of this prospectus supplement, it will not, without the prior written consent of the underwriter (a) offer, announce the intention to sell, sell, assign, transfer, pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock or (b) enter into any swap, hedge or similar agreement or arrangement that transfers in whole or in part the economic consequences of ownership of common stock, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of shares of our common stock or such other securities, in cash or otherwise. These restrictions do not apply to (i) the issuance by us of common stock in this offering, (ii) the issuance by us of common stock or options pursuant to any of our equity incentive plans, (iii) the issuance of common stock upon exercise of outstanding options or warrants, (iv) the issuance of securities in connection with acquisitions or similar transactions, (v) our issuance of a warrant to a lender in connection with a debt financing, (vi) common stock purchased in the public market after the date of the underwriting agreement, or (vii) shares issued to CLIRSPV LLC pursuant to the purchase right described above. We have also agreed not to accelerate the vesting of any option or warrant or the lapse of any repurchase right and not to file any registration statement, preliminary prospectus or prospectus under the Securities Act registering, or offering for sale, our common stock or securities convertible into or exercisable for our common stock, during such period, except for a registration statement on Form S-8 relating to employee benefit plans.

 

S-12

 

 

Indemnification

 

We have agreed to indemnify the underwriter, its officers, directors, managers, members, employees, representatives and agents, and each person, if any, who controls the underwriter within the meaning of Section 15 of the Securities Act of 1933, as amended (“Securities Act”), against certain liabilities, including civil liabilities arising under the Securities Act, resulting from this offering and to contribute to payments that the underwriter may be required to make for these liabilities.

 

Price Stabilization, Short Positions and Penalty Bids

 

In connection with this offering, the underwriter may engage in transactions that stabilize, maintain or otherwise affect the price of our shares of common stock during and after the offering. Specifically, the underwriter may over-allot in connection with this offering by selling more shares of common stock than are set forth on the cover page of this prospectus supplement. This creates a short position in our offered shares for its own account. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriter is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. To close out a short position, the underwriter may elect to exercise all or part of the over-allotment option. The underwriter may also elect to stabilize the price of our shares or reduce any short position by bidding for, and purchasing, shares of common stock in the open market.

 

The underwriter may also impose a penalty bid. This occurs when an underwriter or dealer repays selling concessions allowed to it for distributing a security in this offering because the underwriter repurchases that security in stabilizing or short covering transactions.

 

Finally, the underwriter may bid for, and purchase, our shares of common stock in market making transactions, including “passive” market making transactions as described below.

 

These activities may stabilize or maintain the market price of our shares of common stock at a price that is higher than the price that might otherwise exist in the absence of these activities. The underwriter is not required to engage in these activities, and may discontinue any of these activities at any time without notice. These transactions may be effected on the Nasdaq Capital Market, in the over-the-counter market, or otherwise and, if commenced, may be discontinued at any time. Neither we nor the underwriter make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock.

 

In connection with this offering, the underwriter and selling group members, if any, or their affiliates may engage in passive market making transactions in our shares of common stock immediately prior to the commencement of sales in this offering, in accordance with Rule 103 of Regulation M under the Securities Exchange Act of 1934, as amended (“Exchange Act”). Rule 103 generally provides that:

 

●           a passive market maker may not effect transactions or display bids for our shares of common stock in excess of the highest independent bid price by persons who are not passive market makers;

 

●           net purchases by a passive market maker on each day are limited to a percentage of the passive market maker’s average daily trading volume in our shares of common stock during a specified prior period, and must be discontinued when the limit is reached; and

 

●           passive market making bids must be identified as such.

 

S-13

 

 

Electronic Distribution

 

The prospectus and the prospectus supplement in electronic format may be made available on internet sites or through other online services maintained by the underwriter, or by its affiliates. In those cases, prospective investors may view offering terms online and, depending upon the underwriter, prospective investors may be allowed to place orders online. The underwriter may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriter on the same basis as other allocations.

 

Other than the prospectus and the prospectus supplement in electronic format, the information on the underwriter’s website and any information contained in any other website maintained by the underwriter is not part of this prospectus supplement, the accompanying prospectus or the registration statement of which this prospectus supplement and the accompanying prospectus form a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter and should not be relied upon by investors.

 

The compensation to be paid to the underwriter in connection with this offering is limited to the fees and expenses described above under “Underwriting Discount and Expenses.”

 

S-14

 

 

LEGAL MATTERS

 

The validity of the issuance of the securities offered hereby will be passed upon for us by Mitchell Silberberg & Knupp, LLP, New York, New York.

 

EXPERTS

 

The consolidated financial statements of ClearSign Technologies Corporation incorporated into this prospectus supplement by reference to our Annual Report on Form 10-K for the year ended December 31, 2019 for each of the years in the two-year period ended December 31, 2019 have been audited by Gumbiner Savett Inc., independent registered public accounting firm, and are incorporated by reference in reliance upon their report dated March 30, 2020, given on their authority as experts in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the SEC a registration statement on Form S-3 under the Securities Act, with respect to the securities covered by this prospectus supplement. This prospectus supplement, which is a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information with respect to us and the securities covered by this prospectus supplement, please see the registration statement and the exhibits filed with the registration statement. The SEC maintains an internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is http://www.sec.gov.

 

We are subject to the information and periodic reporting requirements of the Exchange Act, and, in accordance therewith, we file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information are available for inspection and copying at the website of the SEC referred to above. We maintain a website at http://www.clearsign.com. You may access our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed pursuant to Sections 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our website and the information contained on that site, or connected to that site, are not incorporated into and are not a part of this prospectus supplement.

 

INFORMATION INCORPORATED BY REFERENCE

 

The SEC permits us to “incorporate by reference” the information contained in documents we file with the SEC, which means that we can disclose important information to you by referring you to those documents rather than by including them in this prospectus supplement. Information that is incorporated by reference is considered to be part of this prospectus supplement and you should read it with the same care that you read this prospectus supplement. We have filed with the SEC, and incorporate by reference in this prospectus supplement:

 

·our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on March 30, 2020;

 

·the information specifically incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2019 from our Definitive Proxy Statement on Schedule 14A for our 2020 Annual Meeting of Shareholders, as filed with the SEC on April 27, 2020;

 

·our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 as filed with the SEC on May 14, 2020 and August 14, 2020, respectively;

 

·our Current Reports on Form 8-K as filed with the SEC on January 15, 2020, January 17, 2020, February 20, 2020 (other than information furnished not filed), April 17, 2020, June 22, 2020, July 1, 2020 and July 13, 2020; and

 

S-15

 

 

·the description of our common stock in our registration statement on Form 8-A filed with the SEC on April 23, 2012, including all amendments and reports filed for the purpose of updating such description.

 

Additionally, all documents filed by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than any portions of filings that are furnished rather than filed pursuant to Items 2.02 and 7.01 of a Current Report on Form 8-K), after the date of this prospectus supplement and before the termination or completion of this offering shall be deemed to be incorporated by reference into this prospectus supplement from the respective dates of filing of such documents. Any information that we subsequently file with the SEC that is incorporated by reference as described above will automatically update and supersede any previous information that is part of this prospectus supplement.

 

We are not, however, incorporating, any documents or information that we are deemed to furnish and not file in accordance with SEC rules. We maintain a website at www.clearsign.com. The information on our website is not considered part of or incorporated by reference in this prospectus or any other document we file with or furnish to the SEC.

 

Upon written or oral request, we will provide you without charge, a copy of any or all of the documents incorporated by reference, other than exhibits to those documents unless the exhibits are specifically incorporated by reference in the documents. Please send requests to ClearSign Technologies Corporation, 12870 Interurban Avenue South, Seattle, Washington 98168, Attn: Chief Financial Officer, Telephone: (206) 673-4848.

 

S-16

 

 

PROSPECTUS

 

$50,000,000

 

Debt Securities, Common Stock, Preferred Stock, Warrants,

Units, and Subscription Rights Offered by

ClearSign Combustion Corporation

 

By this prospectus and an accompanying prospectus supplement, we may from time to time offer and sell, in one or more offerings, up to $50,000,000 in any combination of debt securities, common stock, preferred stock, warrants, units, or subscription rights.

 

We will provide you with more specific terms of the securities offered by us in one or more supplements to this prospectus. You should read this prospectus and the applicable prospectus supplement carefully before you invest.

 

We may offer these securities from time to time in amounts, at prices and on other terms to be determined at the time of offering. We may offer and sell these securities to or through underwriters, dealers or agents, or directly to investors, on a continuous or delayed basis.

 

The supplements to this prospectus will provide the specific terms of the plan of distribution. The price to the public of the securities we offer and the net proceeds we expect to receive from such sale will also be set forth in a prospectus supplement.

