CLEARSIGN COMBUSTION CORP (Form: S-1, Received: 11/14/2011 14:16:40)

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 “Summary Selected Financial Information” and our financial statements and related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited, to those set forth under “Risk Factors” and elsewhere in this prospectus.

OVERVIEW

We are a development stage company located in Seattle, Washington. We were formed for the purpose of developing a technology that improves both the energy efficiency and emissions control characteristics of combustion systems.

To date, our operations have been funded through sales of our common stock. We have earned no revenue since inception on January 23, 2008. We cannot assure you 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, since we have no committed source of financing, we cannot assure you 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.

Our financial statements contemplate the continuation of our business as a going concern. However, we are subject to the risks and uncertainties associated with a new business, as noted above we have no established source of capital, we do not yet have the ability to earn revenue and we have incurred significant losses from operations since inception. These matters raise substantial doubt about our ability to continue as a going concern.

The 2011 Private Placement

In closings from March 17 through May 10, 2011, we conducted a private placement of our common stock, in which we raised a total of approximately $3 million in gross proceeds. The price per share was $2.75 and the Company issued a total of 1,090,683 shares of common stock. In conjunction with the offering, MDB Capital Group LLC acted as placement agent, and we issued to MDB, as compensation, 109,091 shares of common stock and a five-year warrant for the purchase of up to 109,091 shares of common stock at an exercise price of $2.75 per share.

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. Please see Note 2 to our 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 develop and market new technologies in combustion systems, and its planned principal operations have not yet commenced. The Company has not generated any revenues from operations and has no assurance of any future revenues. All losses accumulated since its inception on January 23, 2008 have been considered as part of the Company’s development stage activities.

Basis of Presentation . The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States which contemplate continuation of the Company as a going concern. However, the Company is subject to the risks and uncertainties associated with a new business, has no established source of revenue, and has incurred significant losses from operations since inception. The Company’s operations are dependent upon it raising additional capital. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.

Research and Development . The cost of research and development is expensed as incurred.

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.

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.

RESULTS OF OPERATIONS

Comparison of Six Month Period Ending June 30, 2011 and 2010

Operating Expenses . Operating expenses consisted of research and development and general and administrative expenses. Operating expenses increased by $1,388,676 during the six months ended June 30, 2011, from $210,791 during the six months ended June 30, 2010 to $1,599,467. The increase resulted primarily from the payment of a $1,000,000 consulting fee in the form of common stock issued at $2.75 per share to MDB Capital Group LLC for services including assistance to build an intellectual property development strategy, retain appropriate executive personnel, and advice with respect to development of our business. The remaining increase of $388,676 resulted primarily from an increased level of personnel for research and development and general and administrative purposes. General and administrative expenses included costs for general and corporate functions, such as facility fees, travel, telecommunications, investor relations, insurance, professional fees, consulting fees and other overhead.

Loss from Operations . Due to the increase in operating expenses, our loss from operations increased during six months ended June 30, 2011 to $1,599,467, from $210,791 for the six months ended June 30, 2010, presenting an increase of $1,388,676.

Net Loss . As a result of the increase in our operating expenses, our net loss for the six months ended June 30, 2011 was $1,598,422 as compared to a net loss of $210,791 for the six months ended June 30, 2010, an increase of $1,387,631.

Comparison of Fiscal Years Ending December 31, 2010 and 2009

Operating Expenses . Operating expenses are made up of research and development and general and administrative expense. Operating expenses decreased by $133,434, or approximately 25%, during the year ended December 31, 2010, from $528,772 during the year ended December 31, 2009 to $395,338. The decrease resulted from a decrease in research and development expenses of $2,436 and a decrease in general and administrative expenses of $130,998. General and administrative expenses included costs for general and corporate functions, such as facility fees, travel, telecommunications, investor relations, insurance, professional fees, consulting fees and other overhead.

Loss from Operations . Due to the decline in operating expenses, our loss from operations also decreased during the year ended December 31, 2010 by $133,434, or approximately 25%, from $528,772 during the year ended December 31, 2009 to $395,338.

Net Loss . As a result of the decrease in our operating expenses, our net loss for the year ended December 31, 2010 was $395,587 as compared to a net loss of $528,772 for the year ended December 31, 2009, a decrease of $133,185 or approximately 25%.

Liquidity and Capital Resources

We have not generated revenues to date. We have funded our operations through the sale of our common stock. From April 2008 to August 2010 we completed an offering of our common stock from which we raised gross proceeds $841,151, and from March to May 2011 we completed a second offering of our common stock from which we raised approximately $3,000,000 in gross proceeds. We have no committed sources of financing and we do not expect to earn revenues in the near term.

At June 30, 2011, our current assets were in excess of current liabilities resulting in working capital of $1,863,519 compared to a working capital deficiency of $380,459 at June 30, 2010. At June 30, 2011, our accumulated deficit increased to $3,112,365 as compared to $1,329,147 at June 30, 2010 and we had stockholders’ equity of $1,937,748 at June 30, 2011 as compared to a stockholders’ deficit of $333,301 at June 30, 2010.

Operating activities in the six months ended June 30, 2011 resulted in cash outflows of $412,045 which were due primarily to the loss for the period of $1,598,422 offset by common stock issued for services in the amount of $1,007,526 and increases in accounts payable and accrued compensation expense of $197,971. In the six months ended June 30, 2010, cash outflows of $32,534 were primarily due to the loss for the period of $210,791 offset by an increase in accrued compensation expense of $132,822 and payment of $34,336 of services with common stock.

Investing activities during the six months ended June 30, 2011 and 2010 resulted in cash outflows of $28,405 and $0, respectively, for acquisition of fixed assets.

Financing activities during the six months ended June 30, 2011 generated $2,836,338 in net cash from the issuance of common stock. Gross proceeds of $2,999,374 were offset by issuance costs paid of $163,036. Financing activities during the six months ended June 30, 2010 generated $32,485 in cash from the issuance of common stock.

At December 31, 2010, our current liabilities were in excess of current assets resulting in a working capital deficiency of $373,948 compared to a working capital deficiency of $246,006 at December 31, 2009. At December 31, 2010, our accumulated deficit increased to $1,513,943 as compared to $1,118,356 at December 31, 2009 and we had a stockholders’ deficit of $316,806 as of December 31, 2010 as compared to a stockholders’ deficit of $189,331 as of December 31, 2009.

Operating activities in the year ended December 31, 2010 resulted in cash outflows of $129,966 which were due primarily to the loss for the period of $395,587 offset by common stock issued for services in the amount of $49,995, common stock to be issued in the amount of $68,674 and accrued compensation expense of $166,572. In the year ended December 31, 2009, cash outflows of $293,013 were primarily due for the loss of the period of $528,772 offset by increases in accounts payable and accrued expenses of $42,221 and $79,359, respectively, and common stock issuable for services in the amount of $102,844.

Investing activities during the years ended December 31, 2010 and 2009 resulted in cash outflows of $0 and $19,932, respectively, for acquisition of fixed assets.

Financing activities during the years ended December 31, 2010 and 2009 generated $129,942 and $312,212, respectively, in cash from the issuance of common stock.

Off-Balance Sheet Transactions

We do not have any off-balance sheet transactions.

Future Operations

We expect to continue to incur losses in the coming quarters until we can successfully market our technology and sell related products and services. We cannot assure you that our technology or future products and services will be accepted in the marketplace or whether and when we will become profitable.

Trends, Events and Uncertainties

Other than as discussed above, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.

Material Events

On May 10, 2011 we completed an offering of our common stock through MDB Capital Group LLC acting as our placement agent. We offered a total of 1,090,683 shares at a price of $2.75 per share. In consideration for its services, the placement agent received (i) 109,091 shares of our common stock and a five year warrant to purchase 109,091 shares of our common stock at an exercise price of $2.75 per share and (ii) cash in the amount of $30,000 to offset the placement agent’s expenses incurred in connection with the offering. We also retained MDB Capital Group LLC as an intellectual property and business strategy consultant. For these services, we issued to MDB Capital Group LLC 363,636 shares of common stock valued at $1,000,000. The securities offered were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth the names and ages of all of our directors and executive officers. Our officers are appointed by, and serve at the pleasure of, the board of directors.

Name	Age	Position
Richard F. Rutkowski	55	President, Chief Executive Officer and Chairman of the Board of Directors
Joseph Colannino	54	Chief Technology Officer
James N. Harmon	51	Chief Financial Officer
Geoffrey D. Osler	46	Chief Marketing Officer
Andrew U. Lee	60	Senior Vice President of Business Development
David B. Goodson	68	Chief Science Officer and Director
Stephen E. Pirnat	60	Director
Scott P. Isaacson	63	Director
Lon E. Bell, Ph.D.	70	Director

Biographical information with respect to our executive officers and directors is provided below. There are no family relationships between any of our executive officers or directors.

Richard F. Rutkowski, President, Chief Executive Officer, and Chairman of the Board of Directors

Mr. Rutkowski became a director of our Company in January 2008 and was appointed as Chairman and Chief Executive Officer in February 2008. Prior to joining ClearSign, Mr. Rutkowski was a co-founder of Microvision, Inc., a leader in optical beam-scanning display and imaging systems and served as the company’s Chief Executive Ofﬁcer and Director from September 1995 until January 2006. In January 2000, Mr. Rutkowski co-founded Lumera Corporation, a leading developer of a broad range of devices used in optical communications, biomedical analysis and broadband imaging that are based on the company’s proprietary nano-materials and electro-optic polymers. Mr. Rutkowski served as Vice-Chairman of the Lumera’s board from January 2000 until May 2006. In May 2006, Mr. Rutkowski co-founded Ormont, LLC, a management consultancy specializing in advising companies on financing and marketing strategy, where he served as a partner from May 2006 until February, 2008. From November 1992 to May 1994, Mr. Rutkowski served as Executive Vice President of Medialink Technologies Corporation (formerly Lone Wolf Corporation), a developer of high-speed digital networking technology for multimedia applications in audio-video computing, consumer electronics, and telecommunications. From February 1990 to April 1995, Mr. Rutkowski was a principal of Rutkowski, Erickson, Scott, a business development consulting ﬁrm. Mr. Rutkowski has acquired substantial domain expertise in electronic displays, information visualization and visual interface design, mobile computing, MEMS technology and optical MEMS technology, nano-materials and electro-optic materials technology, electro-optical component and systems technology and communications network protocols. Mr. Rutkowski has served several times as an invited member of National Technology Transfer Center’s Advisory Panel. He has frequently been featured as a speaker or panelist at technology and business conferences, and has appeared on local and national television numerous times. He was honored as a Technology Pioneer at the World Economic Forum in 2002 and has been acknowledged by the University of Washington for his support of the University’s research efforts. Mr. Rutkowski attended the University of Chicago and has extensive experience in starting and building technology businesses. For these reasons our board of directors believes that Mr. Rutkowski’s membership on our board of directors is of high value to the Company.

Joseph Colannino, Chief Technology Officer

Mr. Colannino became Chief Technology Officer of our Company in May 2011. Prior to joining ClearSign, from December 2006 to February 2011, Mr. Colannino was director of Research and Development at John Zink Company, LLC, a wholly owned subsidiary of Koch Industries and a worldwide leader in the supply of combustion and air pollution control equipment to the energy industry. During that time his responsibilities were expanded to lead global R&D efforts. As head of global R&D, his responsibilities included management of intellectual property, oversight of John Zink’s testing facility and of the John Zink Institute, which trains more than 1,000 students per year in various aspects of combustion. From November, 2005 to November 2006, Mr. Colannino headed knowledge management efforts at John Zink. Mr. Colannino has more than 25 years in the combustion industry and has authored or contributed to several books including Industrial Combustion Testing , The Air Pollution Control Guide , The John Zink Combustion Handbook and Modeling of Combustion Systems – A Practical Approach . He is a registered professional engineer and has written and reviewed problems appearing on the NCEES professional engineering exam, given in all 50 states for professional engineering licensure. Mr. Colannino’s areas of expertise include R&D management, combustion, pollutant formation and control, and statistical experimental design. Past and present memberships include the American Institute of Chemical Engineers, the American Chemical Society, the Air and Waste Management Association, the American Statistical Association and the National Association of Professional Engineers. Mr. Colannino received a BSc. from the California Polytechnic University in Pomona, and a Masters in Knowledge Management from the University of Oklahoma.

James N. Harmon, Chief Financial Officer

Mr. Harmon was appointed as our Chief Financial Officer in June 2011. Prior to joining ClearSign, Mr. Harmon was Chief Financial Officer of Sahale Snacks, Inc., a highly-differentiated premium snack manufacturer located in Seattle, from September 2010. He was responsible for all financial matters including acquisition of commodities. From November 2008 to September 2010, Mr. Harmon was a financial and real estate consultant for various businesses, including Sahale Snacks. From January 1992 to November 2008, Mr. Harmon held senior management positions and was Treasurer and Secretary of Sabey Corporation, a Seattle-based real estate and investment company that is among the nation’s largest data center landlords for tenants such as Microsoft and JP Morgan Chase. Mr. Harmon was Chief Financial Officer from January 1992 to August 2003 and Senior Vice President-Investments from September 2003 to November 2008. Mr. Harmon was responsible for all financial matters including transactions and financings for sizable commercial properties and both publicly and privately traded securities. Prior to his hiring, Mr. Harmon assisted Sabey Corporation in the initial public offering of one of its affiliates, Sun Sportswear, Inc. Previously, Mr. Harmon was a certified public accountant with Price Waterhouse from 1982 to 1989 where he became an Audit Manager specializing in the manufacturing and retail industries, including SEC registrants filing under the 1933 and 1934 Acts. Mr. Harmon received a B.A. in Business Administration/Accounting from Washington State University.

Geoffrey D. Osler, Chief Marketing Officer

Mr. Osler was appointed as our Chief Marketing Officer in February 2008. He also served as a director from February 2008 until February 2011. In May 2006, Mr. Osler co-founded Ormont, LLC, a management consultancy specializing in advising companies on financing and marketing strategy, where he served as a partner from May 2006 until February 2008. From May 2007 until December 2009, he served as Vice President of Marketing and as a Director of Syngence Corporation, a Dallas, Texas based electronic discovery software company. From February 1999 until March 2006, he was Group Marketing Manager, Internet Products, and later Director of Partner Marketing for Adobe Systems, Inc. where he was responsible for worldwide programs with membership in excess of 10,000 developers, service providers, and certified training centers. From 1996 to 1999, Mr. Osler headed marketing and business development for Baseview Products, Inc., a division of Harris Corporation and a major systems integrator in the newspaper industry. Mr. Osler has managed marketing teams in Europe, Asia and the Middle East in addition to the United States and Canada. Mr. Osler was co-founder and marketing director of Crosstree Systems Inc., the developer of Target, one of the world’s ﬁrst daily, industry-specific email news services. In 1994 at Science and Information Technology, Ltd., Mr. Osler was part of the team that created MAPS, one of the ﬁrst software systems to enable web-based image searching and content management. Mr. Osler concluded agreements placing MAPS at some of the world’s leading publications including The Times of London, The Daily Mirror and The Economist. From 1992 to 1994, at the beginning of the shift to a free market, Mr. Osler worked for Apple Computer in Warsaw, Poland with responsibility for product localization and securing exclusive distribution agreements with leading U.S. software and hardware manufacturers. Mr. Osler has a B.A. in Political Science and Journalism from the University of Western Ontario.

Andrew U. Lee, Senior Vice President of Business Development

Mr. Lee was appointed as our Senior Vice President, Business Development in May 2011. Prior to joining ClearSign, he was Senior Vice President, Sales and Business Development for Adapx, Inc. from July 2008 to May 2011. At Adapx, Mr. Lee had overall P&L and revenue responsibility, assisted with three product launches, and developed OEM relationships in the medical, commercial and defense industries. From November 2006 to May 2008, Mr. Lee was Senior Vice President, Sales for Zonar Systems, Inc., with overall revenue responsibility. From January 2006 to November 2006, he was a partner with Paladin Partners, an early stage business consulting enterprise. From June 1999 to January 2006, Mr. Lee was Vice President, Sales of Microvision, Inc., where he developed numerous channel partners in the US, Europe and Asia. During his tenure, Microvision was awarded the “Fast 50” designation from Deloitte & Touche for sales growth in Washington State. Mr. Lee has extensive experience in the aerospace, defence, retail, transportation and medical sectors and expertise in sales force leadership, and the formation of strategic alliances and contract negotiation. Mr. Lee has a B.A. in Political Science from the University of California, Berkeley.

David B. Goodson, Chief Science Officer and Director

Mr. Goodson became a director of our Company in January 2008 and was appointed as Chief Science Officer in February 2008. Mr. Goodson is also Executive Director of the Alternative Energy Resources Alliance (AERA), a Washington State non-profit foundation dedicated to the development of new forms of electromechanical conversion technology. Mr. Goodson founded AERA in 2002. During his career, Mr. Goodson has led the development and commercialization of a diverse array of technologies including electro-optic polymer materials, advanced combustion systems and fermentation technologies. He has also been a technology advisor and consultant to several other companies in related areas. As founder of Air Pollution Systems, Inc., Mr. Goodson invented and co-developed with the Electric Power Research Institute a novel pre-charger device to increase the effectiveness of electrostatic precipitators. The company was acquired in 1978 by the Linde division of Union Carbide and the technology remains an industry standard in the reduction of particulate emissions resulting from industrial-scale combustion. Earlier in his career, Mr. Goodson was a senior manager at Boeing Aerospace where he was responsible for development efforts at subcontractors such as Bendix, Sperry and IBM, and was granted the US Government’s highest level of security clearance for his work in the defense arena. Mr. Goodson’s scientiﬁc interests began in high school when he collaborated with James Watson and Francis Crick, co-discoverers of the structure of DNA, to place at the top of the International Science Fair. He was also awarded the Patriotic Civilian Service Award by the United States Army for work of value to the Army. Mr. Goodson’s numerous US patents include US 4,110,086, US 4,675,029, US 9/760,214 and US 5,702,244. In light of Mr. Goodson’s extensive science background and his experience in developing and successfully commercializing new technologies, we believe that his membership on our board of directors is of high value to the Company.

Stephen E. Pirnat, Director

Mr. Pirnat became a director of our Company in November 2011. Since September 2009, Mr. Pirnat has held the position of President of Quest Integrated Inc., a technology incubator and boutique private equity firm, and the President & CEO of the newly formed Quest Metrology Group LLC. From February 2000 to September 2009, Mr. Pirnat served as President & CEO of the John Zink Company, LLC, a wholly owned subsidiary of Koch Industries and a worldwide leader in the supply of combustion and air pollution control equipment to the energy industry. In that former capacity, Mr. Pirnat was a Board member of Quest Integrity Group. Mr. Pirnat, a long-time executive with Ingersoll-Rand and Ingersoll-Dresser Corporation, went to John Zink from a previous post as President & CEO of Pangborn Corporation, a leading supplier of surface preparation equipment and associated services to the automotive and aircraft industries. Mr. Pirnat began his career as an applications engineer with the Pump and Condenser Group of Ingersoll-Rand, where he advanced through a variety of sales, marketing, engineering, and operational positions with that company and its successor, Ingersoll-Dresser. These positions included Vice President of Ingersoll-Rand’s Standard Products Division, Vice President of Marketing for Ingersoll-Dresser Pumps, President of Ingersoll-Dresser Pumps Canada Ltd., and Vice President & General Manager of Ingersoll-Rand Engineered Equipment Division. Mr. Pirnat holds a BSc. in Mechanical Engineering from the New Jersey Institute of Technology. Mr. Pirnat’s technological expertise and business experience in the combustion and air pollution control industry led us to conclude that he would be a valuable addition to our board of directors.

Scott P. Isaacson, Director

Mr. Isaacson became a director of our Company in November 2011. He has over 33 years of experience in advising and representing businesses in managing their programs related to environmental, legal and regulatory risk issues. Since 2000, he has held the position as Vice President with California Portland Cement Company where he oversees the environmental programs for this construction materials manufacturing company with operations located in the Western United States. Mr. Isaacson is an experienced legal expert on a broad scope of environmental compliance requirements for major federal environmental laws and programs as well as related state programs. He has been the principal advising attorney on environmental issues for complex, multi-program projects to include remediation of federal and state cleanup sites, development projects, industrial air emissions, and, more recently, federal and state actions to regulate greenhouse gases. In his prior position as a partner with the Seattle law firm of Bogle and Gates, he advised clients on federal, state and local environmental compliance, land use, government contractor liability and exposure to toxic or hazardous materials as well as issues related to individual and corporate civil and criminal liability under environmental laws. Clients included local governments and a number of large and mid-size businesses and companies involved in manufacturing, production, and service. Previous to that , he was the Chief of the Environmental Law Division at the Department of the Army and the senior attorney responsible for advising commands throughout the United States on environmental policy and compliance issues arising from Army activities, and handled or supervised complex and significant environmental actions that were under the scrutiny of federal, state, and local regulators as well as interested private environmental organizations. Mr. Isaacson holds a BSc. from the U.S. Military Academy at West Point and a Juris Doctor from the University of Washington. He is a member of the bar for United States Supreme Court, the Supreme Court of the State of Washington, and the District of Columbia Court of Appeals. Mr. Isaacson’s business experience and legal expertise in the field of environmental compliance led us to conclude that he would be a valuable addition to our board of directors.

