Good day, and welcome to the ClearSign Combustion Q3 Earnings Conference Call. I would now like to turn the conference over to Lou Basenese to begin.

Thank you, operator, and welcome everyone to the ClearSign Combustion Corporation’s Third Quarter 2018 Results Conference Call. During this conference call, the Company will make forward-looking statements. We caution you that 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’s products will be successfully completed, whether ClearSign will be successful in expanding the market for it’s products, and other risks that are described in ClearSign’s public periodic filings with the SEC, including the discussion in the Risk Factor section of the 2017 Annual Report on Form 10-K. Investors or potential investors should read these risks. ClearSign assumes no responsibility to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. On the call with me today are Steve Pirnat, ClearSign’s Chief Executive Officer; Brian Fike, ClearSign’s Chief Financial Officer; Steve Sock, ClearSign’s Senior Vice President of Business Development; and Rob Hoffman, ClearSign’s Chairman of the Board. With that, now I’d like to turn the call over to Brian Fike. Please go ahead, Brian.

Thank you, Lou, and thank you to everyone for joining us on the call today. Before I turn the call over to Steve, I’ll review our results for the third quarter of 2018, as they reported our Form 10-Q. For the quarter, we incurred a loss of $2.3 million, compared to a loss of $2.5 million for the same period in 2017. And the loss of $7 million for the nine months ending September 30 of 2018, compared to a net loss of $7.1 million in the same period of 2017. Shares outstanding on September 30 of 2018 were $26,660,980. During the quarter, we completed a stock offering wherein we sold 5,213,543 shares at $2.25 per share, raising a net of approximately $11.6 million. Our cash resources were approximately $18.1 million at the end of the quarter. It is important to note that we have sufficient working capital available as of our filing today to carry us well into 2020 even assuming no revenue. With that, I’d like to turn the call over to our Chief Executive Officer, Steve Pirnat. Please go ahead, Steve.

Thank you, Brian for the financial update. And I would like to thank and welcome participants on today’s call. Today, we intend to review our progress during the third quarter of 2018 as well as share insight into the remainder of 2018 into 2019 and beyond. On the last call, we cover the investment via private placement of 5.2 million shares of our common stock at a price of $2.25 a share to ClearSign SPV LLC, which is a single purpose vehicle capitalized by a small group of experienced high net worth and single family office investors created for the sole purpose of acquiring a large portion in ClearSign, in order to benefit from the stocks long-term appreciation. Proceeds from this offering are being used to accelerate penetration into target vertical in domestic and international markets and continue product development efforts. As part of the transaction, we added Rob Hoffman to our Board of Directors. Rob comes to ClearSign with more than 30 years of relevant capital markets experience and expertise, and prides himself as a fundamental investor. During the comprehensive due diligence process associated with the private placement of our common stock with clirSPV. I had the opportunity to work closely with Rob and was impressed by his knowledge and appreciation of our business model and technology. He specifically took time to meet with key members of the leadership team and familiarize himself with the Clear organization. I think Rob is an excellent addition to our Board and his addition fits into the Board’s plan to refresh its membership. As we announced previously, we ended up period of management transition. I have recently announced my intention to retire when my contract expires on December 31, 2018. A search for my successor is currently underway with a nationally recognized search…

Thanks, Steve. The original plan was for me to speak on the last quarterly call, but the correct decision was made to allow our business development had destocked the opportunity to update investors on the pipeline of interest to company I think. Furthermore, having the additional time to dig even deeper into the Company’s prospects provides me with even more confidence in what I’m about here. To step back, the primary goal of the SPV’s due diligence process was to verify both the quality of the technology and the market potential. It goes without saying that the results of that due diligence were positive. We also believe that our timing was – since the three major headwinds that have faced the company, we’re actually now turning into tailwind, more specifically time, price of oil and the regulatory landscape. Let’s take them individually. Time, investors need to remember that no matter how confident we are in the technology, we are asking customers to install our product in their most valuable assets, a refinery or in the case of an OTSG, their extraction process. Customers are understandably careful when it comes to a new technology, since if it does not work, the ramifications are significant from both a safety and a profitability perspective. Since we now have approximately three years of Duplex installations that are working respect the confidence level of both current and prospective customers has increased, which manifests in the pipeline of opportunities, Steve Sock walk through on the last call and Steve Pirnat will update later on this one. The price of oil. Earlier in my investing career, I was a large investor in the oil energy space. And as a consequence, I am very familiar with the decision making process of oil companies, when the price of oil…