 

Our common stock is listed on the Nasdaq Capital Market under the symbol “CLIR”. On June 25, 2019, the closing price of our common stock as reported by the Nasdaq Capital Market was $1.0947 per share. The aggregate market value of our outstanding voting common stock held by non-affiliates, based upon a closing sale price of our common stock on June 25, 2019, was $23,403,762. During the 12 calendar month period that ends on, and includes, the date of this prospectus, we have not offered any securities pursuant to General Instruction I.B.6. of Form S-3.

 

An investment in our securities may be considered speculative and involves a high degree of risk, including the risk of a substantial loss of your investment. See “Risk Factors” on page 7 for more information on the risks you should consider before buying our securities. An investment in our securities is not suitable for all investors.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the adequacy or accuracy of this prospectus.  Any representation to the contrary is a criminal offense.

 

The date of this prospectus is July 12, 2019.

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
ABOUT THIS PROSPECTUS 1
MARKET, INDUSTRY AND OTHER DATA 1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS 2
OUR BUSINESS 3
RISK FACTORS 7
USE OF PROCEEDS 7
DILUTION 7
DESCRIPTION OF SECURITIES THAT MAY BE OFFERED 8
Description of Debt Securities 8
Description of Common Stock 15
Description of Preferred Stock 18
Description of Warrants 18
Description of Units 19
Description of Subscription Rights 20
PLAN OF DISTRIBUTION 21
LEGAL MATTERS 23
EXPERTS 23
WHERE YOU CAN FIND MORE INFORMATION 23
INFORMATION INCORPORATED BY REFERENCE 24

 

 

 

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under this shelf process, we may sell the securities described in this prospectus in one or more offerings. This prospectus provides you with a general description of the securities that may be offered. Each time we offer securities for sale, we will provide a prospectus supplement that contains specific information about the terms of that offering. Any prospectus supplement may also add or update information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described below under “Where You Can Find More Information” and “Information Incorporated by Reference.”

 

The registration statement that contains this prospectus (including the exhibits thereto) contains additional important information about us and the securities we may offer under this prospectus. Specifically, we have filed certain legal documents that establish the terms of the securities offered by this prospectus as exhibits to the registration statement. We will file certain other legal documents that establish the terms of the securities offered by this prospectus as exhibits to reports we file with the SEC. You may obtain copies of the registration statement and the other reports and documents referenced herein as described below under the heading “Where You Can Find More Information.”

 

You should rely only on the information contained or incorporated by reference in this prospectus and in any prospectus supplement. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making offers to sell or solicitations to buy the securities in any jurisdiction in which an offer or solicitation is not authorized or in which the person making that offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make an offer or solicitation. You should not assume that the information in this prospectus or any prospectus supplement, as well as the information we file or previously filed with the SEC that we incorporate by reference in this prospectus or any prospectus supplement, is accurate as of any date other than the date of such document. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

In this prospectus, unless the context otherwise requires, references to “ClearSign,” “we,” “us,” “our” or the “Company” refer to ClearSign Combustion Corporation and its subsidiary, ClearSign Asia Limited.

 

MARKET, INDUSTRY AND OTHER DATA

 

This prospectus, including the information incorporated by reference, contains estimates, projections and other information concerning our industry, our business, and the markets for certain products and services, including data regarding the estimated size of those markets and their projected growth rates. Information that is based on estimates, forecasts, projections or similar methodologies is based on a number of assumptions and is inherently subject to uncertainties, including those described in “Risk Factors” and elsewhere in this prospectus and documents incorporated by reference in this prospectus, and actual events or circumstances may differ materially from events and circumstances reflected in this information. You are cautioned not to give undue weight to such estimates, projections and other information.

 

 

 

 

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus and any accompanying prospectus supplement, including the documents that we incorporate by reference, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Forward-looking statements in this prospectus and any accompanying prospectus supplement include, without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

 

  · our limited cash and our history of losses;
  · our ability to successfully develop and implement our technology and achieve profitability;
  · our limited operating history;
  · changes in government regulations that could substantially reduce, or even eliminate, the need for our technology;
  · emerging competition and rapidly advancing technology in our industry that may outpace our technology;
  · customer demand for the products and services we develop;
  · the impact of competitive or alternative products, technologies and pricing;
  · our ability to manufacture any products we design;
  · general economic conditions and events and the impact they may have on us and our potential customers;
  · our ability to obtain adequate financing in the future;
  · our ability to continue as a going concern;
  · our success at managing the risks involved in the foregoing items; and
  · other factors discussed in this prospectus.

 

In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to publicly update or review any forward-looking statement.

 

 2 

 

 

OUR BUSINESS

 

This is only a summary and may not contain all the information that is important to you. You should carefully read both this prospectus and any accompanying prospectus supplement and any other offering materials, together with the additional information described under the heading “Where You Can Find More Information.”

 

About ClearSign Combustion Corporation

 

We design and develop technologies that have been shown to significantly improve key performance characteristics of combustion systems, including emission and operational performance, energy efficiency and overall cost-effectiveness. We believe that our patented Duplex™ technology can enhance the performance of combustion systems in a broad range of markets, including the energy (upstream oil production and down-stream refining), institutional commercial and industrial boiler, chemical, and petrochemical industries. Our Duplex technology, which is our primary technology, uses a porous ceramic matrix at a distance to a burner to significantly reduce flame length and achieve very low emissions without the need for external flue gas recirculation, selective catalytic reduction, or excess air systems. To date, our operations have been funded primarily through sales of our equity securities. We have earned nominal revenue since inception in 2008.

 

Duplex has been successfully installed in commercial projects across four different combustion applications. Based on the results of our testing and initial field installations, we believe that Duplex is more effective and cost-efficient than current industry-standard air pollution control technologies, such as selective catalytic reduction devices, low- and ultra-low NOx burners (which address nitrogen oxides or NOx), external flue gas recirculation systems and other similar technologies. Such systems are used in our current target market segments of petroleum refining and petrochemical process heaters, large-scale once through steam generators (OTSGs), enclosed flares, institutional commercial and industrial boilers and other similar equipment.

 

Based on the limited operating data we have obtained from installations, burners utilizing ClearSign’s ceramic Duplex technology provide increased heat transfer efficiency compared to standard burner designs. This is consistent with the physics of heat transfer and the mechanisms by which the ceramic technology functions. The increased heat transfer efficiency as reported results in cost savings in the low to mid-single digit range which produces an extremely attractive pay-back period for an investment in ClearSign technology-based burners. In addition, since the flames in a Duplex system are established within the confines of a ceramic enclosure and form with minimal “bulking up” from dilutive inert flue gasses, the flame volumes are small, thus virtually eliminating flame impingement and enabling the burners to function better in tightly spaced heaters. As a result, heaters utilizing ClearSign technology require less maintenance, operate at a lower cost, have increased productivity when heater operation is otherwise constrained by the internal furnace volume, and, more importantly, have decreased process downtime.

 

Our Industry

 

The combustion and emissions control markets are significant, both in the wide array of industries in which the systems are used and in the amount of money spent in installing and upgrading systems. Combustion systems are used to provide heat for all manner of industrial processes, including boilers, furnaces, kilns and gas turbines. In order to maximize energy efficiency while keeping pace with regulatory guidelines for air pollution emissions, operators of combustion systems are continually installing, maintaining and upgrading a variety of costly process control, air pollution control and monitoring systems. Although we believe that there are many potential markets for our Duplex technology, to date we have prioritized the introduction of Duplex to petroleum refining process heaters, steam generation, district heating and enclosed flares.

 

Our Proprietary Technology

 

Our Duplex burner technology consists of an industrial burner body and a downstream porous ceramic matrix. When the unreacted mix of gaseous fuel and air is directed at the ceramic matrix, the mixture ignites and stabilizes within the matrix itself. Because the fuel and air have more time to mix, the homogeneous mixture mitigates NOx-forming hot spots and chemistry that are typically produced. The mixing and combustion in the ceramic matrix results in a dramatically shorter flame, and modification of the matrix enables a high level of control over the shape of the flame allowing it to be optimized for a wide range of different applications. NOx, a regulated greenhouse gas pollutant comprised largely of nitrogen oxide and nitrogen dioxide, is greatly reduced to levels of 5ppm or below, depending on the specific application, without any external fans or associated power, thereby minimizing harmful emissions while improving system efficiency. A shorter flame can often allow for operation of the furnace at a higher capacity. We believe Duplex’s radiant heat transfer from the ceramic matrix enhances thermal efficiency, minimizes the possibility of flame impingement and reduces the likelihood of carbon deposits forming on the inside surfaces of the process tubes (coking) or failure of process tubes extending the length of time a heater can remain in operation before the need for maintenance.

 

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Our Duplex Plug & Play® product provides a more simplified, pre-engineered and standardized direct burner replacement for traditional refinery process heaters. We believe that this product will reduce the customized engineering associated with typical retrofits and lend itself to mass production. The product derives its name from the fact that it is designed to allow quick and easy installation into a multi-burner heater or furnace and possibly allow the heater to continue operating during installation rather than be shut down. The ability to install the Duplex Plug & Play while the remaining burner system is operational will allow customers to limit down time and shorten the sales cycle often prolonged by annual or semi-annual scheduled maintenance.

