Good afternoon. Welcome to the ClearSign Technologies second quarter 2025 earnings conference call. It is now my pleasure to hand things over to your host, Matthew Selinger. Please proceed.

Good afternoon, and thank you, operator. Welcome, everyone, to the ClearSign Technologies Corporation Second Quarter 2025 Results Conference Call. During this conference call, the company will make forward-looking statements. Any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs, and prospects. These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call include, but are not limited to, whether field testing and sales of ClearSign products will be successfully completed, whether ClearSign will be successful in expanding the market for its products, and other risks that are described in ClearSign's filings with the SEC, including those discussed under the Risk Factors section of the annual report on Form 10-K for the period ended December 31, 2024. Except as required by law, ClearSign assumes no responsibility to update these forward-looking statements to reflect future events, or actual outcomes and does not intend to do so. So, on the call with me today are Jim Deller, ClearSign's Chief Executive Officer; and Brent Hinds, ClearSign's Chief Financial Officer. So at this point in the call, I would like to turn the call over to Brent Hinds. So, Brent, please go ahead.

Thank you, Matthew, and thank you to everyone joining us here today. Before I begin, I'd like to note that our financial results on Form 10-Q were filed today with the SEC. With that, I'd like to give an overview of the financials for the second quarter of 2025. For the second quarter of 2025, the company recognized approximately $133,000 in revenues compared to $45,000 for the same period in 2024. This year-over-year increase in revenues is driven in large part by spare parts orders to our existing customers and a boiler burner sale to our existing customer. Now for the full income statement. Our net loss decreased by approximately $200,000 compared to the same period in 2024. This year-over-year decrease was predominantly driven by a $155,000 reduction in research and development expenses, as compared to the same period in 2024. Our decreased research and development expense was driven in large part by reduced product development work. Now, I'd like to shift the focus to cash. Our net cash used in operations for the second quarter was approximately $511,000 compared to approximately $1.5 million for the same period in 2024. This $1 million favorable year-over-year reduction was predominantly driven by customer cash collections during the quarter. As of June 30, 2025, we had approximately $12.3 million in cash and cash equivalents, with approximately 52.4 million shares of common stock outstanding. I want to explain our registration statement on Form S-1 that was filed on Tuesday, August 12, 2025. This filing was simply an administrative task to reregister our outstanding redeemable warrants issued in our underwritten public offering in April 2024. It is important to note, we are not offering or selling any new securities in this filing. From an overall financial perspective, we believe our current working capital positions us well to scale our business. We also believe our working capital gives our customers and suppliers confidence to do business with us in the long term. And with that, I'd like to turn the call over to our CEO, Jim Deller. Jim?

ClearSign. For the call today, Matthew will lead a question-and-answer session, we will go through the different business units much like our previous calls. We will end with an outlook for the rest of 2025 and then open up the call for question-and-answer from our investors. Many of you may have seen this, but you can send questions in ahead of time to our Investor Relations at [email protected]. So with that, Matthew?

Great, Jim. And thank you ahead of time to our investors that have sent in questions. We really do appreciate that. It helps us kind of formulate some of the path of the materials that we'll go over here. So Jim, very recently, there have been some announcements about Board transitions over the last couple of months. Is this anything to be concerned about?

The short answer is no. A lot of this has been covered in previous calls, so I won't go over that. A quick update. Leading up to the last AGM, we had one of our prior directors step down. Following the AGM, we did dissolve the special committee and following that, an additional two of our prior directors did resign. That enabled us to reduce the Board size back down to five, which leaves us with one position open that we will fill in due course, but there's no rush to do that. What I can say is the Board has been reconstituted with new members who are energized to help ClearSign, and for the company to grow in the future. From a personal perspective, this has been significant changes. I'm very pleased with the current Board situation. I'm really looking forward to the future.

Great. So with that housekeeping done, Jim, it's been about 3 months since our last call. Frankly, the company has been quiet in terms of news. Now with that, there seems to be a perceived impression of a lack of progress, right, with a lack of news. Can you talk about what's been going on behind the scenes that people don't see day-to-day?

