Matthew Selinger - Three Part Advisors Stephen Pirnat - Chairman and Chief Executive Officer James Harmon - Chief Financial Officer.

Richard Deutsch - Ladenburg Thalmann Asset Management Lou Basenese - Disruptive Tech Research.

Good afternoon and welcome to the ClearSign First Quarter 2016 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Matt Selinger. Please go ahead..

Greetings and welcome to the ClearSign Combustion Corporation first quarter 2016 results conference call. During the course of this conference call, the Company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement.

This includes remarks about the company’s projections, expectations, plans, beliefs and prospects.

These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described as forward-looking statements.

The risks and uncertainties associated with the forward-looking statements made in this conference call include, but are not limited to; whether field testing of ClearSign’s products will be successful completed; whether ClearSign will be successful on expanding the markets for its products and other risks described in ClearSign’s periodic public filings with the SEC, including the discussion in the Risk Factors section of the 2015 report on the Form 10-K.

Investors or potential investors should read these risks. ClearSign assumes no responsibility to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. On today’s call will be Steve Pirnat, Chairman and CEO of ClearSign Combustion Corporation and Jim Harmon, Chief Financial Officer.

So with that, I will turn the call now over to Jim.

Jim?.

Thank you everyone for joining us this afternoon. Before I turn the call over to Steve, I’d like to review our results for the quarter as they’ve been reported in our 10-Q and in this afternoon’s press release.

We incurred a loss of $2,589,000 in the first quarter of 2016 as compared to a loss of $1,583,000 for the same period of 2015 and a loss of $2,558,000 for the quarter ended December 31, 2015.

The increased loss was primarily due to our increased field testing and development efforts related to our Duplex Technology, including the 60% increase in field and R&D headcount to 15 full-time employees. As to our cash resources, we had about $7.9 million of cash at the end of the quarter.

We project that we have about four quarters of cash on hand based on our current rate of usage. We currently have eight field test projects that we have announced regarding our Duplex technology.

Three related to OTSG’s in the enhanced oil recovery industry, one related to Wellhead Enclosed Flares and four related to process heaters in the oil refining industry. Four of these projects are in a design phase and four are in the field work stage.

Our field work has been successful to date in registering NOx emission levels within the customer and relevant regulatory body and specifications. We continue to progress through the customer required field work before we complete the installations and commissioning processes.

Six of the eight field test project agreements include payments once the project is completed and the installed unit is operating to the customer’s satisfaction. The remaining two agreements are designed in phases and will have phase revenue recognition over a handful of steps beginning with the project engineering.

With that, I turn the call over to Steve..

Thank you, Jim for that overview. And I’d like to thank everyone for joining the call today. We continue to build momentum to create a more diversified pipeline of projects within our target markets.

We are pleased by the interesting conversations we are having with current and potential customers and are seeing an increasing backlog of customer requests for Duplex proposals, which we believe will lead to increased deal flow. Just weeks ago we were happy to announce a new contract with a major Canadian oil producer.

The contract marks ClearSign’s first project in the Western Canadian oil sands market which is a logical expansion for similar work in Bakersfield, California for the enhanced oil recovery market. The Alberta based project requires us to design and engineer our Duplex technology for use on their oil field once-through steam generators.

These OTSG’s typically have a thermal output of approximately 250 million BTUs per hour, which is about four times larger than those we have installed in Bakersfield, California. The contract is a multiple phase agreement, which begins with a design and engineering phase.

We will deliver a fully engineered Duplex system design as well as the cost and budget for testing and deployment for the producers existing and planned new fleet of OTSG’s. Once concluded, the Canadian company will evaluate the installation of our Duplex equipment for all or a portion of their fleet.

We believe this could be other enhanced oil recovery operators in Western Canada to also consider adoption of ClearSign technology which puts several 100 once-through steam generators in play. This operator is looking for a solution to their emissions requirements and they have seen our solution and want now to validate it for themselves.

Our second most recent announcement was regarding a contract for an enclosed Wellhead Flare in Southern California. These are flares from upstream wells where they burn-off the unwanted gases from oil field wells. This project is encouraging because the producer approached ClearSign seeking to lower NOx emissions for its fleet of enclosed flares.

This is another example of how word is spreading regarding Duplex and the market pull that I alluded to earlier. As in the case with many of these projects the magnitude of this order can grow upon the success of the initial installation. The customer has an immediate need for five flare systems to be retrofitted and is on an aggressive timeline.

This project specification delivery and emissions targets will differ from other projects like once-through steam generators, which we have in Southern California. However, we are on track with this project and look forward to creating a solution with our technology. We recently came back from a visit to Aera Energy.

The pilot unit continues to perform reliably and it’s operating below the permitted Air Pollution Control Districts emissions limit. Our energy in ClearSign are both pleased with the performance of the pilot unit. Our subsequent unit purchase is installed and awaiting commissioning.

Aera plans to meet with us late in the summer to discuss potential future requirements. Regarding one of our Bakersfield, California refinery installations we are happy to report that they are satisfied with Duplex performance and have commenced their 30-day testing window to demonstrate final contractual acceptance of the unit.

This process started later than we had hoped due to the customers choosing to make additional systems modifications that were completely unrelated to the Duplex retrofit. Regarding the development of our Electrodynamic Combustion Control technology, we continue to move forward in the lab.

As we have said before, we believe the application is well suited for solid fuels like coal which could be meaningful in a massive addressable market in dire need of an emission solution. In a most recent meeting of our Board of Directors, we named Dr. Donald Kendrick as an Executive Officer of the Company Dr.

Kendrick is our Senior Vice President of Technology having joined ClearSign one-year ago. He has driven important advances in our Duplex Technology both in the lab and in the field development installations.

He has proven to be a valuable resource to the Company and we are pleased to recognize his leadership into our Duplex research and development efforts. In closing, our focus will remain on the successful completion of our field installations and on building a book of business.

I am pleased with our progress and would like to thank the team at ClearSign and our customers for making this happen. Before I move to questions, I would like to thank our shareholders for their time, investment and support of our game changing technology and our ClearSign team. At this point, I would be pleased to answer some questions..

Thank you, Mr. Pirnat. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Richard Deutsch of Ladenburg Thalmann. Please go ahead..

Yes. Congratulations on your progress in the last quarter.

I have one question about the oil sands project, on the timing you said you expect it to be done in six months, is that six months from today’s date or was it six months from the date of the announcement of the project?.

Thank you, Richard. It was six months from date of the announcement, but that’s what our portion. There is still going to be a field testing done by the client and it’s not exactly certain how long that will take them to conclude that the technology works to their satisfaction..

Sure.

But your phase then is due to be completed and what would you say five months, four months?.

Well, we are well underway because as I just said we started working on the thing as soon as you made the announcement..

Okay. All right. Well thank you very much, congratulations..

Thanks Rick..

[Operator Instructions] Our next question comes from Lou Basenese of Disruptive Tech Research. Please go ahead..

Hi Steve, hi Jim. Congrats on the progress..

Hello, Mr. Basenese is good to talk to you..

Good to talk to you.

Couple questions just on the timing just coming of Rick, on Canada and moving on to the wellhead flare, you said that’s on track, but can you remind us what the time line again there is to have the initial installation out of the – I think it was five in total?.

Well, the timeline has moved around a little bit as you might recall when we originally announced the project – we were talking about having it sometime this year towards the end of the year. The client has subsequently moved the schedule up and we are anticipating the thing being completed in July and at this point they’re asking us to do it sooner.

That said, as far as our material delivery and engineering we are completely done, so we are waiting for the field installation and cranes and some labor to take place at the customer site. As far as ClearSign is done we are ready to go..

Okay. And then maybe this question is for Jim, this quarter there was a note of increased cost due to the field testing and I think we had one for last quarters as well.

Can you just give us an idea how much of those expenses were upfront outlays that are going to be recouped once revenue is recognized on these installations?.

Well, yes that is a little bit difficult but the cost that have been done to date are involved both installation cost and actual development work that’s being done out in the field.

I suppose you are trying to ask me what’s all the revenue that’s going to be recognized in the future and that’s also difficult for me to tell you because that’s dependent upon successful completion of each of those projects.

To date we haven’t completed one but were in the process of Steve has explained I won’t tell you I am feeling more bullish about the whole process so..

Okay.

So can you give any rough idea of revenue in the backlog may be on the projects that are in process, that are in the field I think you said there is four that are in the process just trying to get an idea on the expense side how things shake out for the second half of the year?.

Yes, I can’t comment on that at this stage until we get to the point, we have a confidentiality agreements associated with these agreements..

Okay. Fair enough. And then just a question as well I don’t know that was in the prepared remarks on the installation in Texas with Delek just curious were the latest status on that installation..

The product is being modified by us to deal with the different field customers actually using as compared to what we originally were told and we’re going to replace some of the Duplex refractory material, live temperature material and then test the unit and return it.

So the unit that was in the field is being sent back to us while we speak and they put the old burner back in the furnace and will turn it around, we have all the material here to do it, we’ll turnaround in a couple days and send it back.

And we’re pretty excited as it is Delek, because they have a lot of extra work they want us to do, so they want to get this thing in and running and demonstrated works because they’ve got a lot other work for us which we’re pretty excited about..

Okay. And that’s good segue to my last question just in terms of the pipeline I know a lot of people are hesitant to be the first to purchase a new technology but there’s plenty that are usually paying attention to be maybe the second.

Can you just give us an idea of some of the companies in the pipeline or the opportunity I think you mentioned multiple requests coming in but just maybe a general sense is it one or two, is it a half dozen or there more than a dozen parties that you are already engaged in talks with?.

It’s closer to a dozen that anything the one that we can definitely but I say in mid two because they’ve allowed it to sorrow, they are very anxious to come into Kern to see the current unit start and frankly they were ready to see this unit in Kern County in May and then the client in Kern County wanted to put in and frankly with somewhat at our recommendation put [indiscernible], supervisory control and data analysis system that would give them some overview of their whole operations and that delayed the thing until June.

So my current understanding is they want to come in June. As you can imagine super majors oil companies are a little skittish about using their name in public.

But I would say half the super majors are all planning on coming to visit the Kern County site and as you may be aware we have the Kern County unit, which is in its acceptance phase and we also have the Tricor unit which is a small refinery that’s been installed and about start up.

So by the time these guys come out over the next 30 days, we should have at least a couple maybe three units up and running. So it will be good trip for them..

Okay. Great I appreciate it..

To answer your question directly they won’t be the first, they will be the second. Actually they’re probably be the fifth..

Fair enough. Congrats and look forward to more progress. Thanks..

Thank you..

[Operator Instructions] Our next question is a follow-up from Richard Deutsch of Ladenburg Thalmann. Please go ahead..

Yes, thanks.

On the Canadian oil sands again this is a massive increase in size from anything you’ve ever done before what’s your level of confidence that your technology can actually perform at those greatly increased levels?.

You know Rick I don’t want to [sound cocky], so I’ll try to like humbly say 90%, but I think it’s a slam-dunk frankly..

Okay..

I mean at the scale we are talking about 250 million BTUs that’s well within the range of what we think it can scale, if I were doing twice that, I’d be a little nervous..

But what’s the largest you’ve done already so far?.

What the largest we’ve done already is for this type of application is the unit at Aera and that’s about 52 million BTUs an hour..

Yes. So you’re talking better than 4X increase, so I’m glad that you guys feel that comfortable that’s where you get a lot of slippage and I’m happy to hear that you’re – you don’t see any issues. One other question and I’ll jump back again.

In your California operation they are operating now under an experimental permit, is that correct?.

Yes. That’s my understanding..

When do you think you can estimate that you would actually get a formal operating permit from California regulators?.

Well, that’s going to be more up to the actual operator in terms of when he says okay, its working and now I want to file for an operating permit.

But in each one of the installations we have – has a definite timeline that I mean it’s not a mystery, we know when the experimental permit expires and we know when they were – typically you have to either renew it or get an operating permit.

But my general sense is all of the experimental permits will convert to operating permits on schedule, because we expect that the testing that’s going to be done by the operator will be successful..

This is Jim, Rick. Just to make one more plate clear. We’re not the ones that obtained the permit, it’s the operator that obtains the permit. So we don’t have direct control over that..

Right. But it seems like the possible permit could be in the very near future.

Is that a correct analysis?.

The operating permit?.

Yes..

Yes. In some cases - some of these installations could be within the next 30 or 60 days, that’s correct..

Okay..

I just have to [indiscernible] that each one of these operators is very sensitive and guarded about talking about their permitting situation with the regulators because that’s something between them and the regulators..

Right. I understand. All right..

Now, I say all that, but that’s old public record too..

Right, okay. All right. Well, great. Thanks a lot..

Yes. Thank you..

Our next question comes from David Brown, a Private Investor. Please go ahead..

Hi, Steve and Jim and congratulations on all your successes in the Duplex technology and it sounds really exciting that half of the super majors are going to be visiting soon in Kern County, so congratulations on that..

Thank you..

And I just have some – yes, you’re welcome. I just have some questions as to was a couple of years ago when many investors were quite excited and a former administration so to speak had made a lot of enthusiastic comments about deals getting signed in the near future in May of 2014 with the boiler space.

I know that of course Duplex in the oil fields is taking a lot of attention in time, but is there anything happening in that space right now and I have a second question, but let’s start with that one..

There is, and here’s our current philosophy on announcing deals, when we have one we’ll announce it..

Fair enough. The second question is the ECC technology going from labs to actual field testing.

Are we getting anywhere close I think in conference call maybe two quarters ago you said we might be within a year or something of that nature if I am recalling correctly?.

We’ve added a couple of really solid young researchers to our ECC team and they have been hard work doing a lot of laboratory testing and validation testing and I’d say the results they have seen – I’ve seen as of yesterday when I checked are pretty promising.

And so the credit of the one researcher I say jeez the results sound really great and he says well until I’ve checked it about three times and I make sure, I’m right, I’m not at a point where I want to tell you anything. And I said good for you when you are absolutely sure, you’re right, come see me because I’ll buy a beer.

We are just being very candid, we are seeing some good signs, but to the previous administration we’ve had kind of mixed signals before and this administration wants to make sure we are absolutely right before we declare victory..

I can appreciate that because I’m certainly one that kind of got burned in two years ago when I was thinking, oh, this is the time to heavily invest and then the stock plunged of course went nothing happened.

So I appreciate that and just it is exciting and I hope that continues to March forward and we hear lots of announcements in various places besides just the oil field, but it’s great to see you’ve expanded it in Oklahoma and Texas in Western Canada and all kinds of excitements going on and so congratulations..

Well I appreciate that and I say this within the limits of – well I can say this is a much better Company now than it was two years ago. End of Q&A.

[Operator Instructions] And this concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Pirnat for any closing remarks..

Since there are no further questions I would like to thank everyone once again for attending today and for your ongoing support and enthusiasm..

Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation..