CLEARSIGN COMBUSTION CORP (CLIR) IPO

Based on an assumed offering price of $4.00 per share, we estimate the gross 
proceeds from the sale of 3,000,000 shares of common stock, prior to deducting 
underwriting discounts and commissions and the estimated offering expenses 
payable by us, will be $12.0 million ($13.8 million if the over-allotment 
option granted to the underwriter is exercised in full). 

We estimate that we will receive net proceeds of approximately $9.5 million, 
after deducting underwriting discounts and commissions and our underwriter’s 
expense allowance, the fees of the qualified independent underwriter, and 
other estimated expenses of approximately $1.2 million, which includes legal, 
accounting, printing costs and various fees associated with the registration 
and listing of our shares. If the underwriter exercises its right to purchase 
an additional 450,000 shares of common stock to cover over-allotments, we will 
receive an additional approximate $1.64 million, after deducting approximately 
$0.16 million for underwriting discounts and commissions.  

We currently intend to use the net proceeds of this offering as follows: 
approximately $5 million for research and development including capital 
expenditures, $1 million for protection of intellectual property, $1.25 
million for exploration of marketing opportunities, and the balance for 
working capital and general corporate purposes. 

The amounts and timing of our actual expenditures will depend on numerous 
factors, including market conditions, results from our research and 
development efforts, business developments and opportunities and related 
rate of growth, sales and marketing activities and competition. Accordingly, 
our management will have broad discretion in the application of the net 
proceeds, and investors will be relying on the judgment of our management 
regarding the application of the proceeds from this offering. We may find 
it necessary or advisable to use portions of the proceeds from this offering 
for other purposes. Circumstances that may give rise to a change in the use 
of proceeds and the alternate purposes for which the proceeds may be used 
include:  

 •  the existence of unforeseen or other opportunities or the need to take 
    advantage of changes in timing of our existing activities;   

 •  the need or desire on our part to accelerate, increase, reduce or eliminate
    one or more existing initiatives due to, among other things, changing 
    market conditions and competitive developments or interim results of 
    research and development efforts;   

 •  results from our business development and marketing efforts, including co-
    development and pilot site installation opportunities that may materialize;

 •  the effect of federal, state, and local regulation, including those 
    governing emissions, of potential customers in our identified industries;  

 •  our ability to attract development funding or to license or sell our 
    technology to industry sponsors or other interested organizations; and/or  

 •  strategic opportunities of which we are not currently aware present 
    themselves (including acquisitions, joint ventures, licensing and other 
    similar transactions).   

From time to time, we evaluate these and other factors and we anticipate 
continuing to make such evaluations to determine if the existing allocation of 
resources, including the proceeds of this offering, is being optimized.

The industry in which we operate is global in scope and is populated by large, 
established suppliers of burners and post-combustion air pollution control 
systems, all of whom possess substantially greater resources than we do. 

Worldwide, suppliers of burners and APC equipment include but are not limited 
to companies such as Babcock and Wilcox, Westinghouse, Callidus, Eclipse, 
General Electric, Haldor Topsøe, Hitachi, John Zink (including affiliates Coen,
Todd, and Hamworthy Combustion), Linde, Maxon, and Fives North American, among 
others.  

These systems include low NO X burners, electrostatic precipitators, baghouses,
selective catalytic reduction systems and various types of scrubbers. The 
companies that provide these systems are well established and their combustion 
and emissions control technologies are based on mature, well-understood 
technologies that are proven in the market.  However, we believe the further 
development of their technologies is limited largely to marginal performance 
improvements. As a consequence of this relatively slow pace of innovation, we 
believe current technology offerings have become largely commoditized, and 
differentiation between suppliers is very often based on price. We believe 
another drawback to conventional combustion control and emissions control 
technologies is that they are only effective over a very narrow range of 
thermal output, and are often highly intolerant of any variance to the chemical
composition of the fuel. These translate to higher costs in the form of reduced
fuel efficiency and an inability to adapt to market or regulatory conditions by
changing fuel feedstocks. 

From a customer's perspective, legacy air pollution control technology is 
viewed as a cost of doing business, and as a means to operate within regulatory
requirements and avoid fines. Unlike most other kinds of capital equipment that
provide an economic return through enhanced productivity or efficiency, we 
believe customers of traditional emissions control equipment do not otherwise 
expect any positive return on these investments.  

We are seeking to enter the combustion and emissions control market and to 
establish ourselves in a highly competitive industry against companies that 
have both substantially greater financial resources than we do and established 
products.  Because they have been available in the market for many years, our 
competitors’ product offerings may have several advantages. Among these are: 

   ·  Availability of trained technicians:   The number of technicians who are 
      able to specify, install and operate our competitors’ products will be 
      greater than those who have been trained on our technology.  

   ·  Conservative choice:   Because our competitors' technologies are well 
      understood and their performance has been proven over time, customers may
      perceive their offerings represent a safe, low-risk choice.  

   ·  Business relationships: Because our competitors have established long-
      standing personal relationships with their customers, they may prefer to 
      continue to do business with one another.  

However, if we are able to successfully bring our technology to market, we 
believe that our Electrodynamic Combustion Control™ technology would be an 
attractive alternative to the products and solutions offered by companies with 
which we seek to compete. In particular, we believe that our technology could 
offer a unique and powerful ability to improve energy efficiency and enhance 
operation while reducing many pollutants at the source. We believe our 
technology could be capable of reducing the requirement for costly legacy 
equipment, offering customers the prospect of a positive return on their 
investment in the form of enhanced efficiency and productivity while reducing 
emissions to the levels of existing air pollution control technologies such as 
scrubbers, electrostatic precipitators and fabric filters (baghouses). In 
particular, we believe ClearSign technology could offer the following 
advantages when compared with the next best alternatives. 

Emissions Reduction from Combustion Sources. Current technology reduces 
emissions by using mechanical mixing aids such as swirlers, staging combustion 
in two or more zones, or treating emissions such as NO X after the fact using 
selective catalytic reduction. In contrast, we believe ClearSign technology 
could:  

 ·  enhance mixing with none of the additional pressure drop or power 
    requirements that swirlers demand; and  

 ·  reduce NO X without reducing turndown or narrowing the burner operating 
    window as staged combustion does or requiring expensive post combustion 
    treatments with chemical additives such as catalytic reduction requires.  

Improving flame shape. The main goal of virtually all process combustion is to 
transfer heat to raise steam or enable a chemical reaction, and to do so as 
efficiently as possible. Conventional technology uses buoyancy (the natural 
tendency for a flame and heat to rise opposite to the force of gravity) and 
momentum (fuel mixed with air and forced through a nozzle, as in a torch) as 
the only tools to shape flames. Unfortunately, momentum effects die out over 
distance from their source and buoyancy always operates counter to the 
gravitational field. Moreover, momentum and buoyancy effects often drive 
wayward flames into process tubes where they cause overheating and potential 
failure or worse. In contrast, we believe that ClearSign's technology could 
allow the use of much stronger body forces that are not limited by orifice 
diameter and are unaffected by gravitational fields. We believe the result 
would be better control over flame shape and direction, allowing the process 
to operate free of the effects of impingement and non-optimal flame structure.

Enhancing heat transfer and process efficiency. The main objective of 
industrial combustion in furnaces and boilers is to transfer heat to a process 
fluid. Conventional combustion techniques do their best to optimize flame shape
to achieve this end, but we believe conventional combustion techniques have no 
additional means for enhancing heat transfer. In contrast, we believe that 
ClearSign’s ECC technology could enhance heat transfer to the process tube 
independent of flame shape using electrical current, and that the result could 
be an increase in process efficiency or throughput, which is a critical goal in
the industrial combustion industry. 

Compared to the products and solutions of companies with which we seek to 
compete, we believe our technology could provide our potential customers with a
lower total cost of ownership, providing the prospect of a positive economic 
return on investment to systems operators. We believe this would be due to a 
reduction in their capital and operating expenses, and an increase in energy 
efficiency.