Certainly. I understand there hasn't been much news regarding orders lately, and the market has experienced significant uncertainty. No orders have been canceled, but we have seen some delays in timelines. Regarding our major projects, we have secured two substantial process burner orders from well-known refiners and chemical companies. The first, a 20-burner order in California, is close to starting up. We've been actively overseeing the installation on-site for the past week, and we expect it to begin operation in the next couple of weeks. This will serve as a significant reference for us. As for the second project, a 26-burner order for a Gulf Coast chemical company, we have completed the necessary testing. This project involved stretching our technology capabilities, and we have met all requirements. We are currently waiting on a few signatures to move into manufacturing, which we anticipate starting shortly. We aim to have the burners built and shipped this year, which will drive revenue from this project. Originally, the timeline for the first burners to be installed and operational was set for the end of 2026, but due to an extension from the Texas Commission on Environmental Quality, that start-up is now expected in early 2026, though I cannot provide an exact date at this moment. Overall, quoting activity has been robust, and we've also dedicated significant time to developing our new products, particularly as part of our diversification initiative.

Okay. Fantastic. And you're developing new projects, so there was an announcement very recently about an advanced engineering order. And to some people that may be kind of nebulous. What does that mean kind of advanced engineering? Could you give more color about that announcement we just put out?

I can. This announcement was made on August 7. We are a technology company with top engineers and tools, including our computer modeling capabilities, which allow us to bring new products to market and advance technology. A crucial part of this process involves getting early adopter customers to install our new products in their equipment, which helps us gather initial operational references in the field. This was the motivation behind our announcement. We have a customer seeking our assistance to enhance productivity from one of their heaters, and we have the capability to do that. We can explain our process clearly, and this order pertains to the computer modeling needed to improve their existing ClearSign burners, enabling their furnace to operate more efficiently to meet their requirements. This request was driven by customer demand, presenting us with the opportunity to develop new technology. If all goes well, this will lead to an installation that addresses the customer's issue while allowing us to introduce either a new technology or an improvement to our existing technology.

It's important to emphasize that this is not an R&D project. To build on what Brent mentioned, our R&D spending has actually decreased. This is a real order from an existing client. Is that correct, it's a previous client?

Yes. Yes, this has been a very frequent client of ours, one we've got a very good relationship with. They came to us with a challenge that they're having to increase the throughput of one of their heaters. And this order and this technology is something that we are working with them to deliver to them to solve that problem of theirs.

Fantastic. So, we're in August 2025. So approximately 2 years ago, back in August 2023, there was a DOE, Department of Energy hydrogen burner development project. So, can you give a status update of where that project is at today?

Yes, I can. The grant was received in August, and now two years later, we have an extension for the project which is moving forward. It's currently in the final stages and progressing very well. The outcome of this project is a brand-new burner design that includes both a large and a small burner. These are currently being manufactured and are set to be installed and demonstrated at the Zeeco test facility in the upcoming months. I'm very excited about this because these burners will allow us to operate across the range of fuel gases used by refinery customers. We've received significant interest from well-known industry end users in these burners, and we are in discussions for them to come and witness the testing of these Department of Energy burners at the Zeeco test facility.

So this project is getting industry attention as well?

Very much so, yes.

That's exciting to hear. The other topic I want to move into and probably on top of a lot of investors' minds is we had an exciting development back in December and then the co-branding launched a few months after that, so just back in March. And this was the agreement with Zeeco to start marketing and selling the co-branded burners. Now you've previously said that this is going to take some time to ramp up, maybe 9 to 12 months. Can you give any color on kind of the relationship and what you're hearing from them?

Yes, certainly. We collaborate with Zeeco almost daily, engaging with their marketing and sales teams as well as their engineering and testing teams. They are very close to our office. Their sales team is actively promoting our burners, and we've received their feedback while also developing marketing materials together. We continue to follow up with them as they pursue ClearSign opportunities with their customers. Many of the opportunities we seek, whether through Zeeco or our other channels, take time to develop. Currently, we are still in the process of pursuing quotes and orders, but they are actively discussing the Zeeco ClearSign burners with their customers.

Great. So, I'd like to shift to the M-Series product line, which we focused the past couple of calls, I think, fairly extensively. This product line is focused on the midstream. When it was released, there was an initial flurry of orders, and I believe some additional inquiries and quotes. What are we seeing here with this product line?

We have seen ongoing strong interest from the midstream sector, particularly for the M-Series and other products. Our first installation was at a Tulsa Heaters Midstream heater on the U.S. Gulf Coast, which has been operating flawlessly. The latest M1 we've sold is going to another heater manufacturer, Devco, and is scheduled to start up later this year. The demand for the M1 burner remains robust. Overall, the midstream industry has been very supportive for us, and we've received significant feedback indicating a potential market gap for a burner with slightly higher NOx levels. This new product, marketed as the M25 burner, will be developed from the M1 to fulfill that demand, as many customers have inquired about a burner suitable for this less stringent NOx requirement. We already have a product available and have provided quotes, and I'm genuinely excited about the opportunities this could present for ClearSign, as it could help us enter a new market segment.