 

To date, we have deployed our Duplex technology through retrofits and replacements of existing burners and complete replacement units in the case of our Plug & Play products. Retrofits often involve engineering around an existing burner architecture that can complicate the Duplex installation, whereas replacements are more straightforward and more amenable to being sold and installed by third parties, enabling more expansive channels to market. This is especially the case after the introduction of our Duplex Plug & Play technology in February 2017 and simplified control and operation in April 2019. Because of this, we have focused the development of our technology to provide designs that can be included into our customers’ equipment as self-contained modules or assemblies rather than as individual projects involving the re-engineering of existing burner systems. In this form, we believe that ClearSign burner technology is ideally suited for installation into new heaters and burner replacement markets, including heater and furnace types requiring large quantities of burners. We have also developed flare and boiler burner technology into a similar repeatable form to aid its inclusion in standard industry equipment on a commercial scale.

 

For simplification and marketing, we have adopted the term “ClearSign Coreä” to refer to the inclusion of this standardized Duplex technology into a variety of combustion systems including, but not limited to, burners, furnaces, boilers, heaters, thermal oxidizers and flares.

 

We have now achieved emission results in multiple applications that were superior to current local Best Available Control Technology (BACT) levels in multiple installations in California related to three of our five target industries. We intend to continue to demonstrate Duplex capabilities through (i) working with local air quality officials to demonstrate the effectiveness of the technology, (ii) operating in-place units, (iii) engineering and testing with new customers and applications, (iv) pursuing additional lab research and development of new applications (e.g. institutional commercial and industrial boilers) and next generation improvements to Duplex design and standardization, including the pursuit of more complete systems similar to the Duplex Plug & Play for application in other vertical markets, and (v) assisting our customers in making emission results available for designation as BACT by local regulatory bodies.

 

Business Model and Monetization Strategy

 

As described above, we have developed our Duplex technology into standardized configurations that can be incorporated into equipment sold by the major vendors in the industry in an effort to gain quick access to our large global markets and that for brand recognition and marketing purposes, we have named the inclusion of our technology into OEM equipment as the “ClearSign Coreä. This approach allows us to sell our technology business to business, through an arrangement similar to a license, to selected alliance companies which then manufacture and deliver the complete equipment to the final customers. The objective of this business model is to enable ClearSign to leverage our technology and the vast resources and networks of our supply partners to sell to the global markets. The details of such collaborative agreements will vary depending on the nature of the individual markets and requirements to achieve an optimum collaboration with our partners. At this time, we have entered into one such agreement and have received demonstrated interest in collaboration from other major equipment suppliers in all major verticals and target markets.

 

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Our Target Markets

 

We compete in the combustion and emissions control markets. These are highly competitive industries that are currently dominated by companies that have both substantially greater infrastructure, customer support networks, and financial resources than we do as well as established products. Based on the testing and the field installations completed to date, however, we believe that our Duplex technology provides a unique and powerful ability to improve energy efficiency and operational performance, while at the same time significantly reducing emissions, leading to an overall cost-effective installation. Further, we believe that the ClearSign burner technology is well suited to create substantial synergistic value through its incorporation into the mainstream commercial offerings of the market incumbents as a “ClearSign Core,” thus leveraging the ClearSign technology and the established breadth and capabilities of collaborating companies.

 

We are targeting the following segments of the combustion market:

 

·institutional commercial and industrial boiler segment;
·refinery and petrochemical segment;
·large industrial segment;
·enclosed flare segment; and
·enhanced oil recovery segment

 

In each segment, we are marketing solutions with our Duplex technology that we believe could simultaneously improve both operational efficiency and pollution control characteristics through (a) cost-effective retrofitting of our Duplex technology into existing standard system designs, and (b) new system designs.

 

Our target markets are greatly affected by air emission regulations and economic conditions, including the price and profitability related to crude oil and its processing. We believe that operators in all of our target markets are under intense pressure to meet current and proposed federal, state and local emissions standards. The standards applicable to our target markets have been developed over the past 50 years with broad political input. Due to the localized effects of poor air quality, we anticipate these standards to continue regardless of national political leadership.

 

Emissions standards in the United States largely emanate from the Clean Air Act, which is administered by the Environmental Protection Agency (EPA) and regulates six common criteria air pollutants, including ground-level ozone. These regulations are enforced by state and local air quality districts as part of their compliance plans. As a precursor to ground-level ozone, NOx is a regulated pollutant by local air quality districts in order to achieve the EPA limits. The 8-hour ground-level ozone regulations have been reduced from 84 parts per billion (ppb) in 1997, to 75 ppb in 2008, and 70 ppb in 2015, with the requirement of realizing these levels approximately 25 years following the year of legislation. The areas of non-attainment related to this 1997 limit of 84 ppb are depicted below in the map on the left and the projected areas of non-attainment related to the 2015 limit of 70 ppb are depicted below in the map on the right.

 

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Non-attainment areas under the 1997 limit of 84 ppb Source: EPA, August 2016   Projected non-attainment areas under the 2015 limit of 70 ppb Source: URS, August 2015

 

Additionally, we believe that current emissions standards in Europe, China, the Middle East, other parts of Asia and Canada will continue to trend towards stricter air emission standards as these jurisdictions seek to achieve cleaner air. Existing and new emissions standards in such jurisdictions may create additional market opportunities for us.

 

Additional Information

 

For a description of our business, financial condition, results of operations and other important information regarding us, we refer you to our filings with the SEC incorporated by reference in this prospectus supplement. For instructions on how to find copies of these documents, see “Where You Can Find More Information.”

 

Corporate Information

 

Our facilities and executive offices are located at 12870 Interurban Avenue South, Seattle, Washington 98168, and our telephone number is (206) 673-4848. We were incorporated in Washington on January 23, 2008. Additional information about us is available on our website at www.clearsign.com. The information contained on or that may be obtained from our website is not, and shall not be deemed to be, a part of this prospectus. Our common stock, par value $0.0001 per share, is currently traded on the Nasdaq Capital Market under the ticker symbol “CLIR.”

 

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RISK FACTORS

 

Investing in our common stock involves a high degree of risk. Please see the risk factors set forth below and in Part I, Item 1A of our Annual Report on Form 10-K and Part II, Item 1A of our Quarterly Reports on Form 10-Q and other filings we make with the SEC, which are incorporated by reference in this prospectus. Additional risk factors may be included in a prospectus supplement relating to a particular offering of securities. Before making an investment decision, you should carefully consider these risks as well as other information we include or incorporate by reference in this prospectus. These risks could materially affect our business, results of operations or financial condition and cause the value of our securities to decline.

 

A cybersecurity incident or other technology disruptions could negatively impact our business and our relationships with customers.

 

We use computers in substantially all aspects of our business operations. We also use mobile devices and other online activities to connect with our employees, suppliers and customers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft, the compromise of trade secrets and inadvertent release of information. Our business involves the storage and transmission of sensitive and/or confidential information and intellectual property, including customers’ and suppliers’ information, private information about employees and financial and strategic information about us. If we fail to assess and identify cybersecurity risks associated with our operations, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage all of which could have a material adverse effect on our business, financial condition or results of operations.

 

USE OF PROCEEDS

 

Unless we state otherwise in an accompanying prospectus supplement, we intend to use the net proceeds from the sale of the securities offered by us under this prospectus and any related prospectus supplement for general corporate purposes. These purposes may include capital expenditures, acquisitions and additions to working capital. When a particular offering of securities is made, the prospectus supplement relating to that offering will set forth our intended use of the net proceeds we receive from the sale of the securities. Pending the application of the net proceeds, we may invest the proceeds in short-term, interest-bearing instruments or other investment-grade securities.

 

DILUTION

 

With the exception of debt securities we may sell with no equity conversion feature and, therefore, no effect on dilution, we will set forth in a prospectus supplement the following information regarding any material dilution of the equity interests of investors purchasing securities sold by ClearSign in an offering under this prospectus:

 

·the net tangible book value per share of our equity securities before and after the offering;

 

·the amount of the increase in such net tangible book value per share attributable to the cash payments made by purchases in the offering; and

 

·the amount of the immediate dilution from the public offering price which will be absorbed by such purchasers.

 

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DESCRIPTION OF THE SECURITIES THAT MAY BE OFFERED

 

Description of Debt Securities

 

The following description, together with the additional information we include in any applicable prospectus supplement, summarizes certain general terms and provisions of the debt securities that we may offer under this prospectus. When we offer to sell a particular series of debt securities, we will describe the specific terms of the series in a supplement to this prospectus. The supplement will also indicate to what extent the general terms and provisions described in this prospectus apply to a particular series of debt securities.

