Good day, and welcome to the ClearSign Technologies Fourth Quarter And Full Year 2020 Conference Call. All participants will be in listen only mode . Please note this event is being recorded. I would now like to turn the conference over to Matthew Selinger, of firm IR Group. Please go ahead.

Good afternoon, and thank you, operator. Welcome, everyone, to the ClearSign Technologies Corporation fourth quarter 2020 and full year 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.

Thank you Matthew, and thank you to everyone for joining us today. Our financial results on Form 10-K will be filed with the SEC in the coming weeks. All numbers mentioned here are preliminary. The cash burn for the quarter ended December 31 2020 was approximately $1.8 million, compared to approximately $1.5 million in the same period of 2019. This increase is specifically due to the extensive product development we have ongoing in our process, burner product line, and some delay payment for past projects. Our cash and investment resources were approximately $8.8 million at the end of the fourth quarter of 2020 compared to $10.6 million at the end of the third quarter of 2020 Shares outstanding as of December 31, 2020 were 30,077,436. It is important to note that with our quarter ending balances, we have sufficient working capital available to carry us well into 2022 and that is without revenue from any other sources. And with that, I would like to turn the call over to our Chief Executive Officer Jim Miller. Please go ahead, Jim.

Thank you, Brian, for the financial overview. Hello, everyone. And welcome to the ClearSign Technologies fourth quarter and full year 2020 conference call. Thank you for joining us. We have had a lot of recent activity, especially in the last few weeks. I'm very excited to share more details with you. Some of this will be new, and some giving more color on backgrounds to topics covered in press releases issued in the last three months. As there have been many new developments since our last call in late November, I will spend the majority of this update giving more detail of these recent activities and how they fit into our overall strategic plan. I will start off discussing two recently completed multiburner, process burner installations. One of these related to our infrastructure project was a topic of press release issued early today. There may be further comments on this product line in general and then move into developments in our boiler burner product lines both domestic and a significant progress in China that we announced yesterday. I will end up with my review of our technologies. Some comments related to flares and provide an update on our ClearSign Eye sensor products. After some general business related topics and my closing remarks, we will open up the call for questions and answers. We have been quiet on activities in the Zeeco test facility for the last few weeks because we have been out in California, installing and starting up our process burners in two installations. Due to the timing of the plan shutdowns, and more importantly startups, both of these projects needed to be executed concurrently. Both of these projects were multi burner heaters, both in critical service that is the plants cannot run without these heaters, both projects presenting complex operational requirements, and now things that are very talented and dedicated process burner engineers and accumulation of months of product refinement and optimization both projects are in operation.

Our first question will come from Amit Dayal with H.C. Wainwright. Please go ahead.

Thank you and good afternoon guys. Congratulations on all the progress. Very impressive stuff. With respect to you know, revenues for 4Q 20, did you have any revenues in the fourth quarter?

So maybe I can start off by my details. The infrastructure project was on call our first that will be an example of a normal operational project that was sold at planet pricing. It was executed as normal fabricated by Zeeco, shipped to the site and started up as normal and just completed. But that project was the other one that we announced very recently. And the actual work on revenues for that will fall into Q1, 2021.

Okay. Not a big deal. I just was wondering if there was any quarter in the fourth quarter, most of that show up in the first quarter? So I guess .

Correct. Yes.

Okay. And then, just with all of these developments from commercialization perspective, could you share a bit more at a high-level if you can like what is in the backlog now? And these projects that you are hoping to deploy, are these all for 2021 you think? Or will some of these go into 2022 also?

Yes. Amit, let me address that. I'm not sure if I can get down to the exact specifics that you'd asked. We'll start with these two big product lines. We'll start with the process burner product line. Also we have the second super major order that we announced. And that project will ship and be installed in Q3 of this year. That at least current scheduled. That's going to be a 2021 project. But we're really looking at a ramp up from this point. That is a demonstration project for that super major oil refinery, even though its going to Europe, they are looking at -- what we believe they're looking I should say, the multi-U.S. refineries that they have here, and is part of their emission reduction programs here in the U.S. So success there is going to really see that pipeline with a major oil company with multiple refineries to be addressed here in the USA. And situation is similar with the ExxonMobil projects. It’s a single project right now. This dues are going to install again Q3 of this year. But the purpose of this project is not a one-off sale. This is for the technology to be proven and then included as part of the emission's control plans for -- at least the beat down requirement, we believe multiple refineries for ExxonMobil. We do -- we also have interest from other client. But I'm really looking at the big strategic opportunity and the pipeline to really deliver the large growth that we expect. And that's going to come from the major oil refineries that have this huge plan and really a huge need of burners and a huge need to control emissions in the regulated states especially California and Texas. Now, we also talked about fire…

Yes. So with respect to your comments on China, that was going to be one of my questions. Where will these products which the Chinese market we manufacture. How should we think about that in terms of your -- the burden on your balance sheet, et cetera to finance some of those things? Is this now going to be shorted a little bit by some of these partners? Or will you still need to make some investments to get some sort of manufacturing setup going over there?.

The plan today is to operate very much as we have in USA. The fabrication of the burner that we have there, and the future we plan to be done in third party fabricators. Now I want to make a distinction. We are not going to a Chinese burner manufacturer for multiple reasons. One being IP. What we've done is, we have the drawings, we've developed the technology here in the U.S. We have the drawings, and then we will take the different burner components as you have them fabricated in different Chinese fabrication shops unrelated to the burner industry. And then we bring those components together to provide the completed burner. But we are doing it with third party shops. So, I won't say never, but certainly at this time, there are no plans to develop our own fabricating facilities in China. We will work through partners and collaboration. And we then do what they do well, which is the fabrication. We will just bring out our technology components together to deliver the final product.

Understood. And with respect to this win in Europe for the demonstration of this super major entity? Was this sort of an organic win? Or was this through a distributor? And how did this come about? What are you doing for potential other opportunities in Europe? Are you working to other distributors? Are you attacking that market organically?

Yes. Great question, Amit. So, let me explain. This product, this particular order is going to a heater in Europe. The plan is a global super major refining company. Along the lines, is obviously not Exxon, but I look at in that tier. We know the senior engineers of these companies very well. And it's through our relationships with them that they have become obviously very aware of what we are providing and ClearSign Technology and the progress that we've made in developing our product and getting it at the point ready for deployment. They wanted to test the products with an eye to their future installation plans. And it just so happened that the heater and insulation that made the most sense for them to put this first project happened to be in one of their European refineries. So we did not approach a sales channel in Europe to find the opportunity. It was really a sell to the super major oil company. They were looking for somewhere to test the technology out as their first project that happened to be for this destination Europe. So I think further in our plan there, I hope that there will be opportunities into Europe. But at this time, the emissions legislation there is not as tight as the USA. And quite frankly, I'm very interested in getting our business going as quickly as possible. We have a very large addressable market in the USA. And especially for the process burners, we are focusing here to get that done quickly rather than spreading ourselves and spreading into Europe at this time.

Okay. Understood. That's all I have for now guys. I'll step back in the queue. Can you take my questions offline.

Great. Thank you, Amit.

Our next question will come from Robert Sussman with Bentley Capital Management. Please go ahead.

Thank you. A few questions. Can you tell us why Exxon delayed until the third quarter? And you indicated I think an issue with your installation in California is slowing down your demo and testing for the Exxon project. Can you give us an idea when the Exxon testing could be done based upon the corrections that you've made in California? And why Exxon did delay it till the third quarter?

Okay. I don't want to create a question. But I think there's some assumptions that I need to address. Firstly, there is no correlation between the installation in California and the testing for Exxon. Exxon have multiple shutdowns. It's a very complex refinery and I can't speak for Exxon. They did move that installation to Q3. And we just very much look forward to getting our product installed in that refinery. Then the other burners in California, the World Oil site, there -- that project -- its little frustrating. But that project worked really well. The burners were installed. They ran up. They were operating. They ran at a maximum fine level for a very sustained period of time. It gave refinery confidence at that fall rates, and they finally just reduced back down to the normal operating rate. So everything was working very well. Aside, at some point later, there was an anomaly in the fuel gas supply that caused a problem. There's always we can address it, we can go back and take care of it. That was a no -- it's not related to Exxon. And unfortunate there, but it shouldn't diminish the results, as they're seen in terms of proving the ClearSign Technology. Our burners are running for a long period of time and very smoothly until it's happened. The reason that I mentioned it is really just to be transparent. And if our customers want to go and see that site, we'd obviously want them to know that the burners were not all operating as we design them right now. We certainly hope they will be as soon as we can get back into that heater. But it's not a -- I wouldn't want to take that as a reflection on the state of our technology, our engineers did an absolutely incredible job developing the burners to this stage and to get these burners running in such a highly fired heater. And performing as smoothly and as well as they did. And up to and including the maximum firing rate in this heater, just as designed was absolutely incredible. And I personally extremely pleased with our result. So, it's very difficult to bring up what happen after. How the concern, it will be taken in their own mind, but this really was a huge success for ClearSign.

So, can you give us some timeframe for when you think you'd be able to complete the Exxon demo and get Exxon to approve it? What the timeframe might be?

I can't give an exact date. We don't have a date arranged with Exxon yet. With a football analogy, I certainly believe we're at the five yard line, getting the burners to operates over fuel gas range from 0% hydrogen to 80% hydrogen. Those maybe just numbers to anyone in the industry knows that is an extreme fuel range. And it's a huge achievement for a burner technology. We've been able to show that and we've got the burners to operate over that range. We do have some minor finishing touches to complete. So we're not quite ready to call in for final demonstration yet. But I'm very pleased the progress we've made. And I think it's going to be in the best set of reasonably near future.

Okay. My last question is what do you think the timeframe? If things go the optimistic timeframe would be to get the approval from the Chinese government to sell your product with your Chinese partner?

So, in the call within this coming quarter?

Within the second quarter is what you mean, I assume?

Yes. The Q1 is pretty much over.

Okay. Thank you very much. That was very helpful.

Thanks Robert.

Our next question will come from Robert Harvey, a Private Investor. Please go ahead.

Thank you, Jim. And Brian. I believe you said, I think it was sometime last year that the addressable boiler burner market was like 7000 or 7500 units in California. But if I recall correctly, like 350,000 in China. California is one of the most populous states in the U.S. How is it that there's so many? And are these like equivalent? The 7500 in California are equivalent to each of the 350,000 in China or the Chinese one smaller? Just a sense of the addressable market would be helpful. Thank you.

Yes. Well, I'll answer the best I can be. The application of boilers in China is a little different. So the 7000 number is what we -- is our estimate of the fire tube boilers in California. The fire tube are typically the -- I'd say the smaller end of the range, because these things really get to be quite big. But when you get up to water tube and steam generation, they get absolutely massive. The 350,000 boilers, and that's not the total boilers in China, that's just the number that we believe need to be converted to ultra-low NOx. Because of the non attainment regions within China's they have a lot more boilers than that. But this is their immediate market need. About 80% of those we believe are the fire tube type. Of the remainder being the larger water tube. The difference in China is the northern regions of China, they have a district heating model. So whereas here in the U.S. we have personal HVAC systems, that heater houses and either offices in China, the district will have a government run boiler plant that will have a whole series of boilers. And they heat up hot water, they pipe around the buildings within their district to provide the heating during the cold months. And you can imagine, in Beijing and all the Beijing it actually gets really cold. So there was a very big government organizations in China that run many, many boilers. And that's how the number gets so high. Also, in our past, and present, we have formed a very close engagement with the Beijing district heating group, which is the largest of these government organizations that provide the heating in Beijing. And we actually have a collaborative project with them. And during the core, I mentioned with regard to the fire tube boiler burner in China, that for our relationship, and our conversations with them in particular, Mr. Manny Menendez over there has a very close relationship. They are very interested also in our fire tube boiler burner project because they have a lot of fire tube boilers in their region. And they are in a non attainment region. And they need to get their NOx emissions in compliance with the requirements of the Chinese government. So if these numbers are correct, I think the fire tube boilers are largest similar, but I think the important difference with China is they have these massive government organizations also provide the district heating. And they also have a very big pending government requirement to get the NOx emissions from their highly dense -- high density population areas where they do have NOx attainment problems. And they've got a mandate to get those NOx emissions down.

Got it? Thank you very much.

Thank you, Robert.

Our next question will come from Jim Kennedy from Marathon Capital. Please go ahead.

Hi, Jim. Most of my questions have been answered. I just had a quick one on the China market. Are you aware of competing technologies? Do they have an SCR market over there? Or are you one of the only solutions that you're aware of where that market?

Jim, from what we've seen, there is very little activity from SCRs in China. I can't say there's none, but I'm not aware of any and certainly believe this very low. From talking to the operators on my last visit there which was unfortunate due to COVID a little while ago. They like the simple operation. The Chinese are also very focused on efficiency. So the horsepower required for blowers and the use of ammonia and the quite large operational costs for an SCR, I believe will be a deterrent to the Chinese deploying that technology. But that's also relevance. When we look at U.S. burner technologies there are other burners in China. They can't -- I don't believe they can get NOx as low as we can. They tend to use a lot of flue gas recirculation, which again, involves blowers and complexity in the controls. And we've actually got similar responses from the operating companies regarding those that just the efficiency, the extra blows and the complexity of running those systems are not liked. And we believe that is the main driver between the interests of the Beijing district heating group have shown in our technology that we offer a burner that has a simple blower has no flue gas recirculation, It doesn't require any additional duct work or blower to. Basically what they do is take the flue gas from the stack and blow it back round the burners. There's extra power and extra destruction there. So I do believe that we offer the simplest solution in China. And as needs arise, as we do in the USA, I believe that our burners will have the ability to provide the lowest NOx also.

Got it. Thank you, Jim. Congratulations on the progress.

Thank you, Jim.

Our next question will come from David Brown, a Private Investor. Please go ahead.

Yes. Thanks, Jim. And great progress. So many different fronts. It's just to me it's encouraging as an investor, and as an author who's written about the company on Seeking Alpha that you have so many different fronts that you're working on and finding success. My question that I haven't heard asked yet, was I wanted a little more color on the parts per million requirements, especially in the more restrictive markets like California, you mentioned a victory in the San Joaquin district, that you're able to get this fire tube boiler down below 2.5 parts per million, which is their current and future targets. I know that those targets have kind of moved from below five to now even lower to below 2.5. And various verticals. Can you tell us a little bit about where the ClearSign core is coming in with the various verticals, the different the different types of applications and how you're meeting the regulations?

Yes. And I will the best I can. I think the first thing to note is especially regarding California and Texas, the San Joaquin Valley did issue their latest targets in December. The other regions are in the process of developing their new guidelines. The best indications we have I believe the other regions of California are going to come out with numbers similar to the San Joaquin Valley. The numbers for Texas at this point I truly don't know where -- I don't want anybody knowing that, but I don't have as good guidance in Texas. I believe the process burners we'll be targeting a similar number. But the regulations typically for the process burners, as well as for the boilers also vary by the size of the equipment. The heaters like the water heater, and the infrastructure project we've just started up. Now, I believe the other regulation for that type of heater is going to come in around the VPN level. That's a general guidance. With that, with the data we've got that we've measured. I mentioned, the commissioning data, which is the only one we've seen so far from the infrastructure project is going to be comfortably below that.

Great, And the same for flare. Now flares have a larger PPM usually I think if I'm remembering correctly. You're doing fine as far as keeping your customers happy, and hopefully the regulator happy as well with the with flares?

Yes, we are. Yes. We are similarly comfortable with the performance compared to the regulations for the flares.

Okay, excellent. I think most all of my other questions have pretty much been answered. It's -- let me just echo a little bit about what I'm thinking I'm hearing from about China, which sounds extremely exciting. So one just one clarifying question about China. So Manny Menendez is the only ClearSign staff that's over there for the last significant period of time. So good for him and getting this all worked out. So you have one demonstration project? Is that or are there more than one fire tube boilers that you can point to when China is vetting this and signing off, so that you can hopefully, very soon get be able to start selling fire tube boilers in China? Is that is that correct? You have one demonstration project right now?

So, David, let me jump in as well. Just regarding the staff, Mr. Manny Menendez is a President of ClearSign Asia. And spends the majority of his time there. We do have a full time Chinese National there also who oversees our business, and obviously, being a Chinese national is their full time. So we do have a continuous presence in China. And Mr. Menendez is in almost constant touch with Chinese when he's not there. It's almost like he doesn't come home. So back to your question we do. Yes. Or regarding the fire tube product we do right now we have one demonstration burners that we have demonstrated. The burners in a boiler of the San Joaquin Group. Turn boilers out multiple boilers out daily. So our expectation is, as we scale up this product line, as they have the setup, and as they have the boilers, it will be a very easy process for us to fit our new burner sizes into new boilers, and to run through the same process in China to build up our product line. And that certainly is our intention. The beauty of our relationship with California boiler is that they also have a fleet of rental boilers here in the USA. And the technology is the same. So as we develop the burner technology, which we can do here in the USA, we can then basically send those drawings to China/ Have those burners fabricated in the manner that I described earlier, and then install them into ever increasingly large boilers with the San Joaquin Group to go through the certification process and build our product line there.

Well, congratulations. I think to me, it sounds like the setup in China is beautiful. Hopefully no glitches. And you having that non-binding collaboration framework agreement with young Shuang Lang boiler company is, which is the top number one company in boilers in China. That's a great victory. So congratulations on that. And I'm extremely excited about that news. And look forward to further announcements from the company. So thank you so much.

Thank you, David.

Our next question will come from Robert Kecseg with Las Colinas Capital Management. Please go ahead.

Hi, Jim, good to talk to you again. And congratulations. So many things really came together on this. I wanted to focus first on the California boiler, because it seems like that's probably the fastest radius to go to add, add new installations and expose the product in the California market. So really, whether they're 7000 or 3000 product as far as timing goes, don't you think that's probably the most immediate impact as far as generating some cash for the company?