Let me explore that briefly. So M25, so would that be, for lack of a better term, kind of a D2 version of maybe the M1?

The M1 is essentially a single-digit NOx burner that is ideal for customers who have no other option but to install an SCR on the heater. It is a highly valuable product that addresses a significant technological need for these customers. However, we recognize that this product is not universally required, and there exists a considerable market that demands a good low NOx burner, although not one of that caliber. This presents an opportunity for us to offer a burner that meets those slightly lower specifications as well. I believe this part of the market represents a much larger volume. That excites me because we need to adapt ClearSign. We should have products that are relevant across all combustion technology sectors. Focusing solely on the very high-tech ultra-low NOx segment may not be in our best interest, especially since there is a much larger market we can tap into. This is a specialized product aimed at providing a slightly less advanced burner for the midstream market.

Yes. I think we might have referred to it on a previous call, some analogy and the fact that instead of being a Ferrari, maybe you'd need a Ford F-150.

Yes. Yes, we'd love to sell Ferrari, but there's a whole lot of people who want Ford F-150.

Yes. Got it. Okay. On the last call, we discussed flares having a resurgence of interest in our target markets. What's the status of those orders? And has this kind of resurgence of interest remained?

It has definitely remained. I will expand on this. I've mentioned in the past about our systems projects, which will follow from the flares. Specifically regarding the flare burners, our first new flare design is out in the field and waiting to be installed. We expect to have that installed later this year. Additionally, we have a second order from that same client currently in the computer modeling phase, and we anticipate that will transition into a detailed engineering order in Q4. Subsequently, we expect an equipment supply order to be issued early in 2026. The client who has the first order has already come back to us to progress the second. We're also seeing these burners going into existing flares, retrofitting the burner part of existing flare bodies. Furthermore, we are receiving inquiries not only to supply a replacement burner but also to provide the entire flare system, including the burner and the surrounding vessel and structure. This greatly expands our scope into what we're starting to refer to as a system rather than just a burner. We're pursuing these opportunities. When we examine our flare technology, the key aspect is our ability to burn hard-to-burn fuel gas. Typically, the industry relies on purchasing natural gas to assist in burning that difficult fuel completely. These systems serve waste disposal needs, allowing us to burn the gas without requiring the client to buy additional natural gas. This represents significant cost savings for them and enhances our value to customers. We can leverage this capability in other applications and supply complete systems, such as thermal oxidizers, where we are actively engaged in discussions. I want to clarify that these are proposals and not guaranteed orders, meaning there is no definitive timeline for them. However, we are experiencing sufficient engagement with customers that has us excited about the potential development of the ClearSign business. To quantify this, the flare replacement burners, including engineering and typical supply, will range from $200,000 to $300,000. For the systems projects, whether flare style or thermal oxidizer style, each unit will be in the $0.5 million to $1 million range. This marks a significant enhancement to the ClearSign product line. Looking at the value of proposals issued, we have noted a stark increase this year compared to last, particularly due to heightened interest and broader scopes of these orders. We are looking at about 10 times the value of proposals for our flare and systems product line combined.

Okay. Great. And I'll hold you to that, Jim, I do have a question about kind of proposals and pipeline. So, I will circle back to that here later.

Yes, certainly.

Yes. Previously, we also announced that we're going to be installing the first commercial installation of the sensor project, the ClearSign Eye, in a refinery of a super major. Where is that project? And any other color with this product line?

Certainly. The sensing technology we have confirms the presence of a flame on the pilot in a burner, which is essential for many of the control systems in our refinery heaters. We have an order from a well-known major refiner for one of their refineries located on the Texas Gulf Coast. They have requested these sensors for a trial installation on every burner in one of their heaters. The sensors are nearly finished with fabrication and will be ready to ship later this month. We are currently awaiting confirmation from the client regarding their installation schedule. We anticipate a 3- to 6-month evaluation period for them to assess the reliability and performance of these sensors. Additionally, we've received a request for a commercial proposal for another set of sensors for a different facility belonging to the same refiner. This will progress after the evaluation period of the initial installation is complete. Simultaneously, we have another installation of the sensors going into a refinery in Los Angeles, where they will be fitted on our own burners in a heater, and those are expected to be delivered later this year. This will allow us to have demonstration sites in both L.A. and Texas, with one using standard burners and the other using ClearSign burners. Furthermore, a client from the Department of Energy who plans to observe the burner we discussed earlier has requested to see our sensor in action. We are developing one to be installed on that burner operating at the Zeeco test facility, which we will showcase to the visitors, including representatives from Zeeco, one of the largest burner manufacturers globally.