 

We may issue debt securities, either separately, or together with, or upon the conversion or exercise of or in exchange for, other securities described in this prospectus. Debt securities may be our senior, senior subordinated or subordinated obligations, issued in one or more series, and, unless otherwise specified in a supplement to this prospectus, the debt securities will be our direct, unsecured obligations.

 

The debt securities will be issued under an indenture between us and a trustee to be identified in the applicable prospectus supplement. We have summarized select portions of the indenture below. Please note, however, that the summary below is not complete. The form of the indenture has been filed as an exhibit to the registration statement of which this prospectus forms a part and you should read the indenture for provisions that may be important to you. Capitalized terms used in the summary below and not defined herein have the meanings specified in the form of the indenture.

 

General

 

The terms of each series of debt securities will be established by or pursuant to a resolution of our board of directors and set forth or determined in the manner provided in a resolution of our board of directors, in an officer’s certificate, or by a supplemental indenture. The particular terms of each series of debt securities will be described in a prospectus supplement relating to such series (including any pricing supplement or term sheet).

 

We can issue an unlimited amount of debt securities under the indenture that may be in one or more series with the same or various maturities, at par, at a premium, or at a discount. The prospectus supplement (including any pricing supplement or term sheet) relating to any series of debt securities being offered will set forth the aggregate principal amount and the other terms of the debt securities, including, if applicable:

 

·the title and ranking of the debt securities (including the terms of any subordination provisions);

 

·the price or prices at which the debt securities will be sold;

 

·any limit on the aggregate principal amount of the debt securities;

 

·the date or dates on which the principal of and premium, if any, on the debt securities is payable and/or the method of determination thereof;

 

·the rate or rates (which may be fixed or variable) per annum or the method used to determine the rate or rates (including any commodity, commodity index, stock exchange index or financial index) at which the debt securities will bear interest, the date or dates from which interest will accrue, the date or dates on which interest will commence and be payable and any regular record date for the interest payable on any interest payment date;

 

·the place or places where principal of, and interest, if any, on the debt securities will be payable (and the method of such payment), where the securities of such series may be surrendered for registration of transfer or exchange, and where notices and demands to us in respect of the debt securities may be delivered;

 

·the right, if any, to extend the interest payment periods and the duration of such extension;

 

·the period or periods within which, the price or prices at which, and the terms and conditions upon which, we may redeem the debt securities;

 

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·any obligation we will have to redeem or purchase the debt securities pursuant to any sinking fund or analogous provisions (including payments made in cash in participation of future sinking fund obligations) or at the option of a holder of debt securities, and the period or periods within which (or manner of determining the same), the price or prices at which (or manner of determining the same), and the terms and conditions upon which, debt securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;

 

·the dates on which, and the price or prices at which, we will repurchase debt securities at the option of the holders of debt securities and other detailed terms and provisions of these repurchase obligations;

 

·the form of the debt securities of the series, including the form of the trustee’s certificate of authentication for such series and any legends or endorsements to be placed thereon;

 

·the denominations in which the debt securities will be issued, if other than denominations of $1,000 and any integral multiple thereof;

 

·whether the debt securities will be issued in the form of certificated debt securities or global debt securities;

 

·the portion of principal amount of the debt securities payable upon declaration of acceleration of the maturity date, if other than the principal amount;

 

·the currency of denomination of the debt securities, which may be United States dollars or any foreign currency, and if such currency of denomination is a composite currency, the agency or organization, if any, responsible for overseeing such composite currency;

 

·the designation of the currency, currencies or currency units in which payment of principal of, premium, if any, and interest on the debt securities will be made;

 

·if payments of principal of, or premium, if any, or interest on the debt securities will be made in one or more currencies or currency units other than that or those in which the debt securities are denominated, the manner in which the exchange rate with respect to these payments will be determined;

 

·the manner in which the amounts of payment of principal of, premium, if any, or interest on the debt securities will be determined, if these amounts may be determined by reference to an index based on a currency or currencies other than that in which the debt securities are denominated or designated to be payable or by reference to a commodity, commodity index, stock exchange index or financial index;

 

·any provisions relating to any security provided for the debt securities;

 

·any addition to, deletion of or change in the Events of Default described in this prospectus or in the indenture with respect to the debt securities and any change in the acceleration provisions described in this prospectus or in the indenture with respect to the debt securities;

 

·any addition to, deletion of or change in the covenants described in this prospectus or set forth in the indenture with respect to the debt securities;

 

·the provisions, if any, relating to conversion or exchange of any debt securities of such series, including if applicable, the conversion or exchange price and period, provisions as to whether conversion or exchange will be mandatory, the events requiring an adjustment of the conversion or exchange price and provisions affecting conversion or exchange;

 

·if other than the trustee, the identity of the trustee, the registrar, paying agent and custodian for the depositary;

 

·if other than The Depository Trust Company, the identity of the depositary; and

 

·any other terms of the debt securities, which may supplement, modify or delete any provision of the indenture as it applies to that series, including any terms that may be required under applicable law or regulations or advisable in connection with the marketing of the securities.

 

We may issue debt securities that provide for an amount less than their stated principal amount to be due and payable upon declaration of acceleration of their maturity pursuant to the terms of the indenture. Information on the federal income tax considerations and other special considerations applicable to any of these debt securities will be provided in the applicable prospectus supplement.

 

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If the purchase price of any of the debt securities is denominated in a foreign currency or currencies or a foreign currency unit or units, or if the principal of and any premium and interest on any series of debt securities is payable in a foreign currency or currencies or a foreign currency unit or units, then information on the restrictions, elections, general tax considerations, specific terms and other information with respect to that issue of debt securities and such foreign currency or currencies or foreign currency unit or units will be provided in the applicable prospectus supplement.

 

Transfer and Exchange

 

Each debt security will be represented by either one or more global securities registered in the name of The Depository Trust Company (which we refer to as “DTC”) or a nominee of DTC (which we refer to as a “book-entry debt security”), or a certificate issued in definitive registered form (which is referred to as a “certificated debt security”), as set forth in the applicable prospectus supplement. Except as set forth under the heading “Global Debt Securities and Book-Entry System” below, book-entry debt securities will not be issuable in certificated form.

 

Certificated Debt Securities. Holders may transfer or exchange certificated debt securities at any office we maintain for this purpose in accordance with the terms of the indenture. No service charge will be made for any transfer or exchange of certificated debt securities, but payment of a sum sufficient to cover any tax or other governmental charge payable in connection with a transfer or exchange may be required.

 

Holders may effect the transfer of certificated debt securities and the right to receive the principal of, or any premium or interest on, certificated debt securities only by surrendering the certificate representing those certificated debt securities and either reissuance by us or the trustee of the certificate to the new holder or the issuance by us or the trustee of a new certificate to the new holder.

 

Global Debt Securities and Book-Entry System. Each global debt security representing book-entry debt securities will be deposited with, or on behalf of, DTC, and registered in the name of DTC or a nominee of DTC.

 

Covenants

 

Any restrictive covenants applicable to any issue of debt securities will be set forth in the applicable prospectus supplement.

 

No Protection in the Event of a Change of Control

 

Unless stated otherwise in the applicable prospectus supplement, the debt securities will not contain any provisions that may afford holders of the debt securities protection in the event we have a change in control or in the event of a highly leveraged transaction (whether or not such transaction results in a change in control) that could adversely affect holders of debt securities.

 

Consolidation, Merger and Sale of Assets

 

We may not consolidate with or merge with or into, or convey, transfer or lease all or substantially all of our properties and assets to any person (a “successor person”) unless:

 

·we are the surviving corporation or the successor person (if other than us) is a corporation that is organized and validly existing under the laws of any U.S. domestic jurisdiction and expressly assumes our obligations on the debt securities and under the indenture; and

 

·immediately after giving effect to the transaction, no Default or Event of Default shall have occurred and be continuing.

 

Notwithstanding the above, our subsidiaries may consolidate with, merge into, or transfer all or part of its properties to us.

 

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Events of Default

 

“Event of Default” means with respect to any series of debt securities, any of the following:

 

·default in the payment of any interest upon any debt security of that series when it becomes due and payable, and continuance of such default for a period of 30 days (unless the entire amount of the payment is deposited by us with the trustee or with a paying agent prior to the expiration of the 30-day period;

 

·default in the payment of principal of any security of that series when it becomes due and payable, whether at stated maturity, upon redemption, upon purchase, upon acceleration or otherwise;

 

·default in the performance or breach of any other covenant or warranty by us in the indenture (other than a covenant or warranty that has been included in the indenture solely for the benefit of a series of debt securities other than that series), which default continues uncured for a period of 60 days after we receive written notice from the trustee, or we and the trustee receive written notice from the holders of not less than a majority in principal amount of the outstanding debt securities of that series as provided in the indenture;

 

·certain voluntary or involuntary events of bankruptcy, insolvency or reorganization of the Company; and

 

·any other Event of Default provided with respect to debt securities of that series that is described in the applicable prospectus supplement.

