Heliogen (HLGN) 10-K2023 FY Annual report

This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Annual Report regarding our future financial performance, as well as our strategy, future operations, financial position, estimated revenues, losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of such terms or other similar expressions. These forward-looking statements are based on management’s current expectations, assumptions, hopes, beliefs, intentions and strategies regarding future events and are based on currently available information as to the outcome and timing of future events. Although we believe such expectations and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. All readers are cautioned that the forward-looking statements contained in this Annual Report are not guarantees of future performance and we cannot assure any reader that such statements will be realized or that the forward-looking events and circumstances will occur.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

You should read this Annual Report with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. This summary should be read together with the more detailed description of each risk factor disclosed under “Item 1A Risk Factors” contained in Part I of this Annual Report.

Heliogen, Inc. and its subsidiaries (collectively, “Heliogen,” the “Company,” “we,” “us,” or “our”) is a leader in next-generation concentrated solar energy. We are developing a modular, AI-enabled, concentrated solar energy plant that will use an array of mirrors to reflect sunlight and capture, concentrate, store and convert it into cost-effective energy on demand. Our product offering will deliver industrial process steam around the clock using thermal energy storage based on proven technology. This steam can also be used to produce electricity when paired with a steam turbine and green hydrogen when coupled with a solid oxide electrolyzer. Our next-generation system will be able to cost-effectively generate and store thermal energy at very high temperatures, enabling more cost-effective production of electricity at a smaller scale. The inclusion of a thermal energy storage system distinguishes our solution from clean energy provided by typical photovoltaic (“PV”) and wind installations which do not produce thermal energy and are only able to produce energy intermittently unless battery storage is added. The system will be configurable for several applications, including carbon-free industrial-grade heat and steam (for use in industrial processes), clean power (electricity), and generation of green hydrogen, based on a customer’s needs.

We have developed innovations in the process of concentrating sunlight which we believe fundamentally improve the potential to efficiently and cost-effectively collect and deliver energy to industrial processes. We believe we will be one of the first technology providers with the ability to deliver cost-effective renewable energy capable of replacing fossil fuels used in industrial processes that require high-temperature heat and/or nearly 24/7 operation. In addition, we believe our disruptive, patented design and AI technology will address intermittency, a fundamental problem confronted by many renewable sources of energy. An intermittent power supply does not match the continuous power demand of industry and the grid. Without storage, wind and PV-based renewable energy generation may rapidly fluctuate between over-supply and under-supply based on resource availability. As the grid penetration of intermittent resources increases, these fluctuations may become increasingly extreme. We believe our technology will contribute to solving this problem. Our next-generation solar plants will have the ability to store very high-temperature energy in solid media. This energy will then be dispatchable, including during times without sunlight, to cost-effectively deliver near 24/7 carbon-free energy in the form of heat and steam, electric power, or green hydrogen fuel.

The three use categories will be configured as follows:

Heliogen’s business focuses on the development and deployment of our innovative concentrated solar energy technology. The main components of our concentrated solar energy technology include heliostat fields and associated control systems, solar receivers, thermal energy storage and heat engines. A heliostat is a mirror affixed to a two-axis tracking mechanism which allows it to move in a trajectory that places its reflected beam of sunlight onto a desired point. A heliostat field is a large array of many heliostats, all operating in coordination to focus their reflected beams on a common location atop a tower located near or within the field. The solar receiver is the device mounted at that focal point which absorbs the highly concentrated solar energy and converts it to thermal energy in a heat transfer medium. The heat transfer medium then carries that thermal energy to the thermal energy storage system, where a large mass of material is brought to very high temperatures inside an insulated enclosure, acting as a thermal battery. When energy is needed, the heat transfer medium transfers thermal energy from the thermal energy storage system and delivers it to the thermal process being powered or for use in generating electricity or hydrogen.

For near-term projects in development, the use of molten salt as a heat transfer and thermal energy storage medium in concentrated solar plants has been demonstrated at many locations around the world, and is considered by Heliogen to be mature, commercially deployable technology. We improve upon this state of the art in two ways. First, we utilize a modular architecture, deploying multiple smaller solar fields and towers to each project rather than the traditional approach of a single, very large tower. This streamlines the project engineering process as the module design can be reused for multiple projects, while leading to higher efficiencies and better land utilization, and creates redundancy for improved operational reliability and uptime. Second, we implement a tightly-integrated concentrated solar power+PV hybrid plant, allowing us to take advantage of both the low cost of PV-generated electricity during daytime hours and the low cost of long-duration thermal energy storage for dispatchable, near continuous operation.

Because Heliogen’s technology is fundamentally a thermal energy source, we believe our products are particularly well-suited to meeting the thermal energy demand of industrial processes. As one example, many industrial facilities use steam to supply energy to their process. Heliogen’s technology, in the form of a steam plant, can supply steam nearly 24/7 by collecting thermal energy while the sun is shining, storing it in a thermal energy storage system, and using that thermal energy to supply heat to a boiler when the industrial process needs steam. Our technological innovations will enable the delivery of our carbon-free heat, steam, power and green hydrogen solutions to customers. Our concentrating solar plants will produce carbon-free heat (e.g. process steam) to support industrial processes. Hybrid power plants will deliver solar thermal energy to a heat engine to produce electrical power. Green hydrogen plants will couple steam and power technology with an electrolyzer to produce green hydrogen fuel. All three solutions will be enabled by Heliogen’s proprietary heliostat design and AI technology and will integrate thermal energy storage to enable operation nearly 24/7, overcoming the intermittency of other solar energy technologies.

We are offering multiple support models to customers looking to deploy Heliogen’s technology:

Longer term, we expect our primary business model to include a combination of Heliogen’s IP licensing and engineering support to third parties interested in manufacturing and installing the hardware.

The most important raw materials required for our concentrated solar energy systems are steel (sheet, tube, bar, extrusions), stainless steel (pipe), glass (float glass), copper (wiring), aluminum (die castings, extrusions), commodity electrical & electronics components, ceramics & ceramic fibers, thermal insulation materials, bauxite particles and/or silica sand and concrete. Our components are produced by suppliers both domestically and internationally where most raw materials are readily available. Many major equipment and systems components are procured on a single or sole-source basis, but where multiple sources exist, we work to qualify multiple suppliers to minimize supply chain risk. We also mitigate risk by maintaining safety stock for key parts and assemblies with lengthy procurement lead times. We use a variety of agreements with suppliers to protect our IP and processes to monitor and mitigate risks of the supply base causing a business disruption. The risks monitored include supplier financial viability, the ability to increase or decrease production levels, business continuity, quality and delivery.

Heliogen’s growth is tied to the global phenomenon commonly described as “the energy transition” – that is, the shift in energy supply from burning fossil fuels to harnessing low-carbon and renewable sources of energy. Data linking the role of carbon emissions in accelerating climate change has led to stockholders and activists applying pressure to companies and governments to take action. This trend has been on the rise since the signing of the Paris Agreement in 2015, led largely by Europe. As a result, the energy transition has become a major focus of both private and public sector leaders around the world. Companies and governments have begun setting ambitious goals to reduce greenhouse gas (“GHG”) emissions and to use renewable resources to sustainably power their operations.

Heliogen’s growth strategy is to harness the significant demand by delivering technology that enables scalable solar-thermal energy plants that can create heat, steam, power and “clean” hydrogen– i.e., without the carbon emissions produced by fossil fuel energy sources. Our solutions target the end markets with a need for heat, electric power and hydrogen. Such markets include the oil & gas, power, cement, steel and mining industries.

Heliogen’s technology platform will allow modular plants for heat, steam, power and/or hydrogen to be built at customer locations. Our strategy to achieve scale is through modularity and repeatability, with minimal custom re-engineering compared to prior iterations of this technology.

Leveraging the modularity of the system and repeatability of its implementation, in the near to medium term, Heliogen will partner with contractors and other supply chain participants to execute projects. In the long term, we expect to license our core, patent-protected technology to owner-operators and EPC companies who can each deploy many plants, to achieve a scale and growth trajectory that can take advantage of the size of the market opportunity. Licensing could enable Heliogen to improve the pace of our deployments, as well as increase our profit margins, beyond what could be achieved solely through our direct implementation.

In order to support Heliogen’s growth as described above, we will continue our dedication to research and development (“R&D”) with a focus on iterating on our novel combination and integration of hardware and software. We are working to harness our specialty of using software, automation, robotics and algorithms to reduce the quantity of materials, the amount of human labor and the duration of time required to deliver our projects at scale.

We are geographically focused on the U.S, Mexico, Australia and South America, which are areas with high energy demand and strong solar resources. According to the U.S. Energy Information Administration, global energy demand is expected to increase nearly 50% over the next 30 years, due to an increase in population and the economic growth of developing countries. We expect that demand for carbon-free replacements for current energy sources will further increase the demand for Heliogen’s products.

The key driver for renewable energy generation and storage will be increased reliance on intermittent renewable energy resources like solar PV and wind. As penetration of these renewable sources increases, the intermittency of these resources can put strain on the grid if the operator is unable to fully match supply with demand. This strain can lead to an inability to supply power when it is needed and increased costs to consumers.

Energy storage is crucial in alleviating strain on the grid. However, as renewable energy penetration increases, conventional energy storage solutions like batteries become insufficient for ensuring grid reliability. According to the U.S. Department of Energy’s Long Duration Storage Shot initiative, which aims to slash grid-scale energy storage costs by 90% for systems providing over 10 hours of duration within the decade, longer duration storage options are imperative for achieving full decarbonization of the electric grid. While current shorter duration storage supports existing levels of renewable energy generation, the deployment of longer duration storage technologies becomes essential with the expansion of renewable sources on the grid. Cheaper and more efficient storage solutions will facilitate the capture and storage of renewable energy for use during periods of low generation or high demand. This includes scenarios such as using solar-generated power during peak demand periods. We anticipate that technologies like Heliogen's will emerge as vital contributors to fulfilling the pressing need for effective energy storage solutions to maintain grid reliability amidst escalating renewable energy integration.

We are committed to matching our renewable energy solutions with the customers who will derive the most benefit from them. In particular, access to energy – particularly green power – is especially challenging for rural and disadvantaged communities and the city or county public sector organizations that govern them. Moreover, green power solutions that are reliable and dispatchable are particularly lacking. Heliogen is actively pursuing this market – the local public sector. Heliogen’s capability to store and dispatch green power over long durations (i.e., > 8 to 10 hours) represents a strong fit for local public sector pursuits and partnerships. Specifically, dispatchable power is critical to supplying affordable, green, and peak-demand power for existing and new commercial and industrial off-takers within a municipality.

As discussed more below, Heliogen’s power solutions will need to operate in accordance with federal and regional reliability standards and regulations promulgated by the North American Electric Reliability Corporation (“NERC”) for the Federal Energy Regulatory Commission (“FERC”) within the DOE. A critical element of compliance is ensuring NERC, FERC and the DOE understand Heliogen’s technical designs and solutions as well as our value propositions. Our compliance with NERC standards will also positively support our collaboration with future owners of our generating facilities.

We have experienced, and expect to continue to experience, strong competition from a number of alternative providers of energy technology, particularly as the economy increasingly shifts towards low-emission, zero-emission or carbon neutral solutions. As a result, we expect competition to intensify in the future as existing competitors and new market entrants introduce new products into our markets.

The traditional energy technology provider market is highly competitive. The declining cost of renewable energy is also contributing to the shift in customer demand as customers seek carbon-free solutions to replace their fossil fuel-based consumption, causing the industry to evolve and expand. The main competitive factors include, but are not limited to:

With the rising demand for clean energy solutions with lower GHG emissions, there has been a transition to renewable energy sources. This industry transformation has created an opportunity for an increased role for thermal energy and long-duration energy storage solutions. As a pioneer of solar energy technology solutions that are well-suited for long duration applications, we believe we have a significant edge over our competition in this rapidly evolving environment. Our competitors include traditional fossil-fueled alternatives; providers of solutions combining solar PV with battery storage; and other forms of renewable energy. Our competitors may have longer operating histories and greater financial, marketing, personnel and other resources than we do and could focus their substantial financial resources to develop a competitive advantage. Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources. Although we are small and at an earlier stage of commercial maturity compared to many of our competitors, we believe we are well-positioned to compete successfully in the market — based on our innovative closed loop tracking system, our carbon-free heat, steam, power and green hydrogen solutions, our strategic partnerships and our experienced leadership team.

New technologies may enter the market that may have additional or superior advantages to our future offerings. A variety of newer and emerging companies have announced plans to develop heat, power, hydrogen and energy storage products using a variety of technologies, including compressed air, thermal energy and solid-state batteries among others. Although many of these companies are not in commercial production today, they may in the future offer solutions that become competitive with our expected offerings. We intend to continuously improve our product offerings and maintain robust R&D efforts in order to stay ahead of existing and emerging competitors.

As a result of factors described below, we believe that we are positioned to become a market leader in renewable energy technology.

Our ability to protect our material IP is important to our business. We rely upon a combination of foreign, federal, state and common law protections afforded to owners of patents, copyrights, trade secrets and trademarks, along with employee and third-party non-disclosure agreements and other contractual restrictions to establish and protect our IP rights. In particular, unpatented trade secrets in the fields of research, development and engineering are an important aspect of our business by ensuring that our technology remains confidential. We also pursue patent protection when we believe we have developed a patentable invention and the benefits of obtaining a patent outweigh the risks of making the invention public through patent filings.

We hold a strong portfolio of patents and numerous trademarks covering key aspects of our plant and process, including our closed-loop tracking system, tracking based on radiance maps, intensity and polarization tracking, and receiver for capturing solar energy. As of December 31, 2023, we had a portfolio of 12 issued U.S. patents, 9 issued non-U.S. patents, 12 pending U.S. patent applications and 18 pending patent applications in other countries, as well as numerous trademarks. However, our portfolio of patents is expected to evolve as new patents are issued, older patents expire, and we continue to innovate. Our U.S. issued patents are expected to expire between 2029 and 2041. We regularly review our development efforts to assess the existence and patentability of new inventions, and we are prepared to file additional patent applications when we determine it would benefit our business to do so.

We operate in the heavily regulated energy sector, which is subject to a variety of federal, state and local regulations and agencies that impact our operations. As a participant in the renewable energy sector specifically, there are additional regulations, tax incentives and support mechanisms in place to promote growth.

U.S. federal tax credits are currently in place that incentivize the deployment of renewable energy. These credits and incentives have been made available through a variety of recent legislation, including the Inflation Reduction Act of 2022 (“IRA”). The IRA was signed into law on August 16, 2022. The IRA contains many provisions intended to incentivize domestic clean energy investment, clean energy production and manufacturing of necessary components, specifically: (a) the extension and enhancement of the Investment Tax Credit (“ITC”) program, which the IRA extends to thermal energy storage equipment; (b) the addition of Production Tax Credits (“PTC”) up to $3.00 per kilogram for clean hydrogen and a three-year extension and modification of PTCs for facilities that begin construction before December 31, 2024; (c) the creation of the Advanced Manufacturing Production Credit which provides certain specified benefits for solar modules and solar module components manufactured in the U.S. and sold to third parties; (d) the creation of a new tax credit for sustainable aviation fuel up to $1.75 per gallon, depending on the lifecycle carbon emissions reduction of the fuel; and (e) the increase in total funds available for the DOE’s Title 17 loan guarantee program by $3.6 billion, bringing the total to $40 billion. The ITC and PTC amount can be increased if certain domestic content requirements are satisfied or if a project is located in (i) an “energy community” or (ii) low-income community, each as defined in the IRA. Heliogen is continuing to evaluate the IRA to understand the full impact of these provisions and additional potential benefits and believes many of these provisions will drive increased demand for its renewable energy technology and related products.

Certain projects generating renewable energy are eligible for investment tax credits that, with proper structuring, lower the capital requirements for renewables projects to be developed and open a new source of funding for these projects. The value of the tax credit varies depending on the year in which construction is deemed to begin as well as several other factors including meeting prevailing wage requirements. Under the current legislative framework, solar projects that started construction in 2023 qualify for a tax credit equal to 22% of the project’s cost. The value of the credit drops to a permanent 10% level for projects that begin construction in 2024 or later. Projects that began construction before 2024 but are not placed in service until 2026 or later, are also limited to the 10% credit. There are additional relevant credits for renewable energy companies including a production tax credit that can be utilized by many producers of renewable power and hydrogen.

The possibility of additional federal incentives and investment from the Biden Administration and Congress has garnered enthusiasm among renewable energy developers. In 2021, the Biden Administration announced goals of decarbonizing the electricity sector entirely by 2035, a goal that would necessitate billions of dollars in additional investment. Some of this money is likely to be invested in solar, hydrogen and storage technologies, potentially a benefit for a company like Heliogen. For example, the Bipartisan Infrastructure Law includes $9.5 billion in funding for clean hydrogen, some of which will be applicable to companies which develop and install technology for clean hydrogen production.

In addition, over the past year, the DOE has announced additional funding for innovative R&D and commercially ready projects to accelerate the large-scale development of solar technologies that can deliver high-temperature solar heat and power on demand. The DOE has also released roadmaps that directly point to changes and technologies needed to make changes in certain sectors, including hydrogen and industrial decarbonization.

State-level incentives have also driven growth in the deployment of renewable energy. According to the U.S. Energy Information Administration, as of November 2022, 36 states and the District of Columbia have established a renewable portfolio standard or a renewable energy goal, which mandates that a certain portion of electricity delivered to customers come from eligible renewal energy resources. In 12 of those states (and the District of Columbia), the requirement is for 100% clean electricity by 2050 or earlier. States have created these standards to diversify their energy resources, promote domestic energy production and encourage economic development.

Different public policy mechanisms have been used by governments to accelerate the adoption and use of solar power and energy storage. Examples of customer-focused financial mechanisms include capital cost rebates, performance-based incentives, feed-in tariffs, tax credits and net energy metering. Some of these government mandates and economic incentives are scheduled to be reduced or to expire, or could be eliminated altogether, while others are scheduled to be extended or expanded. Capital cost rebates provide funds to customers based on the cost and size of a customer’s solar power or energy storage system. Performance-based incentives provide funding to a customer based on the energy produced by their solar power system or stored by their energy storage system. Feed-in tariffs pay customers for solar power system generation based on energy produced, at a rate generally guaranteed for a period of time. Tax credits reduce a customer’s taxes at the time the taxes are due. Net energy metering allows customers to deliver to the electric grid any excess electricity produced by their on-site solar power systems, and to be credited for that excess electricity at or near the full retail price of electricity. New market development mechanisms to encourage the use of renewable energy sources continue to emerge, as well as climate disclosure regulations that may encourage companies to adopt emissions reduction strategies. Recently adopted California legislation will require new climate disclosures commencing in 2026 for companies that qualify as “doing business” in the state. SB 253 (the Climate Corporate Data Accountability Act) will require companies with total annual revenues exceeding $1 billion to annually disclose their Scopes 1, 2 and 3 greenhouse gas emissions and SB 261 (the Climate-Related Financial Risk Act) will require companies with total annual revenues exceeding $500 million to publish a biennial climate-related financial risk report.

For more information about how we avail ourselves of the benefits of public policies and their risks, please see the risk factors set forth under the caption “Item 1A. Risk Factors.”

We are subject to extensive environmental regulations that govern vehicle emissions and the storage, handling, treatment, transportation and disposal of hazardous materials and the remediation of environmental contamination, among other items. These laws and regulations have become more stringent over time. Compliance with such laws and regulations at an international, regional, national, provincial and local level is an important aspect of our ability to continue our operations.

Environmental standards applicable to Heliogen are established by the laws and regulations of the countries in which we operate, standards adopted by regulatory agencies and the permits and licenses issued to us. Each of these sources is subject to periodic modifications and what we anticipate will be increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial administrative, civil or even criminal fines, penalties and possibly orders to cease any violating operations or to conduct or pay for corrective works. In some instances, violations may also result in the suspension or revocation of permits or licenses.

We use, generate and discharge toxic, volatile, or otherwise hazardous chemicals and wastes in our R&D and construction activities. We are subject to a variety of U.S. federal and state laws and regulations related to the purchase, storage, use and disposal of hazardous materials. We believe that we have all environmental permits necessary to conduct our business and expect to obtain all necessary environmental permits for future activities. We believe that we have properly handled our hazardous materials and wastes and have appropriately remediated any contamination at any of our premises. We are currently not subject to any litigation pertaining to environmental regulations and cost of compliance with applicable regulations is expected to be commensurate with our historical spend and other companies in the industry.

In addition to our existing environmental compliance initiatives, we will also be engaging additional resources to focus on a broader Environmental, Social and Governance (“ESG”) program across our business. As part of our commitment to energy sustainability, we completed an ESG assessment during 2022 to develop a baseline against which to prioritize our ESG strategies.

Finally, we are subject to federal, state and local requirements on health, safety and employment. We are subject to the requirements of the Occupational Safety and Health Act, local wage regulations and rigorous health and safety regulations in the State of California.

We take pride in our innovative technology and consider our employees to be the foundation for our growth and continued success. More than 70% of our employees have extensive experience or backgrounds in engineering, energy, or manufacturing. More than half of our employees are involved in product development and manufacturing. As of December 31, 2023, we employed 144 full-time employees, based primarily in Southern California.

Our high-performance culture is based on our commitment to results and our values, which we expect everyone to model in their daily conduct:

We believe that an equitable and inclusive environment with diverse teams is crucial to our efforts to attract and retain key talent, produce more creative solutions and innovative products and services, and foster a work culture that reflects our core values. We have established a Diversity, Equity and Inclusion program, with the goal of developing a multi-year action plan to improve the diversity of our team and ensure every employee feels included and valued.

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”), reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, we have elected not to use the extended transition period for complying with any new or revised financial accounting standards, and as such, we are required to adopt new or revised standards at the same time as other public companies.

As of December 31, 2023, we had liquidity of $75.1 million, consisting of $62.7 million of cash and cash equivalents and $12.4 million of investments and no debt. During the year ended December 31, 2023, we incurred a net loss of $129.6 million and used cash in operations of $71.6 million. As of December 31, 2023, we had an accumulated deficit of $438.2 million. We are an early-stage company and have a history of operating losses and negative operating cash flows. We expect to continue to generate operating losses and have significant cash outflows from operating activities for at least the next few years. The amount of future losses and when, if ever, we will achieve profitability are uncertain. In addition, even if we achieve profitability, there can be no assurance that we will be able to maintain profitability in the future. Based on our liquidity position as of December 31, 2023 and our current forecast of operating results and cash flows, we anticipate that we may not have sufficient resources to fund our cash obligations for the next 12 months after the issuance date of this Annual Report. These factors raise substantial doubt about our ability to continue as a going concern.

We are exploring various cost saving opportunities and intend to continue seeking opportunities to generate additional revenue through our commercialization of engineering services. We have also engaged a financial advisor and we are actively assessing various avenues to secure additional capital, including, but not limited to, the issuance of debt, equity or both. There can be no assurance that we will be successful in our plans described above or in attracting future financing on acceptable terms, or if at all. If we are unable to effectively implement additional cost reductions, generate additional revenue or raise additional funding, we may be forced to delay, reduce or eliminate some or all of our commercialization efforts, product expansion or R&D programs and our business, financial condition and results of operations could be materially and adversely affected. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.

The growth of our business will depend on substantial amounts of additional capital for marketing and development of our carbon-free heat, steam, power and green hydrogen solutions. For the year ended December 31, 2023, we used cash in operations of $71.6 million and had capital expenditures of $1.3 million. Our capital requirements will depend on many factors, including the rate of our enhancements to our existing solutions, our expansion of sales and marketing and product development activities and customer demand for our solutions. As noted above, based on our liquidity position as of December 31, 2023 and our current forecast of operating results and cash flows, we anticipate that we may not have sufficient resources to fund our cash obligations for the next 12 months after the issuance date of this Annual Report, which raises substantial doubt about our ability to continue as a going concern. We will likely need to seek equity or debt financing to finance a portion of our capital expenditures. Such financing might not be available to us in a timely manner or on terms that are acceptable, or at all. The sale of additional equity or equity-linked securities could dilute our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that may restrict our operations or our ability to pay dividends to our stockholders.

Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business model. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds when we need or want them, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our corporate structure and our operations and prospects could be negatively affected. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.

We believe, and our growth plans assume, that the market for solar energy solutions will continue to grow and that we will increase our penetration of this market. However, market opportunity estimates and growth and demand forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. The estimated addressable market may not materialize in the timeframe we expect, if ever, and even if the market meets the predicted size and growth estimates, our business could fail to grow at similar rates. If our expectations as to the size of this market or our ability to sell our products and services in this market are not correct, our revenues will suffer, and our business will be harmed.

Our business depends on our ability to win contracts and purchase orders with customers. To date we have signed contracts for one material project — our commercial agreements with Woodside related to the Capella Project. We have also signed smaller contracts and purchase orders with other customers for projects and engineering services. Refer to Note 3—Revenue to our consolidated financial statements in Part II, Item 8 of this Annual Report, for additional information. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection process, which is affected by a number of factors. These factors may include market conditions, financing arrangements and required governmental approvals. For example, a client may require us to provide a bond or letter of credit to protect the client should we fail to perform under the terms of the contract. If challenging market conditions continue, or if we fail to secure adequate financial arrangements or the required government approvals, we may not be able to pursue particular projects, which could adversely affect our profitability. If we fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, we may incur a loss on that project, which may reduce or eliminate our overall profitability.

Our engagements will involve complex projects. The quality of our performance on such projects depends in large part upon our ability to manage the relationship with our clients and our ability to effectively manage the project and deploy appropriate resources, including third-party contractors and our own personnel, in a timely manner. If a project is not completed by the scheduled date or fails to meet required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. The performance of projects can be affected by a number of factors including delays outside of our control, such as from suppliers and subcontractors, government inaction, public opposition, inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards, labor disruptions and financial market instability or disruptions to the banking system due to bank failures, such as that which occurred with respect to Silicon Valley Bank. To the extent these events occur, the total costs of the project could exceed our estimates and we could experience reduced profits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability. Further, any defects or errors, or failures to meet our clients’ expectations, could result in claims for damages against us.

During the years ended December 31, 2023 and 2022, we recognized a total provision for contract losses of $52.9 million and $33.8 million, respectively, primarily related to the Capella Project, which reflected our best estimate of the full expected loss on the project at the respective times given the consideration expected to be realized under the commercial-scale demonstration agreement (“CSDA”) and the award from the DOE (the “DOE Award”) relative to the total estimated cost at completion. Our current cost estimates for the Capella Project are subject to further refinement as we continue value engineering, exploring additional cost savings opportunities and continue to progress and negotiate an executable EPC contract. As a result, the actual cost for the Capella Project could vary from our current estimate.

The modular, AI-enabled, concentrated solar energy plants that we plan to construct will be subject to various operating risks that may cause them to generate less than expected amounts of output. These risks include a failure or degradation of our equipment, the equipment of our customers or that of our vendors; an inability to find suitable replacement equipment or parts; or a less than expected supply of solar insolation. Any extended interruption in a plant’s operation, or the failure of a plant for any reason to generate the expected amount of output, could have a material adverse effect on our business and operating results due to the damage to our reputation and the resulting dissatisfaction of the owner-operator.

Rapidly changing technologies and industry standards, along with frequent new product introductions, characterize the industries of many of our customers and potential customers. Our financial performance depends, in part, on our ability to design, develop, manufacture, assemble, test, market and support new products and technology enhancements on a timely and cost-effective basis.

Our principal focus has been on R&D activities to improve our technology and make our product offerings more attractive to potential customers. These activities are subject to various risks and uncertainties we are not able to fully control, including changes in customer demand or industry standards and the introduction of new or superior technologies by others. Moreover, any failure by us in the future to develop new technologies or to timely react to changes in existing technologies could materially delay our development of new products, which could result in product obsolescence, decreased revenues and a loss of our market share to our competitors. In addition, products or technologies developed by others may render our products or technologies obsolete or non-competitive. Further, if our products are not in compliance with prevailing industry standards, such non-compliance could materially and adversely affect our financial condition, cash flows and results of operations.

Development, installation, construction, and commissioning of our concentrated solar energy plants, and maintenance support of our concentrated solar energy plants, entails many risks, including:

Any of these factors could give rise to construction delays and costs in excess of our expectations. This could prevent us from completing construction of our projects, cause defaults under any then-existing financing agreements or under contracts that require completion of project construction by a certain time, cause projects to be unprofitable for us, or otherwise negatively impact our business, financial condition and operating results.

Our expected future growth presents numerous managerial, administrative and operational challenges. Our ability to manage the growth of our operations will require us to continue to improve our management information systems and other internal systems and controls. In addition, our growth will increase our need to attract, develop, motivate, and retain both our management and professional employees. We appointed a new Chief Executive Officer and Chief Financial Officer in 2023 and we currently have an Interim Chief Financial Officer after the departure of our former Chief Financial Officer in January 2024. A lack of continuity of management and personnel may make it difficult to implement our business strategy and growth plan. The inability of our management to effectively manage our growth or the inability of our employees to achieve anticipated performance could have a material adverse effect on our business operations and financial results.

For certain contracts, we are exposed to market risk of increases in certain commodity prices of materials. We are dependent on the availability of essential materials, parts and subassemblies from our suppliers and subcontractors. The most important raw materials required for our concentrated solar energy systems are steel, stainless steel, glass, copper, aluminum, commodity electrical & electronics components, ceramics & ceramic fibers, thermal insulation materials, bauxite particles and/or silica sand and concrete. Prices and availability of these raw materials are subject to substantial fluctuations that are beyond our control due to factors such as supply and demand trends, energy costs, transportation costs, inflation, government regulations, global trade relationships, duties and tariffs, changes in currency exchange rates, price controls, general economic conditions and other unforeseen circumstances.

Our components are produced by third-party suppliers both domestically and internationally where most raw materials are readily available and purchased by those independent contractors and suppliers in the country of manufacture. Many major equipment and systems components are procured on a single or sole-source basis, but where multiple sources exist, we work to qualify multiple suppliers to minimize supply chain risk. If existing vendors are unable to supply the raw materials we require, we cannot predict if we will be able to obtain alternative vendors within the time frames that we require and at a comparable cost. Shortages, price increases and/or delays in shipments of our raw materials and purchased component parts, may occur in the future which may have a material adverse effect on our results of operations.

In addition, our customers’ capital budgets may be impacted by the prices of certain materials, and reduced customer spending could lead to fewer project awards and more competition. These prices could be materially impacted by increases in inflation, interest rates, general market conditions and other factors, including U.S. trade relationships with other countries, the imposition of tariffs, or political conditions. While we believe we can increase our prices to adjust for some price increases in commodities, there can be no assurance that price increases of commodities, if they were to occur, would be recoverable or that any increase in our prices will not negatively impact demand. Additionally, we expect many of our contracts to be fixed price, which would not allow us to adjust our prices and, as a result, increases in material costs could reduce our profitability with respect to such projects.

We expect that our projects for customers will typically be financed by third parties. For the modular, AI-enabled, concentrated solar energy plants that we develop, we expect our customers to rely on a combination of their balance sheets and project-finance debt to fund construction costs. Increased interest rates may cause our customers to be unable to raise funds on acceptable terms when needed. Due to this, we may be unable to secure customer contracts, the size of contracts we do obtain may be smaller or we could be required to delay the development and construction of projects, reduce the scope of those projects or otherwise restrict our operations. Any inability by our customers to raise the funds necessary to finance our projects could negatively impact our business, financial condition and operating results.

The development and construction of modular, AI-enabled, concentrated solar energy plants involves numerous risks. We may be required to spend significant sums for preliminary engineering, permitting, legal and other expenses before we can determine whether a project is feasible, economically attractive or capable of being built. In addition, we may choose to bear the costs of such efforts prior to obtaining project financing, prior to getting final regulatory approval and/or prior to the final sale to a customer, if any.

Successful completion of a particular project may be adversely affected by numerous factors, including: failures or delays in obtaining desired or necessary land rights, including ownership, leases and/or easements; failures or delays in obtaining necessary water rights, permits, licenses or other governmental support or approvals, or in overcoming objections from members of the public or adjoining land owners; uncertainties relating to land costs for projects; unforeseen engineering problems; access to available transmission for energy generated by our modular, AI-enabled, concentrated solar energy plants; construction delays and contractor performance shortfalls; work stoppages or labor disruptions and compliance with labor regulations; cost over-runs; availability of products and components from suppliers; adverse weather conditions; environmental, archaeological and geological conditions; and availability of construction and permanent financing.

If we are unable to complete the development of one or more of our modular, AI-enabled, concentrated solar energy plants or fail to meet one or more agreed target construction milestone dates, we may incur losses or be liable for damages or penalties that we may not be able to offset, which would have an adverse impact on our net income in the period in which the loss is recognized. We expect that some projects will require working capital to develop and/or build projects. If we are unable to complete a project, the associated working capital would also be an exposure that may need to be written off, which would have an adverse impact on our net income in the period in which the loss is recognized.

Our revenue, expenses and operating results may fluctuate significantly because of numerous factors. In addition to the other risks described in this “Risk Factors” section, the following factors could cause our operating results to fluctuate:

As a consequence, operating results for a particular future period are difficult to predict and, therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the foregoing factors, or any other factors discussed elsewhere in this “Risk Factors” section, could have a material adverse effect on our business, results of operations and financial condition that could adversely affect our stock price.

Stockholders may from time to time attempt to effect changes in our business, engage in proxy solicitations or advance stockholder proposals in a manner that is not in the best interests of our Company and all of its stockholders. Certain stockholders have made, or have indicated they may make, public and private strategic proposals related to our business, strategy, management or operations and have requested, or have indicated they may request, changes to the composition of our Board of Directors (the “Board”).

For example, on April 13, 2023, we received an unsolicited, non-binding proposal from Continuum Renewables, Inc. (“CRI”) to acquire all of our outstanding capital stock for a purchase price of $0.40 per share of common stock (unadjusted for the subsequent reverse stock split) in cash. CRI was co-founded by our former Chief Executive Officer, Bill Gross, who was terminated by us in February 2023. The non-binding proposal was subject to various contingencies, including CRI obtaining financing. On April 24, 2023, we announced that after careful consideration and consultation with legal and financial advisors, our Board determined that the offer significantly undervalued our company and would result in an implied equity value for our common stockholders that is materially below our available liquidity. Accordingly, our Board determined that the proposal was not in the best interests of our stockholders and the proposal was rejected.

We cannot predict, and no assurances can be given as to, the outcome or timing of any such matters. Proposals can divert the attention of our Board and management from executing on our strategic plans, create uncertainty for our employees, and create additional risks and uncertainties with respect to our financial position and operations, which could impact our relationships with our suppliers, customers and employees. In addition, while we have rejected the unsolicited proposal if it is followed by a proxy contest or other stockholder actions, we would most likely be required to incur significant legal fees and proxy solicitation expenses and significant additional time and attention by management and our Board. This could interfere with our ability to execute our strategic plan, give rise to perceived uncertainties as to our future direction, result in the loss of potential business opportunities or make it more difficult to attract and retain qualified personnel, any of which could materially and adversely affect our business and operating results. Any perceived uncertainties as to our future direction also may adversely affect the market price and volatility of our securities.

Stockholders engaged in such activities may have interests that differ from those of other stockholders. Further, perceived uncertainties as to our future direction, including uncertainties related to the composition of our Board, may lead to the perception of instability or a change in the direction of our business, which may be exploited by our competitors, cause concern to current or potential customers, result in the loss of potential business opportunities, make it more difficult to attract and retain qualified personnel and/or affect our relationships with vendors, customers and other third parties. Moreover, a proxy contest could cause significant fluctuations in the price of our common stock based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Our success depends on our ability to provide services and complete projects in a timely manner, which in part depends on the ability of third parties to provide us with timely and reliable products and services. In providing our services and completing our projects, we rely on products that meet our design specifications and components manufactured and supplied by third parties, as well as on services performed by subcontractors.

We will also rely on subcontractors to perform the majority of the construction work related to our projects; and we may need to engage subcontractors with whom we have no experience for our projects.

If any of our subcontractors are unable to provide services that meet or exceed our customers’ expectations or satisfy our contractual commitments, our reputation, business and operating results could be harmed. In addition, if we are unable to avail ourselves of warranty and other contractual protections with providers of products and services, we may incur liability to our customers or additional costs related to the affected products and components, which could have a material adverse effect on our business, financial condition and operating results. Moreover, any delays, malfunctions, inefficiencies or interruptions in these products or services could adversely affect the quality and performance of our solutions and require considerable expense to establish alternate sources for such products and services. This could cause us to experience difficulty retaining current customers and attracting new customers, and could harm our brand, reputation and growth.

Our success depends, in part, on the effectiveness of our executive team. The Chief Executive Officer is critical to executing on and achieving our vision, strategic direction, culture, products and technology. We appointed Christiana Obiaya, previously our Chief Financial Officer, as Chief Executive Officer in February 2023. The loss of the services of any of our executives could disrupt our operations, delay the development and introduction of our products and services, including with respect to our prototype products, and negatively impact our business, prospects and operating results.

As noted above, we appointed a new Chief Executive Officer and Chief Financial Officer in 2023 and we currently have an Interim Chief Financial Officer after the departure of our former Chief Financial Officer in January 2024. Management transitions may create uncertainty, divert resources and management attention, or impact public or market perception, any of which could negatively impact the company's ability to operate effectively or execute its strategies and result in an adverse impact on its business. Further, these new executives may have different backgrounds, experiences and perspectives from those individuals who previously served in these roles and thus may have different views on the issues that will determine the company’s future, potentially resulting in employee, customer and supplier uncertainty. The employment agreements of our executive officers are each at will, and there is no assurance that we will be able to successfully retain senior leadership necessary to grow our business. Our failure to attract and retain our executive officers could adversely impact our business, prospects, financial condition, and operating results. A lack of continuity of management may harm our ability to effectively manage our operations and implement our strategy and our business may suffer.

The success of our business and construction projects will depend in large part on the skill of our personnel and on trade labor resources, including those with certain specialty subcontractor skills. Competition for personnel, particularly those with expertise in the energy services and renewable energy industries, is high. In the event we are unable to attract, hire and retain the requisite personnel and subcontractors, we may experience delays in completing projects in accordance with project schedules and budgets.

Further, any increase in demand for personnel and specialty subcontractors may result in higher costs, causing us to exceed the budget on a project. Either of these circumstances may have an adverse effect on our business, financial condition and operating results, harm our reputation among and relationships with our customers, and cause us to curtail our pursuit of new projects.

In connection with the preparation and audit of our financial statements as of and for the fiscal year ended December 31, 2021, we identified material weaknesses, as described below, in our internal control over financial reporting, which is an integral component of our disclosure controls and procedures, and such material weaknesses continue to exist as of December 31, 2023. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, our stock price.

Our material weaknesses relate to Heliogen not designing or maintaining an effective control environment specific to the areas of financial reporting and our close process, including effective review of technical accounting matters, proper segregation of duties, including separate review and approval of journal entries and access within our accounting system.

We are currently taking actions to remediate the deficiencies in our internal control over financial reporting and are implementing additional processes and controls designed to address the underlying root causes associated with the above-mentioned deficiencies.

Although we have made significant progress in remediating the aforementioned deficiencies outlined above, the material weaknesses continued to exist as of December 31, 2023.

As of December 31, 2023, we had federal net operating loss carryforwards of $218.2 million and state net operating loss carryforwards of $228.1 million. The federal and state net operating losses will expire starting with 2033 and a portion of the federal net operating losses may be carried forward indefinitely. As of December 31, 2023, we had foreign net operating losses carryforwards of $2.7 million, which may be carried forward indefinitely. It is uncertain if and to what extent various states will conform to federal tax law.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a rolling three-year period, the corporation’s ability to use its pre-change NOL carryforwards and certain other tax attributes to offset its post-change income or taxes may be limited. This could limit the amount of NOLs or other applicable tax attributes that we can utilize annually to offset future taxable income or tax liabilities. We have not undertaken a Section 382 study, and it is possible that we have previously undergone one or more ownership changes so that our use of net operating losses is subject to limitation. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, we may be unable to use all or a material portion of our NOL carryforwards and other tax attributes, which could adversely affect our future cash flows.

New income, sales, use, or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us. For example, the Tax Cuts and Jobs Act of 2017, the Coronavirus Aid, Relief, and Economic Security Act and the IRA enacted many significant changes to the U.S. tax laws. Future guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states will conform to federal tax laws. Future tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.

We operate in a highly competitive, quickly changing environment and our future success depends on our ability to develop or acquire and market products and services that are recognized and accepted as reliable, cost-effective and that achieve broad market acceptance. Some of our potential customers may already use products or services similar to what we currently offer or what we may offer in the future and may be reluctant to replace those products or services. Market acceptance of our products, services and technology will depend on many factors, including, but not limited to, market demand costs, timely completion and introduction of these products, prompt resolution of any defects or bugs in these products, our ability to support these products, market acceptance of these products, delays and quality issues in releasing new products and services and our ability to convince potential customers that our products, services and technology are an attractive alternative to existing products, services and technology. Prior to adopting our products, services and technology, some potential customers may need to devote time and effort to testing and validating our systems. Any failure of our systems to meet these customer benchmarks could result in potential customers choosing to retain their existing systems or to purchase systems other than ours. The occurrence of one or more of the foregoing factors may result in lower revenue than expected, and we may in the future experience product or service introductions that fall short of their projected rates of market adoption.

Our ability to successfully introduce and market new products is unproven. Because we have a limited operating history and the market for our products, including newly acquired or developed products, is rapidly evolving, it is difficult to predict our operating results, particularly with respect to any new products that we may introduce. Our future success will depend in large part upon our ability to identify demand trends in the market in which we operate and quickly develop or acquire, and design, manufacture and sell, products and services that satisfy these demands in a cost-effective manner. Also, we may not be able to respond effectively to new product or service announcements by competitors by quickly introducing competitive products and services.

In order to differentiate our products and services from competitors’ products, we will need to focus on our R&D efforts, including software development. If any products currently sold by, and services offered by, us do not continue, or if our new products or services fail to achieve widespread market acceptance, or if we are unsuccessful in capitalizing on opportunities in the market in which we operate, our future growth may be slowed and our business, results of operations and financial condition could be materially adversely affected.

As part of our business strategy, we intend to continue to consider the expansion of our addressable market by pursuing opportunities to provide our carbon-free heat, steam, power and green hydrogen solutions in international markets, and we expect to generate a material portion of our revenues from operations outside of the U.S. in the future. Operations in international markets may require us to respond to new and unanticipated regulatory, marketing, sales and other challenges. These efforts may be time-consuming and costly, and there can be no assurance that we will be successful in responding to these and other challenges we may face as we enter and attempt to expand in international markets, including:

Our future international operations will also be subject to general geopolitical risks, such as political, social and economic instability, war (including the repercussions of Russia’s invasion of Ukraine, and the war between Israel and Hamas), incidents of terrorism, changes in diplomatic and trade relations, or responses to such events. One or more of these factors could adversely affect any of our international operations and result in lower revenue and/or greater operating expenses than we expect and could significantly affect our results of operations and financial condition.

Our overall success in international markets will depend, in part, on our ability to succeed in differing legal, regulatory, economic, social and political conditions. We may not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each country where we do business. Our failure to manage these risks successfully could harm our international operations, reduce our international sales and increase our costs, thus adversely affecting our business, financial condition and operating results.

Our business is headquartered in southern California and we expect to have multiple facilities in California. Historically, California has been susceptible to natural disasters, such as earthquakes, drought, floods and wildfires. In addition, we are currently constructing a steam plant in west Texas, which is susceptible to severe weather events, including tornados, hurricanes, thunderstorms, hail storms, straight-line winds, blizzards, floods and dust storms. Although we intend to maintain loss insurance where necessary, an earthquake, wildfire, extreme weather event or other natural disaster in the geographic regions in which we operate could result in significant damage to our facilities, destruction or disruption of our critical business or information technology systems, recovery costs and interruption to certain of our operations. In addition, a catastrophic event could interrupt our operations or those of our customers and suppliers, which could result in delays or cancellation of customer orders, the loss of customers and impediments to the manufacture or shipment of products or execution of projects, which could result in loss of business or an increase in expense, both of which may have a material adverse effect on our business. Delays and other weather impacts could adversely affect our ability to meet project deadlines and may increase a project’s cost and decrease its profitability. In the specific case of wildfires, an accusation or ultimate determination that our operations were the cause of a wildfire may also have a material adverse effect on our business. Moreover, we expect to have multiple facilities in other domestic and international markets, which may be subject to similar risks as southern California and west Texas.

Our ability to compete effectively depends in part upon the maintenance and protection of the IP related to our carbon-free heat, steam, power and green hydrogen solutions. As of December 31, 2023, we had a portfolio of 12 issued U.S. patents, 9 issued non-U.S. patents, 12 pending U.S. patent applications and 18 pending patent applications in other countries, as well as numerous trademarks. However, our portfolio of patents is expected to evolve as new patents are issued and older patents expire, and the expiration of patents could have a negative effect on our ability to prevent competitors from duplicating certain or all of our products. Our U.S. issued patents are expected to expire between 2029 and 2041.

We might not succeed in obtaining patents from any of our pending applications. Even if we are awarded patents, they may not provide any meaningful protection or commercial advantage to us, as they may not be of sufficient scope or strength or may not be issued in all countries where our products can be sold. Patent protection is unavailable for certain aspects of the technology and operational processes that are important to our business. Any patent held by us or to be issued to us, or any of our pending patent applications, could be challenged, invalidated, unenforceable or circumvented. In addition, our competitors may be able to design around our patents. To date, we have relied principally on patent, copyright, trademark and trade secret laws, as well as confidentiality and proprietary information agreements and licensing arrangements, to establish and protect our IP. However, we have not obtained confidentiality and proprietary information agreements from our targeted customers and vendors, and although we have entered into confidentiality and proprietary information agreements with all of our employees, we cannot be certain that these agreements will be honored. Some customers are subject to laws and regulations that require them to disclose information that we would otherwise seek to keep confidential. Policing unauthorized use of our IP is difficult and expensive, as is enforcing our rights against unauthorized use.

The steps that we have taken or may take may not prevent misappropriation of the IP on which we rely. In addition, effective protection may be unavailable or limited in jurisdictions outside the U.S., as the IP laws of foreign countries sometimes offer less protection or have onerous filing requirements. From time to time, third parties may infringe our IP rights. Litigation may be necessary to enforce or protect our rights or to determine the validity and scope of the rights of others. Any litigation could be unsuccessful, cause us to incur substantial costs, divert resources away from our daily operations and result in the impairment of our IP. Failure to adequately enforce our rights could cause us to lose rights in our IP and may negatively affect our business.

In addition to patent protection, we rely significantly upon trade secret laws to protect our proprietary technologies. We regularly enter into confidentiality agreements with our key employees, customers, potential customers and other third parties and limit access to and distribution of our trade secrets and other proprietary information. However, these measures may not be adequate to prevent misappropriation of our technologies or to assure that our competitors will not independently develop technologies that are substantially equivalent or superior to our technologies. In addition, the laws of other countries in which we operate may not protect our proprietary rights to the same extent as the laws of the U.S. We are also subject to the risk of adverse claims and litigation alleging infringement of IP rights.

In the ordinary course of our business, we and the third parties upon which we rely process sensitive data, and, as a result, we and such third parties face a variety of evolving threats that could cause security incidents. Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive data and information technology systems, and those of the third parties upon which we rely. Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states and nation-state-supported actors.

Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties we rely on may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain and ability to produce, sell and distribute our services.

Such threats include, but are not limited to, social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by AI, telecommunications failures, earthquakes, fires, floods and other similar threats.

In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations. Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

In addition, our reliance on third-party service providers could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations. We rely on third-party service providers and technologies to operate critical business systems to process sensitive data in a variety of contexts, including, without limitation, cloud-based infrastructure, application hosting, data center facilities, encryption and authentication technology, employee email, content delivery to customers and other functions. We also rely on third-party service providers to provide other products, services, parts, or otherwise to operate our business. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

We have implemented and maintain various information security processes and technologies designed to identify, assess and manage material risks from cybersecurity threats to our computer networks, third party hosted services, communications systems, hardware and software, and our critical data, including intellectual property, and confidential information that is proprietary, strategic or competitive in nature. However, there can be no assurance that these measures will be effective. We take steps designed to detect, mitigate and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely). including through trainings, incident tabletop exercises and system testing. We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Vulnerabilities could be exploited and result in a security incident.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive data or our information technology systems, or those of the third parties upon whom we rely. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our services.

We may expend significant resources or modify our business activities to try to protect against security incidents. Additionally, certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive data.

If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits and inspections); additional notification and reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may negatively impact our ability to grow and operate our business.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive data about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.

The primary maintenance activity for solar thermal projects using our systems will be the routine and continuous cleaning of reflective mirror surfaces. We anticipate each mirror will need to be deep cleaned (rotating brush and water mist) every two weeks to prevent a buildup of soiling which would otherwise significantly degrade the system performance. Operational testing is ongoing on our ChariotAV autonomous cleaning vehicle which is intended to confirm the vehicles ability to accurately navigate the heliostat field autonomously while effectively and repeatedly cleaning the mirrors to maintain optimal light reflectivity. If our ChariotAV autonomous cleaning vehicle does not ultimately operate as intended, actual operating costs of our concentrated solar energy plants may be substantially higher than forecasted or total energy generation may fall short of estimates.

In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit and share (collectively, process) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions and financial information (collectively, sensitive data).

Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.

In the U.S., federal, state and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).

In the past few years, numerous U.S. states—including California, Virginia, Colorado, Connecticut and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (“CPRA”) (collectively, “CCPA”), applies to personal data of consumers, business representatives and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future. These developments may further complicate compliance efforts, and increase legal risk and compliance costs for us and the third parties upon whom we rely.

In addition to data privacy and security laws, we are bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

We publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.

Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.

We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties we rely on may fail to comply with such obligations, which could negatively impact our business operations. If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data. In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.

We benefit in part from legislation and government policies, incentives, mandates or other programs that support renewable energy, and energy storage projects that enhance the economic feasibility of our solar energy projects. This support includes legislation and regulations that encourage or in some cases require other customers to procure power from renewable or low-emission sources or otherwise to procure our services; and provide us or our customers with tax and other incentives that reduce our costs or increase our revenues. For example, the IRA contains many provisions intended to incentivize domestic clean energy investment, clean energy production and manufacturing of necessary components. However, it is unclear whether these initiatives will create sufficient incentives for projects or result in increased demand for our services. In addition, some of these government mandates and economic incentives are scheduled to be reduced or to expire, or could be eliminated altogether, while others are scheduled to be extended or expanded. Without ongoing federal, state, provincial and local government support for renewable energy our ability obtain project commitments and related financing could be adversely affected and our business, financial condition and results of operations could be adversely affected.

We are subject to laws, regulations and rules enacted by national, regional and local governments. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations and rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations and rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.

In addition, laws and regulations impacting our customers may affect the demand for our products. Because most of our revenue is expected to be derived from the energy and industrial market sectors, regulatory and environmental requirements affecting those industries could adversely affect our business, financial condition, results of operations and cash flows. Customers in the industries we serve, including oil & gas companies and power providers, face stringent regulatory and environmental requirements, as well as permitting processes, as they implement plans for their projects, which may result in delays, reductions and cancellations of some of their projects. Our customers’ energy procurement policies may prohibit or limit their willingness to procure our products. Our business prospects may be negatively impacted if we are prevented from completing new installations or our installations become more costly as a result of laws, regulations, ordinances, or rules applicable to our products. These regulatory factors may result in decreased demand for our services, potentially impacting our operations and our ability to grow.