So basically, there's going to be multiple demonstrations of the sensor in the field. Is that correct?

Yes. By the end of this year, we expect to have two complete heaters with burners fitted with this sensor in commercial operation, along with the demonstration unit in the Zeeco test facility.

And is this product helping demonstrate to industry that we are a technology solutions provider, and this is opening other doors for us?

I think that's fair. As you mentioned, we have had a major refiner customer approach us to meet with their engineering team and present the sensor. This has led to discussions about M1 burners for their midstream heaters. The more we expand our product portfolio, the more opportunities we have for sales calls and addressing customer inquiries. In doing so, we can discuss everything we offer and discover various ways to assist customers beyond the single reason they initially engaged with us. Having a range of technologies to discuss is definitely advantageous from a sales perspective.

Okay. And Jim, I told you, I was going to hold you to this, and I think it's a good time to segue now about pipeline. In the last call, I think you were able to quantify the pipeline saying at that time, it was 2x the amount of proposals from the previous year at about 5x the project value from a year previous. Has that changed in the 3 months since the last call?

Yes. I have reviewed the data and that level has remained stable. We have been consistently receiving quotes and proposing projects at that rate. What’s particularly exciting is that some of these are requests for burners for major refineries where we are actually being included as a technology option for evaluation by heater manufacturers working on these projects. Instead of us seeking clients in need, we now have clients developing new heaters that are specifically requesting our technology to be considered in their proposals. This represents significant progress for ClearSign, and I am very enthusiastic about it.

Right. So, we're already halfway through the year. What do you see looking forward to the rest of the year? And again, what do you feel will be potential market catalysts? And when I say market catalysts, I'm talking about industry, not necessarily financial.

We have a lot coming up. We've already discussed some of it. The L.A. heater start has been delayed for over a year, and we're finally set to get it up and running soon. This project is significant as it's a major refinery with two large heaters, much bigger than any previous installations. We expect to begin work on this in the next month. Additionally, the Gulf Coast order involves heater manufacturing from Birwelco, one of the top manufacturers in the world. Our experience with those burners has been noteworthy, and as we move into manufacturing and delivery early next year, these projects represent significant references we've been pursuing for years. Furthermore, our new technology flares are about to launch, and we anticipate a systems project that will showcase our ability to deliver on this scale. This is particularly important as we enter the higher volume M25 market, which could broaden our reach beyond the low NOx niche. There’s much to be excited about that could drive ClearSign's growth. Also, the Texas Commission on Environmental Quality is considering regulatory changes that could impact our largest potential market on the U.S. Gulf Coast. From speaking with customers, there’s some uncertainty stemming from tariffs and environmental regulations creating delays in orders. However, I believe things will stabilize and return to normal. I see this as a positive and look forward to the improvements this could bring for ClearSign.

Okay. And before we segue in opening up for other questions from investors, Jim, any other commentary you'd like to give before we move into the Q&A from investors?

Yes, I would. I'm very encouraged about the start-ups, references, and technology developments we've made over the long term, especially in the last few months. I want to acknowledge the effort of the team here at ClearSign and the engineering department. This has required significant dedication and hard work. I want to express my gratitude for the engineering team's efforts in bringing these new technologies to market as they are today. I truly believe these advancements will lay the groundwork for ClearSign's future growth. So, I want to personally thank the team and recognize their hard work over the past few months.

Great. Well, it sounds like, again, the continuation of the expanding product line. We talked about in the last call, expanding channels, right? And hopefully, we'll start to see some of that coming more to market traction here very soon.

Absolutely. Great.

Okay. So, with that, we will open it up, operator, for some other questions.

And I'll pass the floor back to the management team.

Great, Operator. I'm going to read one of the first questions here. There are a lot of questions about Jim and Zeeco. Perhaps it makes the most sense to start with who Zeeco is and what you believe their motivation is to work with ClearSign?

Yes. I think that's a very observing question. Zeeco is a very big factor in the ClearSign business. To be frank, we moved the business from Seattle to Tulsa and a very big part of the reason we did that was to be in the center of the industry and to be very close to the partners that we need to work with. And Zeeco is definitely the leading amongst those. So those of you who don't know, Zeeco is a global combustion equipment company. Their revenues are somewhere in the order of a billion with a B. They're present on every continent. They manufacture around the world. Very importantly, for us, they have the, I believe, the world's biggest industrial test facility that is here on the outskirts of Tulsa, just minutes away from our ClearSign office. They also have a very large and sophisticated manufacturing capability that has been accredited and is known throughout the refining and petrochemical industry as a very, very trusted manufacturer. Both of those are essential elements of a combustion equipment provider. So for ClearSign, working with Zeeco provided us a way to bring our technology to market with the credentials and these must-have capabilities that are provided through this relationship with Zeeco. When we set the agreement up with Zeeco, the mission was very clear. We wanted to come up with an arrangement that was going to be very profitable and had enormous potential for both companies. Bear in mind, Zeeco is a billion company. We had to be relevant to them. The ClearSign product line in the NOx levels that we provide basically extends the Zeeco portfolio, right? It puts another product in their product line and extends the capabilities of burners offered under the Zeeco name down into a range that actually competes with a selective catalytic reduction system, which is the other alternative in the market. So, it gives ClearSign additional capability. When they got to the point that they agreed to basically carry the ClearSign technology under the Zeeco name. That was a huge milestone for us. It introduced us to the Zeeco sales team and very much, I believe, will put ClearSign on the map for a much bigger audience within the market going forward. So, for Zeeco, you're asking what's in it for Zeeco. Clearly, there is a financial incentive. There's a lot of margin in the high-end ClearSign products sufficient for a mutually beneficial arrangement with Zeeco. And that is their motivation for promoting and growing the ClearSign business, in addition to the extra commercial conversations that they can enter into because of the extended capability of the Zeeco range as that includes the ClearSign technology.

Great. Operator, can we go ahead and prompt again?

There is a financial incentive for Zeeco as there is substantial margin in the high-end ClearSign products, making it a mutually beneficial partnership. This motivates them to promote and expand the ClearSign business, along with engaging in additional commercial discussions made possible by the enhanced capabilities of the Zeeco range that incorporates ClearSign technology.

In the meantime, Operator, I'll go ahead and address another question we received via email. Jim, we have several inquiries about CFD. Can you explain how the company is utilizing CFD for some of the current product lines in daily operations? It would also be helpful if you could clarify what CFD is.

I think the latter is important. CFD stands for Computational Fluid Dynamics. Essentially, it is a simulation we can create on a computer that helps us predict gas flow, interactions, turbulence, chemistry, heat dissipation, and thermal transfer, capturing all the physical phenomena in the complex flow field within a heater and burner. In the context of a combustion system, CFD acts like a computer-generated MRI, providing a view into the heater and burner. This insight is crucial for technology development, enabling us to quickly optimize our designs. Initially, we generate concepts and theories from our engineering team, which we then translate into computer models to compare different proposals and systems, allowing for rapid optimization. The final stage involves building a physical version for testing or initial installation. At ClearSign, we have exceptional engineers and advanced computer modeling capabilities, evident in products like the M1 burner, which went from CFD modeling to installation in a heater without any modifications. The order we announced last week, dated August 7, was facilitated by our ability to model and gather detailed flow field information within the heater, enabling us to develop new technologies based on insights from that modeling. This process is a significant aspect of our work. Recruiting Matt Martin as our Chief Technology Officer was a major asset for ClearSign, as he brings invaluable skills and experience to the team.

Okay. I've got another one. This one is probably here for you, Brent, and just came in. Can you confirm the sequential cash balance maybe from Q1 to Q2?

Yes. Great question. So, for Q1, our cash and cash equivalents was about $12.8 million. In Q2, it's about $12.3 million. That is a $500,000 difference. That's cash used in operations. The difference there is really driven by customer cash collections. As we've said in the past, cash doesn't always go after revenue recognition. It comes in before revenue recognition. So, a substantial amount of cash from projects in process and projects that we've completed and was delivered in Q2.

Matt, I would like to add something to that, and Brent can also chime in. We announced the major orders we received. Part of these numbers includes a significant amount of aftermarket, service, and engineering orders that we don’t specifically announce. However, we have a consistent flow of these orders, which are often quickly executed. They typically involve building replacement parts for equipment in the field or conducting engineering studies, which we can complete promptly. So, despite the lack of many announced orders in our recent press releases, we have ongoing work, and we are still receiving orders and payments.

So with that, Operator, I'll turn it back to you.

I am seeing no questions in the queue at this time. Therefore, I would like to pass the floor back to the Chief Executive Officer of ClearSign, Jim Deller, for closing remarks.

Thank you, Operator. Thank you, everyone, for your interest and taking the time to participate today. We look forward to updating you regarding our developments and speaking with you on our next call. For those of you interested, we will be at the H.C. Wainwright Conference next month in New York City. In the meantime, please keep checking in for developments on our website and for more behind-the-scenes updates, please follow us on LinkedIn. So with that, thank you very much, and we look forward to speaking to you next time.

Thank you. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. Thank you once again for your participation.