Lon E. Bell, Ph.D., Director

Dr. Bell became a director of our Company in November 2011. He founded Amerigon Inc. in 1991 and has been a Consultant to Amerigon since December 2010. Dr. Bell has served many roles in Amerigon, Inc., including Chief Technology Officer until December 2010, Director of Technology until 2000, Chairman and Chief Executive Officer until 1999, and President until 1997. Dr. Bell served as the Chief Executive Officer and President of BSST LLC, a subsidiary of Amerigon from September 2000 to December 2010. He has served as a Director of Amerigon since 1991. Previously, Dr. Bell co-founded Technar Incorporated, which developed and manufactured automotive components, and served as Technar’s Chairman and President until selling majority ownership to TRW Inc. in 1986. Dr. Bell continued managing Technar, then known as TRW Technar, as its President until 1991. He co-founded Mahindra REVA Electric Vehicle Co Ltd. in 1994 and serves as its Vice Chairman. He has been a Member of Scientific Advisory Board of Nextreme Thermal Solutions, Inc. since 2006. Dr. Bell is a leading expert in the mass production of thermoelectric products. He has authored more than 20 publications in the areas of thermodynamics of thermoelectric systems, automotive crash sensors, and other electronic and electromechanical devices. Five of his inventions have gone into mass production and dominated their target markets. Dr. Bell received a BSc. in Mathematics, an MSc. in Rocket Propulsion, and a Ph.D. in Mechanical Engineering from the California Institute of Technology. Dr. Bell’s recognized technological expertise in the field of thermodynamics and his demonstrated ability to commercialize inventions led us to conclude that he would be a valuable addition to our board of directors.

Director Independence

Our board of directors has unanimously determined that Stephen E. Pirnat, Scott P. Isaacson and Lon E. Bell, Ph.D., comprising a majority of our board of directors, are “independent directors” as such term is defined by Nasdaq Marketplace Rule 5605(a)(2). We presently do not have any committees relating to our board of directors, since we have thus far not been required to establish and maintain committees. However, in accordance with Nasdaq requirements, we intend to establish an audit committee and a compensation committee by the end of 2011.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K, except that on August 25, 2008 Mr. Osler filed for personal bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, and his reorganization plan was confirmed on February 5, 2010 with an effective date of March 15, 2010. Mr. Osler’s case was reopened in February 2011 in order to modify the reorganization plan, and the modified plan was confirmed on April 27, 2011. The Company does not believe the foregoing impacts Mr. Osler’s service to the Company.

Technical Advisors

We have a group of technical advisors comprised of individuals with expertise which we call upon for assistance and advice in designing, developing, and marketing our technology. Our technical advisors are consultants who are not members of our board of directors and are not vested with any decision making authority with respect to the Company. The following table sets forth the names and ages of our advisors as of September 30, 2011, and biographical information about each member follow.

Name	Age	Position
Thomas S. Hartwick, Ph.D.	77	Advisor
Robert E. Breidenthal, Ph.D.	60	Advisor
Uri Shumlak, Ph.D.	46	Advisor
John C. Kramlich, Ph.D.	60	Advisor
Swapna Hiray	39	Advisor

Thomas S. Hartwick, Ph.D., Advisor

Dr. Hartwick became an Advisor of our Company in January 2008. He has more than 45 years of experience in general management in the US aerospace industry, leading large organizations in research and development, technology transfer/insertion and mainstream business management supporting all segments of the U.S. government. From 1992 to 1995, Dr. Hartwick led the Satellite Payload Program and System Design Group for TRW. Previously, he was Strategic Plan Manager for Hughes Aircraft Company. Dr. Hartwick’s general management responsibilities have included electro-optic R&D laboratories, chip R&D and manufacturing, and corporate strategic planning. His areas of published academic research include sensors and imaging, optical communications, magnetic materials, microwave devices, molecular lasers, far-infrared lasers, and laser heterodyne radiometry. Appearing regularly as an expert at various Congressional hearings, Dr. Hartwick currently holds Top Secret (Level III) security clearance with the U.S. Government. Dr. Hartwick serves on a number of academic, government, and industrial boards in a technical management role. He is past Chairman (Emeritus) of the Advisory Group on Electron Devices for the Office of the Secretary of Defense and Chair of National Research Council committees on Aviation Security Research and Development. He is active with the Defense Science Board and General Accounting Office, and has served for more than two decades with the National Technology Transfer Center. Dr. Hartwick serves on three corporate boards and is Vice Chair of the Board on Manufacturing and Engineering Design for the National Academy of Science and Engineering. He served on the board of directors of Aculight Corporation, which was acquired in September 2008 by Lockheed Martin Corporation. Dr. Hartwick received a BSc. in Physics from the University of Illinois, a MSc. in physics from the University of California, Los Angeles and a Ph.D. in electrical engineering from the University of Southern California.

Robert E. Breidenthal, Ph.D., Advisor

Dr. Breidenthal became anAdvisor of our Company in November 2009. A professor at the University of Washington’s Department of Aeronautics and Astronautics since 1980, Dr. Breidenthal is a recognized expert in turbulent entrainment, including the high-speed mixing of fuel and oxidant and the high-velocity fluid flow that power jet engines and turbine generators. He has led projects for companies including The Boeing Company, CH2M Hill, ARCO Alaska and PACCAR, and has received research support from the Air Force Office of Scientific Research, the National Science Foundation, NASA and ASEA Brown Boveri, Ltd., of Switzerland. Dr. Breidenthal has published numerous papers for major scientific journals on subjects including ignition and flame propagation process, turbulent mixing, flow visualization, mixing and chemical reaction, elements of entrainment, and addressing complexity in laboratory experiments. Journals in which his papers have appeared include the American Institute of Aeronautics and Astronautics, Physics of Fluids, Journal of the Atmospheric Sciences, and the Journal of the Royal Meteorological Society. He has presented papers at the Symposium of Turbulence and Diffusion, the International Conference on Lasers and Applications, and the International Conference on Fluid Mechanics. Among several issued patents, Dr. Breidenthal is the inventor of a method of improving fuel and air mixing in high-pressure combustion systems, which describes an approach to simplify mechanical design while at the same time reducing emissions, improving fuel efficiency and increasing compression ratios (horsepower). His work is also cited in numerous other US and international patents. Dr. Breidenthal received a BSc. in Aeronautical Engineering from Wichita State University, and a MSc. and Ph.D. in Aeronautics from the California Institute of Technology.

Uri Shumlak, Ph.D., Advisor

Dr. Shumlak became an Advisor of our Company in January 2010. A professor at the University of Washington’s Department of Aeronautics and Astronautics since 1994, Dr. Shumlak’s expertise includes plasma physics, innovative magnetic plasma confinement for fusion energy, electric propulsion, and theoretical and computational plasma modeling. Dr. Shumlak was the recipient of the American Institute of Aeronautics and Astronautics Abe Zarem Award of Excellence in 2003, and is a two-time recipient of the University of Washington Aeronautics and Astronautics Professor of the Year Award in 1999 and 2002. His work includes theoretical and experimental investigation of the stabilizing effect of sheared flows in magnetically confined plasmas and he has been invited to speak at numerous international conferences. Dr. Shumlak has published dozens of papers in major scientific journals, including the Journal of Computational Physics, Review of Scientific Instruments, Physical Review Letters, The Journal of Propulsion and Power and Nuclear Fusion. Dr. Shumlak has been awarded several US patents for his invention of a Plasma-Based EUV Light Source. Professor Shumlak received a BSc. from Texas A&M University and a Ph.D. in Nuclear Engineering from the University of California, Berkeley.

John C. Kramlich, Ph.D., Advisor

Dr. Kramlich became an Advisor of our Company in January 2010. Dr. Kramlich has been a Professor of Mechanical Engineering and the Associate Chair for Academics at the University of Washington’s College of Engineering since 1992. His principal technical interests include combustion, with an emphasis on pollutant formation and control, and the numerical and theoretical analysis of turbulent reacting flows involving combustion. Earlier in his career, he was vice president, process research and development at the Energy and Environmental Research Corporation, where he led research into the development of pollution reduction techniques for large fossil fuel-fired energy systems. Dr. Kramlich has also worked on a number of consulting projects involving energy systems at power plants, oil refineries and biomass conversion plants. Dr. Kramlich’s research interests include mechanisms of resperable ash generation from coal and biomass fuels, development of an acoustically-enhanced afterburner for shipboard incineration applications, development of a turbulence / chemistry performance model for natural gas reburning and NO X control and flame liftoff and stability in microgravity environments. He has published in numerous scientific journals, including Nature for an advanced selective reduction process for NO X control, Geophysical Research Letters for an artifact in the measurement of N 2 O from combustion sources and in Fuel Processing Technology for a chemical kinetic model for the homogeneous oxidation of mercury by chlorine species. In 1996, Dr. Kramlich received the Environmental Protection Agency’s Scientific and Technological Achievement Award for his work on Nitrous Oxide Behavior in the Atmosphere, and in Combustion and Industrial Systems. Dr. Kramlich’s work at the University of Washington has been supported by the Environmental Protection Agency, the Department of Energy, the National Science Foundation, NASA, the Gas Research Institute, and various industrial organizations. Dr. Kramlich received his Ph.D. in Engineering Science from Washington State University.

Swapna Hiray, Advisor

Swapna Hiray became an Advisor of our Company in April 2008. Ms. Hiray is Senior Business Development Analyst at Intellectual Ventures in Bellevue, Washington, a position she has held since June 2008. Previously, Ms. Hiray was a member of the technology development group at Pratt & Whitney, a division of United Technologies Corporation from April 2004. Ms. Hiray directed the marketing of Pratt & Whitney’s Pulse Detonation Engine (PDE) technology, a new product for the removal of ash deposition from utility and other industrial boilers. In this capacity, she worked extensively with customers including American Electric Power (AEP). Prior to Pratt & Whitney, from 2001 to 2004, Ms. Hiray was responsible for managing and marketing of new innovations at University of Washington Center for Commercialization. There, she collaborated with the faculty and administration to establish the technical merits of new innovations and identify potential applications. Ms. Hiray has an undergraduate degree in Engineering. She obtained her MBA from the University of Washington Foster School of Business.

EXECUTIVE COMPENSATION

The table below summarizes the total compensation paid to or earned by our Chief Executive Officer and our Chief Marketing Officer, who during 2010 and 2009 was also our principal financial officer.

Summary Compensation Table

Name and Principal Position	Year	Salary			Bonus	Option Awards		Non-Equity Incentive Plan Compensation	Nonqualified Deferred Compensation Earnings	All Other Compensation		Total

Richard F. Rutkowski	2010	$	131,250	(1)	-		-	-	-		-	$131,250
Chief Executive Officer, President (Principal Executive Officer) and Director	2009	150,000			-	-		-	-	-		150,000


Geoffrey D. Osler (3)	2010	105,000		(2)	-	-		-	-	-		105,000
Chief Marketing Officer	2009	120,000			-	-		-	-	-		120,000

(1)	Of this amount, $54,851 was paid in cash, with the remainder accrued as unpaid compensation. Of this amount, $52,381 was paid in April 2011 and the remainder was paid in September 2011.

(2)	Of this amount, $43,441 was paid in cash, with the remainder accrued as unpaid compensation. Of this amount, $38,095 was paid in April 2011 and the remainder was paid in September 2011.

(3)	Mr. Osler served as a director on our board, without compensation, from February 2008 through February 2011.

Current and Future Compensation Practices

Currently, our compensation program consists only of the payment of base salaries with cash. During 2011, we implemented a compensation program for our employees consisting of base salary and awards of stock options or restricted stock. We believe that a combination of cash, options for the purchase of common stock, or grants of restricted stock will allow us to attract and retain the services of the individuals who will help us achieve our business objectives, thereby increasing value for our shareholders. We believe that share ownership by our employees is an effective method to deliver superior shareholder returns by increasing the alignment between the interests of our employees and our shareholders. No employee will be required to own common stock in our Company.

In setting the compensation for our officers, we look primarily at the person’s responsibilities, at salaries paid to others in businesses similar to ours, at the person’s experience and education and at our ability to replace the individual. We expect the base salaries of our executive officers to remain relatively constant unless the person’s responsibilities are materially changed. During 2009 and 2010, because we had limited cash resources, we periodically accrued salaries for our executive officers. As of September 30, 2011, our executive officers were paid in cash all accrued wages due to them through that date. It is possible that we will again be unable to pay these salaries in a timely manner until we begin to generate cash from sales of our products or we arrange additional financing in the form of equity sales or debt instruments.

We also expect that we may pay bonuses in the future to reward exceptional performance or for the achievement of agreed upon targets, either by the individual or by the Company.

Employment Agreements

We do not currently have any written employment agreements with any of our other executive officers.

Outstanding Equity Awards at December 31, 2010

There were no awards of equity securities granted to our executive officers during the year ended December 31, 2010.

Compensation Committee Interlocks and Insider Participation

We do not currently have a compensation committee. Each member of the board of directors, including our Chief Executive Officer and Chief Science Officer, participated during the year ended December 31, 2010 in deliberations concerning the compensation of our executive officers.

Director Compensation

Members of our board of directors do not receive compensation for their service as directors at this time. However, commencing on the effective date of the registration statement of which this prospectus forms a part, each of the independent directors comprising Messrs. Pirnat and Isaacson and Dr. Bell will receive each calendar year $50,000 in cash and $50,000 of stock or stock option grants in accordance with the Company’s 2011 Equity Incentive Plan. There was no compensation paid to our directors for their services as directors during the year ended December 31, 2010. All directors are reimbursed ordinary and reasonable expenses incurred in exercising their responsibilities.

Indemnification

See the section of this prospectus titled “Indemnification of Directors and Executive Officers”.

DESCRIPTION OF CAPITAL STOCK

The following is a brief description of our capital stock. This summary does not purport to be complete in all respects. This description is subject to and qualified entirely by the terms of our Articles of Incorporation, as amended and our bylaws, copies of which have been filed with the SEC and are also available upon request from us.

Authorized Capitalization

We have 52,000,000 shares of capital stock authorized under our Articles of Incorporation, consisting of 50,000,000 shares of common stock and 2,000,000 shares of preferred stock. As of September 30, 2011, we had 4,118,114 shares of common stock outstanding and no shares of preferred stock outstanding. Our authorized but unissued shares of common stock and preferred stock are available for issuance without further action by our shareholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. If the approval of our shareholders is not so required, our board of directors may determine not to seek shareholder approval.

Common Stock

Holders of our common stock are entitled to such dividends as may be declared by our board of directors out of funds legally available for such purpose, subject to any preferential dividend rights of any then outstanding preferred stock. The shares of common stock are neither redeemable nor convertible. Holders of common stock have no preemptive or subscription rights to purchase any of our securities.

Each holder of our common stock is entitled to one vote for each such share outstanding in the holder’s name. No holder of common stock is entitled to cumulate votes in voting for directors.

In the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive pro rata our assets which are legally available for distribution, after payments of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then outstanding. All of the outstanding shares of our common stock are fully paid and non-assessable. The shares of common stock offered by this prospectus will also be fully paid and non-assessable.

There is no public market for our common stock. We intend to apply for listing of our common stock on the Nasdaq Capital Market, and listing on this exchange is a condition to the consummation of this offering.

Preferred Stock

Our Articles of Incorporation permits us to issue up to 2,000,000 shares of preferred stock in one or more series and with rights and preferences that may be fixed or designated by our board of directors without any further action by our shareholders. We currently have no shares of preferred stock outstanding.

Subject to the limitations prescribed in our Articles of Incorporation and under Washington law, our Articles of Incorporation authorize the board of directors, from time to time by resolution and without further shareholder action, to provide for the issuance of shares of preferred stock, in one or more series, and to fix the designation, powers, preferences and other rights of the shares and to fix the qualifications, limitations and restrictions thereof. The issuance of preferred stock could adversely affect the rights of holders of our common stock, including with respect to voting, dividends and liquidation and, by issuing shares of preferred stock with certain voting, conversion and/or redemption rights. Such issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control. Preferred stock could be issued quickly with terms calculated to delay or prevent a change in control of our Company or to make removal of management more difficult. Additionally, the issuance of preferred stock may decrease the market price of our common stock.

Stock Options and Warrants

As of September 30, 2011, the following were outstanding:

●

173,091 shares of our common stock reserved for issuance under various outstanding warrant agreements, at a weighted average exercise price of $2.57 per share; and

●

500,000 shares of our common stock reserved for future issuance under our 2011 Equity Incentive Plan, of which 290,000 shares are reserved for issuance under various outstanding option agreements at a weighted average exercise price of $2.75 per share and 100,000 are reserved for restricted stock grants.

Voting Agreement

On March 4, 2008, David Goodson, the BD and DBG Living Trust (formerly known as the B. D. and D. G. Goodson Trust), The Alternative Energy Resource Alliance (a former shareholder controlled by David Goodson), Geoffrey Osler, Richard Rutkowski, The Rutkowski Family Trust I (formerly known as Trinity West Trust I) and The Rutkowski Family Trust II (formerly known as Trinity West Trust II) (collectively, the “Rutkowski Family Trusts”) entered into a Voting Agreement. Pursuant to the terms of the Voting Agreement, each party to it agrees to vote his or its voting stock for the designee selected by the following:

●

the group made up of David Goodson, the BD and DBG Living Trust and Alternative Energy Resource Alliance is entitled to designate one member of the board of directors, so long as in the aggregate they hold 15% of the outstanding capital stock;

●

Mr. Osler is entitled to designate one member of the board of directors so long as he holds 5% of the outstanding common stock; and

●

Mr. Rutkowski and the Rutkowski Family Trusts is entitled to designate one member of the board of directors so long as in the aggregate they hold 7.5% of the outstanding common stock.

When ownership of the designating person or designating group drops below the required threshold, the right to designate a director terminates. No designated director can be removed unless the removal is directed or approved by the designating person or designating group. Any vacancy on the board of directors caused by the resignation, death, removal or disqualification of a designated director may be filled by the person or group responsible for his designation. The parties also agreed not to vote to change the number of directors so long as the Voting Agreement is in effect and not to revoke the Voting Agreement. The Voting Agreement will terminate upon the consummation of the first underwritten public offering of our common stock (other than for a sale of securities to be issued to our employees or to be issued in a transaction which is subject to Rule 145 promulgated under the Securities Act of 1933, as amended), by agreement of the parties (although if the designating person or designating group does not own at least 10% of the outstanding common stock, the remaining parties are not required to obtain the consent of that designating person or designating group to terminate the Voting Agreement) or upon the consummation of a change of control, as that term is defined in the Voting Agreement.

Founders Agreement

On April 14, 2008 the Company entered into a Founders Agreement with David Goodson, BD and DBG Living Trust, The Alternative Energy Resource Alliance (a former shareholder controlled by David Goodson), Geoff Osler, Richard Rutkowski, The Rutkowski Family Trust I and The Rutkowski Family Trust II (individually a “Shareholder” and collectively the “Shareholders”). For purposes of this discussion, David Goodson, BD and DBG Living Trust and The Alternative Energy Resource Alliance form a Shareholder group and Richard Rutkowski, The Rutkowski Family Trust I and The Rutkowski Family Trust II form a Shareholder group. Pursuant to the Founders Agreement, before a Shareholder may voluntarily transfer his or its shares of common stock, or before a Shareholder’s shares of common stock can be transferred involuntarily, the non-transferring Shareholders will have a right of first refusal to purchase all or any portion of the transferred shares and the Company will have a right of first refusal to purchase any shares not purchased by the non-transferring Shareholders. The transferring Shareholder must give written notice to the non-transferring Shareholders of the terms of the proposed transfer. The non-transferring Shareholders will have a period of 10 business days to elect to purchase all or any portion of their respective pro rata shares at the same price and subject to the same terms and conditions as described in the notice. If the non-transferring Shareholders fail to purchase all of the shares being transferred, the transferring Shareholder must provide notice to the Company of the number of shares available for purchase. The Company will have a period of 15 business days to exercise its right of first refusal and must complete the purchase within 30 days of receiving the notice. If the transfer is by pledge, gift, in-kind transfer or involuntary transfer, then the non-transferring Shareholders and the Company may purchase the shares at fair market value, which will be determined in good faith by the Company’s board of directors. Like the Voting Agreement, the Founders Agreement will terminate upon the consummation of the first underwritten public offering of our common stock (other than for a sale of securities to be issued to our employees or to be issued in a transaction which is subject to Rule 145 promulgated under the Securities Act of 1933, as amended), by agreement of the parties (although if a Shareholder or Shareholder group does not own at least 10% of the outstanding common stock, the remaining parties are not required to obtain the consent of that Shareholder or Shareholder group to terminate the Founders Agreement), upon the consummation of a change of control, as that term is defined in the Founders Agreement or when the shares of common stock owned collectively by the Shareholders constitutes less than 20% of the Company’s outstanding capital stock.

Anti-Takeover Effects of Certain Provisions of Washington Law and Our Charter Documents

The following is a summary of certain provisions of Washington law, our Articles of Incorporation and our bylaws. This summary does not purport to be complete and is qualified in its entirety by reference to the corporate law of Washington and our Articles of Incorporation and bylaws.

Effect of Washington Anti-Takeover Statute. Assuming that the registration statement of which this prospectus is a part is declared effective, we will be subject to Section 23B.19 of the Washington Revised Statutes, an anti-takeover law (the “Anti-Takeover Statute”). In general, the Anti-Takeover Statute prohibits a target corporation from entering into a significant business transaction with an acquiring person for a period of five years following the acquiring person’s share acquisition unless

the share acquisition is exempt because it was inadvertently made and the acquiring person divests himself of a sufficient amount of the voting shares so that he is no longer the beneficial owner, directly or indirectly, of 10% or more of the outstanding voting shares of the target corporation and would not have, during the five year period prior to the announcement date of the significant business transaction been an acquiring person but for the inadvertent acquisition,

the significant business transaction or the purchase of shares made by the acquiring person is approved prior to the acquiring person’s share acquisition time by a majority of the members of the board of directors of the target corporation; or

At or subsequent to the acquiring person’s share acquisition time, the significant business transaction is approved by a majority of the members of the board of directors of the target corporation and approved at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting shares, except shares beneficially owned by or under the voting control of the acquiring person.

The Anti-Takeover Statute generally defines an “acquiring person” as a person or group of persons, other than the target corporation or a subsidiary of the target corporation, who beneficially owns 10% or more of the outstanding voting shares of the target corporation. The term “acquiring person” does not include a person who (a) beneficially owned 10% or more of the outstanding voting shares of the target corporation on March 23, 1988; (b) acquires its shares by gift, inheritance, or in a transaction in which no consideration is exchanged; (c) exceeds the 10% threshold as a result of action taken solely by the target corporation, such as redemption of shares, unless that person, by his own action, acquires additional shares of the target corporation; (d) beneficially was the owner of 10% or more of the outstanding voting shares prior to the time the target corporation had a class of voting shares registered with the SEC pursuant to section 12 or 15 of the Securities Exchange Act; or (e) beneficially was the owner of 10% or more of the outstanding voting shares prior to the time the target corporation amended its articles of incorporation to provide that the corporation shall be subject to the provisions of this chapter.

The Anti-Takeover Statute defines a “significant business transaction” as:

(a)

A merger, share exchange, or consolidation of a target corporation or a subsidiary of a target corporation with (i) an acquiring person, or (ii) any other domestic or foreign corporation which is, or after the merger, share exchange, or consolidation would be, an affiliate or associate of the acquiring person;

(b)

A sale, lease, exchange, mortgage, pledge, transfer, or other disposition or encumbrance, whether in one transaction or a series of transactions, to or with an acquiring person or an affiliate or associate of an acquiring person of assets of a target corporation or a subsidiary of a target corporation (i) having an aggregate market value equal to 5% or more of the aggregate market value of all the assets, determined on a consolidated basis, of the target corporation, (ii) having an aggregate market value equal to 5% or more of the aggregate market value of all the outstanding shares of the target corporation, or (iii) representing 5% or more of the earning power or net income, determined on a consolidated basis, of the target corporation;

(c)

The termination, while the corporation has an acquiring person and as a result of the acquiring person’s acquisition of 10% or more of the shares of the corporation, of 5% or more of the employees of the target corporation or its subsidiaries employed in this state, whether at one time or over the five-year period following the share acquisition time;

(d)

The issuance, transfer, or redemption by a target corporation or a subsidiary of a target corporation, whether in one transaction or a series of transactions, of shares or of options, warrants, or rights to acquire shares of a target corporation or a subsidiary of a target corporation to or beneficially owned by an acquiring person or an affiliate or associate of an acquiring person except pursuant to the exercise of warrants or rights to purchase shares offered, or a dividend, distribution, or redemption paid or made pro rata to, all shareholders or holders of options, warrants, or rights to acquire shares of the target corporation, and except for involuntary redemptions permitted by the target corporation’s charter or by the law of this state or the state of incorporation;

(e)

The liquidation or dissolution of a target corporation proposed by, or pursuant to an agreement, arrangement, or understanding, whether or not in writing, with an acquiring person or an affiliate or associate of an acquiring person;

(f)

A reclassification of securities, including, without limitation, any shares split, shares dividend, or other distribution of shares in respect of stock, or any reverse shares split, or recapitalization of a target corporation, or a merger or consolidation of a target corporation with a subsidiary of the target corporation, or any other transaction, whether or not with or into or otherwise involving an acquiring person, proposed by, or pursuant to an agreement, arrangement, or understanding, whether or not in writing, with an acquiring person or an affiliate or associate of an acquiring person, that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of a class or series of voting shares or securities convertible into voting shares of a target corporation or a subsidiary of the target corporation that is directly or indirectly owned by an acquiring person or an affiliate or associate of an acquiring person, except as a result of immaterial changes due to fractional share adjustments; or

(g)

A receipt by an acquiring person or an affiliate or associate of an acquiring person of the benefit, directly or indirectly, except proportionately as a shareholder of a target corporation, of loans, advances, guarantees, pledges, or other financial assistance or tax credits or other tax advantages provided by or through a target corporation.

Finally, the Anti-Takeover Statute defines a “target corporation” as:

(a)

Every domestic corporation, if:

(i) The corporation has a class of voting shares registered with the SEC pursuant to Section 12 or 15 of the Securities Exchange Act; or

(ii) The corporation’s articles of incorporation have been amended to provide that such a corporation shall be subject to the provisions of this chapter, if the corporation did not have a class of voting shares registered with the SEC pursuant to section 12 or 15 of the Securities Exchange Act on the effective date of that amendment; and

(b)

Every foreign corporation required to have a certificate of authority to transact business in the State of Washington if:

(i) The corporation has a class of voting shares registered with the SEC pursuant to section 12 or 15 of the Securities Exchange Act;

(ii) The corporation’s principal executive office is located in the state;

(iii) The corporation has: (A) more than 10% of its shareholders of record resident in the state; or (B) more than 10% of its shares owned of record by state residents; or (C) 1,000 or more shareholders of record resident in the state;

(iv) A majority of the corporation’s employees, together with those of its subsidiaries, are residents of the state or the corporation, together with its subsidiaries, employs more than one thousand residents of the state; and

(v) A majority of the corporation’s tangible assets, together with those of its subsidiaries, measured by market value, are located in the state or the corporation, together with its subsidiaries, has more than fifty million dollars’ worth of tangible assets located in the state.

Our Charter Documents. Our charter documents include provisions that may have the effect of discouraging, delaying or preventing a change in control or an unsolicited acquisition proposal that a shareholder might consider favorable, including a proposal that might result in the payment of a premium over the market price for the shares held by our shareholders. Certain of these provisions are summarized in the following paragraphs.

Effects of authorized but unissued common stock and blank check preferred stock. One of the effects of the existence of authorized but unissued common stock and undesignated preferred stock may be to enable our board of directors to make more difficult or to discourage an attempt to obtain control of our Company by means of a merger, tender offer, proxy contest or otherwise, and thereby to protect the continuity of management. If, in the due exercise of its fiduciary obligations, the board of directors were to determine that a takeover proposal was not in our best interest, such shares could be issued by the board of directors without shareholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover transaction by diluting the voting or other rights of the proposed acquirer or insurgent shareholder group, by putting a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent board of directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise.

In addition, our Articles of Incorporation grant our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance also may adversely affect the rights and powers, including voting rights, of those holders and may have the effect of delaying, deterring or preventing a change in control of our Company.

Cumulative Voting. Our Articles of Incorporation do not provide for cumulative voting in the election of directors which would allow holders of less than a majority of the stock to elect some directors.

Vacancies. Our bylaws provide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum.

Special Meeting of Shareholders. A special meeting of shareholders may only be called by our chairman of the board, the president or the board of directors or by holders of at least 25% of all the votes entitled to be cast proposed to be considered at the special meeting.

DIVIDEND POLICY AND OTHER SHAREHOLDER MATTERS

We have never paid cash dividends on our securities and we do not anticipate paying any cash dividends on our shares of common stock in the foreseeable future. We intend to retain any future earnings for reinvestment in our business. Any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as our board of directors deems relevant.

We intend to apply for the listing of our common stock on the Nasdaq Capital Market but we cannot assure you that our application will be approved. If our application is not approved, we may not complete the offering.

As of September 30, 2011, we had approximately 4,118,114 shares of common stock outstanding, held of record by approximately 77 shareholders.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

We have set forth in the following table certain information regarding our common stock beneficially owned by (i) each shareholder we know to be the beneficial owner of 5% or more of our outstanding common stock, (ii) each of our directors and named executive officers, and (iii) all executive officers and directors as a group. Generally, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which the person has the right to acquire beneficial ownership within 60 days pursuant to options, warrants, conversion privileges or similar rights. Unless otherwise indicated, ownership information is as of September 30, 2011 and is based on 4,118,114 shares of common stock outstanding on that date.

Name and Address of Beneficial Owner (1)	Amount of Beneficial Ownership (2)			Percent of Class
Directors and Officers:
Richard F. Rutkowski		225,000			5.3	%
Geoffrey D. Osler		392,900			9.5	%
David B. Goodson		-			0.0	%
James N. Harmon		100,000	(3)		2.4	%
All Directors and Executive Officers as a Group (3 persons)		717,900			17.0	%

5% Shareholders:
Howard Sprouse		832,000	(4)		20.2	%
Ronald P. Erickson		384,000	(5)		9.3	%
Integrated Surgical Systems, Inc.		363,636	(6)		8.8	%
MDB Capital Group LLC		290,819	(7)		7.0	%

(1)	The address of each officer and director is 12870 Interurban Avenue South, Seattle, Washington 98168.

(2)

Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and is generally determined by voting powers and/or investment powers with respect to securities. Unless otherwise noted, the shares of common stock listed above are owned as of September 30, 2011 and are owned of record by each individual named as beneficial owner and such individual has sole voting and dispositive power with respect to the shares of common stock owned by each of them.

(3)	These shares were awarded under the 2011 Equity Incentive Plan and are subject to repurchase by the Company at $0.0001 per share should Mr. Harmon terminate employment, or upon other related circumstances, prior to June 30, 2015.

(4)

Mr. Sprouse is the trustee of the BD and DBG Living Trust, and in such capacity he has voting and investment control over the shares owned by the trust. BD and DBG Living Trust is an irrevocable trust established for the benefit of Mr. Goodson’s child. Mr. Sprouse disclaims beneficial ownership of the shares owned by the trust.

(5)

Includes 192,000 shares of common stock held by the Rutkowski Family Trust I, and 192,000 shares of common stock held by the Rutkowski Family Trust II. Mr. Erickson is the trustee of the foregoing trusts, and in such capacity he has voting and investment control over the 192,000 shares owned by each of these trusts. Rutkowski Family Trust I and Rutkowski Family Trust II are irrevocable trusts established for the benefit of the children of Mr. Rutkowski. Mr. Erickson disclaims beneficial ownership of the shares owned by these trusts.

(6)

The address for Integrated Surgical Systems, Inc. is 401 Wilshire Boulevard, Suite 1020, Santa Monica, California 90401. Christopher A. Marlett is a CEO/director and Robert M. Levande is a Secretary/director of Integrated Surgical Systems, Inc. Mr. Marlett and Mr. Levande are also CEO and Senior Managing Director, respectively, of MDB Capital Group LLC. The board of directors of Integrated Surgical Systems, Inc., at large, holds voting and investment control over the securities held by the corporation.

(7)

The address for MDB Capital Group LLC is 401 Wilshire Boulevard, Suite 1020, Santa Monica, California 90401. This amount includes 231,365 shares of common stock and a warrant for the purchase of 59,454 shares of common stock. Christopher A. Marlett has sole voting and dispositive power with respect to these shares of common stock.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

We intend to apply for the listing of our common stock on the Nasdaq Capital Market. Therefore, our determination of the independence of directors is made using the definition of “independent” contained in the listing standards of the Nasdaq Stock Market. On the basis of information solicited from each director, the board has unanimously determined that each of Mr. Pirnat, Mr. Isaacson and Dr. Bell has no material relationship with the Company and is independent within the meaning of such rules.

SEC regulations define the related person transactions that require disclosure to include any transaction, arrangement or relationship in which the amount involved exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at year end for the last two completed fiscal years in which we were or are to be a participant and in which a related person had or will have a direct or indirect material interest. A related person is: (i) an executive officer, director or director nominee of the Company, (ii) a beneficial owner of more than 5% of our common stock, (iii) an immediate family member of an executive officer, director or director nominee or beneficial owner of more than 5% of our common stock, or (iv) any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons has a substantial ownership interest or control.

For the period from January 1, 2008 through the date of this prospectus (the “Reporting Period”), described below are certain transactions or series of transactions between us and certain related persons, other than compensation arrangements that are otherwise required to be described under “Executive Compensation.”

In conjunction with founding the Company, David B. Goodson, Geoffrey D. Osler, BD and DBG Living Trust and Richard F. Rutkowski each entered into Subscription and Contribution Agreements with us. These agreements were dated as early as March 4, 2008 and as late as April 14, 2008. Pursuant to the Subscription and Contribution Agreements, (i) Mr. Goodson transferred to us the sum of $5,200 and assigned to us certain business plans and intellectual property in exchange for 208,000 shares of our common stock, (ii) Mr. Rutkowski cancelled a loan made to us in the sum of $2,400 and assigned to us certain business plans and intellectual property in exchange for 96,000 shares of our common stock, (iii) Mr. Osler transferred to us the sum of $9,500 and assigned to us certain business plans and intellectual property in exchange for 380,000 shares of our common stock, and (iv) the BD and DBG Living Trust transferred to us the sum of $20,800 in exchange for 832,000 shares of our common stock. In his capacity as the prior trustee of The Rutkowski Family Trust I and The Rutkowski Family Trust II, Mr. Osler also transferred to us $4,800 on behalf of each trust in exchange for 192,000 shares of our common stock being issued to each trust. The trusts were created by Mr. Rutkowski for the benefit of his children.

Thomas S. Hartwick, David B. Goodson, Richard F. Rutkowski, Geoffrey D. Osler and Christopher A. Wiklof, as joint inventors, executed an assignment dated September 21, 2010 which assigned to the Company the application for United States letters patent titled “System and Apparatus for Applying an Electric Field to a Combustion Volume” and the invention covered that application.

UNDERWRITING

We are offering the shares of common stock described in this prospectus through a single underwriter. MDB Capital Group LLC is acting as sole book-running manager of the offering. We have agreed to enter into an underwriting agreement with the underwriter prior to the closing of this offering. Subject to the terms and conditions of the underwriting agreement, we will agree to sell to the underwriter, and the underwriter will agree to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus supplement, shares of common stock.

MDB Capital Group LLC owns 231,365 shares of common stock and a warrant agreement to purchase 59,454 shares of common stock. Christopher A. Marlett is CEO and Robert M. Levande is Senior Managing Director of MDB Capital Group LLC. Additionally, Mr. Marlett is a CEO/director and Mr. Levande is a Secretary/director of Integrated Surgical Systems, Inc. which owns 363,636 shares of common stock. Collectively, this constitutes 15.7% of our common stock outstanding prior to the issuance of shares in the offering.

The underwriter is committed to purchase all the common shares offered by us, other than those covered by the option to purchase additional shares described below, if they purchase any shares.

A copy of the underwriting agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.

We have been advised by the underwriter that the underwriter proposes to offer shares of our common stock directly to the public at the public offering prices set forth on the cover page of this prospectus and to certain dealers that are members of the Financial Industry Regulatory Authority (FINRA). Any securities sold by the underwriter to such securities dealers will be sold at the public offering prices less a selling concession not in excess of $_________ per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $___________ per share from the public offering price. After the public offering of the shares, the offering price and other selling terms may be changed by the underwriter.

The underwriting agreement provides that the underwriter’s obligations to purchase shares of our common stock are subject to conditions contained in the underwriting agreement.

None of our securities included in this offering may be offered or sold, directly or indirectly, nor may this prospectus and any other offering material or advertisements in connection with the offer and sales of any of our common stock be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who receive this prospectus are advised to inform themselves about and to observe any restrictions relating to this offering of our common stock and the distribution of this prospectus. This prospectus is neither an offer to sell nor a solicitation of any offer to buy any of our common stock included in this offering in any jurisdiction where that would not be permitted or legal.

The underwriter has advised us that it does not intend to confirm sales to any accounts over which they exercise discretionary authority.

Underwriting Discount and Expenses

The following table summarizes the underwriting discount and commission to be paid to the underwriter by us.

	Without Over-Allotment	With Over-Allotment
Public offering price	$	$
Underwriting discount to be paid to the underwriter by us for the common stock
Non-accountable expense allowance
Proceeds, before expenses, to us

We estimate the expenses payable by us for this offering to be $________, including the underwriting discount, or $________ if the underwriter’s over-allotment option is exercised in full.

Over-allotment Option

We have granted to the underwriter an option, exercisable not later than 45 days after the date of this prospectus, to purchase up to an additional ____________ shares of our common stock (up to 15% of the shares firmly committed in this offering) at the public offering price, less the underwriting discount, set forth on the cover page of this prospectus. The underwriter may exercise the option solely to cover over-allotments, if any, made in connection with this offering. If any additional shares of our common stock are purchased pursuant to the over-allotment option, the underwriter will offer these additional shares of our common stock on the same terms as those on which the other shares of common stock are being offered hereby.

Determination of Offering Price

There is no current market for our common stock. Our underwriter, MDB Capital Group LLC, is not obligated to make a market in our securities, and even if it chooses to make a market, can discontinue at any time without notice. Neither we nor the underwriter can provide any assurance that an active and liquid trading market in our securities will develop or, if developed, that the market will continue.

The public offering price of the shares offered by this prospectus has been determined by negotiation between us and the underwriter. Among the factors considered in determining the public offering price of the shares were:

●

our history and our prospects;

●

the industry in which we operate;

●

our past and present operating results;

●

the previous experience of our executive officers; and

●

the general condition of the securities markets at the time of this offering.

The offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the shares. That price is subject to change as a result of market conditions and other factors, and we cannot assure you that the shares can be resold at or above the public offering price.

Underwriter Warrant

We have agreed to issue to MDB Capital Group LLC a warrant to purchase shares of our common stock (up to 10% of the shares of common stock sold in this offering). This warrant is exercisable at $______ per share (100% of the price of the common stock sold in this offering), commencing on the closing date of this offering and expiring five years from the closing date of this offering. The warrant and the shares of common stock underlying the warrant have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. MDB Capital Group LLC (or permitted assignees under the Rule) will not sell, transfer, assign, pledge, or hypothecate this warrant or the securities underlying this warrant, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of this warrant or the underlying securities for a period of 180 days from the date of this prospectus.

This warrant will be valued based on the underlying shares of common stock obtainable and valuation factors appropriate at the time it is issued. We currently estimate that value to be approximately $______, based on the number of shares of common stock subject to this warrant, an offering price of the shares of $________, the exercise price of the warrant, the five year term of the warrant, a risk-free interest rate of ____% currently commensurate with that term, an expected dividend yield of ___% and estimated volatility of _____%, based on a review of our historical volatility. The initial value of this warrant will be charged to additional paid-in capital as part of this offering costs incurred.

Lock-Up Agreements

All of our officers, directors and shareholders beneficially owning 5% or more of our common stock have agreed that, for a period of 180 days from the date of the closing of the offering under this prospectus, they will not sell, contract to sell, grant any option for the sale or otherwise dispose of any of our equity securities, or any securities convertible into or exercisable or exchangeable for our equity securities, without the consent of the representative except for exercise or conversion of currently outstanding warrants, options and convertible debentures, as applicable; and exercise of options under an acceptable stock incentive plan. The underwriter may consent to an early release from the lock-up period if, in its opinion, the market for the common stock would not be adversely impacted by sales and in cases of a financial emergency of an officer, director or other shareholder. We are unaware of any officer, director or shareholder who intends to ask for consent to dispose of any of our equity securities during the relevant lock-up periods.

Indemnification

We will agree to indemnify the underwriter against certain liabilities, including certain liabilities arising under the Securities Act, and to contribute to payments that the underwriter may be required to make for these liabilities.

Stabilization, Short Positions and Penalty Bids

The underwriter may engage in over-allotment, stabilizing transactions, syndicate covering transactions, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Exchange Act.

●

Over-allotment involves sales by the underwriter of shares in excess of the number of shares the underwriter is obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by an underwriter is not greater than the number of shares that it may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriter may close out any short position by either exercising its over-allotment option and/or purchasing shares in the open market.

●

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

●

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriter will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which it may purchase shares through the over-allotment option. If an underwriter sells more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if an underwriter is concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

●

Penalty bids permit an underwriter to reclaim a selling concession from a syndicate member when the shares originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NASDAQ Capital Market and/or OTC Bulletin Board, in the case of the common stock or otherwise and, if commenced, may be discontinued at any time.

Neither we nor the underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor the underwriter make any representation that the underwriter will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Passive Market Making

In connection with the offering, the underwriter may engage in passive market making transactions in the common stock on the NASDAQ Capital Market in accordance with Rule 103 of Regulation M under the Exchange Act during the period before the commencement of offers or sales of common stock and extending through the completion of distribution. A passive market maker must display its bids at a price not in excess of the highest independent bid of the security. However, if all independent bids are lowered below the passive market maker’s bid, that bid must be lowered when specified purchase limits are exceeded.