 

No Event of Default with respect to a particular series of debt securities (except as to certain events of bankruptcy, insolvency or reorganization) necessarily constitutes an Event of Default with respect to any other series of debt securities. The occurrence of certain Events of Default or an acceleration under the indenture may constitute an event of default under certain other of our indebtedness or indebtedness of our subsidiaries outstanding from time to time.

 

So long as any of the securities are outstanding, we will provide the trustee written notice of any Default or Event of Default within 30 days of becoming aware of the occurrence of such Default or Event of Default.

 

If an Event of Default with respect to debt securities of any series at the time outstanding occurs and is continuing, then the trustee or the holders of not less than a majority in principal amount of the outstanding debt securities of that series may, by a notice in writing to us (and to the trustee if given by the holders), declare to be due and payable immediately the principal of (or, if the debt securities of that series are discount securities, that portion of the principal amount as may be specified in the terms of that series) and accrued and unpaid interest, if any, on all debt securities of that series. Such acceleration will not be effective until the earlier of (1) the acceleration of indebtedness under our senior secured credit facilities or (2) five business days after receipt by us of written notice of such acceleration, at which time the principal, premium, if any, interest and any other monetary obligations on all the then outstanding series of debt securities will become due and payable immediately. In the case of an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization, the principal (or such specified amount) and accrued and unpaid interest, if any, on all outstanding debt securities or the applicable series will become and be immediately due and payable without any declaration or other act on the part of the trustee or any holder of outstanding debt securities. At any time after a declaration of acceleration with respect to debt securities of any series has been made, but before a judgment or decree for payment of the money due has been obtained by the trustee, the holders of a majority in principal amount of the outstanding debt securities of that series may rescind and annul the acceleration if all Events of Default, other than the non-payment of accelerated principal and interest, if any, with respect to debt securities of that series, have been cured or waived as provided in the indenture. Please refer to the prospectus supplement relating to any series of debt securities that are discount securities for the particular provisions relating to acceleration of a portion of the principal amount of such discount securities upon the occurrence of an Event of Default.

 

The indenture will provide that the trustee will be under no obligation to exercise any of its rights or powers under the indenture unless the trustee receives indemnity satisfactory to it against any cost, liability or expense which might be incurred by it in exercising such right of power. Subject to certain rights of the trustee, the holders of a majority in principal amount of the outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee with respect to the debt securities of that series.

 

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No holder of any debt security of any series will have any right to institute any proceeding, judicial or otherwise, with respect to the indenture or for the appointment of a receiver or trustee, or for any remedy under the indenture, unless:

 

·that holder has previously given to the trustee written notice of a continuing Event of Default with respect to debt securities of that series; and

 

·the holders of not less than a majority in principal amount of the outstanding debt securities of that series have made written request, and offered indemnity or security satisfactory to the trustee, to the trustee to institute the proceeding as trustee, and the trustee has not received from the holders of not less than a majority in principal amount of the outstanding debt securities of that series a direction inconsistent with that request and has failed to institute the proceeding within 60 days.

 

Notwithstanding any other provision in the indenture, the holder of any debt security will have an absolute and unconditional right to receive payment of the principal of, premium and any interest on that debt security on or after the due dates expressed in that debt security and to institute suit for the enforcement of payment.

 

The indenture requires us, within 120 days after the end of our fiscal year, to furnish to the trustee a statement as to compliance with the indenture. If a Default or Event of Default occurs and is continuing with respect to the debt securities of any series and if it is known to a responsible officer of the trustee, the trustee shall mail to each holder of the debt securities of that series notice of a Default or Event of Default within 90 days after it occurs. The indenture provides that the trustee may withhold notice to the holders of debt securities of any series of any Default or Event of Default (except in payment on any debt securities of that series) with respect to debt securities of that series if the trustee determines in good faith that withholding notice is in the interest of the holders of those debt securities.

 

Modification and Waiver

 

We and the trustee may modify, amend or supplement the indenture or the debt securities of any series without the consent of any holder of any debt security:

 

·to cure any ambiguity, defect or inconsistency;

 

·to comply with covenants in the indenture described above under the heading “Consolidation, Merger and Sale of Assets”;

 

·to provide for uncertificated securities in addition to or in place of certificated securities;

 

·to make any change that does not adversely affect the rights of any holder of debt securities;

 

·to provide for the issuance of and establish the form and terms and conditions of debt securities of any series as permitted by the indenture;

 

·to add covenants for the benefit of the holders of debt securities of any series or to surrender any right or power conferred upon the Company;

 

·to effect the appointment of a successor trustee with respect to the debt securities of any series and to add to or change any of the provisions of the indenture to provide for or facilitate administration by more than one trustee; or

 

·to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act of 1939, as amended.

 

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We may also modify and amend the indenture with the consent of the holders of at least a majority in principal amount of the outstanding debt securities of each series affected by the modifications or amendments. We may not make any modification or amendment without the consent of the holders of each affected debt security then outstanding if that amendment will:

 

·reduce the amount of debt securities whose holders must consent to an amendment, supplement or waiver;

 

·reduce the rate of or extend the time for payment of interest (including default interest) on any debt security;

 

·reduce the principal of or premium on or change the fixed maturity of any debt security or reduce the amount of, or postpone the date fixed for, the payment of any sinking fund or analogous obligation with respect to any series of debt securities;

 

·reduce the principal amount of discount securities payable upon acceleration of maturity;

 

·waive a default in the payment of the principal, premium or interest on any debt security (except a rescission of acceleration of the debt securities of any series by the holders of at least a majority in aggregate principal amount of the then outstanding debt securities of that series and a waiver of the payment default that resulted from such acceleration);

 

·make the principal of or premium or interest on any debt security payable in currency other than that stated in the debt security;

 

·make any change to certain provisions of the indenture relating to, among other things, the right of holders of debt securities (i) to receive payment of the principal, premium and interest on those debt securities, (ii) to institute suit for the enforcement of any such payment, or (iii) to consent to an amendment or waiver in accordance with the requirements of the debenture; or

 

·waive a redemption payment with respect to any debt security.

 

Except for certain specified provisions, the holders of at least a majority in principal amount of the outstanding debt securities of any series may, on behalf of the holders of all debt securities of that series, waive compliance by us with provisions of the indenture. The holders of a majority in principal amount of the outstanding debt securities of any series may, on behalf of the holders of all the debt securities of such series, waive any past default under the indenture with respect to that series and its consequences, except a default in the payment of the principal of or any interest on any debt security of that series; provided, however, that the holders of a majority in principal amount of the outstanding debt securities of any series may rescind an acceleration and its consequences, including any related payment default that resulted from the acceleration.

 

Defeasance of Debt Securities and Certain Covenants in Certain Circumstances

 

Legal Defeasance. The indenture provides that, unless otherwise provided by the terms of the applicable series of debt securities, we may be discharged from any and all obligations in respect of the debt securities of any series (subject to certain exceptions). We will be so discharged upon the deposit with the trustee, in trust, of money and/or U.S. government obligations or, in the case of debt securities denominated in a single currency other than U.S. dollars, government obligations of the government that issued or caused to be issued such currency, that, through the payment of interest and principal in accordance with their terms, will provide money in an amount sufficient in the opinion of a nationally recognized firm of independent public accountants or investment bank to pay and discharge each installment of principal, premium and interest on and any mandatory sinking fund payments in respect of the debt securities of that series on the stated maturity of those payments in accordance with the terms of the indenture and those debt securities.

 

This discharge may occur only if, among other things, we have delivered to the trustee an opinion of counsel stating that we have received from, or there has been published by, the United States Internal Revenue Service a ruling or, since the date of execution of the indenture, there has been a change in the applicable United States federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the holders of the debt securities of that series will not recognize income, gain or loss for United States federal income tax purposes as a result of the deposit, defeasance and discharge and will be subject to United States federal income tax on the same amounts and in the same manner and at the same times as would have been the case if the deposit, defeasance and discharge had not occurred.

 

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Defeasance of Certain Covenants. The indenture provides that, unless otherwise provided by the terms of the applicable series of debt securities, upon compliance with certain conditions:

 

·we may omit to comply with the covenant described under the heading “Consolidation, Merger and Sale of Assets” and certain other covenants set forth in the indenture, as well as any additional covenants that may be set forth in the applicable prospectus supplement; and

 

·any omission to comply with those covenants will not constitute a Default or an Event of Default with respect to the debt securities of that series (“covenant defeasance”).

 

The conditions include:

 

·depositing with the trustee money and/or U.S. government obligations or, in the case of debt securities denominated in a single currency other than U.S. Dollars, government obligations of the government that issued or caused to be issued such currency, that, through the payment of interest and principal in accordance with their terms, will provide money in an amount sufficient in the opinion of a nationally recognized firm of independent public accountants or investment bank to pay and discharge each installment of principal of, premium and interest on and any mandatory sinking fund payments in respect of the debt securities of that series on the stated maturity of those payments in accordance with the terms of the indenture and those debt securities; and

 

·delivering to the trustee an opinion of counsel to the effect that the holders of the debt securities of that series will not recognize income, gain or loss for United States federal income tax purposes as a result of the deposit and related covenant defeasance and will be subject to United States federal income tax on the same amounts and in the same manner and at the same times as would have been the case if the deposit and related covenant defeasance had not occurred.

 

Covenant Defeasance and Events of Default. In the event we exercise our option to effect covenant defeasance with respect to any series of debt securities and the debt securities of that series are declared due and payable because of the occurrence of any Event of Default, the amount of money and/or U.S. government obligations or foreign government obligations on deposit with the trustee will be sufficient to pay amounts due on the debt securities of that series at the time of their stated maturity but may not be sufficient to pay amounts due on the debt securities of that series at the time of the acceleration resulting from the Event of Default. However, we shall remain liable for those payments.

 

No Personal Liability of Directors, Officers, Employees or Stockholders

 

None of our past, present or future directors, officers, employees or stockholders, as such, will have any liability for any of our obligations under the debt securities or the indenture or for any claim based on, or in respect or by reason of, such obligations or their creation. By accepting a debt security, each holder waives and releases all such liability. This waiver and release is part of the consideration for the issue of the debt securities. However, this waiver and release may not be effective to waive liabilities under U.S. federal securities laws, and it is the view of the SEC that such a waiver is against public policy.

 

Governing Law

 

The indenture and the debt securities will be governed by, and construed in accordance with, the laws of the State of New York without regard to conflict of law principles that would result in the application of any law other than the law of the State of New York.

 

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Description of Common Stock

 

The following summary of the rights of our common stock is not complete and is subject to and qualified in its entirety by reference to our articles of incorporation and bylaws, copies of which are included as exhibits to our registration statement on Form S-3, of which this prospectus forms a part. See “Where You Can Find More Information.”

 

We have 64,500,000 shares of capital stock authorized under our articles of incorporation, consisting of 62,500,000 shares of common stock and 2,000,000 shares of preferred stock.

 

As of June 25, 2019, we had 29,090,232 shares of common stock issued and outstanding. Our authorized but unissued shares of common stock are available for issuance without further action by our shareholders, unless such action is required by applicable law or the rules of The Nasdaq Stock Market or any other stock exchange or automated quotation system on which our securities may become listed or traded. If the approval of our shareholders is not so required, our board of directors may determine not to seek shareholder approval.

 

Holders of our common stock are entitled to such dividends as may be declared by our board of directors out of funds legally available for such purpose, subject to any preferential dividend rights of any then outstanding preferred stock. The shares of common stock are neither redeemable nor convertible. Holders of common stock have no preemptive or subscription rights to purchase any of our securities.

 

Each holder of our common stock is entitled to one vote for each such share outstanding in the holder’s name. No holder of common stock is entitled to cumulate votes in voting for directors.

 

In the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive pro rata our assets which are legally available for distribution, after payments of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then outstanding. All of the outstanding shares of our common stock are fully paid and non-assessable. The shares of common stock offered by this prospectus will also be fully paid and non-assessable.

 

Our common stock is listed on the Nasdaq Capital Market under the symbol “CLIR”. On June 25, 2019, the last sale price of our common stock was $1.0947 per share. The transfer agent and registrar for our common stock is VStock Transfer, LLC. Its address is 18 Lafayette Place, Woodmere, New York 11598, and its telephone number is (212) 828-8436.

 

Anti-Takeover Effects of Certain Provisions of Washington Law and Our Charter Documents

 

The following is a summary of certain provisions of Washington law, our articles of incorporation and our bylaws. This summary does not purport to be complete and is qualified in its entirety by reference to the corporate law of Washington and our articles of incorporation and bylaws.

 

Effect of Washington Anti-Takeover Statute. We are subject to Chapter 23B.19 of the Revised Code of Washington, an anti-takeover law (the “Anti-Takeover Statute”). In general, the Anti-Takeover Statute prohibits a target corporation from entering into a significant business transaction with an acquiring person for a period of five years following the acquiring person’s share acquisition unless

 

·the share acquisition is exempt because it was inadvertently made and the acquiring person, as soon as practicable, divests himself of a sufficient amount of the voting shares of the target corporation so that he is no longer the beneficial owner, directly or indirectly, of voting shares entitled to cast votes comprising 10% or more of the voting power of the target corporation and would not have, at any time during the five year period  preceding the announcement date of the significant business transaction have been an acquiring person but for the inadvertent acquisition,

 

  · the significant business transaction or the purchase of shares made by the acquiring person is approved prior to the acquiring person’s share acquisition time by a majority of the members of the board of directors of the target corporation; or

 

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  · at or subsequent to the acquiring person’s share acquisition time, the significant business transaction is approved by a majority of the members of the board of directors of the target corporation and approved at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of at least two-thirds of the votes entitled to be cast by the outstanding voting shares of the target corporation, except shares beneficially owned by or under the voting control of the acquiring person.

 

The Anti-Takeover Statute generally defines an “acquiring person” as a person or group of persons, other than the target corporation or a subsidiary of the target corporation, who is the beneficial owner of voting shares entitled to cast votes comprising 10% or more of the voting power of the target corporation; provided, however, that the term “acquiring person” does not include a person who (a) beneficially owned voting shares entitled to cast votes comprising 10% or more of the voting power of the target corporation on March 23, 1988; (b) acquired its voting shares of the target corporation solely by gift, inheritance, or in a transaction in which no consideration is exchanged; (c) equals or exceeds the 10% threshold as a result of action taken solely by the target corporation, such as redemption of shares, unless that person, by his own action, acquires additional shares of the target corporation; (d) beneficially owned voting shares entitled to cast votes comprising 10% or more of the voting power of the target corporation prior to the time the target corporation had a class of voting shares registered with the SEC pursuant to section 12 or 15 of the Securities Exchange Act; or (e) beneficially owned voting shares entitled to cast votes comprising 10% or more of the voting power of the target corporation prior to the time the target corporation amended its articles of incorporation to provide that the corporation shall be subject to the provisions of this chapter.

 

The Anti-Takeover Statute defines a “significant business transaction” as:

 

  (a) A merger, share exchange, or consolidation of a target corporation or a subsidiary of a target corporation with (i) an acquiring person, or (ii) any other domestic or foreign corporation which is, or after the merger, share exchange, or consolidation would be, an affiliate or associate of the acquiring person;

 

  (b) A sale, lease, exchange, mortgage, pledge, transfer, or other disposition or encumbrance, whether in one transaction or a series of transactions, to or with an acquiring person or an affiliate or associate of an acquiring person of assets of a target corporation or a subsidiary of a target corporation (i) having an aggregate market value equal to 5% or more of the aggregate market value of all the assets, determined on a consolidated basis, of the target corporation, (ii) having an aggregate market value equal to 5% or more of the aggregate market value of all the outstanding shares of the target corporation, or (iii) representing 5% or more of the earning power or net income, determined on a consolidated basis, of the target corporation;

 

  (c) The termination, while the corporation has an acquiring person and as a result of the acquiring person’s acquisition of 10% or more of the shares of the corporation, of 5% or more of the employees of the target corporation or its subsidiaries employed in this state, whether at one time or over the five-year period following the share acquisition time;

 

  (d) The issuance, transfer, or redemption by a target corporation or a subsidiary of a target corporation, whether in one transaction or a series of transactions, of shares or of options, warrants, or rights to acquire shares of a target corporation or a subsidiary of a target corporation to or beneficially owned by an acquiring person or an affiliate or associate of an acquiring person except pursuant to the exercise of warrants or rights to purchase shares offered, or a dividend, distribution, or redemption paid or made pro rata to, all shareholders or holders of options, warrants, or rights to acquire shares of the target corporation, and except for involuntary redemptions permitted by the target corporation’s charter or by the law of this state or the state of incorporation;

 

  (e) The liquidation or dissolution of a target corporation proposed by, or pursuant to an agreement, arrangement, or understanding, whether or not in writing, with an acquiring person or an affiliate or associate of an acquiring person;

 

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  (f) A reclassification of securities, including, without limitation, any shares split, shares dividend, or other distribution of shares in respect of stock, or any reverse shares split, or recapitalization of a target corporation, or a merger or consolidation of a target corporation with a subsidiary of the target corporation, or any other transaction, whether or not with or into or otherwise involving an acquiring person, proposed by, or pursuant to an agreement, arrangement, or understanding, whether or not in writing, with an acquiring person or an affiliate or associate of an acquiring person, that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of a class or series of voting shares or securities convertible into voting shares of a target corporation or a subsidiary of the target corporation that is directly or indirectly owned by an acquiring person or an affiliate or associate of an acquiring person, except as a result of immaterial changes due to fractional share adjustments; or

 

  (g) A receipt by an acquiring person or an affiliate or associate of an acquiring person of the benefit, directly or indirectly, except proportionately as a shareholder of a target corporation, of loans, advances, guarantees, pledges, or other financial assistance or tax credits or other tax advantages provided by or through a target corporation.

 

Finally, the Anti-Takeover Statute defines a “target corporation” as:

 

  (a) Every domestic corporation, if:

 

(i) The corporation has a class of voting shares registered with the SEC pursuant to Section 12 or 15 of the Securities Exchange Act; or

 

(ii) The corporation’s articles of incorporation have been amended to provide that such a corporation shall be subject to the provisions of this chapter, if the corporation did not have a class of voting shares registered with the SEC pursuant to section 12 or 15 of the Securities Exchange Act on the effective date of that amendment; and

 

  (b) Every foreign corporation required to register to transact business in the State of Washington pursuant to Chapter 23B.15 and Article 5 of Chapter 23.95 of the Revised Code of Washington, if:

 

(i) The corporation has a class of voting shares registered with the SEC pursuant to section 12 or 15 of the Securities Exchange Act;

 

(ii) The corporation’s principal executive office is located in the state;

 

(iii) The corporation has: (A) more than 10% of its shareholders of record resident in the state; or (B) more than 10% of its shares owned of record by state residents; or (C) 1,000 or more shareholders of record resident in the state;

 

(iv) A majority of the corporation’s employees, together with those of its subsidiaries, are residents of the state or the corporation, together with its subsidiaries, employs more than one thousand residents of the state; and

 

(v) A majority of the corporation’s tangible assets, together with those of its subsidiaries, measured by market value, are located in the state or the corporation, together with its subsidiaries, has more than fifty million dollars’ worth of tangible assets located in the state.

 

Our Charter Documents. Our charter documents include provisions that may have the effect of discouraging, delaying or preventing a change in control or an unsolicited acquisition proposal that a shareholder might consider favorable, including a proposal that might result in the payment of a premium over the market price for the shares held by our shareholders. Certain of these provisions are summarized in the following paragraphs.

 

Effects of authorized but unissued common stock and blank check preferred stock. One of the effects of the existence of authorized but unissued common stock and undesignated preferred stock may be to enable our board of directors to make more difficult or to discourage an attempt to obtain control of our Company by means of a merger, tender offer, proxy contest or otherwise, and thereby to protect the continuity of management. If, in the due exercise of its fiduciary obligations, the board of directors were to determine that a takeover proposal was not in our best interest, such shares could be issued by the board of directors without shareholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover transaction by diluting the voting or other rights of the proposed acquirer or insurgent shareholder group, by putting a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent board of directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise.

 

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In addition, our articles of incorporation grant our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance also may adversely affect the rights and powers, including voting rights, of those holders and may have the effect of delaying, deterring or preventing a change in control of our Company.

 

Cumulative Voting. Our articles of incorporation do not provide for cumulative voting in the election of directors and accordingly do not allow holders of less than a majority of the stock to elect some directors.

 

Vacancies. Our bylaws provide that any vacancy occurring on our board of directors may be filled by the shareholders, by the board of directors or, if the directors in office constitute less than a quorum, by the affirmative vote of a majority of the remaining directors.

 

Special Meeting of Shareholders. A special meeting of shareholders may only be called by the chairperson of the board of directors, the president or the board of directors or by holders of at least 20% of all the votes entitled to be cast on any issue proposed to be considered at the special meeting. 

 

Description of Preferred Stock

 

Our articles of incorporation permit us to issue up to 2,000,000 shares of preferred stock in one or more series and with rights and preferences that may be fixed or designated by our board of directors without any further action by our shareholders. We currently have no shares of preferred stock outstanding.

 

Subject to the limitations prescribed in our articles of incorporation and under Washington law, our articles of incorporation authorize the board of directors, from time to time by resolution and without further shareholder action, to provide for the issuance of shares of preferred stock, in one or more series, and to fix the designation, limitations, voting powers, preferences and relative rights of the shares, including the right to convert the shares into shares of our common stock, and to fix the qualifications, limitations and restrictions thereof.

 

Description of Warrants

 

We may issue warrants for the purchase of any of our securities, including the securities we are registering. As explained below, each warrant will entitle its holder to purchase the securities subject to the warrant at an exercise price set forth in, or to be determined as set forth in, the related prospectus supplement. Warrants may be issued separately or together with securities. The warrants will be issued pursuant to warrant agreements.

 

The particular terms of each issue of warrants and the warrant agreement relating to the warrants will be described in the applicable prospectus supplement, including, as applicable:

 

·the title of the warrants;

 

·the initial offering price;

 

·the aggregate number of warrants and the aggregate number of securities purchasable upon exercise of the warrants;

 

·if applicable, the designation and terms of the securities with which the warrants are issued, and the number of warrants issued with each security;

 

·the date on which the right to exercise the warrants will commence and the date on which the right will expire;

 

·if applicable, the minimum or maximum number of the warrants that may be exercised at any one time;

 

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·anti-dilution provisions of the warrants, if any;

 

·redemption or call provisions, if any, applicable to the warrants;

 

·any additional terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants; and

 

·the exercise price.

 

Holders of warrants will not be entitled, solely by virtue of being holders, to vote, to consent, to receive dividends, to receive notice as shareholders with respect to any meeting of shareholders for the election of directors or any other matter, or to exercise any rights whatsoever as a holder of the securities purchasable upon exercise of the warrants.

 

In the case of debt warrants, the prospectus supplement will contain, where appropriate, the following additional information:

 

  · the designation, aggregate principal amount, currency and terms of the debt securities that may be purchased upon exercise of the debt warrants; and

 

  · the designation, terms and amount of debt securities, if any, to be issued together with each of the debt warrants and the date, if any, after which the debt warrants and debt securities will be separately transferable.

 

Description of Units

 

We may, from time to time, issue units comprised of one or more of the other securities described in this prospectus in any combination. A prospectus supplement will describe the specific terms of the units offered under that prospectus supplement, and any special considerations applicable to investing in those units. You must read the applicable prospectus supplement and any applicable unit agreement for a full understanding of the specific terms of any units. We will incorporate by reference into the registration statement of which this prospectus is a part the form of unit agreement, including a form of unit certificate, if any, that describes the terms of the series of units we are offering before the issuance of the related series of units. While the terms we have summarized below will generally apply to any future units that we may offer under this prospectus, we will describe the particular terms of any series of units that we may offer in more detail in the applicable prospectus supplement and incorporated documents. The terms of any units offered under a prospectus supplement may differ from the terms described below.

 

We may issue units consisting of common stock, preferred stock, warrants, subscription rights, debt securities or any combination thereof. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at any time, or at any time before a specified date.

 

We will describe in the applicable prospectus supplement and any incorporated documents the terms of the series of units, including the following:

 

·the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;

 

·any unit agreement under which the units will be issued; and

 

·any provisions for the issuance, payment, settlement, transfer, or exchange of the units or of the securities comprising the units.

 

The provisions described in this section, as well as those described under “Description of Debt Securities,” “Description of Common Stock,” “Description of Preferred Stock,” “Description of Warrants” and “Description of Subscription Rights” will apply to each unit and, as applicable, to each security included in each unit.

 

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We may issue units in such amounts and in such numerous distinct series as we determine.

 

Each unit agent will act solely as our agent under the applicable unit agreement and will not assume any obligation or relationship of agency or trust with any holder of any unit. A unit agent may act as our agent for more than one series of units. A unit agent will have no duty or responsibility in case of any default by us under the applicable unit agreement or unit, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a unit, without the consent of the related unit agent or the holder of any other unit, may enforce by appropriate legal action its rights as holder under any security included in the unit.

 

We, the unit agent, and any of their agents may treat the registered holder of any unit certificate as an absolute owner of the units evidenced by that certificate for any purposes and as the person entitled to exercise the rights attaching to the units so requested.

 

Description of Subscription Rights

 

We may issue subscription rights to purchase common stock, preferred stock, debt securities or other securities. These subscription rights may be issued independently or together with any other security offered hereby and may or may not be transferable by the shareholder receiving the subscription rights in such offering. In connection with any offering of subscription rights, we may enter into a standby arrangement with one or more underwriters or other purchasers pursuant to which the underwriters or other purchasers may be required to purchase any securities remaining unsubscribed for after such offering.

 

The applicable prospectus supplement will describe the specific terms of any offering of subscription rights for which this prospectus is being delivered, including the following:

 

·the price, if any, for the subscription rights;

 

·the exercise price payable for each security upon the exercise of the subscription rights;

 

·the number of subscription rights issued to each shareholder;

 

·the number and terms of the securities which may be purchased for each subscription right;

 

·the extent to which the subscription rights are transferable;

 

·any other terms of the subscription rights, including the terms, procedures and limitations relating to the exchange and exercise of the subscription rights;

 

·the date on which the right to exercise the subscription rights shall commence, and the date on which the subscription rights shall expire;

 

·the extent to which the subscription rights may include an over-subscription privilege with respect to unsubscribed securities; and

 

·if applicable, the material terms of any standby underwriting or purchase arrangement entered into by us in connection with the offering of subscription rights.

