Good day, and welcome to the ClearSign Technologies First Quarter 2022 Conference Call. All participants will be in a 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 sir.

Good afternoon, and thank you, operator. Welcome, everyone, to the ClearSign Technologies Corporation first quarter 2022 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's 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 public periodic filings with the SEC, including the discussion in the Risk Factors section of the 2020 annual report on Form 10-K. Except as required by law, ClearSign assumes no responsibility to update these forward-looking statements to reflect future events or actual outcomes and is not intended to do so. On the call with me today are Jim Deller, ClearSign's President and Chief Executive Officer; and Brent Hinds, ClearSign's Vice President of Finance and Controller. So at this point, I would like to turn the call over to VP of Finance, Brent Hinds. Please go ahead, Brent.

Thank you, Matthew. And thank you for everyone joining us here today. Before I begin, I'd like to note that our financial results, our quarterly form and 10-Q were filed with the SEC on May 16. With that, I'd like to give an overview of the financials for the first quarter of 2022. The company recognized no revenues during the three months ended March 31, 2022 compared to revenues of $363,000 for the three months ended March 31, 2021. Our net cash used in operations for the quarter ended March 31, 2021 was approximately $1.5 million, which is essentially the same for the prior period March 31, 2021. We reported approximately $1.5 million net loss for the three months ended March 31, 2022, which is approximately $0.5 million favorable change compared with the same period in 2021. This favorable change is primarily attributable to decreased human capital costs and changing the compensation plan for our Board of Directors. As of March 31, 2022, there were 32,134,746 shares of our common stock issued and outstanding. During the three months ended March 31, 2022, the company raised approximately $614,000 by issuing approximately 496,000 shares of common stock at an average price of $1.24 per share. These sales were conducted through our ATM or at-the-market offering sales agreement with Virtu Americas LLC. In addition, on June 1, we closed an underwritten public offering with Newbridge Securities Corporation. This deal allowed us to raise gross proceeds of approximately $4.2 million in cash by issuing 4,186,000 shares of common stock. With that being said, we have confidence in our financial position and balance sheet and with our quarter ending balances, we have sufficient working capital available to carry us through 2024 and with that is without revenue from our other sources. We do believe that the increased strength of our balance sheet will enhance our position as we compete for future customer business. With that, I would like to turn the call over to Jim Deller. Jim?

Thank you, Brent, for the financial overview. Hello, everyone, and welcome to ClearSign's First Quarter 2022 Results Conference Call. I'd like to thank everyone on the call today for your time and your interest in ClearSign. We are just some weeks past our last call with you, but I appreciate having the opportunity to provide an update on some developments since then. I will start with our process burner technology, and in particular, give more background on the Department of Energy grants that we announced last week. Next, I'll give an update on our boiler product line and finally make some comments on where we stand with our prospects and relationships in China. Before we get into the ongoing business progress part of the call, following Brent's comments, I'd like to share the thinking that led to the capital raise announced late last week. At the time, we had cash in the bank to cover almost a full year of expenses. So this raise was not initiated out of necessity. However, given the uncertainty surrounding the economy, with inflation running high and the stress on global supply chains, one can never predict the effects these will have on our customers' investment policies and time lines or the condition in the stock market. Also, and as Brent mentioned, not inconsequential to our thinking was the fact that having a stronger balance sheet enables our customers and suppliers to have confidence in doing business with us and also will assist in recruiting and retaining the employee talent that we need to grow our business. So moving on to process burners. I will start giving a little more perspective on the news we released on May 24, announcing that we were selected and awarded a grant by the DOE to develop a burner…

The first question comes from Jeff Feinglass -- a private investor. Please go ahead.

Hey Jim. Thanks for the update. A couple of quick questions, though. First, as the California Boiler, I mean would you still characterize the relationship as strong or maybe expand a little bit on how things are going with that relationship?

Jeff, thanks for the question. I mean the -- working with California Boiler has been great. I appreciate there's not been a lot to show for it, and we can't show what's going on behind the scenes. But the team there are extremely engaged. We have our sales personnel working daily with them. They have set up a subsidiary Rogue Combustion and the leader of that subsidiary is actually based in our office here in Tulsa. And Rogue Combustion has been formed by the sole mission of developing the ClearSign burner technology. The California Boiler team, so this is a employee-owned company, and I'll refer back, but they've invested a lot of money getting our burner established and proven in California. And it really continue to give us a very high priority. And just to remind everyone, they're a big organization. We believe their market share in California is in the region of 40%. So if you think of all the boilers there, they are the daily service team for about 40% of our markets. They have very extensive contacts. We see the traffic and the communications. We know that they have a lot going on. It's really just a matter of time, in my opinion, until we really start to see the fruits of that labor.

Got it. One other quick question. As it relates to China, you didn't mention this specifically, but I think I read last week that China is kind of backing off this zero COVID policy. I assume this is helpful in getting many back over there and getting a visa. I mean, is that -- would that be your assessment of it as well?

Yes. Jeff, we -- yes, of course, we've seen the same reports as well. And also through our connections there, we're hearing the same news internally. It's -- yes, it's great to hear that especially Shanghai is opening up their COVID restrictions. We also believe that the government officials are able to get back to work, and that includes the personnel who process the visas. So we are optimistic that we will hear some good news soon in terms of Mr. Menendez getting a visa back to China. During the downtime, I did mention in the script, but during the downtime, we have expanded the projects we're working on. So not only are we planning now to certify the watertube boiler for the Beijing Heating Group, but we also have plans to get the 500-horsepower a midrange firetube boiler burner certified as well, which also has a very big market in China with the heating districts. So we've not been idle during this time, but we're very much looking forward to get back into China to get our plans back on track.

Our next question comes from Robert Kecseg with Las Colinas Capital Management.

Jim, I was curious as far as give us a idea in the industry for the existing companies that are selling say process burners. I was going to say how -- if they got an order, would they go through the exact same process we're going through? Or in their condition, are they replacing the exact same product that's already in there that's worn out and needs to be replaced? So could you give us an idea of how they go through with having similar products, I guess, being replaced, I'm assuming compared to something new?

Yes. Bob, and I'll do my best to answer and, of course, reflecting back on my past career as to what's typical. But it's very normal to replace burners that are currently installed in a heater with a different type of burner. In fact, that's usually the reason. You'd very rarely replace them with the same burner because the change out is typically either because the operating conditions have changed or often because the emission requirements are different. So nearly always, you're going to be taking an existing -- basically, we'd see as a hole in the furnace, you take that existing hole and you would have to fit and customize a new burner to fit into the hole. So the process that we describe when we go through engineering and testing and CFD modeling, is absolutely standard amongst all of the burner manufacturers. It is not unique to ClearSign. And I know really at least as the start of 2019 since I took over, we are very much focused on developing the ClearSign Core products to be easy to introduce and to use in exactly the same way as the standard products in the industry. We needed to do that so that the engineering companies can use our products, so that the heater manufacturers can incorporate them into their heaters with exactly the same procedures and understanding as they would do with any of the other burners on the market. Of course, the difference that the emissions performance in the ClearSign technology is vastly reduced.

Okay. And just I'm clear on this. In the case of the Midwest customer that's, I guess, we would consider the most imminent as far as the process burners go. Has the change in ownership already closed? Has that already taken place?

Bob, I believe the -- yes, the merger is complete. We believe following that, but at least within the organization for whatever reason, they are -- the review of their capital projects is still ongoing. And as I mentioned in the script, we have to be a little patient and wait for the outcome of that. So at this point, that project is -- the testing went extremely well. We met our obligations fully. So we are very pleased with the way that our technology has performed. We're just waiting on the outcome of the review and hopefully getting to proceed with that project and put those burners out in the field to show what they can do.

And then one other thought that I had on the boiler burners, since it's such a large market out there that you're describing in the footprint that California Boiler has. Isn't there ongoing replacement of equipment that would have nothing to do really with the new standards? Do you see what I mean? Aren't there always companies that have to replace things that they have or they have to add or they'd have to do some expansion, add to what they have?

Yes. Bob, before California Boiler joined with ClearSign, their business is and was servicing the boilers in California. But just as the AC unit in your house needs maintenance and needs upgrading, it's the same with boilers and the boiler controllers equipment. So that business is ongoing. Just with the recent changes in the legislation and the environmental requirements, those have generated a very large change out requirement, our market, which is the reason that our technology is so important to the clients there because of this new revamp work and the driver that has been created by the environmental regulations. But the old business still goes on.

As we have no questions at this time, this concludes our question-and-answer session. I would like to turn the conference back over to Jim Deller for any closing remarks.

Yes. Thank you, operator, and thank you, everyone, for your interest and taking the time to participate today. We look forward to updating you regarding our developments and speaking to you all on our next call. Thank you.

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