10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission File Number 001-35521

CLEARSIGN COMBUSTION CORPORATION

(Exact name of registrant as specified in its charter)

WASHINGTON (State or other jurisdiction of
incorporation or organization) 26-2056298 (I.R.S. Employer
Identification No.)

12870 Interurban Avenue South

Seattle, Washington 98168

(Address of principal executive offices)

(Zip Code)

(206) 673-4848

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer,” and “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer  ¨	Smaller reporting company  x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  x

As of November 11, 2013 the issuer has 8,810,674 shares of common stock, par value $.0001, issued and outstanding.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	3
Item 1.	Condensed Financial Statements
	Condensed Balance Sheets as of September 30, 2013 and December 31, 2012 (Unaudited)	3
	Condensed Statements of Operations for the three and nine months ended September 30, 2013 and 2012 and for the period from Inception (January 23, 2008) to September 30, 2013 (unaudited)	4
	Condensed Statement of Stockholders’ Equity for the period from Inception (January 23, 2008) to September 30, 2013 (Unaudited)	5
	Condensed Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 and for the period from Inception (January 23, 2008) to September 30, 2013 (Unaudited)	6
	Notes to Unaudited Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II	OTHER INFORMATION	19
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits	20
SIGNATURES		21

2

 

PART I-FINANCIAL INFORMATION

ITEM 1

ClearSign Combustion Corporation

(a Development Stage Company)

Condensed Balance Sheets

(Unaudited)

	September 30,		December 31,
	2013		2012
ASSETS
Current Assets:
Cash and cash equivalents	$	3,989,000	$	8,027,000
Prepaid expenses		225,000		60,000
Total current assets		4,214,000		8,087,000
Fixed assets, net		416,000		400,000
Patents and other intangible assets		1,216,000		618,000
Other assets		10,000		10,000
Total Assets	$	5,856,000	$	9,115,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	205,000	$	276,000
Accrued compensation and taxes		706,000		168,000
Total current liabilities		911,000		444,000
Deferred rent		33,000		35,000
Total liabilities		944,000		479,000
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $0.0001 par value, zero shares issued and outstanding		-		-
Common stock, $0.0001 par value, 8,810,674 and 8,752,015 shares issued and     outstanding at September 30, 2013 and December 31, 2012, respectively		1,000		1,000
Additional paid-in capital		17,715,000		17,314,000
Deficit accumulated in the development stage		(12,804,000)		(8,679,000)
Total stockholders' equity		4,912,000		8,636,000
Total Liabilities and Stockholders' Equity	$	5,856,000	$	9,115,000

The accompanying notes are an integral part of these condensed financial statements.

3

 

ClearSign Combustion Corporation

(a Development Stage Company)

Condensed Statements of Operations

(Unaudited)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Period from Inception (January 23, 2008) to September 30,
	2013		2012		2013		2012		2013
Co-development revenue	$	50,000	$	-	$	50,000	$	-	$	50,000
Cost of co-development revenue		34,000		-		34,000		-		34,000
Gross profit		16,000		-		16,000		-		16,000
Operating expenses:
Research and development		470,000		331,000		1,466,000		887,000		3,174,000
General and administrative		911,000		811,000		2,685,000		2,145,000		9,681,000
Total operating expenses		1,381,000		1,142,000		4,151,000		3,032,000		12,855,000
Loss from operations		(1,365,000)		(1,142,000)		(4,135,000)		(3,032,000)		(12,839,000)
Other income (expense):
Interest income		3,000		10,000		10,000		16,000		36,000
Interest expense		-		-		-		(1,000)		(1,000)
Total other income (expense)		3,000		10,000		10,000		15,000		35,000
Net Loss	$	(1,362,000)	$	(1,132,000)	$	(4,125,000)	$	(3,017,000)	$	(12,804,000)
Net Loss per share - basic and fully diluted	$	(0.15)	$	(0.13)	$	(0.47)	$	(0.42)	$	(2.89)
Weighted average number of shares outstanding - basic and fully diluted		8,801,402		8,752,015		8,790,801		7,209,133		4,432,985

The accompanying notes are an integral part of these condensed financial statements.

4

 

ClearSign Combustion Corporation

(a Development Stage Company)

Condensed Statement of Stockholders' Equity

(Unaudited)

For the period from Inception (January 23, 2008) to September 30, 2013

					Common Stock						Deficit Accumulated in the		Total
	Common Stock				Class B				Additional		Development		Stockholders'
	Shares		Amount		Shares		Amount		Paid-In Capital		Stage		Equity
Shares issued to founders, at no cost		1,065,000	$	-		476,000	$	-	$	33,000	$	-	$	33,000
Shares issued for services ($0.02 per share)		125,000		-		-		-		2,000		-		2,000
Shares issued for cash ($0.02 per share)		-		-		384,000		-		10,000		-		10,000
Shares issued for cash ($1.80 per share)		467,310		-		-		-		841,000		-		841,000
Shares issued for cash ($2.20 per share)		1,363,364		-		-		-		2,999,000		-		2,999,000
Issuance costs		-		-		-		-		(813,000)		-		(813,000)
Shares issued in initial public offering ($4.00 per share)		3,450,000		1,000		-		-		13,799,000		-		13,800,000
Issuance costs of initial public offering		-		-		-		-		(2,727,000)		-		(2,727,000)
Share based payments of warrants		-		-		-		-		240,000		-		240,000
Shares issued for services ($1.80 per share)		146,644		-		-		-		264,000		-		264,000
Shares issued for services ($2.20 per share)		733,523		-		-		-		1,614,000		-		1,614,000
Shares issued for services ($4.00 per share)		18,000		-		-		-		72,000		-		72,000
Shares issued for services ($4.94 per share)		20,799		-		-		-		103,000		-		103,000
Shares issued to retire payable ($4.00 per share)		110,000		-		-		-		440,000		-		440,000
Conversion of shares		1,075,000		-		(860,000)		-		-		-		-
Share based compensation		177,375		-		-		-		437,000		-		437,000
Net loss		-		-		-		-		-		(8,679,000)		(8,679,000)
Balances at December 31, 2012		8,752,015		1,000		-		-		17,314,000		(8,679,000)		8,636,000
Shares issued for services ($5.00 per share)		30,000		-		-		-		150,000		-		150,000
Shares issued for services ($9.12 per share)		11,250		-		-		-		102,000		-		102,000
Shares issued upon exercise of warrant ($2.20 per share)		17,409		-		-		-		39,000		-		39,000
Share based compensation		-		-		-		-		110,000		-		110,000
Net loss		-		-		-		-		-		(4,125,000)		(4,125,000)
Balances at September 30, 2013		8,810,674	$	1,000		-	$	-	$	17,715,000	$	(12,804,000)	$	4,912,000

The accompanying notes are an integral part of these condensed financial statements.

5

 

ClearSign Combustion Corporation

(a Development Stage Company)

Condensed Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended September 30,				For the Period from Inception (January 23, 2008) to
	2013		2012		September 30, 2013
Cash flows from operating activities:
Net loss	$	(4,125,000)	$	(3,017,000)	$	(12,804,000)
Adjustments to reconcile net loss to net cash used     in operating activities:
Common stock issued or issuable for services		181,000		119,000		1,710,000
Share based payments		110,000		116,000		432,000
Depreciation		154,000		60,000		311,000
Abandonment of capitalized patent		4,000		-		4,000
Deferred rent		(2,000)		18,000		33,000
Change in operating assets and liabilities:
Prepaid expenses		(94,000)		323,000		(154,000)
Other assets		-		10,000		(10,000)
Accounts payable		(71,000)		156,000		699,000
Accrued compensation		538,000		301,000		821,000
Net cash used in operating activities		(3,305,000)		(1,914,000)		(8,958,000)
Cash flows from investing activities:
Acquisition of fixed assets		(170,000)		(286,000)		(706,000)
Disbursements for patents and other intangible assets		(602,000)		(242,000)		(1,220,000)
Net cash used in investing activities		(772,000)		(528,000)		(1,926,000)
Cash flows from financing activities:
Proceeds from issuance of common stock for cash,     net of offering costs		39,000		11,200,000		14,921,000
Proceeds from issuance of short term promissory note		-		98,000		98,000
Principal payments on promissory notes		-		(146,000)		(146,000)
Net cash provided by financing activities		39,000		11,152,000		14,873,000
Net increase (decrease) in cash and cash equivalents		(4,038,000)		8,710,000		3,989,000
Cash and cash equivalents, beginning of period		8,027,000		930,000		-
Cash and cash equivalents, end of period	$	3,989,000	$	9,640,000	$	3,989,000
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	-	$	1,000	$	1,000

Supplemental disclosure of non-cash investing and financing activities:

During the nine months ended September 30, 2013, the Company:

• issued 30,000 shares of common stock valued at $150,000 to directors for services to be performed in 2013, and

• issued 11,250 shares of common stock valued at $102,000 to a consultant for services to be performed from April to December 2013.

During the nine months ended September 30, 2012, the Company:

• issued warrants to purchase 345,000 shares of common stock valued at $128,000 as part of an underwriting fee related to the initial public offering,

• issued 110,000 shares of common stock valued at $440,000 in partial satisfaction of an account payable,

• issued 20,799 shares of common stock valued at $103,000 to directors for services performed from April to December 2012, and

• issued 18,000 shares of common stock valued at $72,000 to a consultant for services performed in 2012.

