ClearSign Technologies Corporation Common Stock (DE) H.C. Wainwright 28th Annual Global Investment Conference

Thank you very much. Well, good afternoon, everyone. As said, I am the Chief Executive Officer of ClearSign Technologies Corporation. We are an industrial technology company. We are a public company listed on NASDAQ with ticker symbol CLIR. We sell pollution control equipment to clients like the major oil refineries, petrochemical companies, and energy companies around the world. We are a technology company. We have very valuable IP that allows us to sell our technology at high technology level margins. We are generating revenue, we are making sales, and we're at a point that we have significant traction within the industry. What's key is we're in a very conservative industry, and it's very important for our clients that we have equipment that's out and operating in the field. So getting to the point that we have significant references is very important for the development of ClearSign.

Before I go on, you'll see many of these, I will not dwell on it. It is important, I will be making forward-looking statements in this presentation. All right. I said we are a technology company. Our specialty is combustion. We make flames. What's important in the flames is when you understand the structure, you can basically design a flame and control the mixing such that we make sure the flame does everything it needs to do. You can turn it up and down, it delivers heat. But we can do that and also in a way that we can make sure that flame does not make pollution. This is a really big deal because in today's world, pollution control is a very big need of oil refineries.

You can either clean it up after the fact or even better, if you don't make it in the first place. All right. Try and get our arms around the problem. As more and more people are driving cars, we burn more petroleum. There's a greater growth in population. There's more hydrocarbons are being consumed. As those hydrocarbons get consumed, there's more and more pollution developed down at ground level. As that pollution crosses a threshold, the EPA will lean on the local regulators, and they are then basically forced to implement tighter regulations on the industries in their area. A typical large-scale oil refinery will have between 40 and 50 heaters on that oil refinery. For them to use the existing typical technology on all of those heaters, they're looking at cost of somewhere in the region of half a billion dollars.

They also need to be able to burn fuels that operate over a wide range. As they process oil, they get a lot of off gases or waste gases coming off the oil. That gets fed into their fuel gas system. It basically provides them feed fuel. The combustion equipment has to operate over a whole different mixture of fuels that can swing wildly and looking to the future, up to and including 100% hydrogen. We have a client currently in California, and that single project of theirs, they've given us numbers that to use the existing technology, called a selective catalytic reduction system, will cost them in the region of $50 million on their two heaters. I said for a typical large refinery, they could be looking at cost of up to half a billion dollars. That kind of number is restrictive on the foundry.

It could even jeopardize future projects or the expansion or the viability of the entity itself. For the solution at ClearSign, we have with our special burner technology, we can not make that emissions in the first place. We can take out the existing burners. We've developed our product to be easy to install, it's easy to operate, and it's basically a low-cost solution for our customer. For that one California refinery, where their SCR project was going to cost them about $50 million, our estimate for them to use our technology is in the region of $10 million. In addition to that, with our ability to control the flame, there's cases we actually have the ability to help the clients operate their equipment more efficiently. We can reduce downtime and increase their productivity.

If you look at the products, the bulk of our revenue comes from process burners. These are the burners that go into oil refineries, petrochemical plant, et cetera. These projects are highly customized, they're white glove service. We have a standard burner technology, but this product has to be designed to work with their exact fuel gas for that specific heater. The product has to be demonstrated at full scale before we go into full production. While these are high-value products, with there being many heaters or many burners in a single heater, the projects will run from $1.5 million to $3 million. The cycle time for these is also quite long. From the time that we start getting inquiry to the point that this equipment is out in the field and up and running is typically about two years.

Mixed in with that, we have burners going down to the midstream industry. These are much more simple heaters. It's a standard product. These turn much quicker. A typical project will be one to three burners. They turn much more frequently, but with a cycle time in the region of three to six months. On our third product line, the flares. A flare is basically a waste disposal system. These either go into a upstream drilling area where they have off gases that need to be disposed of or a biofuels plant where there's off gases. In this case, we sell the entire structure, typically in the range of $750,000 up to one we're manufacturing right now or is being installed of a $1.5 million. These will turn in about six months to one year, typically. These are not just pipe dreams.

These are products that we have going out to the field right now. Process burners, the one on the left is actually a job that we sold back in 2000. This is a very early project of ours. That project's still up and running today. The reason we highlight this is that we have good data for the SCR cost and for the ClearSign installation. The reason is that when we went to the engineering company that installed this project, they had already sold it using the SCR technology. We explained how our equipment worked, what it did. They took that proposition to their customer, and their customer agreed to change. We then displaced the SCR project with a ClearSign solution. As a result of that, we have actual numbers. This is an extremely small heater. It has only three very small burners in it.

The cost of the SCR project to the customer was $2.7 million, while the cost of the ClearSign solution was just under five. We have a project down in Texas right now that's due to start up. It's going to be installed next month, due to start up in November with 26 burners right down on the Texas Gulf Coast. We have another project in progress for a California refinery. This is the one where we're saving them $40 million. That one's in the engineering phase now. The first phase due to ship out next year. For the midstream products, we've and all following ClearSign, you'll see there's been a flurry of press releases recently with burners going down to the Midland region in the West Texas Permian Basin. This is a growing industry. Our first burner was sold for a permit requirement of 8 PPM. We guaranteed eight. We started up and demonstrated two.

This has become a very popular product line. We're selling them in batches of ones and threes, but if you look at the press releases this year, this has been a very big sale for us. Then finally, the flares. We had our first formal flare test. The first one installed was run through its emissions measurements, and we got those results back just over a month ago. We came in at 16 or 60% of the allowable level. NOx is measured in parts per million. The requirement's 15, so we came in at eight. We have a second flare being constructed right now for $1.5 million. That's due to start up later this year. That client has told us they have two more permit applications in progress based on ClearSign technology.

The industry this size, this is truly a global need. It's a very prominent pain point for our customers. It's a very high-value one, and there are some global players in this market. You'd expect that this was significant competition. John Zink is owned by Koch Industries. Callidus, my previous employer, is owned by Honeywell. Comparing ClearSign to these, we have a burner that's easy to install and easy to use. It's designed to be operatable across all the fuel range that we'd see on a common refinery. We get emissions down to the level required by the modern regulations. Obviously, our IP is very valuable. It is protected. We have a significant IP portfolio. But the fundamental way that these burners work is protected in addition to patents protecting the designs of the individual product lines. Trying to get our arms around the market, right?

The combustion equipment market is truly billions of dollars around the world. To try and get something significant to what we're dealing to make it meaningful, we estimate that the market for low NOx combustion technologies is in the region of $1.2 billion, right? If you slice that down to the market that's really addressable by ClearSign technology, we're looking at about $300 million per year. Then finally, if you look at the obtainable market today, right, with the products that we have in operation today and the emissions requirements, where they are today and the regions they've been implemented, we think there's an obtainable market for ClearSign today of about $100 million per year. That's significant when a revenue of $16 million, we believe, will get ClearSign to break even. So how do we make money?

Up until now, we've typically sold products for equipment to the clients with a margin, and we're shooting for about 45% margins. They'll be running at our technology-level margins. For growth, it's obviously a lot more efficient when we have customers have the ability to manufacture equipment to convert to more of a licensing type model. We have our first projects in progress today where we have actually licensed our drawings to a client and they are building burners based on our drawings. The good news is we've been able to maintain the same margin dollars on those licensed product sales as we do when we're selling the equipment ourself. This is a highly scalable means for ClearSign to grow in the future. What is really important is the third leg, which is the aftermarket service. We're selling equipment that basically exists in flames, right?