The demand for our product could also be impacted by infrastructure legislation and funding. The locations of renewable energy projects, including the expected locations of our concentrated solar energy plants, are often remote and may not be viable unless new or expanded transmission infrastructure to transport the energy to demand centers is economically feasible. Furthermore, funding for renewable energy initiatives may not be available. These factors could result in fewer renewable energy projects and a delay in the construction of these projects and the related infrastructure, which could negatively impact our business.

Most government contracts are awarded through a regulated competitive bidding process, including the award we received from the DOE to deploy our renewable energy technology in California. We may incur significant costs associated with bidding for government contracts before we realize any revenues from these contracts. Government agencies may review a contractor’s performance, cost structure and compliance with applicable laws, regulations and standards. If government agencies determine through these reviews that costs were improperly allocated to specific contracts, they will not reimburse the contractor for those costs or may require the contractor to refund previously reimbursed costs. If government agencies determine that we engaged in improper activity, we may be subject to civil and criminal penalties. Government contracts are also subject to renegotiation of profit and termination by the government prior to the expiration of the term.

On November 7, 2023, we received a letter from the staff of NYSE Regulation notifying us that it had determined to commence proceedings to delist our common stock and public warrants (“Public Warrants”). Trading in these securities was immediately suspended. The NYSE Regulation reached its decision to delist these securities pursuant to Section 802.01B of the NYSE’s Listed Company Manual because we had fallen below the NYSE’s continued listing standard requiring listed companies to maintain an average global market capitalization over a consecutive 30 trading day period of at least $15 million. We are currently appealing the NYSE’s determination to delist our common stock and Public Warrants, but unless our appeal is ultimately successful, our common stock and Public Warrants will be delisted after the completion of the NYSE’s application to the SEC.

Should our securities be delisted from the NYSE, we can provide no assurance that we will be able to, re-list our common stock or the Public Warrants on a national securities exchange or that there will be an active market for these securities on the OTC market. Moreover, without an active trading market, the market price of our securities may be extremely volatile and not reflective of the market price that would be seen on a more active trading market. For so long as our common stock is suspended from trading on the NYSE, which suspension will become permanent if our common stock is ultimately delisted from the NYSE, we and our stockholders could face significant negative consequences including:

On November 8, 2023, our common stock and Public Warrants began trading on the OTC market under the symbols HLGN and HLGNW, respectively.

The price of our stock has experienced substantial price volatility and may continue to do so in the future. From January 1, 2023 to March 20, 2024, our stock price fluctuated between a low of $0.52 per share and a high of $26.25 per share (as adjusted for the reverse stock split). Additionally, the energy and technology industries, and the stock market as a whole have, from time to time, experienced extreme stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to the performance of the companies’ in these sectors. We believe the price of our stock should reflect expectations of future growth and profitability. If we fail to meet expectations related to future growth, profitability, or other market expectations, the price of our stock may decline significantly, which could have a material adverse impact on investor confidence and employee retention.

As of December 31, 2023, we had Public Warrants and private placement warrants (“Private Warrants,” and together with the Public Warrants, the “Public and Private Warrants”) outstanding. We may redeem our outstanding Public Warrants at a price of $0.35 per warrant, provided that the last reported sales price of our common stock equals or exceeds $630.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. We may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.

In addition, we may redeem all (but not less than all) of our outstanding Public and Private Warrants at a price of $3.50 per warrant if the following conditions are satisfied: (i) the last reported sale prices of our common stock equals or exceeds $350.00 (as may be adjusted for stock splits, stock dividends, reorganizations, recapitalizations or the like) on the trading day prior to the date of the notice; (ii) the Private Warrants are also concurrently exchanged at the same price as the outstanding Public Warrants; and (iii) there is an effective registration statement covering the issuance of the shares of our common stock issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the 30-day period after written notice of redemption is given.

In either case, the redemption of our outstanding Public and Private Warrants could force the warrant holders (i) to exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, (ii) to sell their warrants at the then-current market price when they might otherwise wish to hold their warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of their warrants. The value received upon exercise of the warrants (i) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (ii) may not compensate the holders for the value of the warrants, including because the number of shares of common stock received is capped at 0.01 shares of our common stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants. Refer to Note 4—Warrants for additional information about our Public and Private Warrants.

We have outstanding Public and Private Warrants to purchase an aggregate of 244,762 shares of our common stock that are currently exercisable. The exercise price of the Public and Private Warrants is $402.50 per share, or approximately $98.5 million in the aggregate for all shares underlying these warrants, assuming none of the warrants are exercised through “cashless” exercise. To the extent such warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to holders of our common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our common stock. However, there is no guarantee that the Public and Private Warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

The market price of our common stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention and resources from other business concerns and could also require us to make substantial payments to satisfy judgments or to settle litigation either of which could seriously harm our business.

We are incorporated in the State of Delaware. However, some of our directors may reside outside of the U.S. As a result, our stockholders may not be able to effect service of process upon those persons within the U.S. or enforce against those persons judgments obtained in U.S. courts.

Our second amended and restated certificate of incorporation (“Certificate of Incorporation”) contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions include:

These provisions, alone or together, could delay hostile takeovers and changes in control or changes in our Board or our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law (“DGCL”), which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our common stock. Any provision of our Certificate of Incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or our Certificate of Incorporation or bylaws, or (iv) any action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, except any action (A) as to which the Court of Chancery of the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (C) for which the Court of Chancery does not have subject matter jurisdiction.

Our Certificate of Incorporation also provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act establishes concurrent jurisdiction for federal and state courts over Securities Act claims. Accordingly, both state and federal courts have jurisdiction to hear such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our Certificate of Incorporation also provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

While the Delaware courts have determined that such choice of forum provisions are facially valid and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our Certificate of Incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions. If a court were to find either exclusive forum provision in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with litigating Securities Act claims in state court, or both state and federal court, which could seriously harm our business, financial condition, results of operations and prospects.

Any person or entity purchasing or otherwise acquiring or holding or owning (or continuing to hold or own) any interest in any of our securities shall be deemed to have notice of and consented to the forum provisions in our Certificate of Incorporation. Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our current or former directors, officers, stockholders or other employees, which may discourage such lawsuits with respect to such claims. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provisions.

Our Public and Private Warrants are issued in registered form under a warrant agreement between us and Continental Stock Transfer & Trust Company, as warrant agent. The warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the U.S. District Court for the Southern District of New York and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the U.S. federal district courts are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the U.S. District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”) and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.

This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and Board.

We have implemented and maintain various information security processes and technologies designed to identify, assess and manage material risks from cybersecurity threats to our computer networks, third party hosted services, communications systems, hardware and software, and our critical data, including intellectual property and confidential information that is proprietary, strategic or competitive in nature (“Information Systems and Data”).

Heliogen’s Chief Information Security Officer (“CISO”) and the information security team, in conjunction with Heliogen’s legal team and third-party service providers, help identify, assess and manage Heliogen’s cybersecurity threats and risks. Heliogen’s CISO and the information security team identify and assess risks from cybersecurity threats by monitoring and evaluating our threat environment using various methods from time to time, including, for example: conducting vulnerability assessments to identify vulnerabilities; conducting scans of corporate devices and network infrastructure; analyzing reports of potential, known and identified threats and actors; using automated and manual tools to monitor for, identify, or evaluate threats and risks; conducting audits and threat assessments; subscribing to reports and services that help identify cybersecurity threats; using third party threat assessments and external intelligence feeds; and evaluating our company’s and our industry’s risk profile.

We implement and maintain technical, physical, and organizational measures, processes, and/or policies, depending on the environment, designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example: dedicated cybersecurity staff; an incident response plan and policy; a vulnerability management policy; risk assessment process; processes and policies to address access to systems and networks; physical security protocols; processes for asset management; encryption of certain company data, systems, and networks; penetration testing; and employee training. We also maintain cybersecurity insurance.

Our assessment and management of risks from cybersecurity threats are integrated into our overall risk management processes. For example, cybersecurity risk is identified and addressed as a component of the Company’s general risk management strategy. We have also established a cybersecurity committee consisting of our CISO, information security team, and other senior leaders to oversee our cybersecurity risk management process and strategies to mitigate cybersecurity threats, including through trainings, incident tabletop exercises and system testing.

We use third-party service providers to assist us from time to time to identify, assess, and manage risks from cybersecurity threats, including professional services firms, cybersecurity consultants, managed cybersecurity service providers and penetration testing firms.

We use third-party service providers to perform a variety of functions throughout our business, such as application hosting. We have a vendor management program to manage cybersecurity risks associated with our use of certain service providers. The program includes, depending on the nature of the services and the identity of the service provider, completion of security questionnaires, review of the service provider’s written security program, and imposition of cybersecurity-related contractual obligations related on the provider.

For a description of the risks from cybersecurity threats that may materially affect Heliogen and how they may do so, see our risk factors under “Item 1A. Risk Factors” contained in Part I of this Annual Report, including “If our information technology systems or those of third parties upon which we rely, or our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.”

Our Board addresses Heliogen’s cybersecurity risk management as part of its general oversight function. The Boards’ Audit Committee is responsible for overseeing Heliogen’s cybersecurity risk management processes, including oversight of mitigation of risks from cybersecurity threats.

Our cybersecurity risk assessment and management processes are implemented and maintained by certain members of Heliogen management, including our CISO who has over 40 years of cybersecurity expertise and experience.

Our CISO implements programs and policy recommendations to integrate cybersecurity risk considerations into our overall risk management strategy and works with the information security team to communicate key priorities. Our CISO is responsible for helping to prepare the Company for cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports.

Our incident response plan is designed to escalate certain cybersecurity incidents to members of our incident response team and members of management depending on the circumstances, including executive management and the Board. Our CISO and information security team work with our incident response team to help the Company mitigate and remediate cybersecurity incidents of which they are notified. In addition, our incident response plan includes reporting to the Audit Committee for certain cybersecurity incidents.

The Audit Committee receives periodic reports and is updated during the quarterly audit committee meetings from the CISO and information security team concerning Heliogen’s significant cybersecurity threats and risk and the processes Heliogen has implemented to address them. The Audit Committee also receives reports, summaries or presentations related to cybersecurity threats, risk and mitigation.

Information relating to various commitments and contingencies is described in Note 18—Commitments and Contingencies to our consolidated financial statements in Part II, Item 8 of this Annual Report and the information discussed therein is incorporated by reference into this Part I, Item 3.

Effective November 8, 2023, our common stock and Public Warrants are traded on the OTC market under the symbol “HLGN” and “HLGNW,” respectively. Prior to November 8, 2023, our common stock and Public Warrants were traded on the NYSE under the symbol “HLGN” and “HLGN.W,” respectively. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

As of March 20, 2024, we had 505 stockholders of record of our common stock and 4 holders of record of our Public and Private Warrants.

The actual number of stockholders of our common stock and Public and Private Warrants is greater than this number of record holders and includes holders who are beneficial owners but whose shares of common stock or Public and Private Warrants are held in “street name” by banks, brokers and other nominees.

We currently do not pay dividends on our common stock, and we do not anticipate paying cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our Board and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our Board may deem relevant.

None.

None.

Heliogen is a leader in next-generation concentrated solar energy. We are developing a modular, AI-enabled, concentrated solar energy plant that will use an array of mirrors to reflect sunlight and capture, concentrate, store and convert it into cost-effective energy on demand. Our product offering will deliver industrial process steam around the clock using thermal energy storage based on proven technology. This steam can also be used to produce electricity when paired with a steam turbine and green hydrogen when coupled with a solid oxide electrolyzer. Our next-generation system will be able to cost-effectively generate and store thermal energy at very high temperatures, enabling more cost-effective production of electricity at a smaller scale. The inclusion of a thermal energy storage system distinguishes our solution from clean energy provided by typical PV and wind installations which do not produce thermal energy and are only able to produce energy intermittently unless battery storage is added. The system will be configurable for several applications, including carbon-free industrial-grade heat and steam (for use in industrial processes), clean power (electricity), and generation of green hydrogen, based on a customer’s needs.

In March 2023, we entered into an agreement with NantG Power, LLC (“NantG”), an affiliated sister-company to Nant Capital LLC, a holder of more than 5% of Heliogen’s outstanding voting stock, to provide front-end concept design and R&D engineering services for up to $5 million. Additionally, during 2023, we performed engineering studies for companies evaluating our product offering.

We have historically incurred operating losses as we are in the early stages of commercializing our technology and investing in the R&D and infrastructure necessary to achieve these goals. However, we remain focused on achieving sufficient scale and efficiency improvements through technological progress and additional learning to ultimately achieve profitability.

We primarily generate revenue by contracting with owner-operators to build turnkey facilities that deploy Heliogen’s technology. Our services revenue which is derived from customer contracts, is primarily recognized over time using the incurred costs method for our contracts with customers that include projects under development and engineering and design services. Engineering service contracts can be short-term or span several years and we recognize revenue over time as customers receive and consume the benefit of such services. Additionally, we have government grants which are accounted for as grant revenue and is recognized only when there is reasonable assurance that the entity will comply with any conditions attached to the grant and the grant funds will be received.

Cost of revenue consists primarily of direct material, labor and subcontractor costs related to our revenue contracts. Additionally, we have indirect costs related to contract performance, such as indirect labor, supplies, tools and allocated depreciation.

During the year ended December 31, 2023, we recognized total revenue of $4.4 million, a decrease of $9.3 million compared to total revenue of $13.8 million for the year ended December 31, 2022.

We recognized services revenue of $0.9 million during the year ended December 31, 2023, a decrease of $5.6 million compared to services revenue of $6.5 million for the year ended December 31, 2022. The decrease was primarily driven by an unfavorable cumulative adjustment of $3.4 million recorded during the fourth quarter of 2023 to services revenue, as a result of changes in the Capella Project estimate, discussed in more detail below. The remaining decrease in services revenue was driven by a reduction in costs incurred on the Capella Project for the scope of work and engineering services performed during the year ended December 31, 2023 compared to the year ended December 31, 2022.

We recognized grant revenue of $3.6 million during the year ended December 31, 2023, a decrease of $3.7 million compared to grant revenue of $7.2 million for the year ended December 31, 2022. The decrease was driven by a decrease of $2.1 million related to reimbursable costs incurred on the Capella Project under the DOE Award for the year ended December 31, 2023 and a decrease of $1.5 million related to the employee retention credit under the Coronavirus Aid, Relief and Economic Security Act which was recognized during the year ended December 31, 2022.

During the year ended December 31, 2023, we recognized a gross loss of $55.6 million, a change of $21.8 million compared to a gross loss of $33.8 million for the year ended December 31, 2022. The change was primarily driven by the recognition of provisions for contract losses of $52.9 million and $33.8 million during the years ended December 31, 2023 and 2022, respectively, primarily associated with the Capella Project. The provision for contract losses reflects our best estimate of the full expected loss on the Capella Project given the consideration expected to be realized under the CSDA and the DOE Award relative to the total estimated cost at completion. During the fourth quarter of 2023, we adjusted the Capella Project estimate after completing the front-end engineering design phase. Our current cost estimates for the Capella Project are subject to further refinement as we continue value engineering, exploring additional cost savings opportunities and continue to negotiate an executable engineering, procurement and construction (“EPC”) contract. As a result, the actual cost for the Capella Project could vary from our current estimate.

The following table summarizes selling, general and administrative (“SG&A”) expenses:

During the year ended December 31, 2023, we recognized SG&A expense of $50.7 million, a decrease of $30.6 million compared to SG&A expense of $81.2 million for the year ended December 31, 2022. The decrease was primarily driven by a reduction in share-based compensation as a result of no longer recognizing expense due to forfeitures during the year ended December 31, 2023 and a net reduction of $12.5 million during the first quarter of 2023, as a result of stock options forfeited in connection with the termination of our former Chief Executive Officer. The remaining decrease in share-based compensation expense was a result of an expected reduction in expense over time due to graded vesting schedules for awards issued prior to our business combination with Athena Technology Acquisition Corp. (“Athena”). The decrease was partially offset by an increase in employee compensation of $7.8 million primarily driven by headcount growth at the beginning of the year to support our commercial operations and incentive programs and $1.2 million of reorganization costs related to employee severance and related benefits.

The following table summarizes R&D expenses:

During the year ended December 31, 2023, we recognized R&D expense of $21.0 million, a decrease of $17.3 million compared to R&D expense of $38.3 million for the year ended December 31, 2022. The decrease was driven by a reduction of $13.6 million in other R&D direct costs due to focusing our R&D efforts on select strategic priorities, partially offset by $1.5 million of expense associated with inventory allocated to our R&D projects.

During the year ended December 31, 2023, we recognized impairment charges of $7.8 million, consisting of $5.3 million to fully impair the remaining book value of our Collaboration Warrants, $1.5 million to fully impair the remaining book value of our cloud computing implementation costs and $1.0 million to fully impair goodwill. While we continue to believe in the long-term commercial viability of our products and technology, the sustained decrease in our market capitalization and prolonged losses beyond our initial estimates resulted in certain assets no longer deemed recoverable.

During the year ended December 31, 2022, we recognized impairment charges of $6.9 million, consisting of $3.8 million for impairments of property, plant and equipment related to certain project-related costs as management determined the project was no longer probable of being constructed and $3.1 million for an impairment of an intangible asset related to acquired technology as the deployability of this technology has been delayed, resulting in a higher likelihood of this technology becoming obsolete during its useful life.

During the year ended December 31, 2023, we recognized a gain of $0.5 million, a change of $13.4 million compared to a gain of $13.9 million for the year ended December 31, 2022, related to the change in fair value of our outstanding Public and Private Warrants. The change in fair value of the Public and Private Warrants are highly correlated to changes in our stock price.

During the year ended December 31, 2023, we recognized an income tax provision of $1 thousand compared to an income tax benefit of $1.0 million during the year ended December 31, 2022. The income tax benefit in 2022 primarily related to the release of our deferred tax liability, which was established upon the finalization of the HelioHeat Acquisition in March 2022. The deferred tax liability was related to the intangible asset acquired in the HelioHeat Acquisition and it was fully impaired during the year ended December 31, 2022.

Our principal sources of liquidity are cash and investments on hand, which are short-term in duration and highly liquid, and cash receipts from customers and government grants. Our principal uses of cash are expenditures related to project development and completion, as well as R&D and SG&A expenditures in support of our technology development and operational support and growth efforts.

Total liquidity, including cash and cash equivalents and available-for-sale investments are as follows:

The accompanying financial statements have been prepared assuming we will continue as a going concern. As of December 31, 2023, our liquidity was $75.1 million and we had an accumulated deficit of $438.2 million. During the year ended December 31, 2023, we incurred a net loss of $129.6 million and used cash in operations of $71.6 million. We expect to continue to generate operating losses and have significant cash outflows from operating activities for at least the next few years. Based on our liquidity position as of December 31, 2023 and our current forecast of operating results and cash flows, we anticipate that we may not have sufficient resources to fund our cash obligations for the next 12 months after the issuance date of this Annual Report. These factors raise substantial doubt about our ability to continue as a going concern.

We have evaluated the conditions discussed above and we are taking various steps in an effort, to alleviate them. We are exploring various cost saving opportunities and intend to continue seeking opportunities to generate additional revenue through our commercialization of engineering services. We have also engaged a financial advisor and we are actively assessing various avenues to secure additional capital, including, but not limited to, the issuance of debt, equity or both. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to us. If we are unable to effectively implement additional cost reductions, generate additional revenue or raise additional funding, we may be forced to delay, reduce or eliminate some or all of our commercialization efforts, product expansion or R&D programs and our business, financial condition and results of operations could be materially and adversely affected. Assuming no additional funding and based on our current operating and development plans, we expect that existing liquidity as of the date of this filing will be sufficient to fund currently anticipated operating expenses through the end of 2024.

The following table provides a summary of our cash flows:

For the year ended December 31, 2022, we had net cash invested in available-for-sale securities of $64.7 million as we invested the funds received in late 2021 from the closing of the business combination with Athena and capital expenditures of $9.0 million to support growth in our commercial operations, machinery, equipment and improvements of our facilities, and office and computer equipment to support our headcount growth.

Our material cash requirements from known contractual and other obligations include:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results could differ from those estimates and assumptions. The following are considered critical to our consolidated financial statements because they require the most difficult, subjective or complex judgments, often because of the need to make estimates about matters that are inherently uncertain. We analyze our estimates on a periodic basis and base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances. Our significant accounting policies are included in Note 2—Significant Accounting Policies.

Inventories consist primarily of raw materials, work in progress and finished goods. Inventories are stated at the lower of cost or net realizable value. Provisions are made to reduce obsolete inventories for excess quantities to their estimated net realizable values based on future demand, market conditions and valuation.

We assess long-lived assets classified as “held and used,” including our property, plant and equipment for impairment whenever events or changes in circumstances arise, including consideration of technological obsolescence, that may indicate that the carrying amount of such assets may not be recoverable. For purposes of recognition and measurement of an impairment loss, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

When impairment indicators are present, we compare undiscounted future cash flows, including the eventual disposition of the asset group at market value, to the asset group’s carrying value to determine if the asset group is recoverable. If the carrying value of the asset group exceeds the undiscounted future cash flows, we measure any impairment by comparing the fair value of the asset group to its carrying value. Fair value is generally determined by considering (i) internally developed discounted cash flows for the asset group, (ii) third-party valuations, and/or (iii) information available regarding the current market value for such assets. If the fair value of an asset group is determined to be less than its carrying value, an impairment in the amount of the difference is recorded in the period that the impairment indicator occurs. Estimating future cash flows requires significant judgment and such projections may vary from the cash flows eventually realized.

We perform our goodwill impairment evaluation at least annually, as of October 1, or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of our reporting unit is less than its carrying value. We may first apply a qualitative assessment to determine if it is more likely than not that goodwill is impaired. If the qualitative assessment indicates that it is more likely than not that impairment exists, or if we choose to bypass the assessment, a quantitative assessment is performed, which involves comparing the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of the reporting unit exceeds its estimated fair value, we would record an impairment loss equal to the excess.

We recognize project revenue over time as work is performed using the incurred costs method, which we believe is the method that most accurately reflects our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed-price contracts is recognized as work is performed based on the ratio of costs incurred to date compared to the total estimated costs at completion of the performance obligations.

Incurred costs include all direct material, labor and subcontract costs, and those indirect costs related to contract performance, such as indirect labor, supplies and tools. Other costs for inventoried items, such as heliostats, are included in incurred costs when the item has been installed by being permanently attached or fitted. Cost-based input methods of revenue recognition require us to make estimates of net contract revenues and costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the amount of net contract revenues, including the impact of any performance incentives, liquidated damages and other payments to customers. Significant judgment is also required to evaluate assumptions related to the costs to complete the projects, including materials, labor, contingencies and other system costs. If a change in facts or circumstances occurs, the estimates will be adjusted, and the revenue recognized to date will be adjusted based on the revised estimates. Differences between the cumulative revenue recognized based on the previous estimates and the revenue recognized based on the revised estimates are recognized as an adjustment to revenue in the period in which the change in estimate occurs under the cumulative catch-up method.

If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and present such losses as contract loss provisions. Following recognition of contract loss provisions, we amortize the loss recognized in future periods as a reduction to cost of revenues using a similar method of measuring progress for each contract as done for revenue being recognized. We recognize changes in estimated contract revenue or total estimated costs and the resulting adjustment in the contract loss provision on a cumulative basis.

We are required to measure the fair value of the Public and Private Warrants at the end of each reporting period. The Public Warrants are traded on an exchange and thus management uses the closing price of the warrants at each period end. In assessing the valuation of the Private Warrants, management assessed the value holders of the Private Warrants would receive in a redemption scenario and concluded that due to the make-whole exercise provision, the value of Private Warrants approximates the value of the Public Warrants. Thus, we have estimated the fair value of the Private Warrants based on the closing price of the Public Warrants.

Contingent consideration arrangements are classified as liabilities and are remeasured to fair value at each reporting period, with any change in fair value being recognized on the consolidated statement of operations. The estimated fair value of the contingent consideration is based primarily on estimates of meeting the applicable contingency conditions as per the terms of the agreement. Significant judgment related to the probability and timing of payment is required by management in estimating the fair value of the contingent consideration.

We are a smaller reporting company as defined by Item 10 of Regulation S-K and are not required to provide the information otherwise required under this item.

To the Board of Directors and Shareholders of Heliogen, Inc.

We have audited the accompanying consolidated balance sheets of Heliogen, Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive loss, of stockholders' equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company expects to continue to generate operating losses and have significant cash outflows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2022.

Heliogen, Inc. and its subsidiaries (collectively, “Heliogen” or the “Company”), is involved in the development and commercialization of next-generation concentrated solar energy. We are developing a modular, artificial intelligence (“AI”)-enabled, concentrated solar energy plant that will use an array of mirrors to reflect sunlight and capture, concentrate, store and convert it into cost-effective energy on demand. Unless otherwise indicated or the context requires otherwise, references in our consolidated financial statements to “we,” “us,” or “our” and similar expressions refer to Heliogen.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of Heliogen and the subsidiaries it controls. All material intercompany balances are eliminated in consolidation. Certain immaterial prior period amounts have been reclassified to conform to current period presentation. Such changes did not have a material impact on our financial position or results of operations.

On August 31, 2023, the Company effected a 1-for-35 reverse stock split of the Company’s common stock. As a result of the reverse stock split, every 35 shares of the Company’s issued and outstanding common stock as of 5:00 p.m. (Eastern Time) on August 31, 2023 was automatically combined into one issued and outstanding share of common stock, with no change in par value per share. No fractional shares of common stock were issued as a result of the reverse stock split. Any fractional shares in connection with the reverse stock split were rounded down to the nearest whole share and cash payments were made to the stockholders. The reverse stock split had no impact on the number of shares of common stock or preferred stock that the Company is authorized to issue pursuant to its certificate of incorporation. Proportional adjustments were made to the number of shares of common stock issuable upon exercise or conversion of the Company's equity awards and warrants, as well as the applicable exercise price. All share and per share information included in this Annual Report on Form 10-K has been retroactively adjusted to reflect the impact of the reverse stock split.

These financial statements have been prepared assuming the Company will continue as a going concern. This basis of accounting contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. These financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

As of December 31, 2023, the Company had liquidity of $75.1 million, consisting of $62.7 million of cash and cash equivalents and $12.4 million of investments and no debt. During the year ended December 31, 2023, the Company incurred a net loss of $129.6 million and used cash in operations of $71.6 million. The Company expects to continue to generate operating losses and have significant cash outflows from operating activities for at least the next few years. Based on these factors, the Company anticipates that it may not have sufficient resources to fund its cash obligations for the next 12 months after the issuance date of the consolidated financial statements, which raises substantial doubt about the Company’s ability to continue as a going concern.

The Company has evaluated the conditions discussed above and is taking various steps in an effort, to alleviate them. The Company is exploring various cost saving opportunities and intends to continue seeking opportunities to generate additional revenue through its commercialization of engineering services. The Company, has also engaged a financial advisor and is actively assessing various avenues to secure additional capital, including, but not limited to, the issuance of debt, equity or both. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company.

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business Startups Act of 2012, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We have elected not to use the extended transition period for complying with any new or revised financial accounting standards, and as such, we are required to adopt new or revised standards at the same time as other public companies.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and the accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to inputs used to recognize revenue over time, accounting for income taxes, fair values of share-based compensation, inventory valuation, lease liabilities, warrant liabilities, contingent consideration, goodwill impairments and long-lived asset impairments. Despite our intention to establish accurate estimates and reasonable assumptions, actual results could differ materially from such estimates and assumptions.

The Company operates as one operating segment. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on a consolidated basis for the purposes of allocating resources and assessing performance.

We consider highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2023 and 2022, our cash and cash equivalents balances were $62.7 million and $45.7 million, respectively. As of December 31, 2023, our restricted cash balance, including the long-term portion, was $1.5 million and was comprised of a standby letter of credit issued in relation to the lease for our Long Beach, California facility. As of December 31, 2022, our restricted cash balance, including the long-term portion, was $2.2 million and was comprised of a standby letter of credit issued in relation to the lease for our Long Beach, California facility and a commercial letter of credit used to pay a supplier as certain conditions are met.

The primary objectives of our investment portfolio are to maintain the safety of our invested capital, provide prudent levels of liquidity to accommodate operational and capital needs and maintain an acceptable level of risk. These risks include credit risk, interest rate risk and concentration risk, which are mitigated through the use of various well-established financial institutions as well as an investments portfolio consisting of very liquid and high credit quality instruments. The Company reviews its available-for-sale securities portfolio for impairment and determines if impairment is due to credit losses or other reasons. In making the assessment of whether a loss is from credit or other factors, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows is less than the amortized cost basis, a credit loss exists and an allowance is created, limited by the amount that the fair value is less than the amortized cost basis. Subsequent activity related to the credit loss component (e.g. write-offs, recoveries) is recognized as part of the allowance for credit losses on available-for-sale securities.

We record accounts receivable based on contracted prices when we obtain an unconditional right to payment under the terms of our customer contracts or government grants. The carrying value of such receivables, net of the allowance for credit losses, represents the estimated net realizable value. Payment terms for receivables from customers are generally due upon demand or within 30 days.

As a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less. We typically do not include extended payment terms in our contracts with customers.

The allowance for credit losses is a valuation account that is deducted from a financial asset’s amortized cost to present the net amount we expect to collect from such asset. We estimate allowances for credit losses using relevant available information from both internal and external sources. We monitor the estimated credit losses associated with our trade accounts receivable and unbilled accounts receivable based primarily on our collection history and the delinquency status of amounts owed to us, which we determine based on the aging of such receivables. Such methods and estimates are adjusted, as appropriate, for relevant past events, current conditions and reasonable and supportable forecasts. We recognize write-offs within the allowance for credit losses when cash receipts associated with our financial assets are deemed uncollectible. As of December 31, 2023, we had $0.2 million of allowance for credit losses for trade receivables associated with our projects in Germany. We did not have any allowances for credit losses as of December 31, 2022.

We consider governmental grant receivables to be fully collectible and accordingly, no allowance for credit loss balance has been established. If amounts become uncollectible, they are charged to operations.

Inventories consist primarily of raw materials, work in progress and finished goods. Inventories are stated at the lower of cost or net realizable value. Provisions are made to reduce obsolete inventories for excess quantities to their estimated net realizable values based on future demand, market conditions and valuation. Refer to Note 7—Inventories for additional information.

We report our property, plant and equipment at cost, less accumulated depreciation and any impairment losses. Cost includes the price paid to acquire or construct the assets, required installation costs, interest capitalized during the construction period and any expenditures that substantially add to the value of or substantially extend the useful life of the assets. We capitalize costs related to computer software obtained or developed for internal use, which generally includes enterprise-level business and finance software that we customize to meet our specific operational requirements. We expense repair and maintenance costs at the time we incur them.

We begin depreciation for our property, plant and equipment when the assets are placed in service. We consider such assets to be placed in service when they are both in the location and condition for their intended use. We compute depreciation expense using the straight-line method over the estimated useful lives of assets. We depreciate leasehold improvements over the shorter of their estimated useful lives or the remaining term of the lease. The estimated useful life of an asset is reassessed whenever applicable facts and circumstances indicate a change in the estimated useful life of such asset has occurred. Refer to Note 8—Property, Plant & Equipment for additional information.

We assess long-lived assets classified as “held and used,” including our property, plant and equipment and finite-lived intangibles, for impairment whenever events or changes in circumstances arise, including consideration of technological obsolescence, that may indicate that the carrying amount of such assets may not be recoverable. For purposes of recognition and measurement of an impairment loss, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

When impairment indicators are present, we compare undiscounted future cash flows, including the eventual disposition of the asset group at market value, to the asset group’s carrying value to determine if the asset group is recoverable. If the carrying value of the asset group exceeds the undiscounted future cash flows, we measure any impairment by comparing the fair value of the asset group to its carrying value. Fair value is generally determined by considering (i) internally developed discounted cash flows for the asset group, (ii) third-party valuations, and/or (iii) information available regarding the current market value for such assets. If the fair value of an asset group is determined to be less than its carrying value, an impairment in the amount of the difference is recorded in the period that the impairment indicator occurs. Estimating future cash flows requires significant judgment and such projections may vary from the cash flows eventually realized. Refer to Note 15—Impairment Charges for additional information.

We consider a long-lived asset to be abandoned after we have ceased use of the asset and we have no intent to use or repurpose it in the future. Abandoned long-lived assets are recorded at their salvage value, if any.

At inception, we determine whether an arrangement is a lease and the appropriate classification as an operating or finance lease. When a lease is identified, a right-of-use asset and the corresponding lease liability are recognized upon commencement of the lease term based on the present value of the lease payments not yet paid, discounted using our incremental borrowing rate, in the event that the implicit rate is not available. The right-of-use asset is also adjusted for prepayments and initial direct costs. Our leases may contain renewal options that are exercisable at our discretion. At the commencement date of a lease, we include in the lease term any periods covered by a renewal option, to the extent we are reasonably certain to exercise such options. Leases with an initial term of one year or less are considered short-term leases and are not recognized as lease assets and liabilities. Right-of-use assets are assessed periodically for impairment if events or circumstances occur that indicate the carrying amount of the asset may not be recoverable.

We recognize operating lease costs on a straight-line basis over the lease term, and any variable lease costs are recognized in the period in which they are incurred. We do not separate lease and nonlease components of a contract.

Goodwill represents the excess of the purchase price over the estimated fair value of net tangible and identifiable intangible assets acquired in business combinations. Goodwill is not amortized but is evaluated for impairment at the reporting unit level. The Company determined it has one reporting unit as of December 31, 2023 and 2022, which is the same as its single operating segment. The Company performs its goodwill impairment evaluation at least annually, as of October 1, or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of the Company’s reporting unit is less than its carrying value. The Company may first apply a qualitative assessment to determine if it is more likely than not that goodwill is impaired. If the qualitative assessment indicates that it is more likely than not that impairment exists, or if the Company chooses to bypass the assessment, a quantitative assessment is performed, which involves comparing the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of the reporting unit exceeds its estimated fair value, the Company would record an impairment loss equal to the excess. Refer to Note 9—Goodwill and Intangible Assets and Note 15—Impairment Charges for additional information.

Finite-lived intangible assets purchased in a business combination are recorded at fair value and amortized over their estimated useful lives. Refer to Note 9—Goodwill and Intangible Assets for additional information.

Implementation costs incurred in cloud computing hosting arrangements that are service contracts are capitalized. These costs include external direct costs for materials and services. Software maintenance and training costs are expensed in the period in which they are incurred. The capitalized implementation costs are included in other long-term assets on our consolidated balance sheets and are amortized using the straight-line method over the term of the cloud computing hosting arrangement, including reasonably certain renewals, beginning when the module or component of the hosting arrangement is ready for its intended use. Cash payments for capitalized implementation costs are classified as cash outflows from operating activities.

During the years ended December 31, 2023 and 2022, we capitalized cloud computing implementation costs for enterprise resource planning systems of $1.1 million and $0.7 million, respectively. Amortization expense related to capitalized cloud computing implementation costs was $0.8 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively, and is included in selling, general and administrative (“SG&A”) expense on our consolidated statements of operations.

During the fourth quarter of 2023, we recorded an impairment of $1.5 million to fully impair the remaining book value of our cloud computing implementation costs, included in impairment charges on our consolidated statements of operations. Refer to Note 15—Impairment Charges for additional information.

Our revenue is derived from services revenue and grant revenue. Our services revenue is derived from contracts with customers and our grant revenue is derived from government grants.

Our contracts with customers may include multiple promised goods and services. In such cases, we identify performance obligations by evaluating whether the promised goods and services are capable of being distinct within the context of the contract at contract inception. Promised goods and services that are not distinct at contract inception are combined. Once we identify the performance obligations, we determine a transaction price based on contractual amounts and an estimate of variable consideration. We allocate the transaction price to each performance obligation based on the relative stand-alone selling price (“SSP”) maximizing the use of observable inputs. Judgment is exercised to determine the SSP of each distinct performance obligation. Our services revenue is further disaggregated into project revenue and engineering revenue, which are discussed in more detail below.

If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known and present such losses as contract loss provisions. Following recognition of contract loss provisions, we amortize the loss recognized in future periods as a reduction to cost of revenues using a similar method of measuring progress for each contract as done for revenue being recognized. We recognize changes in estimated contract revenue or total estimated costs and the resulting adjustment in the contract loss provision on a cumulative basis.

As a practical expedient, we do not adjust the consideration in a contract for the effects of a significant financing component when we expect, at contract inception, that the period between a customer’s advance payment and our transfer of a promised product or service to the customer will be one year or less. Additionally, we do not adjust the consideration in a contract for the effects of a significant financing component when the consideration is received as a form of performance security.

Funds to be received under the Company’s government grants are presented as grant revenue. The related reimbursable expenses are expensed as incurred and presented separately as cost of grant revenue. Refer to Note 3—Revenue for additional information.

We incur R&D costs during the process of researching and developing new products and enhancing our existing products, technologies and manufacturing processes. Our R&D costs consist primarily of employee compensation, materials and outside services. We expense these costs as incurred until the resulting product has been completed, tested and made ready for commercial scale-up.

We recognize reorganization costs for one-time termination benefits, including severance payments, outplacement job training, counseling and other termination benefits, at fair value at the communication date if no future service is required. Reorganization costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period.

In February 2023, the Company initiated a strategic plan to respond to market feedback, streamline our operations, and improve our financial condition. As a result, during the year ended December 31, 2023, we recorded reorganization costs of $1.2 million, included in SG&A expense on our consolidated statements of operations, related to employee severance and related benefits. We did not record any reorganization costs during the year ended December 31, 2022.

We recognize share-based compensation expense for the estimated fair value of equity awards issued as compensation to individuals over the requisite service period, which generally ranges from six months to four years. We account for forfeitures as they occur. Accordingly, in the absence of a modification, if an individual’s continuous service is terminated, all previously unvested awards granted to such individual are forfeited, which results in a benefit to share-based compensation expense in the period of termination equal to the cumulative expense recorded through the termination date for the unvested awards. For employee stock awards with graded vesting schedules and only services conditions, we recognize share-based compensation expense on a straight-line basis over the total requisite service period of the award, ensuring that cumulative recorded share-based compensation expense equals the grant date fair value of vested awards at each period-end.

For modifications of share-based payment awards, we record the incremental fair value of the modified award as share-based compensation on the date of modification for vested awards or over the remaining vesting period for unvested awards. The incremental compensation is the excess of the fair value of the modified award on the date of modification over the fair value of the original award immediately before the modification. In addition, we record the remaining unrecognized compensation cost for the original cost of the award on the modification date over the remaining vesting period for unvested awards.