Electronic Distribution

A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by the underwriter, or by its affiliates. In those cases, prospective investors may view offering terms online and, depending upon the underwriter, prospective investors may be allowed to place orders online. The underwriter may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriter on the same basis as other allocations.

Other than the prospectus in electronic format, the information on the underwriter’s website and any information contained in any other website maintained by the underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter and should not be relied upon by investors.

The underwriter’s compensation in connection with this offering is limited to the fees and expenses described above under “Underwriting discount and expenses.”

USE OF PROCEEDS

Based on an assumed offering price of $______ per share, we estimate the gross proceeds from the sale of __________ shares of common stock, prior to deducting underwriting discounts and commissions and the estimated offering expenses payable by us, will be approximately $__.0 million (approximately $______ million if the over-allotment option granted to the underwriter is exercised in full).

We estimate that we will receive net proceeds of $________ million, after deducting underwriting discounts and commissions and our underwriter’s expense allowance and estimated expenses of approximately $_______ 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 ________ shares of common stock to cover over-allotments, we will receive an additional $_____ million, after deducting $____ million for underwriting discounts and commissions.

We currently intend to use the net proceeds of this offering for working capital, research and development, marketing, and general corporate purposes.

The amounts that will actually be spent by us for any specific purpose may vary significantly, and will 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. In addition, we may use a portion of any net proceeds to acquire complementary products, technologies or businesses; however, we do not have any commitments for any acquisitions of this nature at this time. We will have significant discretion in the use of any net proceeds. Investors will be relying on the judgment of our management regarding the application of the proceeds of any sale of our common stock.

Pending its use, we intend to invest the net proceeds of this offering in direct and guaranteed obligations of the United States, interest-bearing, investment-grade instruments or certificates of deposit.

CAPITALIZATION

The following table sets forth our actual cash and cash equivalents and capitalization, each as of June 30, 2011:

●

on an actual basis; and

●

on a pro forma as adjusted basis to give effect to the issuance of the common stock offered hereby and the use of proceeds, as described in the section entitled “Use of Proceeds.”

You should consider this table in conjunction with our financial statements and the notes to those financial statements included in this prospectus.

	As of June 30, 2011
	(in thousands, except per share data)
	Actual			As Adjusted (1)
	(unaudited)
Cash and cash equivalents	$	2,395,913		$

Total debt	$	-		$

Shareholders’ equity:
Common stock, par value $0.0001 per share: 50,000,000 shares of common stock authorized; 3,976,214 issued as of June 30, 2011		399
Additional paid in capital		5,049,714
Accumulated deficit		(3,112,365	)
Total stockholders’ equity	$	1,937,748		$

Total capitalization	$	1,937,748		$

(1)

Assumes that $___ million of our common stock is sold in this offering at $____ per share and that the net proceeds thereof are approximately $____ million after deducting underwriting discounts and commissions and our estimated expenses. If the underwriter’s over-allotment option is exercised in full, net proceeds will increase to $_____ million.

DILUTION

Our net tangible book value as of June 30, 2011 was approximately $1.9 million, or $0.49 per share of our common stock. Our net tangible book value per share represents our total tangible assets less total liabilities divided by the number of shares of our common stock outstanding on June 30, 2011. Assuming that we issue all of the shares of our common stock offered by us at the public offering price of $______ per share, and after deducting the commissions and estimated offering expenses payable by us, our net tangible book value as of June 30, 2011 would have been approximately $____ million, or $______ per share of our common stock. This amount represents an immediate increase in net tangible book value of $_____ per share to our existing shareholders and an immediate dilution in net tangible book value of $______ per share to new investors purchasing shares of our common stock in this offering.

We determine dilution by subtracting the adjusted net tangible book value per share after this offering from the public offering price per share of our common stock. The following table illustrates the dilution in net tangible book value per share to new investors:

Public offering price per share			$
Net tangible book value per share as of June 30, 2011	$	0.49
Increase per share attributable to new investors	$
Adjusted net tangible book value per share after this offering			$
Dilution in net tangible book value per share to new investors			$

The following shares were not included in the above calculation:

●

173,091 shares of our common stock reserved for issuance under various outstanding warrant agreements, at a weighted average exercise price of $2.57 per share; and

●

500,000 shares of our common stock reserved for future issuance under our 2011 Equity Incentive Plan;

Unless otherwise specifically stated, information throughout this prospectus assumes that none of our outstanding warrants to purchase shares of our common stock are exercised.

LEGAL MATTERS

Richardson & Patel LLP, with an office at 750 Third Avenue, 9 th Floor, New York, New York 10017, will pass upon the validity of the shares of common stock offered by this prospectus. As of September 30, 2011, Richardson & Patel LLP and its principals or entities controlled by its principals own 154,946 shares of our common stock, a portion of which it accepted as payment for certain legal services rendered to us. Although Richardson & Patel LLP is not under any obligation to accept shares of our common stock in payment for services, it may do so in the future.

EXPERTS

The financial statements of ClearSign Combustion Corporation at December 31, 2009 and 2010, and for each of the two years in the period ended December 31, 2010, included in this prospectus and elsewhere in the registration statement have been audited by Gumbiner Savett Inc., independent registered public accounting firm (which contain an explanatory paragraph related to our ability to continue as a going concern as described in Note 2 to our financial statements) as set forth in their report. We have included these financial statements in the prospectus and elsewhere in the registration statement in reliance upon the report of Gumbiner Savett Inc., given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly, and current reports, proxy statements and other information with the SEC. Our SEC filings are and will become available to the public over the Internet at the SEC’s web site at www.sec.gov and on the investor relations page of our website at www.clearsigncombustion.com . Information on our web site is not part of this prospectus. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street N.E., Washington, D.C. 20549. You can also obtain copies of the documents upon the payment of a duplicating fee to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Some items are omitted in accordance with the rules and regulations of the SEC. You should review the information and exhibits included in the registration statement for further information about us and the securities we are offering. Statements in this prospectus concerning any document we filed as an exhibit to the registration statement or that we otherwise filed with the SEC are not intended to be comprehensive and are qualified by reference to these filings. You should review the complete document to evaluate these statements.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION

FOR SECURITIES ACT LIABILITIES

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

Clearsign Combustion Corporation

Index to Financial Statements

INDEX TO FINANCIAL STATEMENTS

	Page No.
ANNUAL FINANCIAL INFORMATION

Report of Independent Registered Public Accounting Firm for the years ended 2010 and 2009 and from Inception (January 23, 2008) to December 31, 2010	F-1
Balance Sheets at December 31, 2010 and 2009	F-2
Statements of Operations for the years ended December 31, 2010 and 2009 and from Inception (January 23, 2008) to December 31, 2010	F-3
Statement of Changes of Stockholders’ Deficit from Inception (January 23, 2008) to December 31, 2010	F-4
Statements of Cash Flows for the years ended December 31, 2010 and 2009 and from Inception (January 23, 2008) to December 31, 2010	F-5
Notes to Financial Statements	F-6

INTERIM FINANCIAL INFORMATION

Balance Sheets at June 30, 2011 (Unaudited) and December 31, 2010	F-11
Statements of Operations for the six months ended June 30, 2011 and 2010 and from Inception (January 23, 2008) to June 30, 2011 (Unaudited)	F-12
Statement of Changes of Stockholders’ Equity (Deficit) from Inception (January 23, 2008) to June 30, 2011 (Unaudited)	F-13
Statements of Cash Flows for the six months ended June 30, 2011 and 2010 and from Inception (January 23, 2008) to June 30, 2011 (Unaudited)	F-14
Notes to Unaudited Financial Statements	F-15

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

of ClearSign Combustion Corporation

We have audited the balance sheets of ClearSign Combustion Corporation (a development stage company) (the “Company”) as of December 31, 2010 and 2009, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years ended December 31, 2010 and 2009, and for the period from inception (January 23, 2008) through December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ClearSign Combustion Corporation as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years ended December 31, 2010 and 2009, and for the period from inception (January 23, 2008) through December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 2 to the financial statements, the Company may not have sufficient working capital or outside financing available to meet its planned operating activities over the next twelve months. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

GUMBINER SAVETT INC.

April 6, 2011

Santa Monica, California

F-1

ClearSign Combustion Corporation

(a Development Stage Company)

Balance Sheets

	December 31,
	2010			2009

ASSETS

Current Assets:
Cash	$	25		$	49
Prepaid Expenses		43,355			-

Total Current Assets		43,380			49

Fixed Assets, net of Accumulated Depreciation of $30,369 and $11,335 at
December 31, 2010 and 2009, respectively		57,142			56,675

Total Assets	$	100,522		$	56,724



LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
Accounts Payable	$	147,022		$	142,321
Accrued Salaries		270,306			103,734

Total Current Liabilities		417,328			246,055

Stockholders' Deficit:
Preferred Stock, $0.0001 par value, zero shares issued and outstanding at
December 31, 2010 and 2009, respectively		-			-
Common Stock, $0.0001 par value, 1,356,732 and 1,268,093 shares issued and
outstanding at December 31, 2010 and 2009, respectively		136			127
Common Stock Class B, $0.0001 par value, zero and 860,000 shares issued and
outstanding at December 31, 2010 and 2009, respectively		86			86
Common Stock to be Issued		199,346			130,672
Additional Paid-In Capital		997,569			798,140
Deficit Accumulated in the Development Stage		(1,513,943	)		(1,118,356	)

Total Stockholders' Deficit		(316,806	)		(189,331	)

Total Liabilities and Stockholders' Deficit	$	100,522		$	56,724

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

F-2

ClearSign Combustion Corporation

(a Development Stage Company)

Statements of Operations

	For the Years Ended December 31,						Period from Inception (January 23, 2008) to December 31,
	2010			2009			2010

Operating Expenses:
Research and Development	$	-		$	2,436		$	60,881
General and Administrative		395,338			526,336			1,453,283

Total Operating Expenses		395,338			528,772			1,514,164

Loss from Operations		(395,338	)		(528,772	)		1,514,164

Other Income (Expense):
Interest Income		-			-			470
Other Expense		(249	)		-			(249	)

Total Other Income (Expense)		(249	)		-			221

Net Loss	$	(395,587	)	$	(528,772	)	$	(1,513,943	)

Net Loss per Share - Basic and Fully Diluted	$	(0.18	)	$	(0.25	)	$	(0.77	)

Weighted Average Number of Shares Outstanding - Basic and Fully Diluted		2,235,426			2,104,325			1,955,312

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

F-3

ClearSign Combustion Corporation

(a Development Stage Company)

Statement of Changes in Stockholders' Deficit

From Inception (January 23, 2008) to December 31, 2010

	Common Stock Issuable				Common Stock				Common Stock Class B				Additional Paid			Deficit Accumulated in the Development			Total Stockholders' Equity/
	Shares		Amount		Shares		Amount		Shares		Amount		-In Capital			Stage			(Deficit)

Shares issued to founders, at no cost		-	$	-		852,000	$	85		476,000	$	48	$	33,067		$	-		$	33,200
Shares issued for services ($0.025 per share)		-		-		100,000		10		-		-		2,490			-			2,500
Shares issued for cash ($2.25 per share)		-		-		177,332		18		-		-		398,979			-			398,997
Shares issued for cash ($0.025 per share)		-		-		-		-		384,000		38		9,562			-			9,600
Offering costs		-		-		-		-		-		-		(5,958	)		-			(5,958	)
Common stock issuable for services		33,613		75,630		-		-		-		-		-			-			75,630
Net loss		-		-		-		-		-		-		-			(589,584	)		(589,584	)

Balances at December 31, 2008		33,613		75,630		1,129,332		113		860,000		86		438,140			(589,584	)		(75,615	)

Shares issued for cash ($2.25 per share)		-		-		138,761		14		-		-		312,198			-			312,212
Share based payments		-		-		-		-		-		-		47,802			-			47,802
Common stock issuable for services		24,463		55,042		-		-		-		-		-			-			55,042
Net loss		-		-		-		-		-		-		-			(528,772	)		(528,772	)

Balances at December 31, 2009		58,076		130,672		1,268,093		127		860,000		86		798,140			(1,118,356	)		(189,331	)

Shares issued for cash ($2.25 per share)		-		-		57,752		6		-		-		129,936			-			129,942
Shares issued for services ($2.25 per share)		-		-		30,887		3		-		-		69,493			-			69,496
Common stock issuable for services		30,522		68,674		-		-		-		-		-			-			68,674
Net loss		-		-		-		-		-		-		-			(395,587	)		(395,587	)

Balances at December 31, 2010		88,598	$	199,346		1,356,732	$	136		860,000	$	86	$	997,569		$	(1,513,943	)	$	(316,806	)

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

F-4

ClearSign Combustion Corporation

(a Development Stage Company)

Statement of Cash Flows

	For the Year Ended December 31,						Period from Inception (January 23, 2008) to December 31,
	2010			2009			2010
Cash flows from operating activities:
Net Loss	$	(395,587	)	$	(528,772	)	$	(1,513,943	)
Adjustments to reconcile net loss to net cash used
in operating activities:
Common stock issued for services		49,995			-			85,695
Share based payments		68,674			102,844			247,148
Depreciation		19,034			11,335			30,369
Changes in operating assets and liabilities:
(Increase) in:
Prepaid expenses		(43,355	)		-			(43,355	)
Increase in:
Accounts payable		4,701			42,221			147,022
Accrued salaries		166,572			79,359			270,306

Net cash used in operating activities		(129,966	)		(293,013	)		(776,758	)

Cash flows from investing activities:
Purchase of fixed assets		-			(19,932	)		(68,010	)

Cash flows from financing activities:
Proceeds from issuance of common stock for cash,
net of offering costs		129,942			312,212			844,793

Net increase (decrease) in cash		(24	)		(733	)		25

Cash, beginning of period		49			782			-

Cash, end of period	$	25		$	49		$	25

Non-cash investing activities

During 2010, the Company issued 8,667 shares of common stock with a fair value of $19,501 in exchange for prototype equipment.

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

F-5

ClearSign Combustion Corporation

(A Development Stage Company)

Notes to Financial Statements

Note 1 – Organization and Description of Business

ClearSign Combustion Corporation (“ClearSign” or the "Company") is a Development Stage Company 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 emissions control characteristics of combustion systems. The Company’s technology introduces a computer-controlled electric field into the combustion region to precisely control gas-phase chemical reactions, enabling improved system performance and cost-effectiveness. ClearSign’s technology adapts to various fuel types and multiple system sizes and configurations, and can be deployed on both a retrofit and new-build basis.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“US GAAP”), which contemplate continuation of the Company as a going concern. However, the Company is subject to the risks and uncertainties associated with a new business, has no established source of revenue, and has incurred significant losses from operations since inception. These matters raise substantial doubt about the Company's ability to continue as a going concern. As discussed herein, the Company has retained an investment banker as its placement agent to raise $3,000,000 from the sale of common stock. If this fundraise is unsuccessful, the Company will need to seek an alternative financing source in order to continue operations.

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 develop and market new technologies in combustion systems, and its planned principal operations have not yet commenced. The Company has not generated any 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 US GAAP 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.

Fixed Assets

Fixed assets, which include testing equipment, are recorded at cost. Management has made certain estimates regarding the useful life of such equipment. Depreciation is computed using the straight-line method over the estimated life of four years.

F-6

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 market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. As of December 31, 2010 and 2009, 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, 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 sheet. 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.

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—the requisite service period (usually the vesting period). Stock compensation for stock granted to non-employees is determined at the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

F-7

Net Loss per Common Share

Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were 64,000 warrants outstanding at December 31, 2010 or 2009 which were potentially dilutive.

Recently Issued Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements (“ASU 2010-06”) . ASU 2010-06 amends ASC 820, “ Fair Value Measurements” ("ASC 820") to require a number of additional disclosures regarding fair value measurements. The amended guidance requires entities to disclose the amounts of significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for these transfers, the reasons for any transfers in or out of Level 3, and information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis. The ASU also clarifies the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. The amended guidance was effective for financial periods beginning after December 15, 2009, except the requirement to disclose Level 3 transactions on a gross basis, which becomes effective for financial periods beginning after December 15, 2010. ASU 2010-06 did not have a significant effect on the Company’s financial position or results of operations.

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

Note 3 – Income Taxes

Through December 31, 2010, the Company incurred net operating losses for tax purposes of approximately $1,500,000. The net operating loss carry forward for federal purposes may be used to reduce taxable income through the year 2030. The availability of the Company's net operating loss carry forward is subject to limitation if there is a 50% or more positive change in the ownership of the Company's stock.

The gross deferred tax asset balance as of December 31, 2010 and 2009 is approximately $500,000 and $380,000, respectively. A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry forward cannot reasonably be assured. Components of the deferred tax assets are limited to the Company’s net operating loss carry forwards, and are presented as follows at December 31:

	2011			2010

Net operating loss carryforwards	$	500,000		$	380,000
Valuation allowance		(500,000	)		(380,000	)

Net deferred tax asset	$	-		$	-

The Company is subject to taxation in the United States. The tax years for 2008 and forward are subject to examination by tax authorities. The Company is not currently under examination by any tax authority. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2010 and 2009, there was no accrued interest and penalties related to uncertain tax positions.

F-8

Note 4 – Stockholders’ Deficit

Common Stock

The Company is authorized to issue 12,000,000 shares of Common Stock, of which 8,000,000 shares are designated as “Common Stock”, and 4,000,000 shares are designated as “Class B Common Stock”. As of December 31, 2010 and December 31, 2009 the Company had 1,356,732 and 1,268,093 shares outstanding of Common Stock, respectively and 860,000 shares outstanding of Class B Common Stock for both periods. As of December 31, 2010 and 2009, the Company had 88,598 and 58,076 shares of common stock issuable for services, valued at $199,349 and $130,672, respectively. These shares were issued in February and April 2011.

During the year ended December 31, 2010, the Company:

Issued 57,752 shares of common stock for cash at $2.25 per share, for proceeds of $129,942;

Issued 30,887 shares of common stock for services at a fair value of $69,496 ($2.25 per share).

During the year ended December 31, 2009, the Company issued 138,761 shares of common stock for cash at $2.25 per share, for proceeds of $312,212.

For the period from inception (January 23, 2008) through December 31, 2008, the Company:

Issued 852,000 shares of common stock and 476,000 shares of Class B common stock to founders, at no cost, valued at $33,200 ($0.025 per share);

Issued 100,000 shares of common stock for services at a fair value of $2,500 ($0.025 per share);

Issued 177,332 shares of common stock for cash at $2.25 per share, for proceeds of $398,997;

Issued 384,000 shares of Class B common stock for cash at $0.025 per share, for proceeds of $9,600.

Preferred Stock

The Company is authorized to issue 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.

Warrants

During the year ended December 31, 2009, the Company granted a total of 64,000 warrants to purchase common stock of the Company to certain technical advisors. The warrants, which will be issued in 2011, are exercisable at $2.25 per share, vest immediately, and expire in 2021. The weighted average grant-date fair value of these warrants was $47,802. The fair value of these warrants was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

risk free rate of return of 2.01%;

volatility of 34%

dividend yield of 0%; and

expected term of 5 years.

At both December 31, 2010 and 2009, 64,000 warrants were issuable with a weighted average exercise price of $2.25 per share, and remaining contractual terms of approximately 10 years and 11 years, respectively.

F-9

Note 5 – Commitments

Operating Lease

In June 2008 the Company entered into two separate lease agreements for office space. The lease agreements have expired and the Company is currently occupying the space on a month-to-month basis.

For the years ended December 31, 2010 and 2009, rent expense under these operating leases amounted to $47,453 and $37,844, respectively, and was paid through the issuance of common stock in February 2011.

Note 6 – Subsequent Events

The Company has retained MDB Capital Group LLC as its placement agent for an equity offering with the intent of raising up to $3,000,000 from the sale of common stock. The Company has placed an expected price of $2.75 per share related to this offering.

In January 2011, the Company amended the Articles of Incorporation by (a) eliminating the Class B common stock designation, (b) converting existing Class B common stock into common stock, and (c) increasing the authorized number of shares of common stock from 12,000,000 to 50,000,000.

F-10

ClearSign Combustion Corporation

(a Development Stage Company)

Balance Sheets




	June 30,			December 31,
	2011			2010
	(Unaudited)
ASSETS

Current Assets:
Cash	$	2,395,913		$	25
Prepaid Expenses		82,905			43,355
Total Current Assets		2,478,818			43,380

Fixed Assets, net of Accumulated Depreciation of $41,687 and $30,369 at
June 30, 2011 and December 31, 2010, respectively		74,229			57,142

Total Assets	$	2,553,047		$	100,522



LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)

Current Liabilities:
Accounts Payable	$	328,889		$	147,022
Accrued Salaries		286,410			270,306

Total Current Liabilities		615,299			417,328

Stockholders' Equity/(Deficit):
Preferred Stock, $0.0001 par value, zero shares issued and outstanding at
June 30, 2011 and December 31, 2010, respectively		-			-
Common Stock, $0.0001 par value, 3,976,214 and 1,356,732 shares issued and
outstanding at June 30, 2011 and December 31, 2010, respectively		399			136
Common Stock Class B, $0.0001 par value, zero and 860,000 shares issued and
outstanding at June 30, 2011 and December 31, 2010, respectively		-			86
Common Stock to be Issued		-			199,346
Additional Paid-In Capital		5,049,714			997,569
Deficit Accumulated in the Development Stage		(3,112,365	)		(1,513,943	)

Total Stockholders' Equity/(Deficit)		1,937,748			(316,806	)

Total Liabilities and Stockholders' Equity/(Deficit)	$	2,553,047		$	100,522

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

F-11

ClearSign Combustion Corporation

(a Development Stage Company)

Statements of Operations

(Unaudited)

	For the Six Months Ended June 30,						Period from Inception (January 23, 2008) to
	2011			2010			June 30, 2011

Operating Expenses:
Research and Development	$	120,138		$	-		$	181,019
General and Administrative		1,479,329			210,791			2,932,612

Total Operating Expenses		1,599,467			210,791			3,113,631

Loss from Operations		(1,599,467	)		(210,791	)		3,113,631

Other Income (Expense):
Interest Income		1,045			-			1,515
Other Expense		-			-			(249	)

Total Other Income (Expense)		1,045			-			1,266

Net Loss	$	(1,598,422	)	$	(210,791	)	$	(3,112,365	)

Net Loss per Share - Basic and Fully Diluted	$	(0.52	)	$	(0.10	)	$	(1.47	)

Weighted Average Number of Shares Outstanding - Basic and Fully Diluted		3,052,036			2,205,067			2,113,487

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

F-12

ClearSign Combustion Corporation

(a Development Stage Company)

Statement of Changes in Stockholders' Equity/(Deficit)

(Unaudited)

From Inception (January 23, 2008) to June 30, 2011

	Common Stock Issuable						Common Stock				Common Stock Class B						Additional Paid			Deficit Accumulated in the Development			Total Stockholders' Equity/
	Shares			Amount			Shares		Amount		Shares			Amount			-In Capital			Stage			(Deficit)

Shares issued to founders, at no cost		-		$	-			852,000	$	85		476,000		$	48		$	33,067		$	-		$	33,200
Shares issued for services ($0.025 per share)		-			-			100,000		10		-			-			2,490			-			2,500
Shares issued for cash ($0.025 per share)		-			-			-		-		384,000			38			9,562			-			9,600
Shares issued for cash ($2.25 per share)		-			-			373,845		38		-			-			841,113			-			841,151
Issuance costs		-			-			-		-		-			-			(5,958	)		-			(5,958	)
Shares issued for services ($2.25 per share)		-			-			30,887		3		-			-			69,493			-			69,496
Share based payments		-			-			-		-		-			-			47,802			-			47,802
Common stock issuable for services		88,598			199,346			-		-		-			-			-			-			199,346
Net loss		-			-			-		-		-			-			-			(1,513,943	)		(1,513,943	)

Balances at December 31, 2010		88,598			199,346			1,356,732		136		860,000			86			997,569			(1,513,943	)		(316,806	)

Conversion of shares		-			-			860,000		86		(860,000	)		(86	)		-			-			-
Shares issued for services ($2.25 per share)		(83,936	)		(188,856	)		86,427		9		-			-			194,452			-			5,605
Canceled common shares issuable previously
for services ($2.25 per share)		(4,662	)		(10,490	)		-		-		-			-			-			-			(10,490	)
Shares issued for services ($2.75 per share)		-			-			582,372		58		-			-			1,601,465			-			1,601,523
Shares issued for cash ($2.75 per share)		-			-			1,090,683		110		-			-			2,999,264			-			2,999,374
Issuance costs		-			-			-		-		-			-			(807,210	)		-			(807,210	)
Share based payments of warrants		-			-			-		-		-			-			64,174			-			64,174
Net loss		-			-			-		-		-			-			-			(1,598,422	)		(1,598,422	)

Balances at June 30, 2011		-		$	-			3,976,214	$	399		-		$	-		$	5,049,714		$	(3,112,365	)	$	1,937,748

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

F-13

ClearSign Combustion Corporation

(a Development Stage Company)

Statement of Cash Flows

(Unaudited)

	For the Six Months Ended June 30,						Period from Inception (January 23, 2008) to
	2011			2010			June 30, 2011
Cash flows from operating activities:
Net Loss	$	(1,598,422	)	$	(210,791	)	$	(3,112,365	)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Common stock issued for services		1,007,526			-			1,093,221
Share based payments		-			34,336			247,148
Depreciation		11,318			9,517			41,687
Changes in operating assets and liabilities:
(Increase) in:
Prepaid expenses		(30,438	)		-			(73,793	)
Increase in:
Accounts payable		181,867			1,582			328,889
Accrued salaries		16,104			132,822			286,410

Net cash provided by (used in) operating activities		(412,045	)		(32,534	)		(1,188,803	)

Cash flows from investing activities:
Purchase of fixed assets		(28,405	)		-			(96,415	)

Cash flows from financing activities:
Proceeds from issuance of common stock for cash,
net of offering costs		2,836,338			32,485			3,681,131

Net increase (decrease) in cash		2,395,888			(49	)		2,395,913

Cash, beginning of period		25			49			-

Cash, end of period	$	2,395,913		$	-		$	2,395,913

Supplemental disclosure of non-cash operating, investing, and financing activities:

During the six months ended June 30, 2011, the Company issued common stock valued at $580,000 and warrants valued at $64,174 for issuance costs related to a common stock offering. Additionally, the Company issued common stock valued at $9,112 as prepaid rent expense.

During the three months ended September 30, 2010, the Company issued common stock valued at $19,501 in exchange for prototype equipment.

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

F-14

ClearSign Combustion Corporation

(a Development Stage Company)

Notes to Unaudited 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 emissions control characteristics of combustion systems. The Company’s technology introduces a computer-controlled electric field into the combustion region to precisely control gas-phase chemical reactions, enabling improved system performance and cost-effectiveness. ClearSign’s technology adapts to various fuel types and multiple system sizes and configurations, and can be deployed on both a retrofit and new-build basis.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation and Going Concern

The accompanying unaudited condensed financial statements of ClearSign 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.

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 for the year ended December 31, 2010. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year or any other future periods.

Because of our historic net losses and negative working capital position, our independent auditors in their report on our financial statements for the year ended December 31, 2010 expressed substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“US GAAP”) which contemplate continuation of the Company as a going concern. However, the Company is subject to the risks and uncertainties associated with a new business, has no established source of revenue, and has incurred significant losses from operations since inception. The Company’s operations are dependent upon it raising additional capital. These matters raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.

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 develop and market new technologies in combustion systems, and its planned principal operations have not yet commenced. The Company has not generated any 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

F-15

Fixed Assets

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 market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. As of June 30, 2011 and 2010, the Company determined that there was no impairment.

Fair Value of Financial Instruments

Research and Development

The cost of research and development is expensed as incurred.

Income Taxes

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.

F-16

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 at June 30, 2011 and 2010 amounted to 173,091 and 64,000 warrants, respectively.

The computation of basic and diluted loss per share for the six months ended June 30, 2011 and 2010, and for the period from inception (January 23, 2008) to June 30, 2011, is equivalent since the Company reported a net loss and the effect of any common stock equivalents would be anti-dilutive.

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.

Note 3 – Income Taxes

Through June 30, 2011, the Company incurred net operating losses for tax purposes of approximately $3,100,000. The net operating loss carry forward for federal purposes may be used to reduce taxable income through the year 2031. The availability of the Company's net operating loss carry forward is subject to limitation if there is a 50% or more positive change in the ownership of the Company's stock.

The gross deferred tax asset at June 30, 2011 and 2010 is approximately $1,050,000 and $450,000, respectively. A 100% valuation allowance has been established against the deferred tax assets as the utilization of the loss carry forward cannot reasonably be assured. Components of the deferred tax assets are limited to the Company’s net operating loss carry forwards, and are presented as follows at June 30:

	2011			2010

Net operating loss carryforwards	$	1,050,000		$	450,000
Valuation allowance		(1,050,000	)		(450,000	)

Net deferred tax asset	$	-		$	-

The Company is subject to taxation in the United States. The tax years for 2008 and forward are subject to examination by tax authorities. The Company is not currently under examination by any tax authority. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. As of June 30, 2011 and 2010, there was no accrued interest or penalties related to uncertain tax positions.

Note 4 – Stockholders’ Equity/(Deficit)

Common Stock

In February 2011, the Company amended its articles of incorporation. Previously, the Company was authorized to issue 8,000,000 shares of Common Stock and 4,000,000 shares of Class B Common Stock. By amendment, authorized Common Stock was increased to 50,000,000 shares and Class B Common Stock was eliminated. Prior to the amendment, the holders of the Class B Common Stock voluntarily converted the 860,000 outstanding shares to 860,000 Common Stock shares.

F-17

From March to May 2011, the Company completed the sale of 1,090,683 shares of Common Stock at $2.75 per share to raise $2,999,374. In conjunction with this sale, the placement agent, MDB Capital Group LLC (MDB), earned a fee of $300,000 which they elected to receive in the form of 109,091 Common Stock shares valued at $2.75 per share. MDB also earned warrants to purchase 109,091 Common Stock shares at $2.75 per share with a weighted average grant-date fair value of these warrants of approximately $64,174. The Company’s legal counsel and others were also paid with 101,818 Common Stock shares at $2.75 per share. The Company incurred a total $807,210 of issuance costs which is recorded against Additional Paid-In Capital at June 30, 2011, of which $644,173 was paid with Common Stock. In addition, MDB provided consulting services to the Company in 2011 where it earned a fee of $1,000,000 which they elected to receive in the form of 363,636 Common Stock shares valued at $2.75 per share. This fee is included in General and Administrative Expense.

Preferred Stock

Warrants

In conjunction with the issuance of Common Stock from March 2011 to May 2011, MDB earned warrants to purchase 109,091 Common Stock shares at $2.75 per share. These warrants are exercisable through May 2016 and contain weighted average, price-based anti-dilution provisions, demand and piggyback registration rights, and cashless exercise provisions. The Company has set aside a reserve of 109,091 shares for the issuance of these warrants. The weighted average grant-date fair value of these warrants approximates $64,174. The fair value of these warrants was estimated on the date of the grant using the Black-Scholes option-pricing model with weighted-average assumptions of 0.81% risk free rate of return, 33% volatility, 0% dividend yield, and an expected term of 2.5 years. The rate of volatility was determined through the average of a peer group of public companies.

In 2009, the Company granted warrants to purchase a total of 64,000 shares of Common Stock of the Company to certain technical advisors. The warrants, which were issued in 2011, are exercisable at $2.25 per share, vest immediately, and expire in 2021. The weighted average grant-date fair value of these warrants was $47,802. The fair value of these warrants was estimated on the date of the grant using the Black-Scholes option-pricing model with weighted-average assumptions of 2.01% risk free rate of return, 34% volatility, 0% dividend yield, and an expected term of 5 years. The rate of volatility was determined through the average of a peer group of public companies.

Note 5 - Equity Incentive Plan

The Company has adopted an Equity Incentive Plan providing 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 Company has reserved 500,000 shares of common stock for issuance under the plan. The plan provides for periodic increases in the number of authorized shares available for issuance under the plan on the first day of each of the Company’s fiscal quarters beginning October 1, 2011. The quarterly increases are equal to the lesser of 10% of any new shares subsequently issued by the Company or such lesser amount as the Board of Directors shall determine. A committee comprised of two or more members 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.

F-18

Note 6 – Commitments

The Company has two full service operating lease agreements for office and industrial space which expire in August 2011. Subsequent to June 30, 2011, the Company entered into a lease for office and lab space for the period November 2011 to February 2017. The Company continued to lease its previous space on a month to month basis until it occupied this new space in November 2011. Under the terms of the new lease, the Company will pay no rent for the period November 2011 to February 2012. Rent payments will commence in March 2012 and will escalate annually by 3%. In accordance with US GAAP, the Company will record 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 approximately $35,000 will be accrued during the period of November 2011 to February 2012. Under the terms of the lease, the Company will also pay monthly operating costs which are initially $1,946 per month. Minimum future payments under these leases at June 30, 2011 are as follows:

2011	$	9,112
2012		96,582
2013		108,447
2014		111,699
2015		115,047
2016		117,612
2017		9,801
	$	568,300

For the six months ended June 30, 2011 and 2010, rent expense under the office and industrial space operating leases amounted to $18,016 and $23,726, respectively.

Note 7 – Subsequent Events

The Company has retained an investment bank, MDB Capital Group LLC, as its placement agent to raise funds from the sale of Common Stock. If successful, the fee for the placement agent is expected to be 10% of the value of shares sold, all expenses associated with the offering, and warrants to purchase Common Stock shares at the issuance price equal to 10% of the shares sold. At the agent’s election, the fee is payable in cash or common stock priced at the issuance price. The warrants would be exercisable for 5 years, and would contain weighted average, price-based anti-dilution provisions, demand and piggyback registration rights, and cashless exercise provisions. If earned, the Company intends to set aside a reserve of the shares necessary for the issuance of these warrants.

Subsequent to June 30, 2011, the Company issued to key employees under the Equity Incentive Plan 100,000 Common Stock shares as a stock bonus valued at $2.75 per share and options to purchase 290,000 Common Stock shares at a price of $2.75 per share which expire in 2021. These grants vest over four years.

F-19

Selling Security Holder Table

Name (A)	Securities Beneficially Owned Prior to Offering (1) (B)		Securities Being Offered (C)		Securities Beneficially Owned After Offering (2) (D)		% Beneficial Ownership After Offering (E)
Aaron A. Grunfeld (3)		11,000		11,000		0		0	%
Benjamin L. Padnos (4)		18,182		18,182		0		0	%
Michael Bennett Trustee, Bennett Living Trust, U/A 3/12/1992 (5) (6)		10,000		10,000		0		0	%
Blue Earth Fund, L.P. (7) (8)		37,000		37,000		0		0	%
Bristol Investment Fund, Ltd. (9) (10)		14,545		14,545		0		0	%
Bull Hunter LLC ( 11) (12)		54,545		54,545		0		0	%
Christopher Edward Gay (13)		3,636		3,636		0		0	%
Christopher and Karen Jennings (14) (38)		15,000		15,000		0		0	%
Edgar D. Park (15)		14,545		18,182		0		0	%
Del Rey Management LP (16) (17)		40,000		40,000		0		0	%
George Hugh Brandon (18)		16,737		16,737		0		0	%
Gregory Howard Suess (19)		7,272		7,272		0		0	%
GRQ Consultants Inc., 401K (20) (21)		54,546		54,546		0		0	%
Law Offices of Aaron A. Grunfeld Defined Benefit Pension Plan (22) (23)		4,000		4,000		0		0	%
Mark Strome Living Trust (24) (25)		20,000		20,000		0		0	%
Michael Joseph Cavalier, Jr. (26) (38)		18,181		18,181		0		0	%
MPP Holdings LLC (27) (28)		17,273		17,273		0		0	%
Nicholas Lewin (29)		36,636		36,636		0		0	%
Nicholas A. Foley (30)		72,727		72,727		0		0	%
NTC & CO. FBO John P. Francis PRI (31) (32)		18,182		18,182		0		0	%
Peter Hogan (33)		1,818		1,818		0		0	%
NFS/FMTC Rollover IRA FBO Robert Campbell Clifford (34) (35)		10,000		10,000		0		0	%
Thomas L. Wallace, Sr. (36)		36,363		36,363		0		0	%
Gary Alan Schuman (37) (38)		3,849		3,849		0		0	%
James Edward Clark & Ricki Clarke (39)		1,819		1,819		0		0	%
Richardson & Patel, LLP (40) (41)		18,181		18,181		0		0	%
Integrated Surgical Systems, Inc. (42) (43)		363,636		363,636		0		0	%
William J. McCluskey (44) (38)		18,181		18,181		0		0	%
John V. Winfield (45)		55,000		55,000		0		0	%
Robert M. Levande & Andrea Brown, JTWROS (46)		73,585		73,585		0		0	%
Kevin M. Cotter (47) (38)		13,101		13,101		0		0	%
Amy En-mei Wang (48)		73,585		73,585		0		0	%
Robert Campbell Clifford (49)		13,101		13,101		0		0	%
Christopher A. Marlett and Terri Marlett (50) (51) (38)		73,585		73,585		0		0	%
MDB Capital Group LLC (52) (53)		290,819		290,819		0		0	%
Total:		1,530,630		1,530,630		0		0	%

(1)

Unless otherwise indicated, the selling security holders listed in the table above acquired the securities being offered in the March to May 2011 closings of the Company’s $3.0 million 2011 Private Placement described above, in which the Company issued its common stock at $2.75 per share. Percentages stated in the above table are based on a total of 4,118,114 shares of common stock outstanding as of September 30, 2011.

(2)	Assumes that all of the shares offered hereby are sold and that shares owned before the offering but not offered hereby are not sold.

(3)	Includes 11,000 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(4)	Includes 18,182 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(5)	Includes 10,000 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(6)	The address of this security holder is 2036 Grand Ave. Ojai, CA 93023. Michael Bennett, as Trustee of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(7)	Includes 37,000 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(8)	The address of this security holder is 1312 Cedar St. Santa Monica, CA 90405. Brett Conrad, as Managing Member and General Partner of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(9)	Includes 14,545 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(10)	The address of this security holder is c/o Bristol Capital Advisors, LLC, Attn: Amy Wang, Esq., 6353 W. Sunset Blvd., Suite 4006, Hollywood, CA 90028. Bristol Capital Advisors, LLC (“BCA”) is the investment advisor to Bristol Investment Funds, Ltd. Paul Kessler, as Manager and Director of BCA, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(11)	Includes 54,545 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(12)	The address of this security holder is 420 Lincoln Road #320, Miami Beach, FL 33139. Mark Groussman, as Managing Member of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(13)	Includes 3,636 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.

II-6

(14)	Includes 15,000 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(15)	Includes 14,545 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(16)	Includes 40,000 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(17)	The address of this security holder is 877 W. Main Street #600, Boise, ID 83702. Gregory Bied, as Managing Partner of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(18)	Includes 10,796 shares of common stock, 3,636 shares of common stock issued to this selling security holder in the 2011 Private Placement, and 2,305 shares of common stock underlying a warrant all of which we are registering pursuant to the Securities Purchase Agreement.

(19)	Includes 7,272 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(20)	Includes 54,546 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(21)	The address of this security holder is 440 Biscayne Blvd. #850, Miami, FL 33137. Barry Honig, as Trustee of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(22)	Includes 4,000 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(23)	The address of this security holder is 10900 Wilshire Blvd., Suite 500, Los Angeles, CA 90024. Aaron A. Grunfeld, as Trustee of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(24)	Includes 20,000 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(25)	The address of this security holder is 100 Wilshire Blvd., Suite 1750, Santa Monica, CA 90401. Mark Strome, as Trustee of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(26)	Includes 18,181 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(27)	Includes 17,273 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(28)	The address of this security holder is 11355 W. Olympic Blvd., Los Angeles, CA 90064.
(29)	Includes 36,636 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(30)	Includes 72,727 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(31)	Includes 18,182 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(32)	The address of this security holder is 1453 3 rd Street, Suite 470, Santa Monica, CA 90401. John Francis, as Account Owner of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(33)	Includes 1,818 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.

II-7

(34)	Includes 10,000 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(35)	The address of this security holder is 1057 Corsica Drive, Pacific Palisades, CA 90272. Robert Campbell Clifford, as Account Owner of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(36)	Includes 36,363 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(37)	Includes 3,600 shares of common stock and 249 shares of common stock underlying a warrant, all of which we are registering pursuant to the Securities Purchase Agreement.
(38)	This security holder is an affiliate of a broker-dealer. The broker-dealer affiliate has represented to the Company that such person (a) acquired the securities in the ordinary course of business, and (b) had no agreements or understandings, directly or indirectly, with any person to distribute the securities at the time of their acquisition. In addition, the broker-dealer affiliate received these securities as compensation for services rendered prior to their assignment to such broker-dealer affiliate.
(39)	Includes 1,819 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(40)	Includes 18,181 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(41)	The address of this security holder is 10900 Wilshire Blvd., Suite 500, Los Angeles, CA, 90024. Erick Richardson, as Managing Partner of this security holder, has dispositive and voting power over these securities and may be deemed to be the beneficial owner of these securities.
(42)	Includes 363,636 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.
(43)	The address of this security holder is 401 Wilshire Blvd., Suite 1020, Santa Monica, CA, 90401. Christopher Marlett is the Chief Executive Officer of this security holder, and as such is deemed to be affiliated with MDB Capital Group LLC. Christopher A. Marlett is a CEO/director and Robert M. Levande is a Secretary/director of Integrated Surgical Systems, Inc.
(44)	Includes 18,181 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.

(45)	Includes 55,000 shares of common stock issued to this selling security holder in the 2011 Private Placement, all of which we are registering pursuant to the Securities Purchase Agreement.

(46)	Includes 59,658 shares of common stock and 13,927 shares of common stock underlying a warrant, all of which we are registering pursuant to the Securities Purchase Agreement.

(47)	Includes 13,101 shares of common stock and 2,305 shares of common stock underlying a warrant, all of which we are registering pursuant to the Securities Purchase Agreement.