I think it's a bit of a race to be honest. I think that California boiler are in a market where we are seeing immediate demand very shortly after we had announced that we had the 2.5 PPM NOx burner. We very quick became aware of a lot of interest. Actually beings live sent in through California boiler. So that is very encouraging on this front. I mentioned the race also in China with little things that we have the company showing their own boiler company who manufacture boilers, we have been discussing with them a, an integrated boiler burner package, where they will sell a boiler enabled with a ClearSign called burner as a package. That's going to be a unique offering within China and we think of the magnitude of that company with a 700 person sales team. I'm not sure which horse I'm going to back in this race. I think they're both extremely exciting.

Well, good. I was going to say, when we think about the boiler burner, compared to the, to the process heater, bigger units. Do you think that, again, is where the sooner cash? I'm concerned about cash flow and financing down the road as well? I'm kind of talking to. And so the sooner we get cash flow, the better off we are as shareholders.

Certainly.

Could you just speak to that?

I can’t. Again, I don't I don't think there's a very clear answer both of our major product lines or processes are no, I really believe that that businesses is finally poised to make some huge inroads. With the multi burner installations we now have in California, that is a reference point we've never had before. Seeing the emissions numbers, or at least what we believe will be the emissions numbers on the infrastructure projects isn't a great validation for us. Completing the excellent testing and having installed sites with two super majors coming up and demonstrating the operating range that Exxon has put before us is going to be a great reference when the industry is not. These projects are not just being watched by their owners. This is a very tight and collaborative industry in general. And the tenant, the technical specialist from all the refineries are watching these projects. So without success, I really think it's going to potentially go into create a strong growth in the process burner industry. So whether that ends up growing faster than the boiler business is hard to say we've obviously with the boilers with the opportunity before us in China and the relationship with California boiler here in the U.S. And the degree that we've got the technology developed to fit the new requirements of the water size in California. If it, I don't see the one as be weak, I think they both got great potential. And I think we've gotten both to the cusp of really changing this business.

Yes, I have to say that, I think it has to be comforting to know that we're just going for that certification now everything is in their hands. And to have that on this call, I think was really significant to. Could you just clear up for me on that World Oil. So you put in the five burners, you ran them, demonstrated for them and the Zeeco fab was what I have here in my notes. And California boiler made the field installation. But are you saying that it's that they're not running the not actually running those burners now?

No, Bob. So let me clear that up. Our burners are in there. They are all running at maximum rates, okay. Refinery is in normal operation, and I believe their refinery is actually running at very high rate. So in terms of the productivity from this heater, is doing everything that could be asked for it. The only blemish that I've mentioned that is not down to the burner technology is just an unfortunate occurrence is that we've had too much I'll modify the tip components slightly and the burner which basically is what we've done is we've been, we've had to be to the not reducing features, just because of some fortunate instances has occurred. And that's no, we just want to get back into to get them back to normal. But they ran in that normal configuration as designed for a long time and extra at the maximum firing rate. So as far as the technology goes, it was a great success. It's just unfortunately, it's not a great reference for us. Just because not all the burners are running in our house design form until we can get back in there just to switch them back.

Okay. And then there was something I learned years ago in this industry, about this BACT, the best available control technology in these districts, kind of a declaration of the of the level of achievement of the technology, is that something still significant that we can look forward to? Is it or is it not that important?

Bob, let me talk in a little more general terms, and I'll be absolutely honest, the very specific requirements to get formal declaration of BACT. I'm not confident enough about that, to talk about it in detail. We are obviously working closely with the South Coast Air quality management districts as part of that World Oil collaboration. And we are doing that with them because they basically need to demonstrate to the industry that there is technology available to meet the requirements that they are imposing in the industry. As far as I'm aware, especially with our recently completed reference sites, we are the most advanced burner technology that they have for that. But in terms of -- if you get down to the technical details of what goes into the BACT I wouldn't want to mislead anyone. I'm not absolutely confident of the details of that requirement.

It sounds it sounds great, though, if from the from the way you just described it, in effect, it can have a real lever for the company to get more business. Well, I can't think of anything else right now. I maybe call you later. And congratulations to everybody. I really appreciate the news today, Jim.

Great. Thank you, Bob. It's good to hear from you.

Due to time constraints, this concludes our question and answer session. I'd like to turn the conference back over to Jim Deller for any closing remarks.

Well, everyone, I really appreciate your time today. And thank you for joining the call. On behalf of everyone at ClearSign Technologies. I wish you all the best and thanks for calling in.

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