During the period from inception (January 23, 2008) to September 30, 2013, exclusive of the above, the Company:

• issued 263,637 shares of common stock valued at $580,000 and warrants to purchase 136,368 shares of common stock valued at $64,000 for issuance costs related to a common stock offering,

• issued 454,547 shares of common stock valued at $1,000,000 to MDB Capital Group LLC for consulting services in 2011,

• issued 52,375 shares of common stock valued at $115,000 to certain employees to partially satisfy compensation accrued at December 31, 2010,

• issued 68,091 shares of common stock valued at $126,000 in order to discharge $99,000 of common stock to be issued at December 31, 2010 and pay rent for the eight months ended August 31, 2011,

• issued 49,728 shares of common stock valued at $90,000 in order to discharge the common stock to be issued at December 31, 2010,

• canceled 5,825 shares valued at $10,000 in order to partially discharge common stock to be issued at December 31, 2010,

• made stock grants of 50,000 and 75,000 shares to an employee valued at $275,000 which is to be earned from July 2011 to September 2016,

• swapped 860,000 shares of Class B common stock held by its founding shareholders for 1,075,000 shares of common stock,

• converted a $46,000 account payable to a vendor and acquired a fixed asset valued at $2,000 through a $48,000 interest-bearing promissory note retired in 2012,

• issued 3,555 shares of common stock valued at $8,000 in partial satisfaction of an account payable,

• issued 10,834 shares of common stock valued at $20,000 in exchange for equipment, and

• issued 2,000 shares of common stock valued at $4,000 to a consultant for services performed in 2011.

The accompanying notes are an integral part of these condensed financial statements.

6

 

ClearSign Combustion Corporation

(a Development Stage Company)

Notes to Unaudited Condensed Financial Statements

Note 1 – Organization and Description of Business

ClearSign Combustion Corporation (ClearSign or the Company) is a development stage company located in Seattle, Washington and incorporated in the state of Washington on January 23, 2008. The Company was formed to design, develop and market technologies that improve both the energy efficiency and emission control characteristics of combustion systems. The Company’s primary technologies include its  Electrodynamic Combustion Control™ or ECC™ technology, which introduces a computer-controlled electric field into the combustion region which may better control gas-phase chemical reactions and improve system performance and cost-effectiveness, and its Duplex™ technology, which achieves very low emissions without the need of external flue gas recirculation, selective catalytic reduction, or higher excess air operation.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed balance sheet at December 31, 2012 has been derived from the Company’s audited financial statements.

In the opinion of management, these financial statements reflect all normal recurring and other adjustments necessary for a fair presentation. These financial statements should be read in conjunction with the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2012. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods.

Development Stage Enterprise

The Company is a development stage company as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915, Development Stage Entities. The Company is devoting substantially all of its present efforts to design and develop new technologies in combustion systems and its planned principal operations have not yet commenced. The Company has not generated any significant revenues from operations and has no assurance of any future revenues. All losses accumulated since January 23, 2008 have been considered as part of the Company's development stage activities.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue on co-development agreements using the percentage completion method. Under this method, the completion percentage is determined by dividing costs incurred to date by total estimated project costs. Since these projects will require technological development to complete, which by its nature is difficult to predict, the actual cost required to complete contracted work may vary from estimates. Estimated project costs are revised regularly which can alter the reported level of project profitability. Any estimated project losses are recognized in the current reporting period. Customer billings are recorded when cash receipt is probable and in accordance with the underlying co-development contract. If billings exceed recognized revenue, the difference is recorded as a current liability, while any recognized revenues exceeding billings are recorded as a current asset. Recognized revenues are subject to revisions as the contract progresses to completion and actual revenue and cost become certain. Revisions in revenue estimates are reflected in the period in which the facts that give rise to the revision become known.

7

Cost of Revenue

Cost of co-development revenue includes both direct and allocated indirect costs of completing the scope of work of co-development agreements. Direct costs include labor, materials and other costs incurred directly in fulfilling co-development agreements. Indirect costs include labor, rent, depreciation and other costs associated with operating the Company. Due to the nature of the work involved, the cost of co-development projects may fluctuate substantially from period to period.

Cash and Cash Equivalents

Highly liquid investments purchased with an original maturity of three months or less are considered cash equivalents. Cash is maintained with a commercial bank where accounts are generally guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company’s deposits may at times exceed this limit.

Fixed Assets

Fixed assets are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated over the life of the lease or their useful life, whichever is shorter. All other fixed assets are depreciated over thirty months to four years. Maintenance and repairs are expensed as incurred.

Patents and Trademarks

Patents and trademarks are recorded at cost. Amortization is computed using the straight-line method over the estimated useful lives of the assets once they are awarded, which has not yet occurred.

Impairment of Long-Lived Assets

The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. During the nine months ended September 30, 2013, the Company recorded an impairment loss of $4,000 from abandonment of a capitalized patent. As of December 31, 2012, the Company determined that there was no impairment.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company's financial instruments primarily consist of cash and cash equivalents, accounts payable and accrued expenses. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is primarily attributed to the short maturities of these instruments. The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value.

8

Research and Development

The cost of research and development is expensed as incurred. Research and development costs consist of salaries, benefits, share based compensation, consulting fees, rent, utilities, depreciation, and consumables.

Deferred Rent

Operating lease agreements which contain provisions for future rent increases or periods in which rent payments are reduced or abated are recorded in monthly rent expense in the amount of the total payments over the lease term divided by the number of months of the lease term. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent which is reflected on the accompanying balance sheet.

Income Taxes

The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.

Stock-Based Compensation

The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the financial statements based on the estimated fair value of the awards on the grant date. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

Stock Issuance Costs

Stock issuance costs are recorded as a reduction of the related proceeds through a charge to stockholders’ equity.

Common Stock

The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied.

Net Loss per Common Share

Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included because their effect would be anti-dilutive. Potentially dilutive shares outstanding amounted to 1,107,324 and 920,743 at September 30, 2013 and 2012, respectively.

9

Recently Issued Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective standards, if adopted, will have a material effect on the financial statements.

Emerging Growth Company

The Company is an emerging growth company as defined under the Jumpstart Our Business Startups Act of 2012 (JOBS Act).  An emerging growth company may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company will remain an emerging growth company until December 31, 2017, although it will lose that status sooner if its revenues exceed $1 billion, if it issues more than $1 billion in non-convertible debt in a three year period, or if the market value of its common stock that is held by non-affiliates exceeds $700 million as of any June 30. At June 30, 2013, the market value of its common stock that is held by non-affiliates totaled $60 million.

Note 3 – Fixed Assets

Fixed assets are summarized as follows:

	September 30,		December 31,
	2013		2012
Machinery and equipment	$	596,000	$	444,000
Office furniture and equipment		91,000		71,000
Leasehold improvements		30,000		29,000
Accumulated depreciation		(311,000)		(157,000)
		406,000		387,000
Construction in progress		10,000		13,000
	$	416,000	$	400,000

Note 4 – Stockholders’ Equity

Common Stock and Preferred Stock

The Company is authorized to issue 62,500,000 shares of common stock and 2,000,000 shares of preferred stock. Preferences, limitations, voting powers and relative rights of any preferred stock to be issued may be determined by the Company’s Board of Directors. The Company has not issued any shares of preferred stock.

In April and May 2012, the Company completed an initial public offering (IPO) whereby 3,450,000 shares of common stock were issued at $4.00 per share, which included the exercise of the overallotment allowance by the underwriter, MDB Capital Group LLC (MDB). Gross proceeds from the IPO totaled $13.8 million and net cash proceeds approximated $11.2 million. Expenses of the offering approximated $2.7 million, including underwriter fees of $1.2 million paid to MDB along with a warrant to purchase 345,000 shares of ClearSign’s common stock at $5.00 per share exercisable from April 2013 to April 2017 and valued at $128,000, qualified independent underwriter fees of $110,000, underwriter legal fees of $125,000, underwriter expenses of $35,000, and issuer legal fees of $822,000, which was paid in part through the issuance of 110,000 shares of the Company’s common stock to its legal counsel at a price of $4.00 per share.   

Equity Incentive Plan

The Company has an Equity Incentive Plan (the Plan) which provides for the granting of options to purchase shares of common stock, stock awards to purchase shares at no less than 85% of the value of the shares, and stock bonuses to officers, employees, board members, consultants, and advisors. The Compensation Committee of the Board of Directors is authorized to administer the Plan and establish the grant terms, including the grant price, vesting period and exercise date. As of September 30, 2013, the number of shares reserved for issuance under the Plan totaled 989,559 shares. The Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 10% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine. 

10

In January 2013, the Company granted 203,990 stock options under the Plan to certain employees. The stock options have an exercise price of $4.88 per share, the grant date fair value, a contractual life of 10 years, and vest over four years. The fair value of stock options granted in January 2013 estimated on the date of grant using the Black-Scholes option valuation model was $302,000. The recognized compensation expense associated with these grants for the three and nine months ended September 30, 2013 was $19,000 and $57,000, respectively. The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options:

Expected life	6.25 years
Weighted average volatility	33%
Forfeiture rate	13%
Weighted average risk-free interest rate	1.29%
Expected dividend rate	-

In January 2013, the Company granted 30,000 shares of common stock from the Plan to its three independent directors in accordance with agreements for board service in 2013. The fair value of the stock at the time of grant was $5.00 per share for a total value of $150,000 which the Company will recognize in general and administrative expense on a quarterly basis in 2013, including $37,000 and $112,000 for the three and nine months ended September 30, 2013, respectively.

Outstanding stock option grants at September 30, 2013 and December 31, 2012 totaled 563,365 and 359,375 with 305,636 and 242,188 being vested and exercisable at September 30, 2013 and December 31, 2012, respectively. Stock grants made to date through September 30, 2013 and December 31, 2012 totaled 175,799 shares and 145,799 shares, respectively. Of these amounts, 48,000 and 60,000 at September 30, 2013 and December 31, 2012, respectively, are subject to declining repurchase rights by the Company at $0.0001 per share through September 30, 2016. The recognized compensation expense associated with these grants for the three and nine months ended September 30, 2013 and 2012 and for the period from inception (January 23, 2008) to September 30, 2013 totaled $35,000, $110,000, $20,000, $115,000, and $432,000, respectively. At September 30, 2013, the number of shares reserved under the Plan but unissued totaled 250,395. At September 30, 2013, there was $393,000 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 2.5 years.

Consultant Stock Plan

On May 2, 2013, the shareholders approved the 2013 Consultant Stock Plan (the Consultant Plan) which provides for the granting of shares of common stock to consultants who provide services related to capital raising, investor relations, and making a market in or promoting the Company’s securities. The Company’s officers, employees, and board members are not entitled to receive grants from the Consultant Plan. The Compensation Committee of the Board of Directors is authorized to administer the Consultant Plan and establish the grant terms. The number of shares reserved for issuance under the Consultant Plan on the date of adoption of May 2, 2013 and September 30, 2013 totaled 75,000 and 75,113 shares, respectively. The Consultant Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 1% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine.  The Company granted 11,250 shares from the Consultant Plan to a consultant for 2013 services. The fair value of the stock at the time of grant was $9.12 per share for a total value of $102,000 which the Company will recognize in general and administrative expense on a quarterly basis over the remainder of 2013. The Consultant Plan expense for the three and nine months ended September 30, 2013 was $34,000 and $68,000, respectively.

11

Warrants

The Company has the following warrants outstanding at September 30, 2013:

		Total Outstanding Warrants
Exercise Price		Warrants	Weighted Average Exercise Price		Life (in years)
$	1.80	80,000	$	1.80	7.39
$	2.20	118,959	$	2.20	2.61
$	5.00	345,000	$	5.00	3.57
		543,959	$	3.92

In August 2013, a warrant to purchase 17,409 shares of common stock at $2.20 per share was exercised whereby the Company received $39,000 in proceeds.

Note 5 – Related Party Transactions

For the three and nine months ended September 30, 2013 and 2012 and for the period from inception (January 23, 2008) to September 30, 2013, the Company incurred consulting fees of $30,000, $90,000, $30,000, $90,000 and $389,000, respectively, to the Alternative Energy Resource Alliance, a non-profit organization whose executive director is David Goodson. In exchange, Mr. Goodson provides services as the Company’s Chief Science Officer. Mr. Goodson is a director and co-founder of the Company and, through an irrevocable trust, a significant beneficial owner of the Company's common stock.

Note 6 – Commitments and Contingencies

The Company has a triple net lease for office and laboratory space for the period November 2011 to February 2017. Under the terms of the lease, the Company paid no rent for the period November 2011 to February 2012. Rent payments commenced in March 2012 and rent escalates annually by 3%. The Company records monthly rent expense equal to the total of the payments over the lease term divided by the number of months of the lease term. Therefore, rent expense of $18,000 was accrued for the nine months ended September 30, 2012 and for the nine months ended September 30, 2013 the deferred rent was reduced by $2,000. Under the terms of the lease, the Company also pays triple net operating costs which currently approximate $2,000 per month. Minimum future payments under the lease at September 30, 2013 are as follows:

2013	$	27,000
2014		111,000
2015		115,000
2016		118,000
2017		20,000
	$	391,000

For the three and nine months ended September 30 2013 and 2012 and for the period from inception (January 23, 2008) to September 30, 2013, rent expense amounted to $34,000, $101,000, $34,000, $103,000 and $374,000, respectively.

Effective January 1, 2012, the Company entered into an Employment Agreement (the Agreement) with Richard Rutkowski, its Chief Executive Officer. Unless earlier terminated, the Agreement will continue for a term of three years. Compensation includes an annual salary of $355,000 with annual cost-of-living adjustments, annual cash and equity bonuses based on performance standards established by the Compensation Committee of the Board of Directors, medical and dental benefits for Mr. Rutkowski and his family, disability insurance, and term life insurance for the benefit of his dependents. Mr. Rutkowski’s employment may be terminated by the Company without cause under certain circumstances, as defined in the Agreement. If Mr. Rutkowski’s employment is terminated without cause, a severance payment would be due in the amount of compensation that would have been due had his employment not been terminated or one year of the current annual compensation, whichever is greater.

12

The Company has agreements with its three independent directors to compensate them annually after the Company’s common stock commenced trading publicly. The obligation totals $300,000 per year of which $150,000 is to be paid with the Company’s common stock at fair value.

The Company’s former legal advisors, Perkins Coie LLP, previously advised the Company in March 2012 that they believe TWB Investment Partnership II, L.P., a party related to Perkins Coie LLP, has the right to acquire 25,250 shares of the Company’s common stock at $0.02 per share pursuant to an engagement letter dated December 4, 2007. The claim was denied since, among other defenses, management believes it entered into a full settlement of all amounts owed to Perkins Coie LLP in November 2011. There has been no further communication with Perkins Coie LLP regarding the matter since March 2012.

13

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

CONTAINED IN THIS REPORT

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “may,” or other similar expressions in this report. In particular, these include statements relating to future actions, prospective products, applications, customers, technologies, future performance or results of anticipated products, expenses, and financial results. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

⋅	our limited cash and our history of losses;
⋅	our ability to achieve profitability;
⋅	our limited operating history;
⋅	emerging competition and rapidly advancing technology in our industry that may outpace our technology;
⋅	customer demand for the products and services we develop;
⋅	the impact of competitive or alternative products, technologies and pricing;
⋅	our ability to manufacture any products we develop;
⋅	general economic conditions and events and the impact they may have on us and our potential customers;
⋅	our ability to obtain adequate financing in the future;
⋅	our ability to continue as a going concern;
⋅	our success at managing the risks involved in the foregoing items; and
⋅	other factors discussed in this report.

The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report. You should not place undue reliance on these forward-looking statements.

14

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q as well as our audited financial statements and related notes included in our annual report on Form 10-K. In addition to historical information, this discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements.

OVERVIEW

We are a development stage company located in Seattle, Washington. We were formed to design, develop and market technologies that improve both the energy efficiency and emission control characteristics of combustion systems. The Company’s primary technologies include its Electrodynamic Combustion Control™ or ECC™ technology, which introduces a computer-controlled electric field into the combustion region which may better control gas-phase chemical reactions and improve system performance and cost-effectiveness, and its Duplex™ technology, which achieves very low emissions without the need of external flue gas recirculation, selective catalytic reduction, or higher excess air operation. To date, our operations have been funded primarily through sales of our common stock. We have earned no significant revenue since inception on January 23, 2008.

Plan of Operation

We are pursuing development of our technology to enable future sales. These activities entail laboratory research, where we have successfully demonstrated our proprietary technology operating in our research facility with thermal output of 1,000,000 BTUs per hour, and business development and marketing activities with established manufacturers and other entities that use boilers, solid fuel burners, refinery heaters, and other combustion systems. We intend to enter into collaborative arrangements which would enable us to work closely with established companies in specific industries to apply developed solutions in laboratory and field settings. In April and July 2013, we announced our intention to enter into development agreements in phased projects  with companies engaged in solid fuel combustion to develop solutions based on our ECC technology. Based upon our letter of intent and customer instruction, we commenced the first phase of a project prior to the execution of a definitive agreement and have received $50,000 of compensation in the quarter ended September 30, 2013. However, there is no assurance that additional revenues will be realized, terms will be reached, or a final agreement executed.

In April and May 2012, we completed an initial public offering (IPO) of our common stock whereby we sold 3,450,000 shares of common stock at $4.00 per share, which included the exercise of the underwriter’s overallotment option, resulting in gross proceeds of $13.8 million and, after reflecting certain costs paid with common stock, net proceeds of $11.6 million. The net proceeds have been used as follows through September 30, 2013: approximately $3,000,000 for the purchase of short-term certificates of deposit, $958,000 increased cash and money market funds, $5,740,000 for operations, $482,000 for capital expenditures primarily related to research and development machinery and equipment, $1,092,000 for patents, $238,000 for the payment of accrued compensation, and $129,000 for the repayment of short term indebtedness. We expect the net proceeds from the IPO to be sufficient to fund our activities at least through April 2014. Our anticipated costs include employee salaries and benefits, compensation paid to consultants, capital costs for research and other equipment, costs associated with development activities including travel and administration, legal expenses, sales and marketing costs, general and administrative expenses, and other costs associated with an early stage, publicly-traded technology company. We currently have 13 full-time employees and anticipate continuing to increase the number of employees as required in the areas of research and development, sales and marketing, and general and administrative functions required to support our efforts. We expect to incur consulting expenses related to technology development commensurate with our current levels and we expect to incur increasing expenses to protect our intellectual property.  We expect capital expenditures to be between $0.5 and $1.0 million annually, but these are highly dependent on the nature of the operations where co-development activities are ongoing.

 The amount that we spend for any specific purpose may vary significantly, and could depend on a number of factors including, but not limited to, the pace of progress of our commercialization and development efforts, actual needs with respect to product testing, development and research, market conditions, and changes in or revisions to our marketing strategies.

15

Research and development of new technologies is, by its nature, unpredictable.  Although we will undertake development efforts with commercially reasonable diligence, there can be no assurance that the net proceeds from the IPO will be sufficient to enable us to develop our technology to the extent needed to create future sales to sustain operations.  If the net proceeds from the IPO are insufficient for this purpose, we will consider other options to continue our path to commercialization, including, but not limited to: additional financing through follow-on stock offerings, debt financing, co-development agreements, sale or licensing of developed intellectual or other property, or other alternatives.

If management is unable to implement its proposed business plan or employ alternative financing strategies, it does not presently have any alternative proposals. In that case, we may be required to scale back our development plans by reducing expenditures for employees, consultants, business development and marketing efforts, and other envisioned expenditures or curtail or even suspend our operations.   

We cannot assure that our technology will be accepted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. Furthermore, we have no committed source of financing and we cannot assure that we will be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

CRITICAL ACCOUNTING POLICIES

The following discussion and analysis of financial condition and results of operations is based upon our financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. See Note 2 to our unaudited condensed financial statements for a more complete description of our significant accounting policies.

Development Stage Enterprise. The Company is a development stage company as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915, Development Stage Entities. The Company is devoting substantially all of its present efforts to design and develop new technologies in combustion systems and its planned principal operations have not yet commenced. The Company has not generated any significant revenues from operations and has no assurance of any future revenues. All losses accumulated since January 23, 2008 have been considered as part of the Company's development stage activities.

Revenue Recognition. The Company recognizes revenue on co-development agreements using the percentage completion method. Under this method, the completion percentage is determined by dividing costs incurred to date by total estimated project costs. Since our projects will require technological development to complete, which by its nature is difficult to predict, the actual cost required to complete contracted work may vary from estimates. Estimated project costs are revised regularly which can alter the reported level of project profitability. Any estimated project losses are recognized in the current reporting period. Customer billings are recorded when cash receipt is probable and in accordance with the underlying co-development contract. If billings exceed recognized revenue, the difference is recorded as a current liability, while any recognized revenues exceeding billings are recorded as a current asset. Recognized revenues are subject to revisions as the contract progresses to completion and actual revenue and cost become certain. Revisions in revenue estimates are reflected in the period in which the facts that give rise to the revision become known.

Cost of Revenue. Cost of co-development revenue includes both direct and allocated indirect costs of completing the scope of work of co-development agreements. Direct costs include labor, materials and other costs incurred directly in fulfilling co-development agreements. Indirect costs include labor, rent, depreciation and other costs associated with operating the Company. Due to the nature of the work involved, the cost of co-development projects may fluctuate substantially from period to period.

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Research and Development. The cost of research and development is expensed as incurred. Research and development costs consist of salaries, benefits, share based compensation, consulting fees, rent, utilities, depreciation, and consumables.

Stock-Based Compensation. The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the financial statements based on the estimated fair value of the awards on the grant date. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

Fair Value of Financial Instruments. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company's financial instruments primarily consist of cash and cash equivalents, accounts payable and accrued expenses. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is primarily attributed to the short maturities of these instruments. The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value.

RESULTS OF OPERATIONS

Comparison of the Three and Nine Months Ending September 30, 2013 and 2012 

Revenue, Cost of Revenue, and Gross Profit. The Company reported its first revenue in the quarter ended September 30, 2013. The $50,000 of revenue resulted from a solid fuel burner co-development project and resulted in a gross profit of $16,000.

Operating Expenses. Operating expenses, consisting of research and development (R&D) and general and administrative (G&A) expenses, increased by approximately $239,000 to $1,381,000 for the three months ended September 30, 2013 (Q3 2013) compared to the same period in 2012 (Q3 2012). The Company increased its R&D expenses by $139,000 to $470,000 for Q3 2013. R&D expenses rose primarily due to increased compensation of $92,000 related to increased personnel levels, increased consumables and testing materials cost of $59,000, and increased depreciation expense of $21,000, offset by a decrease in consulting expense of $41,000. G&A expenses increased by $100,000 to $911,000 in Q3 2013 resulting primarily from $51,000 from increased personnel levels and $73,000 of increased marketing costs, offset by a decrease in intellectual property consulting expense of $27,000.

Operating expenses increased by $1,119,000 to $4,151,000 for the nine months ended September 30, 2013 compared to the same period in 2012. The Company increased its R&D expenses by $579,000 to $1,466,000 for the nine months ended September 30, 2013. R&D expenses rose due primarily to increased compensation of $363,000 related to increased personnel levels, increased consumables and testing materials cost of $182,000, and increased depreciation expense of $87,000, offset by a decrease in consulting expense of $111,000. G&A expenses increased by $540,000 to $2,685,000 for the nine months ended September 30, 2013 resulting primarily from the expense of operating as a public company which increased by $320,000 since the Company completed its IPO in April 2012. Further, G&A expenses increased $74,000 from increased personnel levels and $137,000 from increased marketing costs.

Loss from Operations. Due to the increase in operating expenses, our loss from operations increased during Q3 2013 by $223,000 to $1,365,000 and increased for the nine months ended September 30, 2013 by $1,103,000 to $4,135,000.

17

Net Loss. Primarily as a result of the increase in operating expenses, our net loss for Q3 2013 was $1,362,000 as compared to a net loss of $1,132,000 for Q3 2012, resulting in an increased net loss of $230,000, and our net loss for the nine months ended September 30, 2013 was $4,125,000 as compared to a net loss of $3,017,000 for Q3 2012, resulting in an increased net loss of $1,108,000. 

Liquidity and Capital Resources

At September 30, 2013, our cash and cash equivalent balance totaled $3,989,000 compared to $8,027,000 at December 31, 2012. This cash reduction reflected our continued costs in research and development of our technology to enable future sales. We expect this sum to be sufficient to fund our activities at least through April 2014. Although we are pursuing co-development agreements, there is no assurance that they will be adequate to fund our operations and to commercialize our technology. To the extent co-development agreement funding is insufficient to raise adequate funds, we may undertake offerings of our securities, debt financing, selling or licensing our developed intellectual or other property, or other alternatives. In that regard, the Company filed a Form S-3 shelf registration statement with the Securities and Exchange Commission (SEC) on May 6, 2013 that was declared effective on May 30, 2013. The registration statement allows the Company to offer up to an aggregate of thirty million dollars of common stock, preferred stock or warrants from time to time as market conditions permit. This equity funding would be used to enable further investment in our technology and product development and to maintain a strong balance sheet as we pursue strategic joint development and marketing relationships and prepare to pursue significant opportunities in various segments of the market. This information does not constitute an offer of any securities for sale.

At September 30, 2013, our current assets were in excess of current liabilities resulting in working capital of $3,303,000 compared to $7,643,000 at December 31, 2012.

Operating activities for the nine months ended September 30, 2013 resulted in cash outflows of $3,305,000 which were due primarily to the loss for the period of $4,125,000, offset by net changes in working capital, exclusive of cash, of $373,000 related primarily to an increase in accrued compensation, services paid with common stock and stock options of $291,000, and other non-cash expenses of $156,000. Operating cash outflows for the nine months ended September 30, 2012 of $1,914,000 were primarily due to the loss for the period of $3,017,000, offset by net changes in working capital, exclusive of cash, of $790,000 related primarily to capitalized costs associated with our IPO and an increase in accrued compensation, $235,000 of services paid with common stock and stock options, and other non-cash expenses of $78,000.

Investing activities for the nine months ended September 30, 2013 resulted in cash outflows of $772,000 for acquisition of fixed assets and development of patents and other intangible assets. Investing activities for the nine months ended September 30, 2012 resulted in cash outflows of approximately $528,000 for acquisition of fixed assets and development of patents and other intangible assets.

Financing activities for the nine months ended September 30, 2013 resulted in $39,000 of cash inflows from the exercise of a warrant to purchase 17,409 common shares of stock at $2.20 per share. Financing activities for the nine months ended September 30, 2012 resulted in $11,152,000 of cash inflows from the IPO of approximately $11,200,000 offset by extinguishment of debt totaling $48,000 from the IPO proceeds.

Off-Balance Sheet Transactions

We do not have any off-balance sheet transactions.

Trends, Events and Uncertainties

Our former legal advisors, Perkins Coie LLP, previously advised us in March 2012 that they believe TWB Investment Partnership II, L.P., a party related to Perkins Coie LLP, has the right to acquire 25,250 shares of our common stock at $0.02 per share pursuant to an engagement letter dated December 4, 2007. We denied the claim since, among other defenses, we believe we entered into a full settlement of all amounts owed to Perkins Coie LLP in November 2011. There has been no further communication with Perkins Coie LLP regarding the matter since March 2012.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company we are not required to provide this information.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Act”) is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has concluded that, as of September 30, 2013, our disclosure controls and procedures are effective.

There have been no material changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 1A. RISK FACTORS

We incorporate herein by reference the risk factors included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012 which we filed with the Securities and Exchange Commission on February 22, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In November 2011 we filed a registration statement, number 333-177946, with the Securities and Exchange Commission to register an offering of 3 million shares of our common stock, with an option granted to the underwriter to sell an additional 450,000 shares of our common stock (the “overallotment”).  The registration statement was declared effective on April 24, 2012. The offering closed on April 30, 2012 and the offering of the overallotment closed on May 15, 2012. The common stock was offered at a price of $4.00 per share. All of the shares of common stock, including the overallotment, were sold. We raised a total of $13,800,000 in gross proceeds in the offering and received approximately $11,200,000 after expenses. Through September 30, 2013, the net proceeds from the offering were used as follows: approximately $3,000,000 for the purchase of short-term certificates of deposit, $958,000 increased cash and money market funds, $5,740,000 for operations, $482,000 for capital expenditures primarily related to research and development machinery and equipment, $1,092,000 for patents, $238,000 for the payment of accrued compensation, and $129,000 for the repayment of short term indebtedness. None of the proceeds were used for construction of plant, building and facilities, the purchase of real estate, or the acquisition of any business.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

Exhibit Number	Document
3.1	Articles of Incorporation of ClearSign Combustion Corporation, amended on February 2, 2011 (1)
3.1.1	Articles of Amendment to Articles of Incorporation of ClearSign Combustion Corporation filed on December 22, 2011 (1)
3.2	Bylaws (1)
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer*
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer*
32.1	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer*
101	The following financial statements from the registrant’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2013, formatted in XBRL: (i) Condensed Balance Sheets (Unaudited); (ii) Condensed Statements of Operations (Unaudited); (iii) Condensed Statement of Stockholders’ Equity (Unaudited); (iv) Condensed Statements of Cash Flows (Unaudited); (v) Notes to Unaudited Condensed Financial Statements.*

*Filed herewith

(1) Incorporated by reference from the registrant’s registration statement on Form S-1, as amended, file number 333-177946, originally filed with the Securities and Exchange Commission on November 14, 2011.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CLEARSIGN COMBUSTION CORPORATION
	(Registrant)
Date: November 11, 2013	By:	/s/ Richard F. Rutkowski
		Richard F. Rutkowski
		Chief Executive Officer
	By:	/s/ James N. Harmon
		James N. Harmon
		Chief Financial Officer

21

 

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Richard F. Rutkowski, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of ClearSign Combustion Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 11, 2013

/s/ Richard F. Rutkowski

Richard F. Rutkowski

Chief Executive Officer (Principal Executive

Officer)

 

EX-31.2

Exhibit 31.2

CERTIFICATION

I, James N. Harmon, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of ClearSign Combustion Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 11, 2013

/s/ James N. Harmon

James N. Harmon

Chief Financial Officer (Principal Financial and Accounting

Officer)

 

EX-32.1

Exhibit 32.1

CERTIFICATION

In connection with the periodic report of ClearSign Combustion Corporation (the “Company”) on Form 10-Q for the nine months ending September 30, 2013 as filed with the Securities and Exchange Commission (the “Report”), we, Richard F. Rutkowski, Chief Executive Officer (Principal Executive Officer) and James N. Harmon, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of our knowledge:

(1)          The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: November 11, 2013

/s/ Richard F. Rutkowski

Richard F. Rutkowski

Chief Executive Officer (Principal Executive Officer)

/s/ James N. Harmon

James N. Harmon

Chief Financial Officer (Principal Financial and Accounting

Officer)

 

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options:

Expected life	6.25 years
Weighted average volatility	33%
Forfeiture rate	13%
Weighted average risk-free interest rate	1.29%
Expected dividend rate	-

Schedule of Share-based Compensation, Activity [Table Text Block]

The Company has the following warrants outstanding at September 30, 2013:

		Total Outstanding Warrants
Exercise Price		Warrants	Weighted Average Exercise Price		Life (in years)
$	1.80	80,000	$	1.80	7.39
$	2.20	118,959	$	2.20	2.61
$	5.00	345,000	$	5.00	3.57
		543,959	$	3.92

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Condensed Statements of Operations (USD $)	3 Months Ended		9 Months Ended		68 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013
Co-development revenue	$ 50,000	$ 0	$ 50,000	$ 0	$ 50,000
Cost of co-development revenue	34,000	0	34,000	0	34,000
Gross profit	16,000	0	16,000	0	16,000
Operating expenses:
Research and development	470,000	331,000	1,466,000	887,000	3,174,000
General and administrative	911,000	811,000	2,685,000	2,145,000	9,681,000
Total operating expenses	1,381,000	1,142,000	4,151,000	3,032,000	12,855,000
Loss from operations	(1,365,000)	(1,142,000)	(4,135,000)	(3,032,000)	(12,839,000)
Other income (expense):
Interest income	3,000	10,000	10,000	16,000	36,000
Interest expense	0	0	0	(1,000)	(1,000)
Total other income (expense)	3,000	10,000	10,000	15,000	35,000
Net Loss	$ (1,362,000)	$ (1,132,000)	$ (4,125,000)	$ (3,017,000)	$ (12,804,000)
Net Loss per share - basic and fully diluted (in dollars per share)	$ (0.15)	$ (0.13)	$ (0.47)	$ (0.42)	$ (2.89)
Weighted average number of shares outstanding - basic and fully diluted (in shares)	8,801,402	8,752,015	8,790,801	7,209,133	4,432,985

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed balance sheet at December 31, 2012 has been derived from the Company’s audited financial statements.

In the opinion of management, these financial statements reflect all normal recurring and other adjustments necessary for a fair presentation. These financial statements should be read in conjunction with the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2012. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods.

Development Stage Enterprise

The Company is a development stage company as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915, Development Stage Entities. The Company is devoting substantially all of its present efforts to design and develop new technologies in combustion systems and its planned principal operations have not yet commenced. The Company has not generated any significant revenues from operations and has no assurance of any future revenues. All losses accumulated since January 23, 2008 have been considered as part of the Company's development stage activities.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue on co-development agreements using the percentage completion method. Under this method, the completion percentage is determined by dividing costs incurred to date by total estimated project costs. Since these projects will require technological development to complete, which by its nature is difficult to predict, the actual cost required to complete contracted work may vary from estimates. Estimated project costs are revised regularly which can alter the reported level of project profitability. Any estimated project losses are recognized in the current reporting period. Customer billings are recorded when cash receipt is probable and in accordance with the underlying co-development contract. If billings exceed recognized revenue, the difference is recorded as a current liability, while any recognized revenues exceeding billings are recorded as a current asset. Recognized revenues are subject to revisions as the contract progresses to completion and actual revenue and cost become certain. Revisions in revenue estimates are reflected in the period in which the facts that give rise to the revision become known.

Cost of Revenue

Cost of co-development revenue includes both direct and allocated indirect costs of completing the scope of work of co-development agreements. Direct costs include labor, materials and other costs incurred directly in fulfilling co-development agreements. Indirect costs include labor, rent, depreciation and other costs associated with operating the Company. Due to the nature of the work involved, the cost of co-development projects may fluctuate substantially from period to period.

Cash and Cash Equivalents

Highly liquid investments purchased with an original maturity of three months or less are considered cash equivalents. Cash is maintained with a commercial bank where accounts are generally guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company’s deposits may at times exceed this limit.

Fixed Assets

Fixed assets are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated over the life of the lease or their useful life, whichever is shorter. All other fixed assets are depreciated over thirty months to four years. Maintenance and repairs are expensed as incurred.

Patents and Trademarks

Patents and trademarks are recorded at cost. Amortization is computed using the straight-line method over the estimated useful lives of the assets once they are awarded, which has not yet occurred.

Impairment of Long-Lived Assets

The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. During the nine months ended September 30, 2013, the Company recorded an impairment loss of $4,000 from abandonment of a capitalized patent. As of December 31, 2012, the Company determined that there was no impairment.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company's financial instruments primarily consist of cash and cash equivalents, accounts payable and accrued expenses. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is primarily attributed to the short maturities of these instruments. The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value.

Research and Development

The cost of research and development is expensed as incurred.  Research and development costs consist of salaries, benefits, share based compensation, consulting fees, rent, utilities, depreciation, and consumables.

Deferred Rent

Operating lease agreements which contain provisions for future rent increases or periods in which rent payments are reduced or abated are recorded in monthly rent expense in the amount of the total payments over the lease term divided by the number of months of the lease term. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent which is reflected on the accompanying balance sheet.

Income Taxes

The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.

Stock-Based Compensation

The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the financial statements based on the estimated fair value of the awards on the grant date. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

Stock Issuance Costs

Stock issuance costs are recorded as a reduction of the related proceeds through a charge to stockholders’ equity.

Common Stock

The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied.

Net Loss per Common Share

Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included because their effect would be anti-dilutive. Potentially dilutive shares outstanding amounted to 1,107,324 and 920,743 at September 30, 2013 and 2012, respectively.

Recently Issued Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective standards, if adopted, will have a material effect on the financial statements.

Emerging Growth Company

The Company is an emerging growth company as defined under the Jumpstart Our Business Startups Act of 2012 (JOBS Act).  An emerging growth company may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.  The Company will remain an emerging growth company until December 31, 2017, although it will lose that status sooner if its revenues exceed $1 billion, if it issues more than $1 billion in non-convertible debt in a three year period, or if the market value of its common stock that is held by non-affiliates exceeds $700 million as of any June 30. At June 30, 2013, the market value of its common stock that is held by non-affiliates totaled $60 million.

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Related Party Transactions (Details Textual) (USD $)	3 Months Ended		9 Months Ended		68 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013
Consulting Fee	$ 30,000	$ 90,000	$ 30,000	$ 90,000	$ 389,000

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Minimum future payments under the lease at September 30, 2013 are as follows:

2013	$	27,000
2014		111,000
2015		115,000
2016		118,000
2017		20,000
	$	391,000

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Commitments and Contingencies (Details Textual) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended	68 Months Ended
	Dec. 31, 2007	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Sep. 30, 2013
Rent Expense Escalation Percentage				3.00%
Operating Leases, Rent Expense, Net					$ 18,000
Operating Leases, Rent Expense		34,000	101,000	34,000	103,000		374,000
Contractual Obligation		300,000		300,000			300,000
Obligation To Pay In Common Stock At Fair Value		150,000		150,000			150,000
Employee Benefits and Share-based Compensation						355,000
Loss Contingency Right To Acquire Common Stock Denied	25,250
Loss Contingency Right To Acquire Common Stock Denied, Exercise Price	$ 0.02
Triple Net Operating Cost				2,000
Reduction In Deferred Rent				$ 2,000

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Commitments and Contingencies (Details) (USD $)	Sep. 30, 2013
2013	$ 27,000
2014	111,000
2015	115,000
2016	118,000
2017	20,000
Operating Leases, Future Minimum Payments Due	$ 391,000

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Condensed Statement of Stockholders' Equity [Parenthetical] (USD $)	9 Months Ended	59 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Common Stock [Member]
Par value of common stock issued for services one		$ 0.02
Par value of common stock issued two		$ 1.80
Par value of common stock issued three		$ 2.20
Par value of shares issued in initial public offering		$ 4.00
Par value of common stock issued for services two		$ 1.80
Par value of common stock issued for services three		$ 2.20
Par value of common stock issued for services four		$ 4.00
Par value of common stock issued for services five		$ 4.94
Par value of shares issued to retire payable		$ 4.00
Par value of common stock issued for services six	$ 5.00
Par value of common stock issued for services Seven	$ 9.12
Par value of common stock issued Exercise Of Warrant	$ 2.20
Common Class B [Member]
Par value of common stock issued one		$ 0.02