(48)	Includes 59,658 shares of common stock and 13,927 shares of common stock underlying a warrant, all of which we are registering pursuant to the Securities Purchase Agreement.

(49)	Includes 10,796 shares of common stock and 2,305 shares of common stock underlying a warrant, all of which we are registering pursuant to the Securities Purchase Agreement.

(50)	Includes 59,658 shares of common stock and 13,927 shares of common stock underlying a warrant, all of which we are registering pursuant to the Securities Purchase Agreement.

(51)	Christopher A. Marlett is the CEO of MDB Capital Group LLC, which is acting as lead underwriter and investment banker for the Company.

(52)	Includes 231,365 shares of common stock and 59,454 shares of common stock underlying a warrant, all of which we are registering pursuant to the Securities Purchase Agreement.

(53)	The address of this security holder is 401 Wilshire Blvd., Suite 1020, Santa Monica, CA, 90401. MDB Capital Group LLC is acting as the lead underwriter and investment banker for the Company.

II-8

[Alternate Page for Selling Security Holder Prospectus]

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the common stock by the selling security holders named in this prospectus. All proceeds from the sale of the common stock will be paid directly to the selling security holders.

II-9

[Alternate Page for Selling Security Holder Prospectus]

PLAN OF DISTRIBUTION BY SELLING SECURITY HOLDERS

Each selling security holder of the common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the Nasdaq Capital Market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling security holder may use any one or more of the following methods when selling shares:

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

an exchange distribution in accordance with the rules of the applicable exchange;

privately negotiated transactions;

settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;

broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share;

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

a combination of any such methods of sale; or

any other method permitted pursuant to applicable law.

The selling security holders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the selling security holders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling security holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

II-10

We are required to pay certain fees and expenses incurred by us incident to the registration of the shares.

Since selling security holders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. There is no underwriter or single coordinating broker acting in connection with the proposed sale of the resale shares by the selling security holders.

We agreed to keep this prospectus and the registration statement which this prospectus forms a part effective until the earlier of (i) the date on which the shares may be resold by the selling security holders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling security holders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling security holders or any other person. We will make copies of this prospectus available to the selling security holders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

II-11

[Alternate Page for Selling Security Holder Prospectus]

LEGAL MATTERS

Richardson & Patel, LLP, with an office at 750 Third Avenue, 9 th Floor, New York, New York 10017, will pass upon the validity of the securities offered in this prospectus.

EXPERTS

WHERE YOU CAN FIND MORE INFORMATION

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

II-12

[Alternate Page for Selling Security Holder Prospectus]

Until , 2011, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

CLEARSIGN COMBUSTION CORPORATION

1,530,630 Shares

Common Stock

_______________, 2011

II-13

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses to be incurred in connection with the sale and distribution of our common stock being registered hereby, all of which will be borne by us (except any underwriting discounts and commissions and expenses incurred for brokerage, accounting, tax or legal services or any other expenses incurred in disposing of the shares). All amounts shown are estimates except the SEC registration fee.

SEC Filing Fee	$	$3,365
FINRA Fee*	$	3,000
NASDAQ Fee*	$	40,000
Printing Expenses*	$	15,000
Accounting Fees and Expenses*	$	30,000
Legal Fees and Expenses*	$	275,000
Transfer Agent and Registrar Expenses*	$	5,000
Miscellaneous*	$	15,000
Total	$	386,365

Estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The following summary is qualified in its entirety by reference to the complete text of any statutes referred to below and the amended Articles of Incorporation of ClearSign Combustion Corporation, a Washington corporation.

The Company’s Articles of Incorporation provide that, to the fullest extent permitted by Washington law, the Company’s directors will not be liable to the Company or its shareholders for monetary damages. This provision, however, does not eliminate or limit liability for acts or omissions that involve intentional misconduct or a knowing violation of law by a director, for conduct violating Revised Code of Washington section 23B.08.310 (approval of an unlawful distribution) or for any transaction from which the director will personally receive a benefit in money, property, or services to which the director is not legally entitled. Pursuant to section 23B.08.52 of the Revised Code of Washington, because the Company’s Articles of Incorporation do not limit the obligation, the Company must indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because of being a director against reasonable expenses incurred by the director in connection with the proceeding.

The Company’s Bylaws further provide that each person who was, is or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit, claim or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, by reason of the fact that he or she is or was a director or officer of the Company or was serving at the Company’s request as a director, officer, partner, trustee, employee or agent of another entity, shall be indemnified and held harmless against all losses, claims, damages, liabilities and expenses actually and reasonably incurred or suffered in connection with the proceeding. This indemnification right continues even after the individual has ceased to be a director or officer or to serve at the Company’s request as a director, officer, partner, trustee, employee or agent of another entity. However, if the person indemnified initiates the proceeding, he or she shall be entitled to indemnification only if the proceeding was authorized or ratified by the Company’s board of directors. No indemnification will be provided for acts or omissions finally adjudged to be intentional misconduct or a knowing violation of law, for conduct finally adjudged to be in violation of Revised Code of Washington section 23B.08.310, for any transaction with respect to which it was finally adjudged that the indemnitee personally received a benefit in money, property or services to which the indemnitee was not legally entitled or if the Company is otherwise prohibited by applicable law from paying indemnification. The Company must advance expenses to an indemnitee for an indemnification obligation so long as the Company receives an undertaking by or on behalf of the indemnitee to repay all amounts so advanced if it is determined by a final judicial decision from which there is no further right to appeal that the indemnitee is not entitled to be indemnified.

II-14

Under our Director and Officer Insurance Policy, our directors and officers are provided liability coverage of $5 million subject to retention. The policy has a one year term with annual renewal possible. The policy can be terminated by the insured if there is a merger or acquisition which includes a change in ownership of 50% of the voting shares. Upon such an occurrence the insurer may elect to cancel the policy. We may elect to then obtain “run off” insurance for a period of between one and six years at a cost of between 125% and 225% of the initial policy premium. The policy is a claim made policy. It covers only those claims made during the policy term. If an act giving rise to a claim occurs during the policy term, but the claim is not reported within 60 days of – of the termination or expiration policy, the claim will not be covered.

We have entered into, and will enter into in the future, indemnification agreements with the individuals who serve as our officers and directors. Pursuant to these agreements, we will indemnify officers and directors who are made parties to, or threatened to be made parties to, any proceeding by reason of the fact that they are or were officers or directors, or are or were serving at our request as a director, officer, employee, or agent of another entity. The agreements require us to indemnify our officers and directors against all expenses, judgments, fines and penalties actually and reasonably incurred by them in connection with the defense or settlement of any such proceeding, subject to the terms and conditions of the agreements.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel that the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, we issued the following securities without registration under the Securities Act of 1933, as amended (the “Securities Act”).

Beginning in April 2008 and continuing until August 2010, the Company raised a total of $841,151 from an offering of shares of common stock to 25 accredited investors. The price per share was $2.25 and the Company issued a total of 373,845 shares of common stock. The Company relied on Rule 506 of Regulation D to make the offering. In the offering there were no more than 35 purchasers of the common stock, appropriate financial and business information was provided to the purchasers in accordance with Rule 502(b), there was no form of general solicitation or general advertising relating to the offer and the Company exercised reasonable care to assure that the purchasers of the common stock were not underwriters within the meaning of section 2(a)(11) of the Securities Act.

II-15

In December 2010, Geoffrey Osler, Richard Rutkowski, Trinity West Trust I and Trinity West Trust II converted their shares of Class B common stock into shares of common stock at a ratio of 1:1. The Company subsequently amended its Articles of Incorporation to eliminate the Class B common stock. The Company relied on section 3(a)(9) of the Securities Act to issue the securities. The securities were exchanged by the Company with its existing security holders exclusively and there were no commissions or other remuneration paid or given directly or indirectly for soliciting the exchange.

On February 16, 2011 the Company issued five warrants for the purchase of up to a total of 64,000 shares of common stock to five consultants. Each warrant has a term of 10 years and an exercise price of $2.25 per share. The warrants were issued in reliance on Rule 701 promulgated under the Securities Act. The consultants rendered valuable services to the Company relating to the development of its product and the Company is not subject to the reporting requirements of section 13 or 15(d) of the Securities Exchange Act of 1934 and is not an investment company registered or required to be registered under the Investment Company Act of 1940. Each of the consultants is a natural person and none of the services provided by the consultants were made in connection with the offer or sale of the Company’s securities. The aggregate sales price of the securities offered in reliance on Rule 701 did not exceed the parameters set forth in Rule 701(d).

Beginning in March 2011 and continuing until May 10, 2011, the Company raised approximately $3 million from an offering of shares of common stock to investors. The price per share was $2.75 and the Company issued a total of 1,090,683 shares of common stock. The Company relied on an exemption under Rule 506 of Regulation D to make the offering. There were no more than 35 purchasers of the common stock, appropriate financial and business information was provided to the purchasers in accordance with Rule 502(b), there was no form of general solicitation or general advertising relating to the offer and the Company exercised reasonable care to assure that the purchasers of the common stock were not underwriters within the meaning of section 2(a)(11) of the Securities Act. In conjunction with the offering, the Company issued to MDB Capital Group LLC a warrant for the purchase of 109,091 shares of common stock. The warrant has a term of 5 years and an exercise price of $2.75 per share. The Company relied on an exemption under section 4(2) of the Securities Act to issue the warrant. The warrant was offered and sold without any form of general solicitation or general advertising, MDB Capital Group LLC represented that it was an accredited investor and, as our placement agent, it was provided with access to the information that registration would otherwise provide.

In April 2011 the Company issued 363,636 shares of common stock to MDB Capital Group LLC in exchange for consulting services that had been rendered in 2011 until May 10, 2011. The Company relied on an exemption under section 4(2) of the Securities Act to issue the common stock. The common stock was offered and sold without any form of general solicitation or general advertising, MDB Capital Group LLC represented that it was an accredited investor and, as our placement agent, it was provided with access to the information that registration would otherwise provide.

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ITEM 16. EXHIBITS

Exhibit No.		Description of Document
1.1		Form of Underwriting Agreement**
3.1		Articles of Incorporation of ClearSign Combustion Corporation, amended on February 2, 2011*
3.2		Bylaws of ClearSign Combustion Corporation*
4.1		Form of Common Stock Purchase Warrant to be issued to MDB Capital Group LLC**
4.2		Form of Common Stock Purchase Warrant issued on February 16, 2011 to various consultants*
5.1		Opinion of Richardson & Patel LLP regarding the validity of the common stock being registered**
10.1		Consulting Agreement dated February 14, 2011 between the registrant and MDB Capital Group LLC*
10.2		Engagement Agreement*
10.3		Lock-Up Agreement**
10.4		Subscription Agreement between the registrant and various investors for an offering completed on April 20, 2011*
10.5		Office Lease Agreement*
10.6		Form of Employee Intellectual Property Assignment and Nondisclosure Agreement*
10.7		ClearSign Combustion Corporation 2011 Equity Incentive Plan*
10.8		Advisory Board Agreement **
10.9		Assignment dated October 18, 2010 between the registrant and Thomas S. Hartwick, David Goodson, Richard Rutkowski, Geoffrey Osler and Christopher A. Wiklof*
10.10		Founders Agreement dated April 14, 2008 between the registrant and David Goodson, B.D. and D.G. Goodson Trust, The Alternative Energy Resource Alliance, Geoff Osler, Richard Rutkowski, Trinity West Trust I and Trinity West Trust II*
10.11		Subscription and Contribution Agreement dated March 4, 2008 between the registrant and David Goodson and The Alternative Energy Resource Alliance*
10.12		Subscription and Contribution Agreement dated March 4, 2008 between the registrant and Geoff Osler*
10.13		Subscription and Contribution Agreement dated March 4, 2008 between the registrant and David Goodson and the B. D. and D. G. Goodson Trust*
10.14		Subscription and Contribution Agreement dated April 14, 2008 between the registrant and Richard Rutkowski, Trinity West Trust I and Trinity West Trust II*
10.15		Restricted Stock Purchase Agreement dated April 14, 2008 between the registrant and Dr. Thomas Hartwick*
10.16		Restricted Stock Purchase Agreement dated April 14, 2008 between the registrant and Chris Wiklof*
10.17		Form of Subscription Agreement between the registrant and various investors in an offering completed in October 2009*
10.18		Form of Director and Officer Indemnification Agreement**
23.1		Consent of Gumbiner Savett Inc., Independent Registered Public Accounting Firm*
23.2		Consent of Richardson & Patel LLP (included in Exhibit 5.1 filed herewith)**

* Filed herewith.

** To be filed by subsequent amendment.

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ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act may be permitted as to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increases or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

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(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; (iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and (iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(5) To provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(6) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus as filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(7) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Seattle, State of Washington, on this 14 th day of November, 2011.

	CLEARSIGN COMBUSTION CORPORATION

	By:	/s/ Richard Rutkowski
		Richard Rutkowski
		Chief Executive Officer

Each person whose signature appears below constitutes and appoints Richard Rutkowski as his or her true and lawful attorneys-in-fact and agents, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to the Registration Statement, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.


Dated: November 14, 2011			/s/ Richard F. Rutkowski
			Richard F. Rutkowski
			Chief Executive Officer and Director (Principal Executive Officer)

Dated: November 14, 2011			/s/ James N. Harmon
			James N. Harmon
			Chief Financial Officer (Principal Financial and Accounting Officer)

Dated: November 14, 2011			/s/ David B. Goodson
			David B. Goodson
			Chief Science Officer and Director

Dated: November 14, 2011			/s/ Stephen E. Pirnat
			Stephen E. Pirnat, Director

Dated: November 14, 2011			/s/ Scott P. Isaacson
			Scott P. Isaacson, Director

Dated: November 14, 2011			/s/ Lon E. Bell
			Lon E. Bell, Ph.D., Director

Exhibit 4.2

THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.

CLEARSIGN COMBUSTION CORPORATION

WARRANT TO PURCHASE SHARES OF COMMON STOCK

Warrant No.: ____

________________, 2011

This WARRANT TO PURCHASE SHARES OF COMMON STOCK certifies that MDB Capital Group LLC, having an address at 401 Wilshire Boulevard, Suite 1020, Santa Monica, California 90401, or permitted assignees is the registered holder (the “ Holder ”) of this Warrant to Purchase Shares of Common Stock (the “ Warrant ”) to purchase shares of the common stock, par value $.0001 per share (the “ Common Stock ”), of ClearSign Combustion Corporation, a Washington corporation (the “ Company ”). This Warrant has been issued to the Holder in connection with the closing of the private placement of up to $3,000,000 of Common Stock offered by the Company on or about the date hereof (the “ Offering ”).

FOR VALUE RECEIVED , the Company hereby certifies that the Holder is entitled to purchase from the Company ____________________ 1 duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (the “ Warrant Shares ”) at a purchase price per share set forth in Section 3 below, and otherwise subject to the terms, conditions and adjustments set forth below in this Warrant. The Holder is the person or entity in whose name this Warrant is registered on the records of the Company regarding registration and transfers of this Warrant (the “ Warrant Register ”) and is the owner and holder thereof for all purposes, except as described in Section 10 hereof.

1. Exercise of Warrant . This Warrant will be exercisable at any time, in the sole discretion of the Holder, commencing on the date hereof (the “ Commencement Date ”).

2. Expiration of Warrant . This Warrant shall expire on _______, 2016 (the “ Expiration Date ”).

3. Warrant Price . At any time through the Expiration Date, all or any portion of this Warrant may be exercised for Warrant Shares, in the Holder’s sole discretion, at a price equal to $2.75 per share, subject to adjustment as provided herein (the “ Warrant Price ”).

1	Equal to 10% of the securities issued in the Offering.

4. Exercise of Warrant . This Warrant shall be exercisable as follows:

4.1 Manner of Exercise . This Warrant may be exercised into shares of Common Stock by the Holder hereof, in accordance with the terms and conditions hereof, in whole or in part with respect to any portion of this Warrant and in the discretion of the Holder, during the period beginning on the Commencement Date and ending on the Expiration Date. Any exercise shall be undertaken during normal business hours on any day other than a Saturday or a Sunday or a day on which commercial banking institutions in New York, New York, or Los Angeles, California are authorized by law to be closed (a “ Business Day ”) on or prior to the Expiration Date with respect to such portion of this Warrant, by surrender of this Warrant to the Company at its office maintained pursuant to Section 10.2(a) hereof, accompanied by an exercise notice in substantially the form attached to this Warrant as Exhibit A duly executed by or on behalf of the Holder together with the payment of the Warrant Price in cash by bank check or wire transfer of immediately available funds.

4.2 When Exercise Effective . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 4.1 hereof (“ Exercise Date ”), and, at such time, the corporation, association, partnership, organization, business, individual, government or political subdivision thereof or a governmental agency (a “ Person ” or the “ Persons ”) in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon exercise as provided herein shall be deemed to have become the holder or holders of record thereof.

4.3 Delivery of Stock Certificates . As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within ten (10) Business Days thereafter, the Company, at its expense (including the payment by it of any applicable issue taxes), will cause to be issued in the name of and delivered to the Holder hereof or, subject to Section 10 hereof, as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct:

(a) a certificate or certificates (with appropriate restrictive legends, as applicable) for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock to which the Holder shall be entitled upon exercise plus, in lieu of any fractional share to which the Holder would otherwise be entitled, all issuances of Common Stock shall be rounded up to the nearest whole share.

(b) in case exercise is in part only, a new Warrant of like tenor, dated the date hereof and stating on the face thereof for the number of shares of Common Stock equal to the number of shares called for on the face of this Warrant minus the number of shares designated by the Holder upon exercise as provided in Section 4.1 hereof (without giving effect to any adjustment thereof).

4.4 Shares to be Fully Paid . The Company covenants and agrees that all shares of Common Stock which may be issued upon the exercise of rights presented by this Warrant will, upon issuance by the Company, be validly issued, fully paid and nonassessable, and free from preemptive rights and free from all taxes, liens and charges with respect thereto.

4.5 Company to Reaffirm Obligations . The Company will, at the time of each exercise of this Warrant, upon the written request of the Holder hereof, acknowledge in writing its continuing obligation to afford to the Holder all rights (including without limitation any rights to registration of the shares of Common Stock issued upon exercise) to which the Holder shall continue to be entitled after exercise in accordance with the terms of this Warrant; provided, however, that if the Holder shall fail to make a request, the failure shall not affect the continuing obligation of the Company to afford the rights to such Holder.

4.6 Cashless Exercise . Notwithstanding anything in this Article 4 to the contrary, this Warrant may be exercised at any time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of shares of Common Stock equal to the quotient obtained by dividing [(A-B)(X)] by (A), where:

(A) = the Current Market Price;

(B) = the Warrant Price of this Warrant, as adjusted pursuant to Section 5 hereof; and

(X) = the number of shares of Common Stock then issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

The term “ Current Market Price ” means the average 4:00 p.m. (Eastern time) (i) closing bid price over the five (5) trading days immediately preceding the date of such election, as such closing price is reported on the Bloomberg system or, if such system is not available, a similar quotation system reasonably acceptable to the Holder, or (ii), if there is no reported closing bid price for the day(s) in question, then the Current Market Price shall be determined based on the latest such dates for which closing bid price information is available, unless such securities have not been traded on an exchange or in the over-the-counter market for at least five (5) trading days during the 30 day period immediately prior to the date of such election, in which case the Current Market Price shall be determined in good faith by, and reflected in a formal resolution of, the Board of Directors of the Company.

5. Adjustments .

5.1 Anti-Dilution Protection . The Warrant Price shall be subject to adjustment from time to time, as follows:

(a) Except for any Exempt Issuances (as defined below), if the Company at any time prior to the Expiration Date issues, sells, transfers, or otherwise conveys any Common Stock or other equity securities of the Company or indebtedness or other securities convertible into other equity securities of the Company (the “ Issued Securities ”) at a price per share equivalent, assuming conversion into Common Stock (the “ Issuance Price ”), of less than the Warrant Price (as adjusted pursuant to this Section 5 ), on the date of issuance of the Issued Securities (the “ Issuance Date ”), then the Warrant Price shall be adjusted downward to a price determined by dividing:

(i) the sum of (w) the Warrant Price in effect before the issuance of such Issued Securities multiplied by the sum of (I) the number of shares of the Company’s Common Stock then issued and outstanding plus (II) the number of shares of Company preferred stock then issued as converted into shares of Common Stock immediately prior to the issuance of such Issued Securities and (x) the consideration, if any, received by or deemed to have been received by the Company on the issue of such Issued Securities by:

(ii) the sum of (y) the number of shares of the Company’s Common Stock then issued and outstanding plus the number of shares of the Company’s preferred stock then issued as converted into shares of Common Stock immediately prior to the issuance of such Issued Securities and (z) the number of additional shares of Common Stock issued or deemed to have been issued in the issuance of such Issued Securities.

In no event shall the Warrant Price after giving effect to the issuance of such Issued Securities be greater than the Warrant Price immediately prior to the issuance of such Issued Securities. “Exempt Issuances” shall mean the following: (i) stock options issued to persons providing goods or services to the Company pursuant to a equity incentive plan approved by the Board of Directors of the Company, and shares of Common Stock issued pursuant to the exercise of such stock options; (ii) any stock options, warrants or shares of Common Stock issued pursuant to the exercise of such options and warrants and shares of Common Stock issued with respect to a transaction which the Board of Directors of the Company determines in good faith to be in the best interest of the Company and relating to strategic investments (i.e., investors who may provide benefits to the Company in addition to capital), strategic alliances or venture leasing, provided the purpose of the transaction is not to circumvent the provisions hereof that are intended to provide for an equitable adjustment to the Warrant Price; (iii) the issuance of shares of Common Stock in connection with any conversion of any equity securities, indebtedness or other securities of the Company existing as of the date hereof; (iv) the issuance by the Company of shares of Common Stock or other securities of the Company in connection with the purchase of the securities or purchase or leasing of certain of the assets of any other business entity, a merger, consolidation, business combination or similar transaction, the performance of services or a borrowing of money approved by the Board of Directors of the Company, provided the purpose of the transaction is not to circumvent the provisions hereof that are intended to provide for an equitable adjustment to the Warrant Price; and (v) issuances pursuant to Sections 5.2 and 5.3 of this Warrant.

(b) In the event that the Issued Securities are not shares of Common Stock, then for purposes of determining the price at which such Issued Securities have been issued, the aggregate consideration paid for the Issued Securities shall be divided by the maximum number of shares of Common Stock issuable upon conversion of the Issued Securities into shares of Common Stock, all as determined as of the Issuance Date.

(c) In the case of the issuance of Issued Securities for cash, the consideration shall be deemed to be the amount of cash paid. In the case of the issuance of Issued Securities for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as reasonably determined by the Company’s Board of Directors consistent with its fiduciary duties irrespective of any accounting treatment.

5.2 Splits, Subdivisions, etc . In the event that the Company should at any time or from time to time, after the date first referenced above, fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock, or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly additional shares of Common Stock (hereinafter referred to as “ Common Stock Equivalents ”) without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Warrant Price shall be appropriately decreased so that the number of shares of Common Stock issuable on exercise of this Warrant shall be increased in proportion to such increase in the aggregate number of shares of the Common Stock outstanding.

5.3 Combinations . If the number of shares of Common Stock outstanding at any time after the date first referenced above is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Warrant Price shall be appropriately increased so that the number of shares of Common Stock issuable upon exercise of this Warrant shall be decreased in proportion to such decrease in outstanding shares.

5.4 Notice of Adjustments . Upon any adjustment of the terms of this Warrant pursuant to this Section 5 , then and in each such case the Company shall promptly deliver a notice to the registered Holder of this Warrant, which notice shall state the Warrant Price resulting from such adjustment and the changes, if any, in the number of Warrant Shares or kind of securities or other property purchasable at such price upon the exercise hereof, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.

5.5 Adjustment in Number of Securities . Upon each adjustment of the Warrant Price pursuant to the provisions of this Section 5 , the number of securities issuable upon the exercise of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Warrant Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Warrant Price.

5.6 No Fractional Shares . No fractional shares shall be issuable upon exercise of this Warrant and the number of Warrant Shares to be issued shall be rounded down to the nearest whole share.

6. Reservation of Shares . The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, free from all taxes, liens and charges with respect to the issue thereof, and not subject to preemptive rights or other similar rights of stockholders of the Company, solely for the purpose of issuing the shares of Common Stock underlying this Warrant, such number of its shares of Common Stock as shall from time to time be sufficient to effect the issuance or exercise thereof, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to issue the Common Stock and effect the exercise of this Warrant, in addition to such other remedies as shall be available to Holder, the Company shall take such corporate action as may, in the opinion of its counsel, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including without limitation, using its best efforts to obtain the requisite stockholder approval necessary to increase the number of authorized shares of the Company’s Common Stock. All shares of Common Stock issuable upon exercise of this Warrant shall be duly authorized and, when issued upon exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable and free from preemptive rights and free from taxes, liens and charges with respect thereto.

7. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant but will at all times carry out all such terms and take all such action as may be reasonably necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

8. Restrictions on Transfer .

8.1 Restrictive Legends . This Warrant and each Warrant issued upon transfer or in substitution for this Warrant pursuant to Section 10 , each certificate for Common Stock issued upon the exercise of any Warrant and each certificate issued upon the transfer of any such Common Stock shall be transferable only upon satisfaction of the conditions specified in this Section 8 . Each of the foregoing securities shall be stamped or otherwise imprinted with a legend reflecting the restrictions on transfer set forth in this Section 8 and any restrictions required under the Securities Act of 1933, as amended (the “ Securities Act ”).

8.2 Notice of Proposed Transfer; Opinion of Counsel . Prior to any transfer of any securities which are not registered under an effective registration statement under the Securities Act (“ Restricted Securities ”), the Holder will give written notice to the Company of the Holder's intention to affect a transfer and to comply in all other respects with this Section 8.2 . Each notice: shall describe the manner and circumstances of the proposed transfer If in the opinion of counsel the proposed transfer may be effected without registration of Restricted Securities under the Securities Act (which opinion shall state the basis of the legal conclusions reached therein), the Holder shall thereupon be entitled to transfer the Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Company. The opinion of counsel referenced in this Section 8.2 shall be provided by counsel to the Company within three (3) business days of the foregoing notice, at the Company’s expense, or, may, at the Holder’s option, be provided by counsel to the Holder and the Company shall reimburse Holder for such expense, subject to such legal opinion being reasonably satisfactory to the Company. Each certificate representing the Restricted Securities issued upon or in connection with any transfer shall bear the restrictive legends required by Section 8.1 hereof.

8.3 Termination of Restrictions . The restrictions imposed by this Section 8 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities: (a) which Restricted Securities shall have been effectively registered under the Securities Act, or (b) when, in the opinions of both counsel for the Holder thereof and counsel for the Company, such restrictions are no longer required in order to insure compliance with the Act or Section 8 hereof. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the Holder thereof shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any), new securities of like tenor not bearing the applicable legends required by Section 8.1 hereof.

9. Registration of Common Stock and Warrant Shares .

(a) Demand Registration . If the Company shall receive at any time prior to the Expiration Date, a written request from the Holder that the Company file a Registration Statement under the Securities Act covering the registration of Registrable Securities (as hereinafter defined), then the Company shall, within twenty (20) days of the receipt thereof, use reasonable best efforts to file the registration under the Securities Act of all Registrable Securities of the Holder subject to such written request and shall cause such Registration Statement to become effective within forty-five (45) days of such filing date or ninety (90) days of such filing date if the SEC commences a full review of such Registration Statement. The term “ Registrable Securities ” means (i) all shares of Common Stock issued to the Holder in connection with the Offering or any subsequent offerings pursuant to that certain Engagement Letter by and between the Company and the Holder dated February __, 2011, (ii) all shares of Common Stock issued to the Holder pursuant to that certain Consulting Agreement by and between the Company and the Holder dated February __, 2011, (iii) the Warrant Shares issuable upon exercise or otherwise pursuant to this Warrant and (iv) any shares of capital stock issued or issuable in exchange for or otherwise with respect to the foregoing, and the term “ Registration Statement ” means a registration statement of the Company under the Securities Act which the Company may or is obligated to file hereunder. The Company’s obligations under this Section 9(a) shall be limited to [one] Registration Statement that has been declared effective. Notwithstanding the foregoing, the Company shall not be required to effect a registration pursuant to this Section 9(a) either (i) prior to [__________ __, 20__] or (ii) during the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of and ending on a date ninety (90) days following the effective date of a Company-initiated registration subject to Section 9(b) below for which the Company will provide for participation by the Holder; provided that, in the case of clause (ii), the Company is actively employing in good faith reasonable best efforts to cause such Registration Statement to become effective; or

(b) Piggy-Back Registrations . In the event that all Registrable Securities are not registered for resale, should the Company at any time prior to the Expiration Date, determine to file with the Securities and Exchange Commission (“ SEC ”) a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other bona fide employee benefit plans), the Company shall send to the Holder written notice of such determination and, if within twenty (20) days after the effective date of such notice in accordance with Section 13 hereof, the Holder shall so request in writing, the Company shall include in such Registration Statement all or any part of the Registrable Securities the Holder requests to be registered. Notwithstanding any other provision of this Agreement, the Company may withdraw any Registration Statement referred to in this Section 9(b) without incurring any liability to the Holder provided that upon such withdrawal, the Company’s obligations under this Section 9(b) shall remain in effect. The Company’s obligations under this Section 9(b) shall be limited to two Registration Statements that have been declared effective.

(c) Obligations of the Company . In connection with the registration of the Registrable Securities in accordance with this Section 9 , the Company shall have the following obligations:

(i) The Company shall use its reasonable best efforts to prepare and file with the SEC a Registration Statement, providing for the registration of the offer and sale of the Registrable Securities by the Holder. For purposes of this Section 9 , the terms “ register ,” “ registered ,” and “ registration ” refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis (“ Rule 415 ”), and the declaration or ordering of effectiveness of such Registration Statement by the SEC; provided, however, if the Holder in good faith determines that under applicable SEC interpretations, rules or policies a Rule 415 registration would not, in light of the circumstances of the Company or the proposed offering, permit the resale of all of the Registrable Securities immediately after effectiveness, or material limitations would be imposed on any such resale, then the registration shall be on Form S-1 or such other form that permits the maximum ability of holders of Registrable Securities to effectuate an unrestricted resale of such securities. Upon effectiveness, the Company shall use its reasonable best efforts to keep such Registration Statement effective pursuant to Rule 415 at all times until such date as is the earlier of: (i) the date on which all of the Registrable Securities covered by the Registration Statement have been sold and (ii) the one (1) year anniversary of the date such Registration Statement became effective under the Securities Act (the “ Registration Period ”).

(ii) The Company shall use reasonable best efforts to prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statements and the prospectus used in connection with the Registration Statements as may be necessary to keep the Registration Statements effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statements. In the event the number of shares available under a Registration Statement filed pursuant to this Agreement is insufficient to cover all of the Registrable Securities issued or issuable upon exercise of the Warrants, the Company shall use reasonable best efforts to amend the Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover all of the Registrable Securities, in each case, as soon as practicable, but in any event within twenty (20) days after the necessity therefor arises (based on the market price of the Common Stock and other relevant factors on which the Company reasonably elects to rely). The Company shall use its reasonable best efforts to cause such amendment and/or new Registration Statement to become effective as soon as reasonably practicable following the filing thereof.

(iii) If requested by the Holder, the Company shall furnish to the Holder: (i) promptly (but in no event more than two (2) business days) after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of each Registration Statement and any amendment thereto, each preliminary prospectus and prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to the Holder as a “Selling Stockholder” (but not any portion of such letters and correspondence that the Company believes would constitute material and non-public information of the Company or any portion that contains information for which the Company has sought confidential treatment), and (ii) promptly (but in no event more than two (2) business days) after the Registration Statement is declared effective by the SEC, such number of copies of a final prospectus and all amendments and supplements thereto and such other documents as the Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by the Holder. The Company will promptly notify the Holder by facsimile of the effectiveness of each Registration Statement or any post-effective amendment. The Company will, as promptly as reasonably practical, respond to any and all comments received from the SEC (which comments relating to such Registration Statement that pertain to the Holder as a “Selling Stockholder” shall promptly be made available to the Holder upon request; provided that, the Company shall not be obligated to make available any comments that would result in the disclosure to the Holder of material and non-public information concerning the Company or that contain information for which the Company has sought confidential treatment), with a view towards causing each Registration Statement or any amendment thereto to be declared effective by the SEC as soon as practicable, shall promptly file an acceleration request as soon as practicable following the resolution or clearance of all SEC comments or, if applicable, following notification by the SEC that any such Registration Statement or any amendment thereto will not be subject to review and, if required by law, shall promptly file with the SEC a final prospectus as soon as practicable following receipt by the Company from the SEC of an order declaring the Registration Statement effective.

(iv) The Company shall use reasonable best efforts to: (i) register and qualify the Registrable Securities covered by the Registration Statements under such other securities or “blue sky” laws of such jurisdictions in the United States as the Holder reasonably requests, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided , however , that the Company shall not be required in connection therewith or as a condition thereto to: (a) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 9(c)(iv) , (b) subject itself to general taxation in any such jurisdiction, (c) file a general consent to service of process in any such jurisdiction, (d) provide any undertakings that cause the Company undue expense or burden, or (e) make any change in its charter or bylaws, which in each case the Board of Directors of the Company determines to be contrary to the best interests of the Company and its stockholders.

(v) As promptly as reasonably practicable after becoming aware of such event, the Company shall notify the Holder of the happening of any event, of which the Company has knowledge, as a result of which the prospectus included in any Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Following the occurrence of such event, as promptly as reasonably practicable under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, the Company shall use its reasonable best efforts to prepare a supplement or amendment to any Registration Statement to correct such untrue statement or omission, and deliver such number of copies of such supplement or amendment to the Holder as the Holder may reasonably request; provided , that the Company shall promptly: (i) notify the Holder in writing of the existence of (but in no event, without the prior written consent of the Holder, shall the Company disclose to such investor any of the facts or circumstances regarding) material non-public information and (ii) advise the Holder in writing to cease all sales under such Registration Statement until such time as the Company elects to disclose such material non-public information.

(vi) The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of any Registration Statement, and, if such an order is issued, to obtain the withdrawal of such order at the earliest possible moment and to notify the Holder who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance of such order and the resolution thereof.

(vii) The Company shall permit a single firm of legal counsel designated by the Holder to review such Registration Statement and all amendments and supplements thereto (as well as all requests for acceleration or effectiveness thereof), a reasonable period of time prior to filing with the SEC, and not file any document in a form to which such counsel reasonably objects and will not request acceleration of such Registration Statement without prior notice to such counsel. The fees of counsel for such review shall not exceed $5,000. The sections of such Registration Statement covering information with respect to the Holder, the Holder’s beneficial ownership of securities of the Company or the Holder’s intended method of disposition of Registrable Securities shall conform to the information provided to the Company by the Holder.

(viii) In connection with an underwritten offering only, the Company shall furnish, on the date that Registrable Securities are delivered to an underwriter for sale in connection with any Registration Statement: (i) an opinion, dated as of such date, from counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the underwriters, if any, and the Holder and (ii) a letter, dated such date, from the Company’s independent registered public accounting firm in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and the Holder.

(ix) The Company shall make available for inspection during reasonable business hours by: (i) the Holder, (ii) any underwriter participating in any disposition pursuant to a Registration Statement, (iii) one firm of attorneys and one firm of accountants or other agents retained by the Holder and (iv) one firm of attorneys retained by all such underwriters (if any) (collectively, the “ Inspectors ”) all pertinent financial and other records, and pertinent corporate documents and properties of the Company, including without limitation, records of conversions by other holders of convertible securities issued by the Company and the issuance of stock to such holders pursuant to the conversions (collectively, the “ Records ”), as shall be reasonably deemed necessary by each Inspector to enable each Inspector to exercise its due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request for purposes of such due diligence; provided, however , that each Inspector shall hold in confidence and shall not make any disclosure (except to the Holder and the other Inspectors) of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless: (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement, (b) the release of such Records is ordered pursuant to a subpoena or other order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement. The Company shall not be required to comply with this Section 9(c)(ix) or otherwise disclose any confidential information in such Records to any Inspector until and unless such Inspector shall have entered into confidentiality agreements (in form and substance satisfactory to the Company) with the Company with respect thereto, substantially in the form of this Section 9(c)(ix) . The Holder agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and the Holder) shall be deemed to limit the Holder’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

(x) The Company shall hold in confidence and not make any disclosure of information concerning the Holder provided to the Company unless: (i) disclosure of such information is necessary to comply with federal or state securities laws or the Company’s obligations under this Agreement, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning the Holder is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Holder prior to making such disclosure, and allow the Holder, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

(xi) The Company shall take all reasonable efforts to cause all the Registrable Securities covered by the Registration Statement to be listed on the OTC bulletin board or a NASDAQ exchange.

(xii) The Company shall provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than the effective date of the Registration Statement.

(xiii) The Company shall cooperate with the Holder and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the managing underwriter or underwriters, if any, or the Holder may reasonably request and registered in such names as the managing underwriter or underwriters, if any, or the Holder may request. Within three (3) business days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to the Holder) a customary instruction letter and opinion of such counsel to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities.

(xiv) At the request of the Holder, the Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and any prospectus used in connection with the Registration Statement as may be necessary in order to change the plan of distribution set forth in such Registration Statement.

(xv) From and after the date of this Agreement, the Company shall not, and shall not agree to, allow the holders of any securities of the Company, other than the Holder, to include any of their securities in any Registration Statement under Section 9(a) hereof or any amendment or supplement thereto under Section 9(c)(ii) hereof without the consent of the Holder.

(xvi) The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Holder of Registrable Securities pursuant to a Registration Statement.

(d) Obligations of the Holder . In connection with the registration of the Registrable Securities in accordance with this Section 9 , the Holder shall have the following obligations:

(i) It shall be a condition precedent to the obligations of the Company to include any Holder’s Registrable Securities in any Registration Statement that Holder shall timely furnish to the Company such information regarding itself, the Registrable Securities held by it, the intended method of disposition of the Registrable Securities held by it and any other information as shall be reasonably required to effect the registration of such Registrable Securities and shall provide such information and execute such documents in connection with such registration as the Company may reasonably request. At least five (5) business days prior to the first anticipated filing date of the Registration Statement, the Company shall notify the Holder of the information the Company requires from the Holder.

(ii) The Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 9(c)(v) or 9(c)(vi) , the Holder will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until the Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 9(c)(v) or 9(c)(vi) and, if so directed by the Company, the Holder shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in the Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

(iii) The Holder may not participate in any underwritten registration in connection with a registration pursuant to Section 9(b) hereof unless the Holder: (i) agrees to sell their Registrable Securities on the basis provided in any underwriting arrangements in usual and customary form entered into by the Company, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (iii) agrees to pay its pro rata share of all underwriting discounts and commissions and any expenses in excess of those payable by the Company pursuant to Section 9(d) below.

(iv) The Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it or an exemption therefrom in connection with the offer and sale of Registrable Securities pursuant to any Registration Statement.

(d) Expenses of Registration . All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 9(a) , 9(b) and 9(c) , including, without limitation, all registration, listing and qualification fees, printers and accounting fees, the fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of counsel selected by the Holder pursuant to Section 9(c)(vii) hereof shall be borne by the Company.

(e) Indemnification . In the event any Registrable Securities are included in a Registration Statement under this Agreement:

(i) To the extent permitted by law, the Company will indemnify, hold harmless and defend: (i) the Holder, (ii) the directors, officers, partners, employees, agents and each person who controls the Holder within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), if any, (iii) any underwriter (as defined in the Securities Act) for the Holder, and (iv) the directors, officers, partners, employees and each person who controls any such underwriter within the meaning of the Securities Act or the Exchange Act, if any (each, an “ Indemnified Person ”), against any joint or several losses, claims, damages, liabilities or expenses (collectively, together with actions, proceedings or inquiries by any regulatory or self-regulatory organization, whether commenced or threatened, in respect thereof, “ Claims ”) to which any of them may become subject insofar as such Claims arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement under which the Registrable Securities were registered or the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act any state securities law, or any rule or regulation thereunder relating to the registration or qualification under the Securities Act, the Exchange Act or state securities laws (the matters in the foregoing clauses (i) through (iii) being, collectively, “ Violations ”). Subject to the restrictions set forth in Section 9(c)(iii) with respect to the number of legal counsel, the Company shall reimburse the Indemnified Person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 9(e)(i) : (i) shall not apply to, and the Company shall not be liable to any Indemnified Person for, a Claim arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by any Indemnified Person or underwriter for such Indemnified Person expressly for use in connection with the preparation of such Registration Statement or any such amendment thereof or supplement thereto; (ii) shall not apply to, and the Company shall not be liable to any Indemnified Person for, amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld; and (iii) with respect to any preliminary prospectus, shall not inure to the benefit of any Indemnified Person if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Holder pursuant to Section 9(h) .

(ii) In connection with any Registration Statement in which the Holder is participating, the Holder agrees severally and not jointly to indemnify, hold harmless and defend, to the same extent and in the same manner set forth in Section 9(e)(i) , the Company, each of its directors, each of its officers who signs the Registration Statement, each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, legal counsel and accountants for the Company, any underwriter and any other stockholder selling securities pursuant to the Registration Statement or any of its directors or officers or any person who controls such stockholder or underwriter within the meaning of the Securities Act or the Exchange Act (collectively and together with an Indemnified Person, an “ Indemnified Party ”), against any Claim to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is based upon any Violation by the Holder, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder expressly for use in connection with such Registration Statement (or any amendment or supplement thereto); and subject to Section 9(e)(iii) the Holder will reimburse any legal or other expenses (promptly as such expenses are incurred and are due and payable) reasonably incurred by such Indemnified Parties in connection with investigating or defending any such Claim; provided, however , that the indemnity agreement contained in this Section 9(e)(ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Holder, which consent shall not be unreasonably withheld; provided, further, however , that the Holder shall be liable under this Agreement (including this Section 9(e)(ii) and Section 9(f) ) for only that amount as does not exceed the net proceeds to the Holder as a result of the sale of Registrable Securities pursuant to such Registration Statement, except in the case of gross negligence, fraud or willful misconduct by the Holder. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Holder pursuant to Section 9 . Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 9(e)(ii) with respect to any preliminary prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected on a timely basis in the prospectus, as then amended or supplemented.

(iii) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 9(e) of notice of the commencement of any action (including any governmental action), such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 9(e) , deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however , that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The indemnifying party shall pay for only one separate legal counsel for the Indemnified Persons or the Indemnified Parties, as applicable, and if the Indemnified Parties is the Holder under Section 9(e)(i) above, such legal counsel shall be selected by the Holder to which the Claim relates, if the Holder is entitled to indemnification hereunder, or the Company, if the Company is entitled to indemnification hereunder, as applicable. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 9(e) , except to the extent that the indemnifying party is actually prejudiced in its ability to defend such action. The indemnification required by this Section 9(e) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable.

(f) Contribution . To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 9(e) to the fullest extent permitted by law; provided, however , that: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 9(e) , (ii) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent misrepresentation, and (iii) contribution (together with any indemnification or other obligations under this Agreement) by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities, except in the case of gross negligence, willful misconduct or fraud by such seller.

(g) Reports Under the Exchange Act . With a view to making available to the Holder the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the investors to sell securities of the Company to the public without registration (“ Rule 144 ”), the Company agrees to:

(i) make and keep adequate public information available, as those terms are understood and defined in Rule 144, at all times after the effective date of any Registration Statement filed by the Company hereunder;

(ii) use its reasonable best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under Section 4(a) of the Securities Purchase Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144 at any time after the Company has become subject to such reporting requirements; and

(iii) furnish to the Holder so long as the Holder owns Registrable Securities, promptly upon request: (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements) and (ii) such other information as may be reasonably requested to permit the Holder to sell such securities pursuant to Rule 144 without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act).

(h) Assignment of Registration Rights; Survival Following Exercise .

(i) The registration rights under this Warrant shall be automatically assignable by the Holder to any transferee of all or any portion of Registrable Securities if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights with respect to such transferred Registrable Securities (which shall not affect the Holder’s registration rights with respect to any Registrable Securities not so transferred), and a copy of such agreement is furnished to the Company promptly after such assignment, (ii) the Company is, promptly after such transfer or assignment furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment, the further disposition of such securities by the transferee or assignee is restricted under the Securities Act and applicable state securities laws, (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained in this Section 9 , and (v) such transferee shall be an “accredited investor” as that term defined in Rule 501 of Regulation D promulgated under the Securities Act. In the event the Holder transfers this Warrant in whole or in part in accordance with Section 10.2(c) , the rights of the Holder and all other holders of warrants received in exchange for Warrant No: [______] 2 or in exchange for any successor warrants thereto (each a “ Rights Holder ” and collectively, “ Rights Holders ”), to request a registration pursuant to Sections 9(a) or 9(b) or to take the actions set forth in Sections 9(c)(vii) , (xiv) or (xv) , may be taken on behalf of all Rights Holders by Rights Holders representing a majority of the Registrable Securities (determined by reference to each Rights Holder’s pro rata share of the aggregate number of shares of Common Stock held or exercisable by all Rights Holders at such time).

2	Insert here the Warrant number for this original warrant.

(ii) For the avoidance of any doubt, the registration rights under this Warrant shall survive and continue to apply with respect to all Registrable Securities following the exercise of this Warrant, whether such exercise occurs in whole or in part.

10. Ownership, Transfer and Substitution of Warrant .

10.1 Ownership of Warrant . The Company may treat the person in whose name this Warrant is registered in the Warrant Register maintained pursuant to Section 10.2(b) hereof as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. Subject to Section 8 hereof, this Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.

10.2 Office; Transfer and Exchange of Warrant .

(a) The Company will maintain its principal offices as the office where notices, presentations and demands in respect of this Warrant may be made upon it until the Company notifies the holder of this Warrant of any change of location of the office.

(b) The Company shall cause to be kept at its office maintained pursuant to Section 10.2(a) hereof a Warrant Register for the registration and transfer of this Warrant. The names and addresses of holders of this Warrant, the transfers thereof and the names and addresses of transferees of this Warrant shall be registered in such Warrant Register. The Person in whose name any Warrant shall be so registered shall be deemed and treated as the owner and holder thereof for all purposes of this Warrant, and the Company shall not be affected by any notice or knowledge to the contrary.

(c) Subject to compliance with Sections 8 and 9(h) hereof, this Warrant and the rights evidenced hereby, may be transferred by the Holder in full or in part. Upon the surrender of this Warrant, properly endorsed, for registration of transfer or for exchange at the office of the Company maintained pursuant to Section 10.2(a) hereof, the Company at its expense will (subject to compliance with Section 8 hereof, if applicable) execute and deliver to or upon the order of the Holder thereof a new Warrant or Warrants of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face thereof for the number of shares of Common Stock called for on the face of this Warrant so surrendered.

10.3 Replacement of Warrant . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, upon delivery of indemnity reasonably satisfactory to the Company in form and amount or, in the case of any mutilation, upon surrender of this Warrant for cancellation at the office of the Company maintained pursuant to Section 10.2(a) hereof, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated the date hereof.

11. No Rights or Liabilities as Stockholder . No Holder shall be entitled to vote or receive dividends or be deemed the holder of any shares of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the shares of Common Stock purchasable upon the exercise hereof shall have become deliverable, as provided herein. The Holder will not be entitled to share in the assets of the Company in the event of a liquidation, dissolution or the winding up of the Company.

12. Notices of Record Date, etc . In case the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company (any such event, a “ Merger or Consolidation ”); or of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the registered holder of this Warrant a notice specifying, as the case may be: (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten (10) days prior to the record date or effective date for the event specified in such notice unless such prior notice is waived by the registered holder of this Warrant.

13. Notices . Any notice or other communication in connection with this Warrant shall be deemed to be given if in writing (or in the form of a facsimile) addressed as hereinafter provided and actually delivered at said address: (a) if to any Holder, at the registered address of such holder as set forth in the Warrant Register kept at the office of the Company maintained pursuant to Section 10.2(b) hereof, or (b) if to the Company, to the attention of its Chief Executive Officer at its office maintained pursuant to Section 10.2(a) hereof; provided, however, that the exercise of any Warrant shall be effective in the manner provided in Section 4 hereof.

14. Payment of Taxes . The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common Stock underlying this Warrant upon exercise of this Warrant; provided, however , that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificate for shares of Common Stock underlying this Warrant in a name other that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof.

15. Governing Law; Jurisdiction; Waiver of Jury Trial . This Warrant shall be enforced, governed by and construed in accordance with the laws of the State of Washington applicable to agreements made and to be performed entirely within such state, without regard to the principles of conflicts of law.

16. Representations and Warranties of the Company . The Company hereby makes, and the Holder is entitled to rely upon, the same representations and warranties made by the Company under the subscription agreements entered into in connection with the Offering, which representations and warranties are incorporated herein by reference; provided, however, that the term “Transaction Documents” used in the subscription agreements shall be deemed to include this Warrant.

17. Miscellaneous . Subject to Section 9(h)(i) with respect to actions permitted by Rights Holders representing a majority of the Registrable Securities, any provision of this Warrant and the observance of any term hereof may be amended, waived or modified (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder. If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance with its terms. The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof. Nothing in this Warrant shall limit the rights of MDB Capital Group LLC contained in that certain letter agreement, dated as of June 9, 2010, between MDB Capital Group LLC and the Company.

[ remainder of page intentionally left blank ]

IN WITNESS WHEREOF , the Company has caused this Warrant to be duly executed as of the date first above written.

CLEARSIGN COMBUSTION CORPORATION

By:
	Name:
	Title:

EXHIBIT A

PURCHASE FORM

To: ClearSign Combustion Corporation

Dated:____________

The undersigned, pursuant to the provisions set forth in the attached Warrant (No. ___), hereby elects to [check applicable subsection] :

________	(a)	Purchase ____________ shares of ________________ of ClearSign Combustion Corporation pursuant to the terms of the attached Warrant and payment of the Warrant Price per share required under such Warrant accompanies this notice;

	OR

________	(b)	Exercise the attached Warrant for [all of the shares] [______ of the shares] [ cross out inapplicable phrase ] purchasable under the Warrant pursuant to the cashless exercise provisions of Section 4.6 of such Warrant.

Please issue a certificate or certificates representing said shares of ClearSign Combustion Corporation the name of the undersigned or in such other name as is specified below:


	Print or Type Name


(Signature must conform in all respects to name of holder as specified on the face of Warrant)


	(Street Address)


	(City) (State) (Zip Code)

Washington		3823		26-2056298
( State or other jurisdiction of incorporation or organization )		( Primary Standard Industrial Classification Code Number )		( I.R.S. Employer Identification No. )

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

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price (1)		Amount of Registration Fee
Common Stock, $0.0001 par value per share (2)	$	18,000,000	$	2,089.80
Underwriter Warrant (3)(4)	$	100		—
Shares of Common Stock underlying Underwriter’s Warrant	$	1,800,000	$	208.98
Common Stock, $0.0001 par value per share (5)	$	9,183,780	$	1,066.24
Total			$	3,365.02

(1)	Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)	Offered pursuant to the registrant’s initial public offering, including shares of our common stock amounting to 15% of the shares offered to the public, that the underwriter has the option to purchase to cover over-allotments, if any.

(3)	No registration fee required pursuant to Rule 457(g) under the Securities Act of 1933.

(4) (5)	Represents a warrant granted to the underwriter to purchase up to shares of common stock amounting to 10% of the number of shares sold to the public in this offering. Represents shares of the registrant’s common stock being offered for resale by the selling security holders named in this registration statement.

	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds to us (before expenses)	$	$

		Page
PROSPECTUS SUMMARY		1
SUMMARY SELECTED FINANCIAL INFORMATION		6
RISK FACTORS		7
BUSINESS		16
PROPERTIES		39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		40
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		44
EXECUTIVE COMPENSATION		50
DESCRIPTION OF CAPITAL STOCK		52
DIVIDEND POLICY AND OTHER SHAREHOLDER MATTERS		57
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS		58
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		58
UNDERWRITING		59
USE OF PROCEEDS		63
CAPITALIZATION		64
DILUTION		64
LEGAL MATTERS		65
EXPERTS		65
WHERE YOU CAN FIND MORE INFORMATION		65
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES		66
INDEX TO FINANCIAL STATEMENTS

Issuer		ClearSign Combustion Corporation, a Washington corporation.

Common stock offered by us		__________ shares of common stock, par value $0.0001 per share.

Over-allotment option		We have granted our underwriter, MDB Capital Group LLC, an option to purchase up to an additional ____________ shares of common stock within 45 days of the date of this prospectus in order to cover over-allotments, if any.

Common stock outstanding prior to this offering		4,118,114 shares of common stock (1)(2)

Common stock outstanding after this offering		_________ shares of common stock (1)(2)

Use of Proceeds		We intend to use the net proceeds from our sale of common stock in this offering for working capital and general corporate purposes. See “Use of Proceeds” for additional information.

Market and trading symbol for the common stock		There is currently no market for our common stock. We intend to apply for listing of our common stock on The NASDAQ Capital Market under the symbol “____”.

Underwriter common stock purchase warrant		In connection with this offering, we have also agreed to sell to MDB Capital Group LLC a warrant to purchase up to 10% of the shares of common stock sold in this offering. If this warrant is exercised, each share may be purchased by MDB Capital Group LLC at $_____ per share (100% of the price of the shares sold in this offering.)

Lockup Agreements		Each of our officers, directors and shareholders beneficially owning 5% or more of our common stock have agreed that for a period of six months from the effective date of this offering, they will be subject to a lockup prohibiting any sales, transfers or hedging transactions in our securities held by them. See section titled “Lockup Agreements” in this prospectus.

	For the Years Ended December 31,				For the Six Months Ended June 30,
	2010		2009		2011		2010
STATEMENT OF OPERATIONS:					(Unaudited)
Operating Expenses
Research and Development	$	-	$	2,436	$	120,138	$	-
General and Administrative		395,338		526,336		1,479,329		210,791
Total Operating Expenses		395,338		528,772		1,599,467		210,791
Loss from Operations		(395,338)		(528,772)		(1,599,467)		(210,791)
Other Income (Expense)		(249)		-		1,045		-

Net loss	$	(395,587)	$	(528,772)	$	(1,598,422)	$	(210,791)

Net loss per common share, basic and diluted	$	(0.18)	$	(0.25)	$	(0.52)	$	(0.10)

Weighted average common shares outstanding, basic and diluted		2,235,426		2,104,325		3,052,036		2,205,067


	3a. Agglomerated particulate 500x mag.		3b. Agglomerated particulate 50,000x mag.


	4a. System off – natural, laminar flame		4b. System engaged – turbulence increases


5a. System off		5b. System engaged		5c. System engaged with ground

Path	Customer Type	Representative Companies	Strategy
Direct	Owner-Operators	AEP, Duke Energy, smaller regional players	Drive early demand: reference system to create channel pull.

Channel	Engineering and Construction (E&C) Contractors	Jacobs, Foster Wheeler, CH2M HILL, Parsons, URS	Integrate into designer’s toolkit with ROI proven at customer site.

OEM	Equipment and Technology suppliers	Babcock & Wilcox, GE, Hitachi	OEM and licensing opportunities with ClearSign technology designed directly into systems.

Jurisdiction	Pat. App. Serial No.	Title	Owner

US	12/753,047	System and Apparatus for Applying an Electric Field to a Combustion Volume	ClearSign Combustion Corporation

US	13/006,344	Method and Apparatus for Electrical Control of Heat Transfer	ClearSign Combustion Corporation

PCT	PCT/US11/21194	Method and Apparatus for Electrical Control of Heat Transfer	ClearSign Combustion Corporation

Very truly yours,

MDB Capital Group, LLC

By:	/s/ Robert M. Levande
	Sr. Managing Director

ClearSign Combustion Corporation

By:	/s/ Richard Rutkowski
	Mr. Richard Rutkowski
	Its: Chief Executive Officer

Very truly yours,

MDB Capital Group LLC

By:	/s/ Christopher Marlett
	Christopher A. Marlett
	Its: Chief Executive Officer

Stage	Amount	Timing

Pre-Listing Financing	Up to $3,000,000	Closes prior to Merger Transaction

Underwritten Offering or PIPE* Financing	$5,000,000 to $20,000,000	Closes in conjunction with Listing on an Exchange

If to the Company:	If to MDB:

Richard Rutkowski	Christopher A. Marlett
Chief Executive Officer	Chief Executive Officer
ClearSign Combustion Corporation	MDB Capital Group LLC
12201 Tukwila International Blvd.	401 Wilshire Blvd - Suite 1020
Seattle, WA 98168	Santa Monica, CA 90401

By:	/s/ Richard Rutkowsk
	Mr. Richard Rutkowski
	Its: Chief Executive Officer

Richard Rutkowski	Chairman, Chief Executive Officer
David Goodson	Chief Science Officer
Geoffrey Osler	Chief Marketing Officer, Secretary

¨ a.	A director, executive officer or general partner of Company.
¨ b.	A natural person whose individual net worth or joint net worth with spouse at time of purchase exceeds $1,000,000. (In calculation of net worth, you may include equity in personal property and real estate ( excluding your principal residence), cash, short term investments, stocks and securities. Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)
¨ c.	A natural person who had an individual income in excess of $200,000 in each of two most recent years or joint income with spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching same level of income in current year.
¨ d.	A corporation, limited liability company, partnership, tax-exempt organization (under Section 501(c)(3) of Internal Revenue Code of 1986, as amended) or Massachusetts or similar business trust (i) not formed for specific purpose of acquiring Common Stock and (ii) having total assets in excess of $5,000,000.
¨ e.	An entity which falls within one of following categories of institutional accredited investors, set forth in 501(a) of Regulation D under Securities Act [if you have marked this category, also mark which of following items describes you:]
	¨ 1.	A bank as defined in Section 3(a)(2) of Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of Securities Act whether acting in its individual or a fiduciary capacity.
	¨ 2.	A broker/dealer registered pursuant to Section 15 of Securities Exchange Act of 1934.
	¨ 3.	An insurance company as defined in Section 2(13) of Securities Act.
	¨ 4.	An investment company registered under Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that act.
	¨ 5.	A Small Business Investment Company licensed by U.S. Small Business Administration under Section 301(c) or (d) of Small Business Investment Act of 1958.
	¨ 6.	Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for benefit of its employees, if such plan has total assets in excess of $5,000,000.
	¨ 7.	Any private business development company as defined in Section 202(a)(22) of Investment Advisers Act of 1940.
	¨ 8.	An employee benefit plan within meaning of Employee Retirement Income Security Act of 1974, if investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors.
	¨ 9.	A trust, with total assets in excess of $5,000,000, not formed for specific purpose of acquiring Class A Common Stock offered, whose purchase is directed by sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D.
¨ f.	An entity in which all equity owners are accredited investors as described above.

Shares :	_______________

Subscription Amount (@ $2.75 per share) :	$_______________

____ (a)	Individual
____ (b)	Community Property
____ (c)	Joint Tenants with Right of Survivorship	) All parties
____ (d)	Tenants in Common	) must sign
____ (e)	Corporate
____ (f)	Partnership
____ (g)	Trust


Address of Residence	Address for Sending Notices
(or Business, if not an individual)	(if different)

Purchaser's Taxpayer ID or Social Security No.:
Citizen of:
E-mail Address:

PURCHASER (if individual):		PURCHASER (if entity):


Signature		Name of Entity

		By:
Name (type or print)

		Name:

		Its:
Signature of Co-Signer (if any)


Name of Co-Signer (type or print)

	CLEARSIGN COMBUSTION CORPORATION

	By:	/s/ Richard Rutkowski
		Richard Rutkowski, Chief Executive Officer

FOUNDERS:

DAVID GOODSON

Signature:	/s/ David B. Goodson

GEOFF OSLER

Signature:	/s/ Geoffrey D. Osler

RICHARD RUTKOWSKI

Signature:	/s/ Richard Rutkowski

INVESTORS:

B.D. AND D.G. GOODSON TRUST

By:	/s/ Howard Sprouse
Name:	Howard Sprouse
Title:	Trustee

THE ALTERNATIVE ENERGY RESOURCE ALLIANCE

By:	/s/ David B. Goodson
Name:	David B. Goodson
Title:	Executive Director

TRINITY WEST TRUST I

By:	/s/ Geoffrey D. Osler
Name:	Geoffrey D. Osler
Title:	Trustee

TRINITY WEST TRUST II

By:	/s/ Geoffrey D. Osler
Name:	Geoffrey D. Osler
Title:	Trustee

By:			CLEARSIGN COMBUSTION CORPORATION
Name and Title of Signatory

SHAREHOLDER (if an entity)		SHAREHOLDER (if an individual)


[Print Name of Shareholder]		[Print Name of Shareholder]


[Signature]		[Signature ]


[Print Name of Signatory]		[Spouse's or Partner's Signature, if applicable]


[Print Title of Signatory]		[Print Spouse's or Partner's Name, if applicable]

CLEARSIGN COMBUSTION CORPORATION

By:	/s/ Richard Rutkowski
Name: Richard Rutkowski
Title: CEO

CLEARSIGN COMBUSTION CORPORATION

By:	/s/ Geoff Osler
Name: Geoffrey Osler
Title: Secretary

PURCHASER
DR. THOMAS HARTWICK

/s/ Dr. Thomas Hartwick
Signature

CLEARSIGN COMBUSTION CORPORATION

/s/ Geoffrey Osler
Signature

Geoffrey Osler
Print Name

Secretary
Print Title

o a.	A director, executive officer or general partner of Company.
o b.	A natural person whose individual net worth or joint net worth with spouse at time of purchase exceeds $1,000,000.
o c.	A natural person who had an individual income in excess of $200,000 in each of two most recent years or joint income with spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching same level of income in current year.
o d.	A corporation, limited liability company, partnership, tax-exempt organization (under Section 501(c)(3) of Internal Revenue Code of 1986, as amended) or Massachusetts or similar business trust (i) not formed for specific purpose of acquiring Class A Common Stock and (ii) having total assets in excess of $5,000,000.
o e.	An entity which falls within one of following categories of institutional accredited investors, set forth in 501(a) of Regulation D under Securities Act [if you have marked this category, also mark which of following items describes you:]
	o 1.	A bank as defined in Section 3(a)(2) of Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of Securities Act whether acting in its individual or a fiduciary capacity.
	o 2.	A broker/dealer registered pursuant to Section 15 of Securities Exchange Act of 1934.
	o 3.	An insurance company as defined in Section 2(13) of Securities Act.
	o 4.	An investment company registered under Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that act.
	o 5.	A Small Business Investment Company licensed by U.S. Small Business Administration under Section 301(c) or (d) of Small Business Investment Act of 1958.
	o 6.	Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for benefit of its employees, if such plan has total assets in excess of $5,000,000.
	o 7.	Any private business development company as defined in Section 202(a)(22) of Investment Advisers Act of 1940.
	o 8.	An employee benefit plan within meaning of Employee Retirement Income Security Act of 1974, if investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors.
	o 9.	A trust, with total assets in excess of $5,000,000, not formed for specific purpose of acquiring Class A Common Stock offered, whose purchase is directed by sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D.
o f.	An entity in which all equity owners are accredited investors as described above.