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Thursday, April 26, 2012 - Page updated at 06:00 p.m.
ClearSign's $12M IPO among first to use JOBS Act exemptions
By Drew DeSilver
Seattle Times business reporter
An early-stage Seattle company that went public Wednesday with a $12 million stock offering appears to be one of the first, if not the first, in the nation to make use of the new JOBS Act.
ClearSign Combustion, which is developing technologies to make boilers, furnaces, turbines and other combustion systems more efficient, said it would take advantage of a provision in the new law that allows it to delay adopting new or revised accounting standards.
In its final prospectus, ClearSign also said it might take advantage of other exemptions the law creates for "emerging growth companies," including disclosing less information about executive pay, not letting shareholders vote on pay arrangements and not having outside auditors attest to the effectiveness of its internal controls.
Those and other provisions of the "Jumpstart Our Business Startups (or JOBS) Act," which became law April 5, are intended to make it cheaper and easier for development-stage companies to raise capital.
However, ClearSign warned that taking all those exemptions might make its stock less attractive to investors.
"Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry," the company said in its prospectus.
As a result, it said, "it may be difficult for us to raise additional capital as and when we need it."
ClearSign, which originally filed to go public in November, added the JOBS Act language to its prospectus in one of the last steps before completing the IPO in which it sold 3 million shares for $4 each.
After fees and expenses, the company expects to net $9.5 million. Its underwriter, MDB Capital of Los Angeles, may sell up to 450,000 additional shares to cover over-allotments.
Kathleen Smith of Renaissance Capital, a boutique investment firm specializing in IPOs, said she didn't know of any other recent IPOs to explicitly claim exemption under the JOBS Act, "but it would not surprise us if we see this disclosure for others."
Last week, New Jersey-based computer-security firm BlackStratus became the first company to file for an IPO using a different JOBS Act provision — releasing only two years of audited financial statements rather than the standard five.
In their first day of trading on the Nasdaq Capital Market under the ticker symbol CLIR, ClearSign's shares gained 20 cents, or 5 percent, to close at $4.20.
The 4-year-old company said it would use approximately $5 million of the IPO proceeds for research and development, including capital expenditures; $1 million to protect its intellectual property; $1.25 million to explore marketing opportunities; and the rest for working capital and general corporate purposes.
ClearSign says its core technology introduces a computer-controlled electric field into the combustion zone to improve control of flame shape and heat transfer. It has built three prototypes to date but has not yet developed any products using its technology.
Like with many startups, ClearSign's finances have been somewhat precarious. It had just $25 in cash at the end of 2010, but a $3 million private placement last May replenished its bank account.
However, the company hasn't generated any revenue and has $4.5 million in accumulated losses. Its accountants have expressed doubts as to its ability to continue as a going concern.
ClearSign's chairman and chief executive is Richard Rutkowski, who co-founded Redmond-based Microvision and was its CEO from 1995 to 2006.
Rutkowski also co-founded Bothell-based Lumera, which merged with GigOptix in 2008.
Drew DeSilver: 206-464-3145 or email@example.com
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