 

The description in the applicable prospectus supplement of any subscription rights we offer will not necessarily be complete and will be qualified in its entirety by reference to the applicable subscription rights certificate, which will be filed with the SEC if we offer subscription rights.

 

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PLAN OF DISTRIBUTION

 

We may offer and sell the securities in any one or more of the following ways:

 

·to or through underwriters, brokers or dealers;

 

·directly to one or more other purchasers;

 

·through a block trade in which the broker or dealer engaged to handle the block trade will attempt to sell the securities as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

 

·through agents on a best-efforts basis;

 

·in “at the market” offerings, as defined in Rule 415 under the Securities Act, at negotiated prices, at prices prevailing at the time of sale or at prices related to such prevailing market prices, including sales made directly on Nasdaq or sales made through a market maker other than on an exchange or other similar offerings through sales agents; or

 

·otherwise through any other method permitted by applicable law or a combination of any of the above methods of sale.

 

In addition, we may enter into option, share lending or other types of transactions that require us to deliver securities to an underwriter, broker or dealer, who will then resell or transfer the securities under this prospectus. We may also enter into hedging transactions with respect to our securities. For example, we may:

 

·enter into transactions involving short sales of our securities by underwriters, brokers or dealers;

 

·sell securities short and deliver the securities to close out short positions;

 

·enter into option or other types of transactions that require the delivery of securities to an underwriter, broker or dealer, who will then resell or transfer the securities under this prospectus; or

 

·loan or pledge the securities to an underwriter, broker or dealer, who may sell the loaned securities or, in the event of default, sell the pledged securities.

 

We may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by or borrowed from us or others to settle those sales or to close out any related open borrowings of securities, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of securities. The third party in such sale transactions will be an underwriter and, if not identified in this prospectus, will be identified in the applicable prospectus supplement (or a post-effective amendment). In addition, we may otherwise loan or pledge securities to a financial institution or other third party that in turn may sell the securities short using this prospectus. Such financial institution or other third party may transfer its economic short position to investors in our securities or in connection with a concurrent offering of other securities.

 

Each time we sell securities, we will provide a prospectus supplement that will name any underwriter, dealer or agent involved in the offer and sale of the securities. Any prospectus supplement will also set forth the terms of the offering, including:

 

·the purchase price of the securities and the proceeds we will receive from the sale of the securities;

 

·any underwriting discounts and other items constituting underwriters’ compensation;

 

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·any public offering or purchase price and any discounts or commissions allowed or re-allowed or paid to dealers;

 

·any commissions allowed or paid to agents;

 

·any other offering expenses;

 

·any securities exchanges on which the securities may be listed;

 

·the method of distribution of the securities;

 

·the terms of any agreement, arrangement or understanding entered into with the underwriters, brokers or dealers; and

 

·any other information we think is important.

 

If underwriters or dealers are used in the sale, the securities will be acquired by the underwriters or dealers for their own account. We may sell the securities from time to time in one or more transactions:

 

·at a fixed price or prices, which may be changed;

 

·at market prices prevailing at the time of sale;

 

·at prices related to such prevailing market prices;

 

·at varying prices determined at the time of sale; or

 

·at negotiated prices.

 

Such sales may be effected:

 

·in transactions on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

 

·in transactions in the over-the-counter market;

 

·in block transactions in which the broker or dealer so engaged will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction, or in crosses, in which the same broker acts as an agent on both sides of the trade;

 

·through the writing of options; or

 

·through other types of transactions.

 

Any securities covered by this prospectus that qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus.

 

The securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more of such firms. Unless otherwise set forth in the prospectus supplement, the obligations of underwriters or dealers to purchase the securities offered will be subject to certain conditions precedent and the underwriters or dealers will be obligated to purchase all the offered securities if any are purchased. Any public offering price and any discount or concession allowed or re-allowed or paid by underwriters or dealers to other dealers may be changed from time to time.

 

The securities may be sold directly by us or through agents as designated from time to time. Any agent involved in the offer or sale of the securities in respect of which this prospectus is delivered will be named, and any commissions payable to such agent will be set forth in, the prospectus supplement. Unless otherwise indicated in the prospectus supplement, any such agent will be acting on a best efforts basis for the period of its appointment.

 

Offers to purchase the securities offered by this prospectus may be solicited, and sales of the securities may be made by us directly to institutional investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any resale of the securities. The terms of any offer made in this manner will be included in the prospectus supplement relating to the offer.

 

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Some of the underwriters, dealers or agents used by us in any offering of securities under this prospectus may be customers of, engage in transactions with, and perform services for us or affiliates of ours in the ordinary course of business. Underwriters, dealers, agents and other persons may be entitled to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to be reimbursed for certain expenses.

 

Subject to any restrictions relating to debt securities in bearer form, any securities initially sold outside the United States may be resold in the United States through underwriters, dealers or otherwise.

 

Any underwriters to which offered securities are sold by us for public offering and sale may make a market in such securities, but those underwriters will not be obligated to do so and may discontinue any market making at any time.

 

The anticipated date of delivery of the securities offered by this prospectus will be described in the applicable prospectus supplement relating to the offering.

 

Any broker-dealer participating in the distribution of the securities may be deemed to be an “underwriter” within the meaning of the Securities Act with respect to any securities such entity sells pursuant to this prospectus.

 

To comply with the securities laws of some states, if applicable, the securities may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the securities may not be sold unless they have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

 

There can be no assurance that we will sell all or any of the securities offered by this prospectus.

 

LEGAL MATTERS

 

Mitchell Silberberg & Knupp LLP, Los Angeles, California, will pass upon the validity of the securities offered in this prospectus. Any underwriters will also be advised about the validity of the securities and other legal matters by their own counsel, which will be named in the prospectus supplement.

 

EXPERTS

 

Gumbiner Savett Inc., independent registered public accounting firm, has audited our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, as set forth in their report, which is incorporated by reference in the prospectus and elsewhere in this registration statement. Our consolidated financial statements are incorporated by reference in reliance on the report of Gumbiner Savett Inc., given on their authority as experts in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the SEC a registration statement on Form S-3 under the Securities Act of 1933, as amended (“Securities Act”), with respect to the securities covered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information with respect to us and the securities covered by this prospectus, please see the registration statement and the exhibits filed with the registration statement. The SEC maintains an internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is http://www.sec.gov.

 

We are subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, we file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information are available for inspection and copying at the website of the SEC referred to above. We maintain a website at http://www.clearsign.com. You may access our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed pursuant to Sections 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our website and the information contained on that site, or connected to that site, are not incorporated into and are not a part of this prospectus.

 

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INFORMATION INCORPORATED BY REFERENCE

 

The SEC and applicable law permits us to “incorporate by reference” into this prospectus information that we have or may in the future file with or furnish to the SEC. This means that we can disclose important information by referring you to those documents. You should read carefully the information incorporated herein by reference because it is an important part of this prospectus. We hereby incorporate by reference the following documents into this prospectus:

 

·our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on March 12, 2019;

 

·our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, as filed with the SEC on May 14, 2019;

 

·all information in our definitive proxy statement filed with the SEC on April 4, 2019 to the extent incorporated by reference in our Annual Report on Form 10-K for the year ended December 31, 2018; and

 

·with the exception of the portions of the following filings that are furnished rather than filed, our Current Reports on Form 8-K filed with the SEC on January 7, 2019, January 10, 2019, January 30, 2019, February 12, 2019, March 19, 2019, April 2, 2019, April 18, 2019, May 13, 2019, which was amended by Amendment No. 1 filed with the SEC on June 5, 2019, and June 12, 2019.

 

Additionally, all documents filed by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than any portions of filings that are furnished rather than filed pursuant to Items 2.02 and 7.01 of a Current Report on Form 8-K), after the date of this prospectus and before the termination or completion of this offering (including all such documents filed with the SEC after the date of the initial registration statement and prior to the effectiveness of the registration statement) shall be deemed to be incorporated by reference into this prospectus from the respective dates of filing of such documents. Any information that we subsequently file with the SEC that is incorporated by reference as described above will automatically update and supersede any previous information that is part of this prospectus.

 

Upon written or oral request, we will provide to each person, including any beneficial owner, to whom a prospectus is delivered, without charge, a copy of any or all of the documents incorporated by reference, other than exhibits to those documents unless the exhibits are specifically incorporated by reference in the documents. Please send requests to ClearSign Combustion Corporation, 12870 Interurban Avenue South, Seattle, Washington 98168, Attn: Brian Fike, Telephone: (206) 673-4848.

 

 24 

 

 

 

 

 

    2,250,000 Shares

 

 

 

ClearSign Technologies Corporation

 

Common Stock

 

Prospectus Supplement

 

 

 

National Securities Corporation

 

 

 

August 20, 2020