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Supplemental disclosure of non-cash investing and financing activities (USD $)	9 Months Ended	68 Months Ended			9 Months Ended		68 Months Ended	9 Months Ended		68 Months Ended	9 Months Ended	68 Months Ended
	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2013 Issue One [Member]	Sep. 30, 2013 Issue Two [Member]	Sep. 30, 2013 Consultant [Member]	Sep. 30, 2012 Consultant [Member]	Sep. 30, 2013 Consultant [Member]	Sep. 30, 2013 Directors [Member]	Sep. 30, 2012 Directors [Member]	Sep. 30, 2013 MDB Capital Group LLC [Member]	Sep. 30, 2012 Common Stock [Member]	Sep. 30, 2013 Common Stock [Member]	Sep. 30, 2013 Common Stock Offering [Member]	Sep. 30, 2013 Common Class B [Member]
Number Of Stock To Be Issued Upon Conversion Of Warrants (in shares)		136,368
Warrants Authorized For Issuance To Acquire Common Stock Shares Number (in shares)	345,000
Share based payments of warrants	$ 128,000
Debt Conversion, Converted Instrument, Shares Issued (in shares)											110,000	3,555
Common stock issued in partial satisfaction of accounts payable	440,000	8,000
Stock Issued During Period, Shares, Issued for Services (in shares)					11,250	18,000	2,000	30,000	20,799	454,547
Stock Issued During Period, Value, Issued for Services					102,000	72,000	4,000	150,000	103,000	1,000,000
Common stock issued for issuance costs													580,000
Common stock issued, shares (in shares)		68,091
Stock issued		126,000
Common stock shares issued to discharge common stock to be issued (in shares)		49,728
Common stock shares cancelled (in shares)		5,825
Common stock value cancelled		10,000
Common stock shares swapped (in shares)														860,000
Common stock shares held by founders (in shares)														1,075,000
Common Stock Share Issued To Partially Satisfy Compensation (in shares)		52,375
Common stock value issued to partially satisfy compensation		115,000
Accounts payable to vendors		46,000
Fair value of assets acquired		2,000
Interest Bearing Promissory Note		48,000
Warrants Issued During Period Value													64,000
Stock Issued During Period, Shares, Other (in shares)		10,834
Stock Issued During Period, Value, Other		20,000
Common Stock Value Issued To Discharge Common Stock To Be Issued One		99,000
Common Stock Value Issued To Discharge Common Stock To Be Issued Two		90,000
Share Based Compensation Arrangement By Share Based Payment Award Shares Issued (in shares)			50,000	75,000
Stock Granted During Period, Value, Share-based Compensation, Gross		$ 275,000
Initial Public Offering For Under writing Fee													263,637

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Fixed Assets

9 Months Ended

Sep. 30, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 3 – Fixed Assets

Fixed assets are summarized as follows:

	September 30,		December 31,
	2013		2012
Machinery and equipment	$	596,000	$	444,000
Office furniture and equipment		91,000		71,000
Leasehold improvements		30,000		29,000
Accumulated depreciation		(311,000)		(157,000)
		406,000		387,000
Construction in progress		10,000		13,000
	$	416,000	$	400,000

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Organization and Description of Business

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Organization, Consolidation, Basis Of Presentation, Business Description and Accounting Policies [Text Block]

Note 1 – Organization and Description of Business

ClearSign Combustion Corporation (ClearSign or the Company) is a development stage company located in Seattle, Washington and incorporated in the state of Washington on January 23, 2008. The Company was formed to design, develop and market technologies that improve both the energy efficiency and emission control characteristics of combustion systems. The Company’s primary technologies include its  Electrodynamic Combustion Control™ or ECC™ technology, which introduces a computer-controlled electric field into the combustion region which may better control gas-phase chemical reactions and improve system performance and cost-effectiveness, and its Duplex™ technology, which achieves very low emissions without the need of external flue gas recirculation, selective catalytic reduction, or higher excess air operation.

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Condensed Balance Sheets [Parenthetical] (USD $)	Sep. 30, 2013	Dec. 31, 2012
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares issued	8,810,674	8,752,015
Common stock, shares outstanding	8,810,674	8,752,015

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 6 – Commitments and Contingencies

The Company has a triple net lease for office and laboratory space for the period November 2011 to February 2017. Under the terms of the lease, the Company paid no rent for the period November 2011 to February 2012. Rent payments commenced in March 2012 and rent escalates annually by 3%. The Company records monthly rent expense equal to the total of the payments over the lease term divided by the number of months of the lease term. Therefore, rent expense of $18,000 was accrued for the nine months ended September 30, 2012 and for the nine months ended September 30, 2013 the deferred rent was reduced by $2,000. Under the terms of the lease, the Company also pays triple net operating costs which currently approximate $2,000 per month. Minimum future payments under the lease at September 30, 2013 are as follows:

2013	$	27,000
2014		111,000
2015		115,000
2016		118,000
2017		20,000
	$	391,000

For the three and nine months ended September 30 2013 and 2012 and for the period from inception (January 23, 2008) to September 30, 2013, rent expense amounted to $34,000, $101,000, $34,000, $103,000 and $374,000, respectively.

Effective January 1, 2012, the Company entered into an Employment Agreement (the Agreement) with Richard Rutkowski, its Chief Executive Officer. Unless earlier terminated, the Agreement will continue for a term of three years. Compensation includes an annual salary of $355,000 with annual cost-of-living adjustments, annual cash and equity bonuses based on performance standards established by the Compensation Committee of the Board of Directors, medical and dental benefits for Mr. Rutkowski and his family, disability insurance, and term life insurance for the benefit of his dependents. Mr. Rutkowski’s employment may be terminated by the Company without cause under certain circumstances, as defined in the Agreement.  If Mr. Rutkowski’s employment is terminated without cause, a severance payment would be due in the amount of compensation that would have been due had his employment not been terminated or one year of the current annual compensation, whichever is greater.

The Company has agreements with its three independent directors to compensate them annually after the Company’s common stock commenced trading publicly. The obligation totals $300,000 per year of which $150,000 is to be paid with the Company’s common stock at fair value.

The Company’s former legal advisors, Perkins Coie LLP, previously advised the Company in March 2012 that they believe TWB Investment Partnership II, L.P., a party related to Perkins Coie LLP, has the right to acquire 25,250 shares of the Company’s common stock at $0.02 per share pursuant to an engagement letter dated December 4, 2007. The claim was denied since, among other defenses, management believes it entered into a full settlement of all amounts owed to Perkins Coie LLP in November 2011. There has been no further communication with Perkins Coie LLP regarding the matter since March 2012.

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Condensed Statement of Stockholders' Equity (USD $)	Total	Common Stock [Member]	Common Class B [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit during Development Stage [Member]
Balances at Jan. 22, 2008
Shares issued to founders, at no cost	33,000	0	0	33,000	0
Shares issued to founders, at no cost (in shares)		1,065,000	476,000
Shares issued for services ($0.02 per share)	2,000	0	0	2,000	0
Shares issued for services ($0.02 per share) (in shares)		125,000	0
Shares issued for cash ($0.02 per share)	10,000	0	0	10,000	0
Shares issued for cash ($0.02 per share) (in shares)		0	384,000
Shares issued for cash ($1.80 per share)	841,000	0	0	841,000	0
Shares issued for cash ($1.80 per share) (in shares)		467,310	0
Shares issued for cash ($2.20 per share)	2,999,000	0	0	2,999,000	0
Shares issued for cash ($2.20 per share) (in shares)		1,363,364	0
Issuance costs	(813,000)	0	0	(813,000)	0
Shares issued in initial public offering ($4.00 per share)	13,800,000	1,000	0	13,799,000	0
Shares issued in initial public offering ($4.00 per share) (in shares)		3,450,000	0
Issuance costs of initial public offering	(2,727,000)	0	0	(2,727,000)	0
Share based payments of warrants	240,000	0	0	240,000	0
Shares issued for services ($1.80 per share)	264,000	0	0	264,000	0
Shares issued for services ($1.80 per share) (in shares)		146,644	0
Shares issued for services ($2.20 per share)	1,614,000	0	0	1,614,000	0
Shares issued for services ($2.20 per share) (in shares)		733,523	0
Shares issued for services ($4.00 per share)	72,000	0	0	72,000	0
Shares issued for services ($4.00 per share) (in shares)		18,000	0
Shares issued for services ($4.94 per share)	103,000	0	0	103,000	0
Shares issued for services ($4.94 per share) (in shares)		20,799	0
Shares issued to retire payable ($4.00 per share)	440,000	0	0	440,000	0
Shares issued to retire payable ($4.00 per share) (in shares)		110,000	0
Conversion of shares	0	0	0	0	0
Conversion of shares (in shares)		1,075,000	(860,000)
Share based compensation	437,000	0	0	437,000	0
Share based compensation (in shares)		177,375	0
Net loss	(8,679,000)	0	0	0	(8,679,000)
Balances at Dec. 31, 2012	8,636,000	1,000	0	17,314,000	(8,679,000)
Balances (in shares) at Dec. 31, 2012		8,752,015	0
Shares issued for services ($5.00 per share)	150,000	0	0	150,000	0
Shares issued for services ($5.00 per share) (in shares)		30,000	0
Shares issued for services ($9.12 per share)	102,000	0	0	102,000	0
Shares issued for services ($9.12 per share) (in shares)		11,250	0
Shares issued upon exercise of warrant ($2.20 per share)	39,000	0	0	39,000	0
Shares issued upon exercise of warrant ($2.20 per share) (in shares)		17,409	0
Share based compensation	110,000	0	0	110,000	0
Share based compensation (in shares)		0	0
Net loss	(4,125,000)	0	0	0	(4,125,000)
Balances at Sep. 30, 2013	$ 4,912,000	$ 1,000	$ 0	$ 17,715,000	$ (12,804,000)
Balances (in shares) at Sep. 30, 2013		8,810,674	0

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Condensed Balance Sheets (USD $)	Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 3,989,000	$ 8,027,000
Prepaid expenses	225,000	60,000
Total current assets	4,214,000	8,087,000
Fixed assets, net	416,000	400,000
Patents and other intangible assets	1,216,000	618,000
Other assets	10,000	10,000
Total Assets	5,856,000	9,115,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	205,000	276,000
Accrued compensation and taxes	706,000	168,000
Total current liabilities	911,000	444,000
Deferred rent	33,000	35,000
Total liabilities	944,000	479,000
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $0.0001 par value, zero shares issued and outstanding	0	0
Common stock, $0.0001 par value, 8,810,674 and 8,752,015 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively	1,000	1,000
Additional paid-in capital	17,715,000	17,314,000
Deficit accumulated in the development stage	(12,804,000)	(8,679,000)
Total stockholders' equity	4,912,000	8,636,000
Total Liabilities and Stockholders' Equity	$ 5,856,000	$ 9,115,000

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Stockholders' Equity (Details Textual) (USD $)	2 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended	59 Months Ended	68 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended		9 Months Ended		59 Months Ended	3 Months Ended	9 Months Ended	2 Months Ended
	May 31, 2012	Sep. 30, 2013	Sep. 30, 2012	May 31, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Dec. 31, 2012	Sep. 30, 2013	Sep. 30, 2013 Director [Member]	Jun. 30, 2013 Consultant Plan [Member]	Sep. 30, 2013 Consultant Plan [Member]	May 02, 2013 Consultant Plan [Member]	Sep. 30, 2013 Consultant Plan [Member] General and Administrative Expense [Member]	Sep. 30, 2013 Common Stock [Member]	Dec. 31, 2012 Common Stock [Member]	Sep. 30, 2013 Equity Incentive Plan [Member]	Sep. 30, 2013 Equity Incentive Plan [Member]	May 31, 2012 Qualified Independent Underwriter Fees [Member]	May 31, 2012 Underwriter Legal Fees [Member]	May 31, 2012 Underwriter Expenses [Member]	May 31, 2012 Legal Fees [Member]
Shares issued in initial public offering ($4.00 per share) (in shares)																3,450,000
Par value of shares issued in initial public offering																$ 4.00
Shares issued in initial public offering ($4.00 per share)								$ 13,800,000								$ 1,000
Proceeds from Issuance of Common Stock							11,200,000
Underwriter Fees							1,200,000
Exercise Price Of Warrants							$ 5.00
Warrants Authorized For Issuance To Acquire Common Stock Value				128,000
Stock Issued During Period, Value, Issued for Noncash Considerations	110,000																		110,000	125,000	35,000	822,000
Common Stock, Shares Authorized		62,500,000			62,500,000				62,500,000
Issuance costs of initial public offering							2,700,000
Preferred Stock, Shares Authorized		2,000,000			2,000,000				2,000,000
Share Based Compensation Arrangement By Share Based Payment Award Purchase Price Share Minimum					85.00%
Common Stock, Capital Shares Reserved for Future Issuance		989,559			989,559				989,559
Increase Decrease Of Share Based Compensation Arrangement By Share Based Payment Award Percentage					10.00%
Exercisable - Common Stock		305,636			305,636		242,188	242,188	305,636
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		563,365			563,365		359,375	359,375	563,365
Declining Repurchase Rights Per Share		$ 0.0001			$ 0.0001				$ 0.0001
Share based payments		35,000	20,000		110,000	116,000			432,000		34,000	68,000					19,000	57,000
Shares Reserved Unissued		250,395			250,395				250,395
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized		393,000			393,000				393,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition					2 years 6 months
Stock grants					175,799		145,799
Share Base Compensation Arrangements By Share Based Payments Awards Granted					302,000
Share Based Compensation Arrangement By Share Based Payment Award Options Grants In Period Fair Value					$ 4.88							$ 9.12						$ 5.00
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term					10 years
Granted - Common Stock					203,990
Stock Granted During Period, Value, Share-based Compensation, Gross									275,000					102,000				150,000
Declining Repurchase Rights Value		48,000			48,000		60,000	60,000	48,000
Stock Issued During Period For Non Cash Consideration Price Per Share	$ 4.00
Selling, General and Administrative Expense		37,000			112,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized												75,113	75,000
Stock Issued During Period Shares Issued For Services										30,000					11,250
Stock Option Plan Description												The Consultant Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 1% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine.
Stock Issued During Period, Shares, Exercise Of Warrant															17,409
Stock Issued During Period Par Value Exercise Of Warrant															$ 2.20
Stock Issued During Period, Value, Exercise Of Warrant					$ 39,000										$ 0

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Related Party Transactions

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 5 – Related Party Transactions

For the three and nine months ended September 30, 2013 and 2012 and for the period from inception (January 23, 2008) to September 30, 2013, the Company incurred consulting fees of $30,000, $90,000, $30,000, $90,000 and $389,000, respectively, to the Alternative Energy Resource Alliance, a non-profit organization whose executive director is David Goodson.  In exchange, Mr. Goodson provides services as the Company’s Chief Science Officer.  Mr. Goodson is a director and co-founder of the Company and, through an irrevocable trust, a significant beneficial owner of the Company's common stock.

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Fixed Assets (Tables)

9 Months Ended

Sep. 30, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Fixed assets are summarized as follows:

	September 30,		December 31,
	2013		2012
Machinery and equipment	$	596,000	$	444,000
Office furniture and equipment		91,000		71,000
Leasehold improvements		30,000		29,000
Accumulated depreciation		(311,000)		(157,000)
		406,000		387,000
Construction in progress		10,000		13,000
	$	416,000	$	400,000

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Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 4 – Stockholders’ Equity

Common Stock and Preferred Stock

The Company is authorized to issue 62,500,000 shares of common stock and 2,000,000 shares of preferred stock. Preferences, limitations, voting powers and relative rights of any preferred stock to be issued may be determined by the Company’s Board of Directors. The Company has not issued any shares of preferred stock.

In April and May 2012, the Company completed an initial public offering (IPO) whereby 3,450,000 shares of common stock were issued at $4.00 per share, which included the exercise of the overallotment allowance by the underwriter, MDB Capital Group LLC (MDB). Gross proceeds from the IPO totaled $13.8 million and net cash proceeds approximated $11.2 million. Expenses of the offering approximated $2.7 million, including underwriter fees of $1.2 million paid to MDB along with a warrant to purchase 345,000 shares of ClearSign’s common stock at $5.00 per share exercisable from April 2013 to April 2017 and valued at $128,000, qualified independent underwriter fees of $110,000, underwriter legal fees of $125,000, underwriter expenses of $35,000, and issuer legal fees of $822,000, which was paid in part through the issuance of 110,000 shares of the Company’s common stock to its legal counsel at a price of $4.00 per share.   

Equity Incentive Plan

The Company has an Equity Incentive Plan (the Plan) which provides for the granting of options to purchase shares of common stock, stock awards to purchase shares at no less than 85% of the value of the shares, and stock bonuses to officers, employees, board members, consultants, and advisors. The Compensation Committee of the Board of Directors is authorized to administer the Plan and establish the grant terms, including the grant price, vesting period and exercise date. As of September 30, 2013, the number of shares reserved for issuance under the Plan totaled 989,559 shares. The Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 10% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine. 

In January 2013, the Company granted 203,990 stock options under the Plan to certain employees. The stock options have an exercise price of $4.88 per share, the grant date fair value, a contractual life of 10 years, and vest over four years. The fair value of stock options granted in January 2013 estimated on the date of grant using the Black-Scholes option valuation model was $302,000. The recognized compensation expense associated with these grants for the three and nine months ended September 30, 2013 was $19,000 and $57,000, respectively.  The following weighted-average assumptions were utilized in the calculation of the fair value of the stock options:

Expected life	6.25 years
Weighted average volatility	33%
Forfeiture rate	13%
Weighted average risk-free interest rate	1.29%
Expected dividend rate	-

In January 2013, the Company granted 30,000 shares of common stock from the Plan to its three independent directors in accordance with agreements for board service in 2013.  The fair value of the stock at the time of grant was $5.00 per share for a total value of $150,000 which the Company will recognize in general and administrative expense on a quarterly basis in 2013, including $37,000 and $112,000 for the three and nine months ended September 30, 2013, respectively.

Outstanding stock option grants at September 30, 2013 and December 31, 2012 totaled 563,365 and 359,375 with 305,636 and 242,188 being vested and exercisable at September 30, 2013 and December 31, 2012, respectively. Stock grants made to date through September 30, 2013 and December 31, 2012 totaled 175,799 shares and 145,799 shares, respectively.  Of these amounts, 48,000 and 60,000 at September 30, 2013 and December 31, 2012, respectively, are subject to declining repurchase rights by the Company at $0.0001 per share through September 30, 2016. The recognized compensation expense associated with these grants for the three and nine months ended September 30, 2013 and 2012 and for the period from inception (January 23, 2008) to September 30, 2013 totaled $35,000, $110,000, $20,000, $115,000, and $432,000, respectively. At September 30, 2013, the number of shares reserved under the Plan but unissued totaled 250,395.  At September 30, 2013, there was $393,000 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the Plan.  That cost is expected to be recognized over a weighted average period of 2.5 years.

Consultant Stock Plan

On May 2, 2013, the shareholders approved the 2013 Consultant Stock Plan (the Consultant Plan) which provides for the granting of shares of common stock to consultants who provide services related to capital raising, investor relations, and making a market in or promoting the Company’s securities. The Company’s officers, employees, and board members are not entitled to receive grants from the Consultant Plan. The Compensation Committee of the Board of Directors is authorized to administer the Consultant Plan and establish the grant terms. The number of shares reserved for issuance under the Consultant Plan on the date of adoption of May 2, 2013 and September 30, 2013 totaled 75,000 and 75,113 shares, respectively. The Consultant Plan provides for quarterly increases in the available number of authorized shares equal to the lesser of 1% of any new shares issued by the Company during the quarter immediately prior to the adjustment date or such lesser amount as the Board of Directors shall determine.  The Company granted 11,250 shares from the Consultant Plan to a consultant for 2013 services. The fair value of the stock at the time of grant was $9.12 per share for a total value of $102,000 which the Company will recognize in general and administrative expense on a quarterly basis over the remainder of 2013. The Consultant Plan expense for the three and nine months ended September 30, 2013 was $34,000 and $68,000, respectively.

 

Warrants

The Company has the following warrants outstanding at September 30, 2013:

		Total Outstanding Warrants
Exercise Price		Warrants	Weighted Average Exercise Price		Life (in years)
$	1.80	80,000	$	1.80	7.39
$	2.20	118,959	$	2.20	2.61
$	5.00	345,000	$	5.00	3.57
		543,959	$	3.92

In August 2013, a warrant to purchase 17,409 shares of common stock at $2.20 per share was exercised whereby the Company received $39,000 in proceeds.

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Condensed Statements of Cash Flows (USD $)	9 Months Ended		68 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013
Cash flows from operating activities:
Net loss	$ (4,125,000)	$ (3,017,000)	$ (12,804,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock issued or issuable for services	181,000	119,000	1,710,000
Share based payments	110,000	116,000	432,000
Depreciation	154,000	60,000	311,000
Abandonment of capitalized patent	4,000	0	4,000
Deferred rent	(2,000)	18,000	33,000
Change in operating assets and liabilities:
Prepaid expenses	(94,000)	323,000	(154,000)
Other assets	0	10,000	(10,000)
Accounts payable	(71,000)	156,000	699,000
Accrued compensation	538,000	301,000	821,000
Net cash used in operating activities	(3,305,000)	(1,914,000)	(8,958,000)
Cash flows from investing activities:
Acquisition of fixed assets	(170,000)	(286,000)	(706,000)
Disbursements for patents and other intangible assets	(602,000)	(242,000)	(1,220,000)
Net cash used in investing activities	(772,000)	(528,000)	(1,926,000)
Cash flows from financing activities:
Proceeds from issuance of common stock for cash, net of offering costs	39,000	11,200,000	14,921,000
Proceeds from issuance of short term promissory note	0	98,000	98,000
Principal payments on promissory notes	0	(146,000)	(146,000)
Net cash provided by financing activities	39,000	11,152,000	14,873,000
Net increase (decrease) in cash and cash equivalents	(4,038,000)	8,710,000	3,989,000
Cash and cash equivalents, beginning of period	8,027,000	930,000	0
Cash and cash equivalents, end of period	3,989,000	9,640,000	3,989,000
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$ 0	$ 1,000	$ 1,000

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Summary of Significant Accounting Policies (Details Textual) (USD $)	9 Months Ended		68 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Jun. 30, 2013	Jun. 30, 2012
Cash, FDIC Insured Amount	$ 250,000		$ 250,000
Exploration Abandonment and Impairment Expense	4,000	0	4,000
Weighted Average Number of Shares Outstanding, Diluted	1,107,324	920,743
Emerging Growth Company Minimum Revenue	1,000,000,000
Emerging Growth Company Non Convertible Debt	1,000,000,000		1,000,000,000
Emerging Growth Company Minimum Non-Affiliate Market Value Of Common Stock				700,000,000	700,000,000
Tax Benefits Recognized Description	The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.
Emerging Growth Company Non-Affiliate Market Value Of Common Stock				$ 60,000,000

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Basis Of Accounting Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed balance sheet at December 31, 2012 has been derived from the Company’s audited financial statements.

In the opinion of management, these financial statements reflect all normal recurring and other adjustments necessary for a fair presentation. These financial statements should be read in conjunction with the audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2012. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods.

Development Stage Enterprise Policy [Policy Text Block]

Development Stage Enterprise

The Company is a development stage company as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915, Development Stage Entities. The Company is devoting substantially all of its present efforts to design and develop new technologies in combustion systems and its planned principal operations have not yet commenced. The Company has not generated any significant revenues from operations and has no assurance of any future revenues. All losses accumulated since January 23, 2008 have been considered as part of the Company's development stage activities.

Use Of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes revenue on co-development agreements using the percentage completion method. Under this method, the completion percentage is determined by dividing costs incurred to date by total estimated project costs. Since these projects will require technological development to complete, which by its nature is difficult to predict, the actual cost required to complete contracted work may vary from estimates. Estimated project costs are revised regularly which can alter the reported level of project profitability. Any estimated project losses are recognized in the current reporting period. Customer billings are recorded when cash receipt is probable and in accordance with the underlying co-development contract. If billings exceed recognized revenue, the difference is recorded as a current liability, while any recognized revenues exceeding billings are recorded as a current asset. Recognized revenues are subject to revisions as the contract progresses to completion and actual revenue and cost become certain. Revisions in revenue estimates are reflected in the period in which the facts that give rise to the revision become known.

Cost of Sales, Policy [Policy Text Block]

Cost of Revenue

Cost of co-development revenue includes both direct and allocated indirect costs of completing the scope of work of co-development agreements. Direct costs include labor, materials and other costs incurred directly in fulfilling co-development agreements. Indirect costs include labor, rent, depreciation and other costs associated with operating the Company. Due to the nature of the work involved, the cost of co-development projects may fluctuate substantially from period to period.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

Highly liquid investments purchased with an original maturity of three months or less are considered cash equivalents. Cash is maintained with a commercial bank where accounts are generally guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company’s deposits may at times exceed this limit.

Fixed Assets Policy [Policy Text Block]

Fixed Assets

Fixed assets are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are depreciated over the life of the lease or their useful life, whichever is shorter. All other fixed assets are depreciated over thirty months to four years. Maintenance and repairs are expensed as incurred.

Patents and Trademarks Policy [Policy Text Block]

Patents and Trademarks

Patents and trademarks are recorded at cost. Amortization is computed using the straight-line method over the estimated useful lives of the assets once they are awarded, which has not yet occurred.

Impairment Of Long Lived Asset Policy [Policy Text Block]

Impairment of Long-Lived Assets

The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. During the nine months ended September 30, 2013, the Company recorded an impairment loss of $4,000 from abandonment of a capitalized patent. As of December 31, 2012, the Company determined that there was no impairment.

Fair Value Of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company's financial instruments primarily consist of cash and cash equivalents, accounts payable and accrued expenses. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is primarily attributed to the short maturities of these instruments. The Company did not identify any other non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

The cost of research and development is expensed as incurred.  Research and development costs consist of salaries, benefits, share based compensation, consulting fees, rent, utilities, depreciation, and consumables.

Deferred Rent Policy [Policy Text Block]

Deferred Rent

Operating lease agreements which contain provisions for future rent increases or periods in which rent payments are reduced or abated are recorded in monthly rent expense in the amount of the total payments over the lease term divided by the number of months of the lease term. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent which is reflected on the accompanying balance sheet.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.

Share-Based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the financial statements based on the estimated fair value of the awards on the grant date. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

Stock Issuance Cost Policy [Policy Text Block]

Stock Issuance Costs

Stock issuance costs are recorded as a reduction of the related proceeds through a charge to stockholders’ equity.

Common Stock Policy [Policy Text Block]

Common Stock

The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied.

Earnings Per Share, Policy [Policy Text Block]

Net Loss per Common Share

Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods for which no common share equivalents are included because their effect would be anti-dilutive. Potentially dilutive shares outstanding amounted to 1,107,324 and 920,743 at September 30, 2013 and 2012, respectively.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective standards, if adopted, will have a material effect on the financial statements.

Growing Company [Policy Text Block]

Emerging Growth Company

The Company is an emerging growth company as defined under the Jumpstart Our Business Startups Act of 2012 (JOBS Act).  An emerging growth company may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.  The Company will remain an emerging growth company until December 31, 2017, although it will lose that status sooner if its revenues exceed $1 billion, if it issues more than $1 billion in non-convertible debt in a three year period, or if the market value of its common stock that is held by non-affiliates exceeds $700 million as of any June 30. At June 30, 2013, the market value of its common stock that is held by non-affiliates totaled $60 million.

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Stockholders' Equity (Details 1) (USD $)	9 Months Ended
	Sep. 30, 2013
Warrants Outstanding	543,959
Warrants Outstanding Weighted Average Exercise Price	$ 3.92
Warrant 1 [Member]
Warrants Exercise Price	$ 1.80
Warrants Outstanding	80,000
Warrants Outstanding Weighted Average Exercise Price	$ 1.80
Warrants Outstanding Remaining Life (in Years)	7 years 4 months 20 days
Warrant 2 [Member]
Warrants Exercise Price	$ 2.20
Warrants Outstanding	118,959
Warrants Outstanding Weighted Average Exercise Price	$ 2.20
Warrants Outstanding Remaining Life (in Years)	2 years 7 months 10 days
Warrant 3 [Member]
Warrants Exercise Price	$ 5.00
Warrants Outstanding	345,000
Warrants Outstanding Weighted Average Exercise Price	$ 5.00
Warrants Outstanding Remaining Life (in Years)	3 years 6 months 25 days

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Fixed Assets (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Machinery and equipment	$ 596,000	$ 444,000
Office furniture and equipment	91,000	71,000
Leasehold improvements	30,000	29,000
Accumulated depreciation	(311,000)	(157,000)
Property Plant and Equipment Gross Excluding Construction In Progress	406,000	387,000
Construction in progress	10,000	13,000
Property, Plant and Equipment, Net, Total	$ 416,000	$ 400,000

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Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 11, 2013
Document Information [Line Items]
Entity Registrant Name	CLEARSIGN COMBUSTION CORP
Entity Central Index Key	0001434524
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	CLIR
Entity Common Stock, Shares Outstanding		8,810,674
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2013

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Stockholders' Equity (Details)	9 Months Ended
	Sep. 30, 2013
Expected life	6 years 3 months
Weighted average volatility	33.00%
Forfeiture rate	13.00%
Weighted average risk-free interest rate	1.29%
Expected dividend rate	0.00%