Thank you, Rob. I’d like to continue by going over some of the pipeline projects and Steve Sock is available for commentary here as well. On July 26, ClearSign announce that it engaged with the second unnamed super major oil and gas company, which joined the previously announced engagement with ExxonMobil. After recent visits from both super majors, ClearSign believes that the process of identifying equipment for initial paid installation at their respective refinery locations will be completed in the coming months. The company believes that this development reaffirms the increasing commercial interest from global super majors and serves as an important validation of Duplex technology. The company continues to move forward on many fronts, the most important of which is expanding our pipeline of commercial opportunities. We are now working on 75 active opportunities up from 68 last quarter, with a wide range of customers from large refineries to global super majors to leading industrial boiler manufacturers. While we have not yet disclosed revenue potential associated with this growing pipeline, I can report that it increased 45% since our last update and if successful provides a clear path to break even ultimate profitability. Further, we just completed comprehensive boiler performance testing, for a leader North American packaged boiler OEM. We were able to demonstrate industry leading emissions performance for our new Fire Tube Boiler Burner on one of their actual package boilers in our test lab. We believe this could lead to supply and licensing agreements for this product. We have received the commitment letter from a southern California refinery to participate in the previously announced South Coast Air Quality Management District project that should demonstrate clears Duplex technology as best available control technology or is the industry term backed candidate to achieve ultra-low emissions levels in refinery process…

[Operator Instructions] Our first question comes from [indiscernible]. Please go ahead.

Hi, Steve, I appreciate it very much. I want to ask the question the press release I’m just reading it here on Yahoo Finance. You mentioned that the Regulator-Funded Demonstration Project with the South Coast Air Quality District. Can you expand on that a little bit?

Yes, that’s correct. And since Steve Sock is here, I’ll let him answer that.

Yes. That’s a project that had been previously announced to be jointly funded by the regulatory districts themselves, South Coast Air Quality Management District, which for those who don’t know is the air regulating authority for Greater Los Angeles. We’ve recently found a host site to partner with and work with on that project and we’re currently going through the process of finalizing the necessary agreements to make that happen.

So one follow-up question, is that normal for a regulator to actually pay for the installation? I’m not an expert in that. But it seems unique to me that the regulator would actually pay this itself.

It is somewhat irregular. Many regulatory districts have funds that can be used to advance technologies often in the form of studies. But rarely is it that they actually invest in actual demonstration projects at this scale. So we’re very pleased and honored to be participating with the district and this host site and look to be announcing more about it in the near future once the appropriate paperwork gets completed.

And one more, I mean, I don’t want to put words in your mouth, but then would you say that sort of speaks volumes for the regulatory districts desire to have this technology, the fact that they’re paying for themselves?

We think it does. We think it represents a win-win for all the parties involved. The regulators see our technology as a opportunity to get to a clean air with less barriers, lower cost, quicker installation times, less complexity. The operators see it as a low – a lower cost alternative for regulatory compliance and obviously clear assigned benefits from commercial demonstration.

Yes. I mean, Jeff, we just think it’s a huge opportunity for us.

Yes, I mean that’s super exciting. I appreciate it. Thank you for that.

[Operator Instructions] Our next question comes from Michael Brcic with National Securities. Please go ahead.

Yes. Hi. Thank you. It’s great to see a lot more opportunities coming along. But I think the market is sort of looking to close on some of these things. Is there any way you can try to give us some idea of some milestones or some – what may happen in the near future to actually close some of these fields. For example, in China, how long is that testing going to take before we can see some concrete steps to take.

Well, I’ll address the China question. I mean, we think we’re – again, we’re waiting for the Chinese client to give us approval to start the boiler. So we could be weeks away from being able to demonstrate it. And then the time it will take them to satisfy themselves that the technology is working satisfactorily, it could be a matter of months.

And just in general, do we have some idea when we are going to start picking up on revenue – it’s seems close in the next few months, if you think it will stop moving the ball forward on getting past the prospect stage, the client state.

Well Michael, I’ll take that. Revenue starts with being selected and awarded contracts and we do hope that and we do expect that in the short-term, we’ll be able to announce project awards in our favor that will lead to future revenue streams for the company.

Great. Thank you, guys.

Our next question comes from Lawrence McGovern [ph] with Retail. Please go ahead.

Yes. Thanks for taking the call. I missed the beginning, got delayed on getting on the call. And so maybe this has been addressed already, but if not, we are now approaching the second week of November and a burning question for myself and I’m sure lots of other investors who have been investing in the company for a long time is what is going to happen with the warrants, which are going to be expiring soon unless they’re extended. I fully believed that it would be foolhardy on the part of the company and a slap in the face to the investors who have invested in the company, especially with the warrants, if those are not extended. And, I’d like to know what plans there are to extend the awareness because in my opinion it’s absolutely necessary.