We record liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Although we cannot predict the outcome of legal or other proceedings with certainty, when it is probable that a loss has been incurred and the amount is reasonably estimable, GAAP requires us to accrue an estimate of the probable loss or range of loss or make a statement that such an estimate cannot be made.

We use the asset and liability method to account for income taxes whereby we calculate deferred tax assets or liabilities using the enacted tax rates and tax law applicable to when any temporary differences are expected to reverse. We establish valuation allowances, when necessary, to reduce deferred tax assets to the extent it is more likely than not that such deferred tax assets will not be realized.

Income tax expense includes (i) deferred tax expense, which generally represents the net change in deferred tax assets or liabilities during the year plus any change in valuation allowances and (ii) current tax expense, which represents the amount of tax currently payable to or receivable from taxing authorities. We only recognize tax benefits related to uncertain tax positions that are more likely than not of being sustained upon examination. For those positions that satisfy such recognition criteria, the amount of tax benefit that we recognize is the largest amount of tax benefit that is more likely than not of being sustained on ultimate settlement of the uncertain tax position. The Company’s policy is to recognize interest and penalties related to uncertain tax positions, if any, in the income tax provision.

We measure certain assets and liabilities at fair value, which is defined as the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. Our fair value measurements use the following hierarchy, which prioritizes valuation inputs based on the extent to which the inputs are observable in the market.

The following table provides information about disaggregated revenue:

Engineering services revenue consists of amounts recognized under contracts with customers for the provision of engineering, R&D, or other similar services in our field of expertise. The Company’s recognized engineering services revenue is associated with engineering studies and our projects in Germany.

Services revenue recognized during the years ended December 31, 2023 and 2022 includes non-governmental customers in the United States (“U.S.”) and Europe.

In October 2021, the Company received an award from the U.S. Department of Energy (the “DOE”) of $39.0 million (the “DOE Award”), of which $3.9 million will be paid directly by the DOE to another party providing services under the DOE Award at the Company’s direction. Under the DOE Award, the Company will apply up to $35.1 million in funds received under the DOE Award pursuant to budget periods defined in the DOE Award as reimbursement for costs incurred in completing the tasks specified in the DOE Award that are part of the Capella Project. Management has evaluated the recapture provisions of the DOE Award and concluded that it is not probable that the recapture provisions will be triggered. The Company and the DOE have the ability to terminate the DOE Award for convenience. Under such a termination, the Company will be permitted to seek reimbursement of valid costs incurred, including permitted indirect costs, through the date of termination.

During the years ended December 31, 2023 and 2022, the Company recognized grant revenue under the Company’s DOE Award of $3.5 million and $5.6 million, respectively, related to costs incurred during such periods that are reimbursable under the DOE Award.

In response to the Coronavirus Disease 2019 pandemic, Congress passed the Coronavirus Aid, Relief and Economic Security Act which, among other provisions, provides for an Employee Retention Credit (“ERC”) against applicable employment taxes, if certain criteria are met. During the years ended December 31, 2023 and 2022, we recognized $41 thousand and $1.6 million, respectively, related to the ERC included in grant revenue on our consolidated statements of operations.

In the fourth quarter of 2023, the Company adjusted its Capella Project estimate after completing the front-end engineering design phase. Our current cost estimates for the Capella Project are subject to further refinement as we continue value engineering, exploring additional cost savings opportunities and continue to negotiate an executable engineering, procurement and construction (“EPC”) contract. In January 2024, the Company and Woodside executed a change order to the CSDA, which was accounted for as a recognized subsequent event for the year ended December 31, 2023, that extends the expected completion date for the Capella Project in order to provide the Company more time to explore additional cost saving and funding opportunities. As a result, the actual cost for the Capella Project could vary from our current estimate.

During the year ended December 31, 2023, the Company recorded an unfavorable cumulative adjustment to project revenue of $3.4 million, as a result of the adjustment to the Capella Project estimate. The Company did not have any adjustments to its contract estimates during the year ended December 31, 2022.

During the year ended December 31, 2023, we recognized a total provision for contract losses of $52.9 million, primarily associated with the change in estimate for the Capella Project. During the year ended December 31, 2022, we recognized a total provision for contract losses of $33.8 million, primarily associated with the Capella Project.

We amortized $6.0 million and $5.7 million during the years ended December 31, 2023 and 2022, respectively, of the previously recognized contract loss provisions as a reduction to cost of services revenue incurred during the periods based on percentages of completion.

Revenue recognized under contracts with customers, which excludes amounts to be received from government grants, relates solely to the performance obligations satisfied during the years ended December 31, 2023 and 2022 with no revenue recognized from performance obligations satisfied in prior periods.

As of December 31, 2023, we had approximately $38.2 million of transaction prices allocated to remaining performance obligations from our customer contracts. Based on our current forecast, we expect to recognize approximately 16% of the remaining transaction prices as revenue over the next 12 months and the remainder to be recognized thereafter through 2027.

The following table outlines the activity related to contract assets, which is included in total receivables on our consolidated balance sheets:

During the year ended December 31, 2023, we recognized revenue of $0.3 million that was included in contract liabilities as of December 31, 2022.

For the years ended December 31, 2023 and 2022, one and two customers, including governmental entities, respectively, each comprised greater than 10% of our total revenue and collectively represented 80% and 97%, respectively, of our total revenue.

As of December 31, 2023 and 2022, two customers, including governmental entities, each comprised greater than 10% of our total receivables and represented 89% and 90%, respectively, of our total receivables.

The Company’s warrant liabilities as of December 31, 2023 include public warrants (the “Public Warrants”) and private placement warrants (the “Private Warrants,” and together with the Public Warrants, the “Public and Private Warrants”). The Public Warrants and Private Warrants permit warrant holders to purchase in the aggregate 238,095 shares and 6,667 shares, respectively, of the Company’s common stock at an exercise price of $402.50 per share. The Public and Private Warrants became exercisable on March 18, 2022 and expire on December 30, 2026, or earlier upon redemption or liquidation. The Company has the ability to redeem outstanding Public Warrants prior to their expiration, at a price of $0.35 per warrant, provided that the last reported sales price of the Company’s common stock equals or exceeds $630.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the notice date of redemption. In addition, the Company has the ability to redeem all, but not less than all, of the outstanding Public and Private Warrants prior to their expiration, at a price of $3.50 per warrant if the last reported sales price of the Company’s common stock equals or exceeds $350.00 on the trading day prior to the date of the notice. The Company evaluated the Public and Private Warrants and concluded that a provision in the underlying warrant agreement dated March 16, 2021, by and between Athena Technology Acquisition Corp. and Continental Stock Transfer & Trust Company, related to certain tender or exchange offers precludes the Public and Private Warrants from being accounted for as components of equity. As both the Public and Private Warrants meet the definition of a derivative, they are recorded as liabilities on the consolidated balance sheets and measured at fair value at each reporting date, with the change in fair value included in gain (loss) on warrant remeasurement on the consolidated statements of operations.

In connection with the execution of the CSDA with Woodside in March 2022, the Company issued warrants permitting Woodside to purchase 26,068 shares of the Company’s common stock at an exercise price of $0.35 per share (the “Project Warrants”). The Project Warrants expire upon the earlier of a change in control of the Company or March 28, 2027 and vest pro rata with certain payments required to be made by Woodside under the CSDA. The fair value of the Project Warrants upon issuance was $173.60 per warrant based on the closing price of the Company’s common stock on March 28, 2022, less the exercise price.

During the years ended December 31, 2023 and 2022, $19 thousand and $0.7 million, respectively, was recognized as additional paid-in capital related to the vesting of Project Warrants. As of December 31, 2023, vested Project Warrants were exercisable for 18,807 shares of the Company’s common stock.

In connection with the execution of a collaboration agreement (the “Collaboration Agreement”) with Woodside in March 2022, the Company issued warrants permitting Woodside to purchase 104,275 shares of the Company’s common stock at an exercise price of $0.35 per share (the “Collaboration Warrants”). Under the Collaboration Agreement, Woodside will assist us in defining product offerings that use our modular technology for potential customers. The Collaboration Warrants expire upon the earlier of a change in control of the Company or March 28, 2027. Of these warrants, (i) half of the warrants vested immediately upon execution of the Collaboration Agreement, to purchase 52,138 shares of the Company’s common stock and (ii) the remaining warrants will vest based on certain specified performance goals under the Collaboration Agreement. The fair value of the Collaboration Warrants upon issuance was $173.60 per warrant based on the closing price of the Company’s common stock on March 28, 2022, less the exercise price.

The Collaboration Warrants were determined to be consideration payable to a customer or non-employee under ASC 718 and are recorded as equity on the consolidated balance sheets. The related expense is being recognized ratably as SG&A expense for marketing services to be provided over the estimated service period. The Company recognized SG&A expense, related to the vesting of the Collaboration Warrants, of $2.0 million and $1.8 million during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the remaining estimated vesting period is approximately 3.3 years.

During the fourth quarter of 2023, we recorded an impairment of $5.3 million to fully impair the remaining book value of our Collaboration Warrants, included in impairment charges on our consolidated statements of operations. Refer to Note 15—Impairment Charges for additional information.

On April 19, 2022, the Company issued warrants to purchase 2,197 shares of the Company’s common stock, at an exercise price of $0.35 per share (the “2022 Vendor Warrants”), to a vendor as compensation for services to be performed by the vendor. The 2022 Vendor Warrants vested in 12 equal monthly installments and had a fair value upon issuance of $0.3 million. The 2022 Vendor Warrants expire on April 19, 2028.

On August 14, 2023, the Company issued additional warrants to purchase 1,285 shares of the Company’s common stock at an exercise price of $0.35 per share (the “2023 Vendor Warrants,” collectively with the 2022 Vendor Warrants, the “Vendor Warrants”), to a vendor as compensation for services to be performed by the vendor. The 2023 Vendor Warrants had a fair value upon issuance of $9 thousand, based on the closing price of the Company’s common stock on August 14, 2023, less the exercise price. The 2023 Vendor Warrants expire on August 14, 2029.

The Vendor Warrants were determined to be consideration payable to a non-employee under ASC 718 and are recorded as equity on the consolidated balance sheets. As of January 18, 2024, all Vendor Warrants were fully vested.

The holders of the Project Warrants, Collaboration Warrants and Vendor Warrants are entitled to certain demand registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

The following table summarizes our investments:

As of December 31, 2023 and 2022, all of our investments are classified as available-for-sale, have original maturities of one year or less and are disclosed as investments on our consolidated balance sheets.

The cost of securities sold is based on the specific-identification method. During the year ended December 31, 2023, there were no sales of investments. During the year ended December 31, 2022, we realized losses of $0.2 million on the sale of investments, included in other income, net on our consolidated statements of operations related to $65.8 million in proceeds from the sale of investments.

There were no credit losses for available-for-sale securities recognized during the years ended December 31, 2023 and 2022 and no allowance for credit losses as of December 31, 2023 and 2022.

The Company’s assets and liabilities measured at fair value on a recurring basis are summarized in the following table by fair value measurement level:

The following table summarizes the activities of our Level 3 fair value measurement:

During the year ended December 31, 2023, we recorded an inventory reserve of $2.4 million, included in cost of services revenue on our consolidated statements of operations, to adjust for excess and obsolete inventories based on current future demand.

Depreciation expense for property, plant and equipment was $2.1 million and $1.9 million for the years ended December 31, 2023 and 2022, respectively, and is recorded in SG&A expense with a portion allocated to cost of services revenue.

During the year ended December 31, 2022, we recorded an impairment of property, plant and equipment of $3.8 million, included in impairment charges on our consolidated statements of operations. Refer to Note 15—Impairment Charges for additional information.

The changes in the carrying amount of goodwill are as follows:

Intangible assets consisted of the following:

Developed technology rights represent the fair value of HelioHeat’s solar receiver technology acquired in the HelioHeat Acquisition. During the year ended December 31, 2022, we recorded an impairment of intangible assets of $3.1 million associated with the acquired developed technology rights, included in impairment charges on our consolidated statements of operations. Refer to Note 15—Impairment Charges for additional information.

Amortization expense related to intangible assets was $0.1 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, intangible assets will be fully amortized through 2025.

Accrued expenses and other current liabilities consisted of the following:

The Company has operating leases, primarily for real estate. There are no material residual value guarantees associated with any of the Company’s operating leases.

On April 1, 2023, we executed a two-year lease with a purchase option for a site in Lancaster, California where we intend to build the “Proxima” green hydrogen project.

The following table provides information on the amounts of our right-of-use assets and liabilities included on our consolidated balances sheets:

The following table summarizes the components of lease costs:

The Company has variable and other related lease costs which were not considered material for the years ended December 31, 2023 and 2022.

The weighted-average remaining lease terms and discount rates for the Company’s operating leases were as follows:

The following table summarizes the supplemental cash flow information related to leases:

As of December 31, 2023, the maturities of our future undiscounted cash flows associated with our operating lease liabilities were as follows: