Good day, and welcome to the ClearSign Technologies Second Quarter 2023 Conference Call. [Operator Instructions]. 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 Second Quarter 2023 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 Farzan's public periodic filings with the SEC, including the discussion in the Risk Factors section of the 2022 annual report on Form 10-K and the quarterly report on Form 10-Q for the quarterly period ended June 30, 2023. 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, with me on the call today are Jim Deller, Chief Executive Officer; and Brent Hinds, ClearSign's Chief Financial Officer. So, at this point, I would like to turn the call over to CFO, Brent Hinds. 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 with the SEC on August 14. Now I'd like to give an overview of the financials for the second quarter of 2023. The company recognized revenues of $150,000 during the three months ended June 30, 2023, as compared to zero revenues for the same period in 2022. Revenues for the three months ended June 30, 2023, were generated predominantly from our engineering feasibility study. For the six months ended June 30, 2023, we recognized approximately $1 million in revenues, which is the highest reported revenues in our history for any given year or six-month period. These revenues were generated predominantly from our process burner product line. Now I'd like to switch the discussion from revenues to cash. Our net cash provided by operations for the three months ended June 30, 2023, was approximately $46,000. In the same three-month period last year, we used approximately $1.8 million in cash. This quarter's operating cash activity was a milestone for the company. For the first time in our history, we added cash to our balance sheet through operational activity. Now I must stress a cautionary note about this milestone. Most of this cash came from our customers for projects that have yet to fully complete. We structure our customer contracts to receive a substantial portion of cash before completion and revenue recognition. All things being equal and no other changes. This milestone is a temporary occurrence driven by timing. However, we do not believe that this is an insignificant milestone and that it is a meaningful marker of our progress. As of June 30, 2023, we had approximately $8.5 million in cash and short-term investments. Now let's switch gears and shift to discussing our profit and loss. Our net loss for the three months ended June 30, 2023, was approximately $1.5 million compared to approximately $1.6 million for the same period in 2022. This was a modest year-over-year improvement. We saw a modest year-over-year improvement in our net loss for the six months ended June 30, 2023. We reported an improvement of $222,000 when compared to the same period in 2022. It is important to note that both of these improvements in our net loss were driven by gross profit from sales of our products. In other words, we are not seeing notable shifts in our cost structure, but we are seeing the effects of notable shifts in sales. Now changing our focus to equity. As of June 30, 2023, we reported approximately 38.6 million shares of common stock outstanding. We have confidence in our financial position and balance sheet. And with our quarter-ending balances, we have more than 12 months of runway in working capital, and that is without cash from any other sources. With that, I'd like to turn the call over to our CEO, Jim Deller. Jim?

Thank you, Brent, for the financial overview. I'd like to thank everyone for joining us on the call today and for your interest in ClearSign. It has been a while since our last update, and I'm happy to share our progress with you. Before I begin, I want to congratulate Brent on his recent promotion to Chief Financial Officer. Brent has undertaken an expansive transformation of ClearSign's accounting functions that is not visible from the outside. This has made our processes much more efficient and also provides an accounting and control system that is structured to enable future growth. On today's call, I will review our business segments, starting with process burners, and discuss both the hydrogen brand development project as well as our other in-process projects and pipeline. Then I will touch on the progression in our boiler burner business and then provide an update on our business in China and the developments there. We also have developments with our collaboration partner, Narion Corporation who is developing applications using our sensing technology and we'll give more insight into this progress. Before I go into detail on our individual product lines, I want to give a little high-level insight into our operations over the last few months because we make announcements of sales, grant awards, and other significant events. There's really only on these calls we get to give some insight into the cooking that goes on in the kitchen. We have completed the engineering design of burners for two different heaters and tee those up for customer testing in the -- the first burner is fabricated and scheduled to install in the test furnace next week to begin the testing process. We have also completed the design and fabrication of the three boiler burners, two in California, one of…

[Operator Instructions]. Our first question comes from Sameer Joshi with H.C. Wainwright. Please go ahead.

Brent, congratulations on the promotion. just a few clarifications from the order flow and the expected deliveries during 2023. The two California burners and the Texas burner, are they expected to be delivered during 2023 or that is -- are these revenue recognition opportunities for 2023?

Okay. Hi Sam. Thanks for the question. Yes, the boiler burners in production at this time are scheduled to all complete and they will ship, we're expecting them all to start up this year.

Okay. And just another clarification on that. I know your process heater burners are multiple orders. Are these boiler burner orders like single boiler burners or multiple burner orders?

Sameer, that is a great question. The three orders that we are in the process of completing and then shipping to the job site and actually starting up at present, those are three single burner orders. However, looking forward, there are mortal burner opportunities in that market segment. And clients with inquiries who are asking about a larger range of boilers to be retrofitted at one. So, just to clarify, the three we have at present are single burner orders, but that is not always going to be the case looking forward.

Yes. I mean what is interesting is one of the Texas burner is actually growing in a non-boiler application, if I heard it right. Can you talk a little bit about that application and the scope or the opportunity set there?

I can. The end-user has -- as we've many, unfortunately, has not given us permission to use their name. But this application is going into a chemicals company. So, unlike a boiler, this is a process heater. The burner was actually sold to a very well-known heat -- Tulsa-based heater manufacturer, Tulsa heaters Midstream to have a significant range of heaters that they sell into many areas of the market, certainly for gas processing and obviously here, in this case, to chemicals plant. The burner is a boiler burner design. It's the same burner. It's mounted horizontally into this heater and it is a heater with a single burner. So, the arrangement of the bono in that regard is similar to a 5G boiler, and that's why this burden is a good fit. Also, what's good is that the emissions we can achieve in the site are in the same range as what we achieve in the 5G boiler. So, meeting these very low single-digit NOx guarantees is right in our warehouse.

Okay. On the process heater burner, again, another call clarification, the two refinery multi-burner orders. Are they 13 each? Or is it 13 combined for the two orders?

No. It is one order of 20 and one order of 13.

Okay. Got it. Understood. Yes. Thanks for clarifying on that 30 -- on that 20-burner order as well. So, moving on to these grants received by Narion and yourself, what is the involvement of ClearSign in the Marion project? Is there any benefit for you? Will you receive part of the money or will you have to expand some of your cash to support this effort?

Okay. And long term, the reason that we have formed a relationship with Naran is certainly for the financial benefit of ClearSign. It probably helps for others listening as well. We've not talked about Narion a lot in the past, but Narion is a specialist company based in Seattle. We formed a collaborative partnership with them because they have expertise in technology and market areas, which are not core to our expertise within ClearSign but in which our sensing technology can have a very significant role. So, we've partnered with Narion to enable them to develop and commercialize applications in areas outside of the typical combustion industry that is the core business of ClearSign. So, the grant that Naren has received is going to fund their research and development of this sense of four flare applications it's going to be executed entirely by Narion. There is no cash outlay from ClearSign's side. It helps them fund the project, but the end result of this project, assuming they are successful, will be a product that contains the ClearSign sensor and will result in a licensing arrangement from ClearSign to Narion to allow them to use our technology, and that will provide the revenue to us.

Yes. makes sense. It's sort of an investment in terms of time and a little bit money at this point.

Yes. So just to add a little, just for the others listening regarding Narion, the -- but no -- this one flare ground that Narion has is a -- it gives us funding it helps accelerate that project. the reason we partnered with them, they have as said, expertise and engagement and they're on assuring projects in many areas. They have aerospace and transport and some very huge global fields. The clear sign just does not have the expertise in. So, while they're a very small company, we're actually very excited about the long-term potential of this collaboration with around.

Understood. Thanks for that color. On the other SBIR Phase II grant for the hydrogen, I know the Phase 1 Zeeco was involved for Phase 2, will that involvement include -- will Zeeco continue to be our partner for that effort?

Yes. No, very much so we have -- and even during the application process, we have support letters provided by Zeeco. We will continue to work with them. They've been an excellent partner for us. The project involves developing the commercial product line, and that includes scaling it up and demonstrating that burner over a range of sizes up to much larger sizes. So, using the multiple test furnaces available at go are a critical part of this project.

Understood. And then the last question on China. You're expecting certification of some form by the end of this year, fourth quarter. Is this expected to be sort of a blanket certification? Does this pertain to the district heating opportunity that we have spoken in the past?

Could you repeat the last part of your question, please?

Yes. So, I think in the past, we talked about a lot of municipal heating or district heating in China. Does this pertain to that?

Okay. So, let me -- I'll tell you one at a time. Yes, I confirm the certification process, we expect to certainly complete this year. for rough timing, the burn is actually installed. We look to actually complete the firing this month, but then it will typically take some time for the Chinese government to believe that processing and delivered the certification certificate. We believe that, that will take somewhere in the order of two months. But with a caveat, we know that there have also been effects of COVID within China, but it is -- and we highly expect that we will receive that certification by the end of the year. The goal in China we are strong on is definitely to develop a complete range of burner sizes in China, not just the burner, but our relationship with Shuangliang. It also includes us collaborating with them and providing an integrated boiler burner package. So Shuangliang is a boiler manufacturing. In fact, one of the biggest in China. This will enable them to sell a NOx compliant boiler into the -- their client sites. The burners we are working on are 5G boiler burners, and we've actually reprioritized in China because the regulations in China, their control NOx have been imposed now also in industrial regions of China. We've mentioned Shenzhen before down on the South Coast. These regions have a lot of boiler burners from the ClearSign perspective. One, this is a very high-volume market. And there's also a product line that we have already proven we have these burners now operating in California. We've proven we can do them. We have them source tested by third parties in California, and we have operating experience of them. So, it makes it a very relatively easy product for us to now commercialize in China. So, with the change in regulations and the development of 5G boiler burner business in California, we've really pushed and are most receptive to developing that product line first. That said, we do have the relationship with the Beijing District Heating Group, we do still have the water tube boiler burner for them on the road map. This is really just a reprioritization patient so we can take advantage of this newly developing opportunity that we think is going to be what most readily available to us and we actually been very lucrative.

Understood. So, the water tube opportunity remains, but this is a more near term and significant opportunity as well. So, is that -- did I understand that?

Yes.

The next question comes from Robert Kecseg with Las Colinas Capital Management. Please go ahead.

Yes. I wanted to maybe simplify on the sales. Is there some way that you could report a sales order backlog? So, it maybe kind of simplifies it for the investors. In other words, perhaps what backlog we have estimated for this year and so far, what would be approximately estimated for the following year 2024 at the present time.

Sorry, go ahead. I cut you off. I didn't mean to. Sorry.

Oh, you cut me off. You couldn't hear me?

I thought your question was continuing. I didn't mean to stop you.

No. I just was asking about the possibility of order backlog reporting. It's great to hear. I'm absolutely wonderful to hear the individual orders and stuff, but to kind of summarize maybe for investors, I didn't know whether that would be possible to say, like a 2023 backlog and what we're looking at now for 2024 backlog of just sales revenue estimate.

Sure. Yes, I can. I think it makes most sense to give you the tools. A good average price for our burners is $100,000 a burner. We do give the number of burners in the announcement we make off of the orders we receive. The process burners have a significant amount of engineering attached to them. So, you can add over 200,000 to that number. With that way, I think you've got a simple tool to get reasonably close to the order values as they come in. And of course, from the queues, you can track the revenue that's recognized the difference being the backlog of our work in progress. I think we've seen looking forward, there are so many factors in the market. I don't think it's reasonable to actually give an expected number, especially not at this day of a forward-looking sales expectation, I'm very encouraged by what we see both on the process burner and the product line. But at this point, I don't think it's reasonable to give a future-looking number. But hopefully, that -- just those round numbers are useful to all for assessing the value of the orders that we've booked and of course, the queues will give you the revenue that's recognized on a quarter-by-quarter basis.

And I just wanted to make mention of this on the call. It's -- it's not directly related to the products, but I did hear from an industry executive that in China, they completed the construction of 82 new coal plants, power plants in 2022, and their intention is to do over 90 coal plants in the 2023 year. And I just thought that was kind of a spectacular number. I was wondering is that does that any way relate to, I mean, their growth? Or does that make our market any bigger? I realize we don't put our equipment in coal plant -- in power plants. But as far as the whole, heating thing that we've been trying to get into and get started.

Yes. Bob, I don't -- it's hard to relate that directly to what we do. But I think it's a it's a good general point. And we talked a lot about the China market and why we're pursuing the China market and the effort we put into China. And I think with China being so far away, sometimes that reason gets lost. But the data that you mentioned, when you see the magnitude of the investment and just realizing the cut of the industry in China, I think we can start to get a feeling for how large that market can be. And that really is what is driving us in China. We are in a different sector, the coal-fired plant or power generation. But just seeing the magnitude of the energy need and realize that the smaller boilers that we provide are also energy providers into China, I think it does illustrate the scope of the potential that we see there.

Yes. And I just want to say how pleasing it is to know how valuable sales is to us that you're able to find somebody with Tina's background and experience. And I hope in the future after she's been around for a while, we could hear some of her perspective of what she's experienced in our market after being there for a time.

Yes, Bob, thank you for that. We were very excited to find someone of Tina's caliber. To attract somebody like that is very gratifying to us. She's hit the ground running. I'm looking forward to working with Tina in the future.

Great. Alright. Thank you very much, Jim.

[Operator Instructions]. Our next question comes from Kevin Dunn of Private Investor. Please go ahead.

Long time listener, first-time caller. Just a few questions. Basically, I've been following you guys for probably five years or so. And I mean in the stock -- if I remember popping over $5, I mean I didn't have any money at the time. I got to convince my mom to buy some and then shortly after the stock plummeted down to $1, and it happened after -- there was an ExxonMobil test and it was -- the reason given -- it's been almost two years since that -- and it was delayed. And it was quote 'there was not enough time for the 2022 turnaround' and given that 2023 is almost over, like should we expect a turnaround in the 2024? I don't even really know what a turnaround is to be honest.

Yes, I think it's a fair question. So, the ExxonMobil testing was predominantly a validation of our technology. They went through the operating conditions of what we believe are all of the Exxon refineries and basically took the highs and the lows of all their operating criteria and asked us to demonstrate our burner over that range. That testing was completed successfully, and we demonstrated that to Exxon be Initial purchase order we had for the testing was headed for following that testing. Unfortunately, the timing and the schedule of that shutdown and that plan on the heater, that was the focus of that initial testing changed, and we've not been able to continue that project. That said, we do maintain relationships with Exxon. We are in constant communication with them. We certainly look forward to working with them in the future.

I follow you guys very closely. And every day, I type in hydrogen into Apple News and an article is political about a coal power plant I think point plus in West Virginia, about it being converted to 100% hydrogen. And in the article, reporter confirmed that it was Zeeco and just given the time needed to manufacture, I think your plan was to have this up and running within about a year. Should we expect an order soon. I believe they were graphite and the process they somehow were able to hydrogen with a byproduct, they were going to be burning in this coal power -- former coal power plant.

Right. Yes. I think that's part of the hydrogen production process. We work -- we work with Zeeco. They have -- obviously, they're a global company and the world's second biggest. They have many product lines that are not products that we cover. The -- we do not…

It's 100% high I thought that was your…

Yes.

100% hydrogen burner, I guess.

Yes. The DOE grant specifically is for the development of burners for processes. So those will be heaters that go into oil refineries. I think if this is replacing a coal-fired power plant, then -- are they looking at power station burns, which are very large and a very different type of boiler burner that ClearSign does not [indiscernible] not quite at present.

Okay. Next question. There's also a second super major Europe -- European has had equipment installed for over a year. I don't know if it is Shell or whoever -- but is there a conflict of interest with these big oil majors business model, specifically regarding like -- I think like the main thing hold you guys back is the cost of hydrogen, but this I've heard -- I heard of blue hydrogen, green hydrogen, but then there's something called white hydrogen that's like naturally in the ground and wouldn't they be the ones to discover it? And would they share this info? I wonder -- could it be in the ultra-deep possibly? Specifically, I remember another Beaverpick, MacBain, exploration, The Davy Jones had such high expectations, but then they plugged it and it was sold at Freeport-McMoran, and just curious about your thoughts.

Kevin, I'll be honest with you, I don't know anything about that. And I -- it's really not appropriate for me to speculate.

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Deller for any closing remarks.

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

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