Okay. Well, I – this was covered in the beginning of the call, but the decision was made not to extend the warrants and probably in simplest terms, it was based on the fact that we felt that the decision would benefit a selected group of investors, not all the shareholders.

[Operator Instructions] Our next question comes from George Sloan, Private Investor. Please go ahead, George.

With respect to the warrants, you’ve mentioned twice now that it would be for the benefit of a select few warrant holders and not to the benefit of the shareholders as a whole. Could you explain what detriment it would play to the shareholders as a whole if you simply extended the warranty for a year? How would it hurt the company and the shareholders?

Well, just to restate what we’ve said. The decision was based on the future delusion and the current capital needs for the company as well as the fact that it benefits a smaller group of shareholders.

Could you be more specific about the delusion and what detriment it would play to the company as a whole as opposed to basically throwing the warrant holders under the bus?

Well, I think it’s – to get into the specifics of the delusion that would be a little bit of an exercise, but I don't know that we threw anybody under the bus. At the time, we offered the rights offering, we offered a tradable warrant which expired. So they got what they – they were promised.

Our next question comes from John Reynolds, Private Investor. Please go ahead, John.

I'd like to further comment on the warranty. You gave us no reasonable time to sell those because you failed on every execution of your model for more than two years. So I agree with everybody who's echoing my feeling with the support…

Our next question comes from [indiscernible]. Please go ahead.

Yeah, this is [indiscernible] and there is $2.5 million warrants out there, and there is 25 million shares roughly. And I concur entirely with the previous spokesman. I would at least like to see some explanation and something filed that would detail the rationale, but I'm extremely disappointed and share with the view that the management has not delivered our expectations time and time again.

Okay.

Steve. This is Rob Hoffman. Let me just pick at point in terms of the fairness. And by the way, I recuse myself from the discussion because the SPV would have benefited as well. But when a warrant is extended, especially a tradable warrant, you're effectively giving a tradable gift to one warrant holder versus a shareholder who does not have a warrant or potentially sold that warrant. So I don't – I think that's part of the definition of unfairness. Is that all shareholders are feeling pain from the current share price, including the SPV, but to extend a warrant and effectively, give something of value to a select group of shareholders. And those warrant holders may in fact be different than the people who participated in the offering, for example, they may have sold those warrants, which is not necessarily good practice. And as the – as Steve mentioned in the – in his initial remarks, there's not a need for capital at this point either. So it doesn't make a whole lot of financial sense to extend those.

Our next question comes from Bob Kecseg with Las Colinas Capital Management. Please go ahead.

All right, thanks. Yes, just – I think everyone's familiar with my name, maybe Bob Kecseg. Yes, I'm going to change the subject to a little bit. I did get laid on the call, so I kind of missed your presentation. I’ll listen to that later. What I guess probably most concerned about is the business and what is the likelihood that we're going to see a new customer anytime soon?

Well, I mean, as I just announced in the part of the opening remarks, we just had arguably the largest industrial packaged boiler company in the United States here for two days worth of testing. We actually have one of their boilers in our test lab and were able to successfully demonstrate our new firetube boiler burner, which by their own admission has the best emissions and overall operating performance of anything on the market. So we disappointingly didn't leave dinner with an order stuff in our pocket, but we left with a very enthusiastic customer that we've been working with for over a year to kind of get to the point, where they would come in and look at the test and evaluate the product. So I think there's, you could go through the backlog of the multiple projects we just talked about and look at each one of these jobs and expect that at some point, if you follow the argument that major multi-national oil companies don't ask you for a price and performance data because they're bored, they do it because they want to eventually buy the equipment. Our assumption in my experience is that these things will convert the waters. But we just don't have the ability using ExxonMobil as an example of making them go faster because the things that drive their decision making or well above our ability to influence it. And just to pick, to paraphrase with the ExxonMobil guys told us if we sell them a burner for a $1, it might cost them $4 or $5 to install and operate it. So their planning cycle and their capital budgeting cycle is far outside the simple cost of our product. And many of these customers is Rob Hoffman mentioned in his discussion are a little bit, let's say reticent to move forward with our kinds of technologies in the short term because they're waiting for the new emission standards to come out. When those emissions standards come out, given all the influence in discussions we've had, we expect them to be lower and the fines to increase and all of that favors our technology. So the external factors that affect the demand for our business have all been favorable, increased number of – “increased dollar values” continued interest among major customers, improved environmental compliance requirements. So it's – I guess, frustrating because of the time it's taking unfortunately a lot of that is the nature of the industry. But it's encouraging quite frankly, to see the significant increase in opportunities, we're saying and quite bluntly, the fact that we've been doing this now for three years and we've never had a problem where we said, Jesus won't work, we better take our ball and go home.

