Good afternoon and welcome to the ClearSign Technologies Second Quarter 2024 Conference Call. All participants will be in a listen-only mode. [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 2024 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 risk 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 a discussion in the risk factor section of the 2023 Annual Report on Form 10-K for the period ended December 31, 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 on the call with me today are Jim Deller, ClearSign's Chief Executive Officer, and Brent Hinds, ClearSign's Chief Financial Officer. So with that, at this point in the call, I would like to turn the call over to CFO, Brent Hinds. So Brent, please go ahead.

Thank you, Matthew. And thank you to everyone joining us here today. Before I begin, I'd like to note that our financial results for the second quarter of 2024 are included in the quarterly report on Form 10-Q that was filed with the SEC last Wednesday on August 14. With that, I'd like to give an overview of the financials for the second quarter of 2024. For the second quarter of 2024, the company recognized approximately $45,000 in revenues compared to $150,000 for the same comparable period in 2023. This $105,000 decrease in revenues is driven by the natural lumpiness in our business, as we continue to work to build our sales pipeline. While we don't provide guidance, Jim will comment later on our project pipeline with shipping and delivery timeframes which can give an indication of future revenues. Looking at the income statement as a whole, our net loss for the second quarter in 2024 was approximately $1.9 million, which is an unfavorable increase of approximately $400,000 compared to the same period in 2023. This unfavorable year-over-year change was predominantly due to a one-time non-cash event for $260,000 related to the vesting of restricted stock units in connection with the resignation of Mr. Hoffman from the Board of Directors. Now I'd like to shift focus from our income statement to the balance sheet, more specifically cash. Our net cash used in operations for the second quarter of 2024 was approximately $1.5 million compared to a generation of cash of approximately $50,000 for the same period in 2023. This unfavorable year-over-year change was driven by the prior year's operations. As you may recall, during the second quarter of 2023, we collected a significant amount of cash from customers because we met billing milestones specified in our contracts. Shifting gears but [continuing our focus] (ph) on cash, I would also like to revisit an announcement we made on June 20, 2024, where we announced the full exercise of the clirSPV Participation Right. Pursuant to a stock Purchase Agreement dated July 12, 2018, clirSPV can participate in equity offerings to maintain its 19.99% ownership. The full exercise of the participation right added approximately $4.3 million in cash to the balance sheet. Coupled this with the other recent equity offerings, we added approximately $13 million in cash to our balance sheet in the second quarter of 2024. So therefore, as of June 30th, 2024, we reported a balance of approximately $16 million in cash and cash equivalents. From a financial perspective, we believe this working capital position instills greater confidence in our customers and suppliers when doing business with us. And with that, I'd like to turn the call over to our CEO, Jim Deller. Jim?

Thank you, Brent, for the financial overview. As always, I'd like to thank everyone for joining us on the call today and for your interest in ClearSign. Before I start on behalf of ClearSign and the Board, I want to thank our former Chairman and Board Member Rob Hoffman for his years of service and for the continued financial support for ClearSign provided by clirSPV. Rob's support was instrumental in fostering this company from a research and development technology company to the viable commercial entity we are today. On a similar note, I'd like to welcome Todd Silva to the ClearSign Board of Directors to fill Rob's vacancy as clirSPV's designee. Todd brings over 30 years of leadership and financial experience in industry spanning financial services, technology, healthcare and others. I think this is an exciting time for the company and we look forward to working with Todd and the other Board members. For the call today, I will review our product line starting with our process burners, then move to boiler burners, and then discuss the outlook for the rest of the year. So turning to our process burner line, in our last call we discussed our multiple installations and follow on orders from Kern Energy in California. At that time, our two largest heater retrofit projects had just been started up, and shortly afterwards their emissions were verified by formal third-party measurements, known as source tests. These two heaters are side-by-side, one with five burners and the other with eight. Since those two projects, we have also received follow-on orders for two additional heaters at Kern Energy. By previous orders, the initial purchase order is for engineering, and we anticipate receiving the orders for the follow-on, fabrication, and delivery to complete these retrofits after our engineering scope is…

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Your first question comes from the line of Amit Dayal from H.C. Wainwright. Please go ahead.

Hi, good afternoon everyone. Thank you for taking my questions. So Jim, I mean, it's good to see all the progress you guys are making, and it's almost now getting hard to track all the sales in your pipeline. Could you maybe help us a little bit and give us a dollar sense of how much you have in hand as orders that you will be shipping out over the next few quarters? And what is in the pipeline?

Yes. Thank you, Amit, and thank you for your question. I think to start, I'll rephrase the general numbers we've given for everyone, our products obviously cover boiler burners and process burners and vary in size. But to keep things simple a good estimate of the sales price or revenue per burner is $100,000 horizon. So I can then talk to the number of burners, both we have in our existing projects and then certainly talk a little bit about what we see in the future. So as I think on the process burner line, the two big orders, I mentioned the 20 burners, which we expect to ship to California late in September. So there's 20 burners there. We have the engineering order, which we fully expect to progress for the chemical facility down in Texas, that's 26 burners. There's 46 in total with just those two orders. There's two heaters that we've mentioned for Kern Energy. The engineering for those is just about complete. There are a handful of boiler burner and oil burner or hot oil heater burners in progress. We obviously have the four burner plan with one single client in California. So I think that's the majority of the standard burn orders. Obviously, there's engineering and service and spare parts and other work that we do. But that's, I think, a good framework to assess the right, the revenue to be recognized based on the work that we have to date. Going forward, I'm always conscious about a burn in the hand as opposed to what's out there. But we are seeing a lot of interest in the hot oil heater line and we're expecting that to progress. We have, I mentioned, ongoing relationship with Kern Energy, and there's certainly interest there. I think some of the more exciting things for me as I look further out to the future, are the ongoing conversations with a company like Birwelco, the engineering company involved in the order we've just announced down in Texas. But also that we are getting drawn or invited to enter discussions at the feed stage of some very large projects. The feed stage is really the first financial and feasibility assessment that our customers go through when developing projects. These are typically going to be two years out, something in that time frame, sometimes even more. But the important thing is that's how you load the pipeline and that's where the growth and the long-term growth of the company comes from is by getting involved in these really big projects early. For me, the reason that's encouraging one is for that pipeline, but also it's an indication of the growing recognition and trust of ClearSign's Technology out there in the market.

Understood. Thank you. And just to clarify, the hot oil heater opportunity is tied to the horizontal process burner offering that you are developing?

That's correct. We've used several names and that – we are actually using that as more of a generic name. There are a number of different processes, but there's a number of horizontally fired heaters in the process industries and gas processing industries. Oil heaters, glycol heaters, there's a number of different process. We've used the term oil heaters generally to describe those horizontally fired single burner forced draft burner applications.

Okay. Got it. You said you guys are probably getting a little stretched with all of the activity in terms of business development and deployments going on. Are you looking to add more people? And how should we think about operating costs on a quarterly basis going forward?

Yeah. I don't may have seen -- we currently have 1 -- I use this as an advertisement as well. We currently have one open job posting out. We are currently viewing regimes or an engineer to both assist with – work with our test furnace and installation work out in the field with our clients. That is the only current open position we have. Obviously, as more orders come in, we will monitor the load on that project management team and maybe even on the engineering team. Part of the reason also that we are focused on that engineering team. It's not only that we need to execute the orders that we have, but that I want to ensure that our senior engineers are also very effective salespeople, maintain the time in their schedule to focus on sales, and as customer conversations to bring orders in and do not get consumed in order execution and engineering because of a low staffing level. And you'd appreciate we have to have people in-house and trained up so that they're effectively able to do that work. So we do keep our workforce to a low level. We also have to balance that to make sure that we have the right people to do the job and not take a foot off the gas and focus on the outreach and the sales activities that are so important to us. I think in terms of just looking at overhead costs. These positions are positions that we add as part of the growing business. So they're not -- I wouldn't classify them as a overhead style cost, they are very much a function of the increasing workflow.

Understood. And just last one from me. These demonstrations with Zeeco that you are doing for clients. What kind of response are you getting from that? And how is this helping sort of maybe improve your sales cycle? Just any color on how you're leveraging these demonstrations to just get more visibility with the customers?

Yes. Absolutely. I mean the -- the whole purpose of doing this is to show what we can do to the industry to get people to see it in person and seeing is believing. Often, I mean this demonstration last week was a big demonstration. It was three burners firing in a test furnace. That is not normal. Most tests are done with just a single furnace -- single burner. I think it's important to note the people that came in, made this trip dedicated, especially for this purpose. They were not in town for the reasons they've flown across the country to be here with us. There was a lot of engagement. We had a full day of active conversations, including the fine demonstration of pursuit in Vegas through a dinner that evening. The burners ran well. We got to show the hydrogen burner. There was a lot of conversation around the hydrogen burner and the Hydrogen burner performance. We had a lot of ClearSign staff amongst the customers, as you would expect, and a lot of one-on-one conversations. And we picked up and got engaged in a lot of conversations with our customers where they were asking how could we help them with their problems. And I think we've picked up a lot of maybe not immediate opportunities, but I think a lot of initiatives that have a very good potential of turning into future opportunities from those conversations. And just -- having that dialogue and ongoing conversations with your customers always keeps you at the front of their mind. And while there’s no specific opportunities we’re bidding immediately as a result of that conference, I am very confident that we will get more engagement and opportunities as a result of that demonstration.

Understood. Thank you Jim, that’s all I have.

Thank you Amit.

[Operator Instructions]

Operator, I'm going to go ahead and read we've got a couple via e-mail. So I'm going to read the first question. You've increasingly highlighted third parties like heater manufacturers in your recent press releases about sales. Can you talk about how many of these relationships we may have and how many of these may exist?

That's a good question. I'll answer and the best I can. So it's probably good to -- just to step back a little bit, everyone explain how the heater manufacturers, the engineering companies fit into the industry. So you think of a typical clients, now let’s pick one [indiscernible] name a [indiscernible] [Chevron] (ph) has a heater. And if they want to buy heater, they also goes to a heater manufacturer and the heater manufacturer would then buy burners to put into the heater and supply as part of the package. Or if they own that heater and require work on the heater that changes purpose or to meet new emissions requirements, they would typically go to one of those heater manufacturers or heater engineering companies and outsource to work to them, and that company would then have a very prominent role in redesigning the heater and selecting the equipment. During the remarks a few minutes ago, I talked to some extent about Birwelco. Birwelco is a really good example of a very prominent heater manufacturer. They supply heaters, they do the engineering, and they were very influential in the 26 burner order that we announced in that role. Yes, I do about it a lot because effectively, they act as a sales channel for us. And as we sell products and new heater companies get involved in ClearSign project, that's another heater company that's aware of what we do and then can use our burners as part of their solution that they are constantly trying to sell to their customers to get business for themselves. So I need to go back and look through details, but we are probably at a handful of half a dozen heater companies that we've worked with to date. I think that might be up by 1 or 2 somewhere in that order. That's the easy part of the question. I think the question is to how many are out there, is a lot more open ended. There's probably 10 to 15, heater and heater engineering companies that are frequently engaged in the US market. But depending on how big the companies you include are and where they are the number will actually be much more than that. And there are a lot of smaller bespoke engineering, a heater companies as well. So that last part is, to be honest, difficult to put a number to.

The second question, in your press release today, you stated an event in California next week to unveil independent data. Can you give more color?

Well, first of all, thank you for reading the press release. So this project, in some ways, is similar to the demonstration we ran at Zeeco last week with some very significant first of all, fundamentally for us, it's focused on our boiler burner technology rather than the process burner. We have a -- or been part of an ongoing burner comparison study that's being run by the California GET program, to look at technologies to reduce NOx emissions and to increase burner efficiency. Essentially increasing efficiency is decarbonization is the savior fuel and that means less carbon. So that is really the focus of this program and how can you decarbonize the boilers and achieve and maintain these exceptionally low NOx numbers. The program has run by GET and funded by them. The engineers were paid by yet. It was hosted at a partner California Boiler sites. The data is owned by GET, they will be releasing a report. We believe sometime in early September, and please follow us on LinkedIn, we will put announcements of our outlook. We will host the report out on our website. Also, the demonstration next week is the ClearSign technology operating in the boiler. It's one of the concluding activities of this GET program. They have managed this. They have been the one primarily is distributing the invitee list and maintain the list. We have I think last count today, we had up to 80 attendees registered for that. Some of them were the engine Global refinery engineer that came into our Zeeco demonstration, some of those was actually going out to California because they're also interested in the boiler burner technologies, so we've got to talk about that at the same time. But this is a big deal and especially the results, I don't have the exact data to share today. But having a burner that [as decarbonization] (ph) is shown to be more efficient and has this world leading NOx level for a burner is a really big deal in my opinion.

Thank you. There are no further questions at this time. I would like to turn the conference back over to ClearSign’s CEO, Mr. Jim Deller for any closing remarks.

Well, 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 with you all on our next call.

This concludes today's call. Thank you for participating. You may all disconnect.