Well, with all the potential customers for that firetube in the thousands, couldn't we just put it in some place for nothing, just to run it in an operational school or hospital or something kind of operation like that? And just get it in and just say, we doesn’t want to put this in for nothing.

We don’t have a problem at this point with that particular customer convince it on that the burner has to be put in for nothing. They’ve already seen it work in a boiler in our lab over two days and they’ve seen it work. So, I think they’re now persuaded that it works, but the steps involved is that we would have to and plan to work with them. This particular company not only is largest packaged boiler OEM in the United States, but they also make their own burners. So what would be the next step is, I were working with their engineers to incorporate Duplex Technology into their existing burners, and they would design their burners in a way that would incorporate our duplex capabilities and they would be able to manufacture in their factory a product of essentially licenses or purchases our technology. And that would be the next step, and I think we’re, there’s a few things that have to be done with their engineering people and our engineering before that starts. But to the fundamental question, they don’t know – they no longer needed to see it, working to see at work. We went through the extraordinary step of getting one of their boilers, having it shipped here, having an installed and testing it. And I guess if I gave him one for free, it wouldn’t be a sale anyway.

Well, it wouldn’t be any different of what we have now, but that’s the point. It doesn’t really cost us anything. It’s to me it would be a lot more valuable to say it, this is running at so and operation for one month, two months, three months and it’s still running and everything’s fine and just like we did in the lab, because we all know about the skepticism about the difference between the control environment and actual industrial application. I like to make a comment about the – it seems like the agitation that people have about how things are done in relationship to these warrants. I’ll tell you an even smaller group that benefits greatly in this organization and that’s the top management with all the bonuses that they’ve gotten year after year after year and how the Board of Directors is another small, tiny group that benefits from $100,000 of compensation each and for a company that doesn’t generate any money, that’s lot of money going into a very few number of people if there’s anything that’s unfair, it’s a good thing, I’m not on the board, because you’d never hear the end of it. Mr. Hopkins on the board as a new person and I can’t believe that anything has not shaken up this board since he’s been here in July. We’re really in the same place that I can see that we were before. So, tell me, tell me how that is an unfair. Both of those, both of those items that I brought up.

This is, this is Rob. Bob, were you on the call earlier when we – when we talked about the changes that we’ve made on board compensation going forward?

No. I apologize, sir. I got on maybe, I don’t know probably four minutes before I asked a question. So not very long.

And as I mentioned it was as an investor prior to my board membership. It was something that stuck in my craw, and I think it was just one of those where the – the previous board perhaps didn’t focus on, on how the perception was, but we agreed at our last board meeting that going forward, not only would board compensation be reduced, but it would be completely any cash component would be eliminated and it would only be a equity based.

Okay.

So we’ve addressed that. And then the other comment that – that the board made the decision is, we’re refreshing the board. And the process of doing that, we said, well, why – traditionally an Annual Meeting takes place, let’s call it the first week of May and that’s because you have to wait until your annual report has done and yada, yada, yada [ph]. Well, we’ve said we’re going to accelerate that. Our financials aren’t very complicated. So as soon as we can get our – we have a, plan for getting, getting the audit completed as soon as possible. And then scheduling the Annual Meeting for dramatically shorter time period than the normal support for exactly that reason so that we can – so that we can present the new board slate that we will be coming up with them.

Okay. I apologize that I got on there late. You have to repeat.

Worth repeating.

Our next question comes from Richard Dortch with National Securities. [Operator Instructions] Please go ahead, Richard.

Yes, that’s a National Securities. Thank you very much for taking my call. I would also like to just bring forward the comments about the warrants. You are a public company, your shares trade, on expectations and on market risk. And you actually pay and to be public and to have an IR department. And it’s just my opinion, but I think you’re being tone deaf when you reject a non dilutive, strike price that basically tripled of what is that trading for and would result in cash payment, $4 a share when you can’t even raise money, above $2 a share, and I would just request as the board to reconsider your comments about unfairness, because I think all the unfairness is that the only original warrant holders for your own dedicated original shareholders who got the right, they’ve been with you for years. And as one of the previous callers have said, the expectations set forth by Mr. Pranat [ph] has never been met. Not only have they not been met, they’ve been horribly missed. And to extend the timeframe, I think would show of flexibility, a return to a smart dealings with Wall Street and be initially, very, very much well received in terms of shareholder reaction. And I would just hope as they reconsideration that the time you still there, you do some thinking on it, review your thoughts about unfairness. Because I think all the unfairness is not only on your own shareholders, but taking it forward, I think the reaction in the marketplace would be extremely well received. On the other side of the coin, I don’t think that you want to be around and follow through with your determination to squash these shareholders. You’re liable listening yourself not on the board. A subsequent to your next meeting. Again, thank you for taking my comment. I would like to hear your thoughtful response.

Let me – this is Rob Hoffman again. I think it would be the board has discussed the proposal at length and the – and made its decision and I think the rationale is very rational. I think it would be a disservice to people to hold out hope that, that we might reconsider the warranty extension. What I would prefer that we do is, is focus on the operational progress of the company, the warrants have three months, give or take of exploration left in them. And if we can deliver on some, good news then, then perhaps those warrants will be indeed worth something. But I don’t think it would be – it would be appropriate for us to do anything other than reiterate the board’s decision as final.

I hear you, sorry about that. But we’ll see what happens.

Our next question is a follow-up from [indiscernible]. Please go ahead.

Yeah, thanks. And I promise this won’t be about the warrant. This is a related to the second supermajor that you’ve announced. You see that tracking on the same path as with Exxon or is there kind of the same time? So you’ve been with Exxon – worked with Exxon for close to a year, you see this with the second supermajor taking the same amount of time or is there some leveraging off the Exxon relationship that could go in so that the second supermajor will be a shorter time frame than what the full relationship with that at this point.

Yes. I kind of think that an operating installation Exxon would kind of push them along a little faster. But again, the decision making at these, I guess they probably call them supermajors for a reason, but their decision making tends to be fairly slow. And I think as Steve Sock mentioned, the risk reward for them is significant. I mean they realize, they will save a fortune with our technology as opposed to SCRs, but they were also always concerned about the safety and reliability of equipment in and having worked for coke industries, which is also a refiner, an event in a refinery that causes a fire could be a $500 million problem.

Got It. Thank you.

Our next question is from Walter Schenker with MAZ Partners. Please go ahead.

Just for what it’s worth, I really have a question. I suspect having been involved with maybe 500 financings, many of which had warrant as long, many, many millions of warrant. I understood they had an expiration, fortunately all of them have expired sort of a condition of contest and it is what it is. Not the point, everyone shoot me now because they look upset. But the real question, it’s really when Steve talks about the business and talks about lengthy analysis by Exxon or another supermajor, but also air energy also all the other people he’s been dealing with the three to five years, 50, 75, 100 different people who’ve evaluated. So, I understand you put the money in so you believed it’s the big issue for me and I’ve been a shareholder for a number of years. I participated in the rights offering. I bought stock in the open market is not one order put the lack of even one order. And why with all of these people evaluating it, no one pulls the trigger. I cannot understand Exxon mobile and you’ve got giant refinery with this is a wide range of people who have evaluated and we’re still waiting for orders. I realize I’m trying to kill something Rob, but I’ve heard Steve for years. I want to hear you one more time. I apologize address the total lack of orders in your mind.

Well thanks for the question, Walter, and thanks for your insight warrant expirations, I think one other things that I’ve been able to do as a board member is, have further granularity to the interest levels, and as I said in my prepared remarks, the lack of consummation of orders has really been a function of those three things, time price of oil in regulatory environment for the most part. And so you can’t push a string. As I reiterated, I have confidence in the breadth and depth of the opportunity pipeline. And I think, maybe I can Steve Sock to join in here, but I think what we’re, what we’re seeing is that as the regulatory clouds start to part or whatever the analogy would be, you have more and more entities that are saying to themselves, let’s make sure we have this operating in our facility, so that when the regulations come down, we will be comfortable with going, going that direction is, is that a good assessment Steve Sock?

I believe, I believe it is. I think the lack of success this year is due in part to the uncertainty of the regulatory changes that have been discussed and published by the different regulatory and also in part people spend in 2018 what was approved in 2017 and sometimes even that approvals further back in time than that. And the crude oil prices and the lack in the freeze on capital spend lags those decisions. And I think we faced a lot of that this year as well, customers are in their budgeting phase now for 2019, crude prices are stronger, that should lead to an increased capital expenditure spend and we expect to see some of that in the new year.

Okay. Thank you.

This will be the end of the question-and-answer session. I would like to turn the call back over to management for any closing remarks.

Thank you. If there are no further questions, I’d like to thank our investors for participating in this call and for their continued support of the ClearSign. Good afternoon.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.